UPDATE 3-Apple cuts forecast, citing weak China sales amid trade tensions

(Reuters) – Apple Inc on Wednesday cut its sales forecast for its latest quarter, with Chief Executive Tim Cook blaming slowing iPhone sales in China, whose economy has been dragged down by uncertainty around U.S.-China trade relations.

People walk outside an Apple store in Beijing, China December 12, 2018. REUTERS/Jason Lee

The news sent Apple shares tumbling in after-hours trade and triggered a broader selloff in the stock market.

The revenue cut raises questions about whether Apple, the face of American business in many parts of the world, is being punished by Chinese officials or consumers in favor of local rivals such as Huawei Technology Cos Ltd, whose pricey smart phones compete with the iPhone and whose telecommunications equipment U.S. officials are considering banning.

Cook told CNBC that Apple products have not been targeted by the Chinese government, though some consumers may have elected not to buy an iPhone or other Apple device because it is an American company.

“The much larger issue is the slowing of the (Chinese) economy, and then the trade tension that has further pressured it,” Cook said.

Some analysts, however, questioned the impact of Apple’s own actions.

The company forecast $84 billion in revenue for its fiscal first quarter ended Dec. 29, which is below analysts’ estimate of $91.5 billion, according to IBES data from Refinitiv. Apple originally forecast revenue of between $89 billion and $93 billion.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Cook said in a letter to investors. “In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”

Wednesday was the first time that Apple issued a warning on its revenue guidance ahead of releasing quarterly results since the iPhone was launched in 2007.

Apple shares, which had been halted ahead of the announcement, skidded 7.7 percent in after-hours trade, dragging the company’s market value below $700 billion. In the broader market, the S&P 500 futures fell 1.5 percent.

A slew of brokerages reduced their first-quarter production estimates for iPhones after several component makers in November forecast weaker-than-expected sales, leading some market watchers to call the peak for iPhones in several key markets.

On Apple’s earnings call in November, Cook cited slowing growth in emerging markets such as Brazil, India and Russia for the lower-than-anticipated sales estimates for the company’s fiscal first quarter. But Cook specifically said he “would not put China in that category” of countries with troubled growth.

That all came before the damage to the Chinese economy from trade tensions with the United States became clear. On Wednesday, China’s central bank magazine said the country’s economic growth could fall below 6.5 percent in the fourth quarter as companies face increased difficulties there.

Apple is now the highest-profile multinational corporation to warn that the economic slowdown in China could hurt its business. Automakers such as Ford Motor Co, Hyundai Motor Co and Nissan Motor Co all previously said they planned to cut production in the country.

Apple has held firm on its premium pricing strategy in China despite the risk of a slower economy, a factor that has been exacerbated by the strong U.S. dollar. Apple tends to set its prices in U.S. dollars and charge a broadly equivalent amount in local currencies.

“The question for investors will be the extent to which Apple’s aggressive pricing has exacerbated this situation and what this means for the company’s longer-term pricing power within its iPhone franchise,” James Cordwell, an analyst at Atlantic Equities, told Reuters.

Hal Eddins, chief economist at Apple shareholder Capital Investment Counsel, said Cook’s comments on how the U.S. trade tensions with China were hurting the company’s outlook “might be a dig at (U.S. President Donald) Trump, but mostly he may be using the trade turmoil as an excuse for some missteps they’ve made over the last year.”

FILE PHOTO: An Apple iphone 6 with Apple Pay is shown in this photo illustration in Encinitas , California June 3, 2015. REUTERS/Mike Blake

Other investors were not immediately alarmed.

In his letter, Cook said Apple has $130 billion in net cash and that it intends to continue its efforts to reduce that cash balance to net zero, which the company has so far accomplished through dividend increases and share buy backs.

“We would anticipate the company increasing share buybacks on the weakness to return capital to shareholders at discount prices,” said Trip Miller, managing partner at Apple shareholder Gullane Capital Partners.

Reporting by Stephen Nellis in San Francisco and Munsif Vengattil in Bengaluru; Additional reporting by Joe White in Detroit; Editing by Leslie Adler

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Sorry that I took so long to upgrade, Apple

Apple had some bad news tonight. It was so bad, in fact, that it had to halt trading for a time while posting a grim report that its numbers would be lower than it had forecast at the last quarterly earnings report in November. Apple blamed faltering sales in Asia, particularly in China, for the adjustment, but I’m afraid it can lay at least part of the blame on me, too.

You see, I was part of the problem, as well. On the bright side, I finally upgraded my iPhone this week. I had been using an old iPhone 6 that was more than three years old. It had become crotchety with a bad battery life, and the recharge cable wouldn’t say stuck without some serious coaxing. The phone had to be flat on a table, and would often disconnect if I even brushed against the cord or looked at it the wrong way.

I had been thinking about upgrading for several months, but I kept putting it off because the thought of spending $1,000 for a new phone frankly irked me, and I had, after all, paid off my trusty 6 in full long ago. I was going to squeeze every bit of life out of it, dammit.

In spite of my great frustration with my old phone, it took the enticement of a $200 credit to finally get me to replace it, as I’m sure the promotion was intended to do. Just yesterday, on New Year’s Day, I headed to my closest Apple Store and I finally did right by the company.

I replaced my ancient 6, but I did something else that probably hurt Apple as part of its death by a thousand cuts. I went into the store thinking I would buy the more expensive XS, but in the end I walked out with the lower-cost XR. I looked at the two phones and I couldn’t justify spending more than $1,000 for a phone with 256 GB of storage. I wanted a phone with longer battery life and a decent display and camera, and the XR gave it to me. Yes, I could have gotten an even better phone, but in the end, the XR was good enough for me, and certainly a huge upgrade over what I had been using.

Clearly lots of people across the world had similar thoughts, and one thing led to another and, before you knew it, you had a situation on your on your hands, one that forced you to halt the trading of your stock and report the bad news. The stock price is paying the price, down more than 7 percent as I write this post.

So, sorry Apple, but it appears that there is a tipping point when it comes to the cost of a new phone. As essential as these devices have become in our lives, it’s just too hard for many consumers around the world to justify spending more than $1,000 for a new phone, and you just have to realize that.

U.S. fund investors yank most cash from stocks since February: ICI

A price monitor is seen on the floor at the New York Stock Exchange (NYSE) in New York City, New York, U.S., January 2, 2019. REUTERS/Shannon Stapleton

NEW YORK (Reuters) – U.S. fund investors anguished over economic growth and policies pulled the most cash from stocks in any weekly period since last February, Investment Company Institute data showed on Wednesday.

Mutual funds and exchange-traded funds (ETFs) tracked by the trade group reported $37.8 billion in withdrawals overall, a 12th week of declines and the most cash pulled since a Chinese growth scare in August 2015. More than $21 billion tumbled out of stock funds during the week ended Dec. 26, the most since February 2018.

And while the withdrawals amount to a sliver of the overall assets in such funds, fast-declining sales of funds reflect deteriorating sentiment as people stockpile cash.

The major broad U.S. stock indexes turned in their worst year since the 2008 financial crisis in 2018, as investors adjusted to slowing growth expectations and the Federal Reserve’s attempts to restore U.S. monetary policy to pre-crisis levels of interest rates and unload the bonds it bought to encourage risk-taking. The year ended with a week of major swings up and down in those indexes.

In addition to the rate hikes, investors have been worried about excessive corporate borrowing, U.S.-China trade tensions, a partial U.S. government shutdown and the potential for slowing economic growth.

While ETFs, used heavily by institutional investors, were stock buyers in December, mutual fund investors typically used by retail investors sucked out a record $86 billion, according to preliminary estimates last week from Lipper, a research service.

Withdrawals from funds primarily invested in international stocks hit $9.3 billion, the most cash ever pulled, at least according to records dating to 2013.

And investors cashed in $9.2 billion of shares in bond funds despite strong demand for relatively safe-haven municipals. Funds invested in gold and other assets took in $707 million, the most cash since April.

Reporting by Trevor Hunnicutt; Editing by James Dalgleish

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Mississippi License Plate Gets Makeover This Year with ‘In God We Trust’

This year, the state of Mississippi is adding “In God We Trust” to all of its standard-issue license plates.

Republican Gov. Phil Bryant announced the move in May 2018.

“I was proud to sign legislation in 2014 that added the United States National Motto, ‘In God We Trust,’ to the Mississippi State Seal,” Bryan wrote in a Twitter Post. “Today, I am equally delighted to announce that it will adorn our new Mississippi license plates.”

Gov. Bryant told residents to expect to see the new plates in 2019. He has kept that promise and new vehicles in Mississippi now have “In God We Trust” on them.  

The decision has drawn mixed reactions.

The American Humanist Association called the plates “unconstitutional.”

“The problem, obviously, is that many individuals do not believe in a God, let alone trust in him, her, or it. Thus, to create a standard license plate that displays that phrase, with no alternative at an equal cost that avoids such a statement, unconstitutionally endorses religion.”

On the other hand, John Pritchett of the Mississippi Center for Public Policy argued it is constitutional.

“We have been misinformed and misled by generations of public policy, education, and media leaders on the so-called ‘separation of church and state.’ The concept has been so pervasive that we generally accept the idea that it is inappropriate to bring any faith-based ideas to the public square. The idea that we should separate religion — of any faith or denomination — from politics is not only false, it is virtually impossible.”

AG nominee Barr to back off previous attack on antifraud law -source

(Reuters) – U.S. President Donald Trump’s attorney general nominee William Barr is expected to back away from prior criticism of an anti-fraud law that allows private individuals to bring lawsuits on behalf of the government, a source familiar with the matter said on Wednesday.

Barr will clarify his current thinking on the U.S. False Claims Act, which he has previously called an unconstitutional “abomination,” when he goes before the U.S. Senate Judiciary Committee in a confirmation hearing in coming months, the source said.

Barr did not immediately respond to a request for comment sent to his law firm email account.

The law allows whistleblowers who expose fraud against the U.S. government to bring private lawsuits and keep a percentage of any damages awarded. In October, for example, the Justice Department agreed to a $93 million bounty for three whistleblowers after drug wholesaler AmerisouceBergen Corp paid $625 million to resolve their allegations of Medicaid fraud.

Business groups, including the U.S. Chamber of Commerce, have criticized the False Claims Act (FCA) as primarily benefiting plaintiffs’ lawyers and their clients instead of taxpayers.

But the Justice Department has raked in nearly $60 billion in FCA settlements and judgments since the law was overhauled in 1986, including nearly $3 billion last year.

The law also still enjoys the strong support of Iowa Republican and Senate Judiciary Chairman Chuck Grassley, who was an architect of 1986 amendments that increased the FCA’s potency.

In 1991, during Barr’s previous confirmation hearing to serve as attorney general under President George H.W. Bush, Grassley explicitly asked Barr to pledge support to the FCA’s whistleblower provisions.

As a high-ranking Justice Department official in the Bush administration, Barr had authored a 1989 memorandum that concluded the law’s whistleblower provisions violated the separation of powers doctrine and other constitutional requirements.

Barr later said in a 2001 interview for an oral history of the Bush presidency that he wanted the Justice Department to attack the constitutionality of the law but was opposed by then Solicitor General Kenneth Starr.

The U.S. Supreme Court ruled unanimously in 2000 that private whistleblowers can sue on behalf of the U.S. government.

Barr has recently told others that his prior comments are outdated, according to the source. Barr believes DOJ’s current handling of FCA cases protects federal interests and no longer thinks a constitutional challenge is warranted, the source said.

Grassley is expected to cede chairmanship of the Judiciary Committee to Lindsey Graham, a Republican from South Carolina, before Barr’s confirmation hearing. He hailed President Trump’s nomination of Barr in a statement last month.

Grassley’s spokesman did not respond to a request for comment.

Reporting by Alison Frankel; Editing by Anthony Lin and Bill Berkrot

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S&P 500 futures fall sharply after Apple cuts guidance

Customers walk past an Apple logo inside of an Apple store at Grand Central Station in New York, U.S., August 1, 2018. REUTERS/Lucas Jackson

SAN FRANCISCO (Reuters) – S&P 500 futures EScv1 fell 1.5 percent as trading resumed late on Wednesday after Apple (AAPL.O) cut its forecast for the holiday quarter.

Apple dropped 7.5 percent and iPhone component suppliers also fell as investors worried about softer demand across the technology industry.

Reporting by Noel Randewich; Editing by James Dalgleish

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Toronto café follows through with Ontario’s scrapped $15 minimum wage

Although the PC government scrapped this year’s planned minimum wage increase to $15, a downtown Toronto café says it’s following through with the increase anyway.

Employees at HotBlack Coffee, near Queen Street W. and University Avenue, got a raise on Jan. 1 even though the minimum wage didn’t go up, and café co-owner Jimson Bienenstock says his decision to pay employees more makes good business sense.

HotBlack Coffee co-owner Jimson Bienenstock says his decision to pay employees more makes good business sense. (CBC)

“If I pay minimum, then why would they want to stay? They could just flip to another job,” he told CBC Toronto.

“We have very low staff turnover, which means that I have to train less people, which means that selfishly I don’t have to pay as much in training.”

I’m quite happy that other people don’t do what we do. It allows me to compete better.– HotBlack Coffee co-owner Jimson Bienenstock

Not only did his staff making near minimum wage get a raise — all the workers got a $1 an hour bump in pay.

Bienenstock says the decision wasn’t about political ideology, but rather about treating employees well.

“I don’t have a problem with the government, and I’m quite alright that everybody has a free choice to do what they want to do,” he said.

“I’m quite happy that other people don’t do what we do. It allows me to compete better.”

‘Good people makes for good business’

HotBlack Coffee is part of the Better Way Alliance, which says investing in employees pays off.

But Bienenstock says that he didn’t join the alliance and then decide to put his wages up, but that they already shared the same philosophy.

HotBlack Coffee is part of the Better Way Alliance, which says investing in employees pays off. (CBC)

“We want to treat people more than the absolute minimum,” Bienenstock added. “It’s our founding principle that having good people makes for good business.”

Last year, the province announced it was cancelling plans for a $15 an hour minimum wage and slashed paid sick days saying they stifled economic growth.

While some businesses lobbied the government for the changes, HotBlack employee Jon Burrowes says he thinks it’s great his café is still going ahead with the pay raise.

“When they made the announcement in terms of the pay increase, a lot of people planned ahead in terms of their lives,” Burrowes said.

“It’s definitely helped me in terms of planning my life out from month to month for the next five years.”

JEFFREY LIPTON in BARBADOS – https://www.cbc.ca/news/canada/toronto/hotblack-coffee-15-minimum-wage-1.4964023?cmp=rss

The number of Alexa skills in the U.S. more than doubled in 2018

Amazon Alexa had a good year as a developer platform – at least in terms of the number of voice apps being built for Alexa, if not yet the monetization of those apps. According to new data published today by Voicebot, the number of Amazon Alexa skills in the U.S. more than doubled over 2018, while the number of skills grew by 233 percent and 152 percent in Alexa’s two other top markets, the U.K. and Germany, respectively.

Amazon began the year with 25,784 Alexa skills in the U.S., which grew to 56,750 skills by the end of 2018, said Voicebot. That represents 120 percent growth, which is down from the 266 percent growth seen the year prior – but still shows continued developer interest in the Alexa platform.

At this rate of growth, that means developers were publishing an average of around 85 skills per day in 2018.

Voicebot has its own method for tracking skill counts, so these are not Amazon’s own numbers, we should note. However, Amazon itself did say at year-end 2018 that its broader Alexa ecosystem had grown to “over 70,000” total skills across markets.

In the U.K., the number of Alexa skills rose 233 percent this year to reach 29,910 by year end. In Germany, the skill count grew by 152 percent to reach 7,869 skills. Canada had 22,873 skills as of the beginning of January 2019; Australia has 22,398; Japan has 2,364; and France has 981. (Voicebot says it hasn’t yet set up a system for counting the skills in India, Spain, Mexico or Italy at this time.)

Also of interest is that much of the skill growth occurred near year-end, ahead of the busy holiday season when Alexa devices became top sellers. In the U.S., U.K. and Germany, developers published 181, 84, and 37 skills per day, respectively, during the last two months of the year.

The firm also pointed out there is some debate over whether or not the growth in third-party skills even matters, since so many of them are virtually invisible – never discovered by end users or installed in large numbers. That’s a fair criticism, in a way, but it’s also still early days for voice-based computing. Developers who are today publishing lower-rated skills may be learning from their mistakes and figuring out what works; and they’re doing so, in large numbers, on the Alexa platform.

As to what sort of skills are actually striking a chord with consumers, Amazon itself recently shared that information.

It released a year-end list of Alexa’s “top” skills, which were selected based on a number of factors including customer reviews, engagement, innovation and more, Amazon told us.

Many of the top skills were games. And many had benefited from their association with big-name brands, or had been promoted heavily by Amazon, or both.

Among the top games were music skill Beat the Intro; Heads Up!, already a top paid iOS app from Ellen DeGeneres; National Geographic’s Geo Quiz skill; Question of the Day; Skyrim Very Special Edition; The Magic Door; Trivia Hero; World Mathematics League; Would You Rather for Family; and Volley’s roleplaying game, Yes Sire.

The non-game skills were focused on daily habits, wellness, and – not surprisingly, given Alexa’s central place in consumers’ homes – family fun.

These included kid-friendly skills like Animal Workout, Chompers, Kids Court, Lemonade Stand, and Sesame Street; plus habit and wellness skills like Chop Chop, Fitbit, Headspace, Sleep and Relaxation Sounds, Find My Phone, AnyPod, Big Sky, Make Me Smart, and TuneIn Live.

It’s interesting to note that many of these also are known app names from the mobile app ecosystem, rather than breakout hits that are unique to Alexa or smart speakers. That begs the question as to how much the voice app ecosystem will end up being just a voice-enabled clone of the App Store, versus becoming a home to a new kind of app that truly leverages voice-first design and smart speakers’ capabilities.

It may be a few years before we have that answer, but in the meantime, it seems we have a lot of voice app developers trying to figure that out by building for Alexa.

TREASURIES-Global growth worries, higher oil flatten yield curve

NEW YORK (Reuters) – Yields on long-dated U.S. Treasury securities fell to their lowest in nearly a year on Wednesday on concerns about the health of the global economy, a worry exacerbated late in the day when Apple Inc (AAPL.O) cut its sales outlook and sent U.S. equity index futures tumbling.

FILE PHOTO: An employee works at a production line of lithium ion batteries inside a factory in Dongguan, Guangdong province, China October 16, 2018. Picture taken October 16, 2018. REUTERS/Joyce Zhou/File Photo

Throughout the first trading day of 2019 investors piled into safe-haven investments like longer-dated Treasuries and German bunds after weak data out of China and Europe was reported overnight and a partial shutdown of the U.S. government continued.

Yields on benchmark 10-year notes US10YT=RR fell to their lowest since late last January. They hit a fresh 11-month low near 2.62 percent late in the day when Apple announced sales would fall well short of previous forecasts largely because of a slowdown in demand for its iPhones in China.

China’s economy was already of central concern after a measure of its manufacturing activity shrank for the first time in 19 months in December, hit by the Chinese-U.S. trade war, with the weakness spilling over to other Asian economies.

“Chinese PMI came in weaker than expected and gave a risk-off tone to global markets. There are now mounting concerns about global growth,” said Justin Lederer, Treasury analyst and trader at Cantor Fitzgerald.

The 10-year note yield was last at 2.63 percent, breaching the key technical level of 2.64 percent. Ten-year yields fell nearly 6 basis points on the day, their largest one-day fall in a month.

Other safe-haven investments also benefited in price from the flight to quality. The benchmark 10-year German government bond yield DE10YT=RR was down 7 basis points, last at 0.17 percent.

While U.S. stocks eked out modest gains on Wednesday to start the new year, after their poorest yearly showing in a decade in 2018, Apple’s weak sales forecast after Wall Street closed sent equity index futures sharply lower, bringing in further support for Treasuries.

The grim readings from Asia’s and Europe’s purchasing manager surveys came ahead of the closely watched U.S. manufacturing survey on Thursday, payrolls data on Friday and the U.S. earnings season later this month, which is expected to show corporate profit shrank in the October-December quarter.

Oil prices rose about 4 percent in choppy trading on Wednesday, supported by gains in U.S. equity markets, but concerns remained about rising crude production and weakening global economic growth.

The yield on the two-year Treasury note US2YT=RR was supported by the rise in oil prices, last up about half a basis point to 2.504 percent. With the sharp drop in long-dated yields the yield curve flattened to a spread of 15.2 basis points between the two- and 10-year note yields US2US10=TWEB.

A section of the yield curve sank deeper into inversion, with the yield on 1-year bills US1YT=RR now exceeding those on all securities through the 7-year maturity US7YT=RR.

Reporting by Kate Duguid; Additional reporting by Dan Burns; Editing by Lisa Shumaker and Tom Brown

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