1. Apple becomes the first US company to be valued at US$2 trillion
- Apple is the first US company to boast a market value of $2 trillion (AUD $2.76t), just two years after it became the first to reach US$1 trillion (AUD $1.38t). The company's hugely loyal customer base trusts its products so much that they continued to buy iPhones and other devices online while stuck at home. Apple recently reported blowout earnings for the April-June quarter. An upcoming four-for-one stock split that will make Apple's shares more affordable to more investors also sparked a rally after it was announced three weeks ago. Just five companies — Apple, Microsoft, Amazon, Facebook and Google's parent company — account for nearly 23 per cent of the S&P 500's entire value.
2. China economic update
- In China, economic activity nearly collapsed in the first quarter and then rebounded very strongly in the second. Now, as the third quarter is well under way, there are mixed signals about the strength of the economy. On one hand, industrial production continued to grow strongly in July. On the other hand, retail sales remained below the level from a year earlier. In addition, fixed asset investment in the first seven months of the year was below the level seen a year earlier, largely due to a sharp drop in private sector investment. The revival of China’s economy has largely involved public sector investment and a surprising boost to exports.
3. Global manufacturing conditions
- In Europe, British manufacturing bounced back to a 16-month high. Still, activity continues to take place below the pre-crisis level. Output and domestic orders were up while export orders continued to fall. Growth was relatively stronger in France and Spain and more modest in Germany and Italy. Meanwhile, the manufacturing industry continued to shed jobs at an alarming rate as businesses struggled to cut costs in response to weak demand and added constraints of the virus.
- In the United States, there has been a stable level of growth after a prolonged period of rapid decline. Thus, the industry still has some way to go before it returns to pre-pandemic levels. Growth of new orders remains lacklustre and backlogs of work continue to fall, hinting strongly at the build-up of excess capacity.
- In Asia, India’s manufacturing showed a continued decline in activity, suggesting that its manufacturing sector had a setback amidst the growing pandemic crisis. Meanwhile in China, output and domestic orders were up sharply while export orders declined at a decelerating pace. The decline in export orders reflects continued weak overseas demand. In Japan, weak manufacturing stemmed from weak domestic demand as well as weak overseas demand, all owing to the crisis. Production of consumer goods stabilized but capital goods remained very weak.
4. US Administration attempts a resolution of the fiscal impasse
- The efforts of the two major US parties to find common ground on a new fiscal stimulus have so far failed. The enhanced unemployment insurance benefits, loans for small businesses, and restrictions on evictions have all expired. Recently, President Trump took unilateral action meant to support the economy, saying that his actions will “take care of, pretty much, the entire situation.” However, presidential powers are limited and the actions he announced are likely to have only limited impact. Following the expiration of the US$600 per week Federal benefit for unemployed workers, the Congress debated what to do next. Democrats supported a continuation of the US$600 benefit while Republicans suggested US$200 per week. Democrats have sought a US$3.5 trillion package while Republicans have sought US$1.5 trillion. Among the issues under debate are support for unemployed workers; support for small and large businesses, especially airlines; support for fiscally troubled state and local governments; and funding for vaccine production and distribution.
Read full issue: