POP QUIZ

In late 2020, there was $18 trillion of negative-yielding bonds worldwide. As global central banks have hiked rates, how much negative-yielding debt remains today? (The answer is at the end of today’s newsletter!)

IN THE NEWS

📱 Apple’s Cautious Outlook Overshadows Record iPhone Sales

Photo by Daniel Romero on Unsplash

On Thursday, Apple warned that revenue for the holiday quarter will be roughly the same as last year, and iPhone revenue is expected to grow. But overall sales will be similar to the current quarter.

In short: Apple reported its fourth consecutive revenue drop, its longest streak since 2001 after the tech bubble burst. There’s a sluggish computer market and so-so demand in China, as well as heightened competition from rival Huawei Technologies, which recently launched a new phone.

• “China has always been the most competitive market in the world, and we think it will continue to be like that,” Apple’s CFO told The Wall Street Journal.

Other takeaways:

• Despite progress in wearables, health, and services, Apple’s iPhones are still the breadwinner, comprising roughly half of Apple sales.
• Apple’s recent results suggest it’s facing deceleration in China, which has banned some U.S. technology. Apple CEO Tim Cook said the drop was mostly due to falling Mac and iPad sales, plus currency fluctuations.
• Apple has over 1 billion service subscriptions, including iCloud and Apple Music. “Every main service hit a record,” Cook said.

From Bloomberg

Apple’s stock dipped this week but is still up ~40% this year and 242% over the past five years. Shares are down more than 10% since its all-time high this summer when it became the first corporation to close with a market value above $3 trillion.

Apple’s earnings also close a fairly dicey earnings season for Big Tech. Many posted strong revenue growth but warned of future weakness.

• Microsoft, Amazon, Meta, and Google-parent Alphabet all reported strong growth and early payoffs from their investments in AI.

At Apple, questions remain about how well it will do in India and China and how many more iPhones it can sell in the years ahead as users hold onto older models for longer.

Read more

💎 China Has a Grip on African Minerals — The U.S. is Responding

Photo by Jonny Caspari on Unsplash

To meet demand, new regions — dense with resources necessary for the green transition — are becoming more geopolitically and economically important.

• Look no further than Africa’s “Copperbelt,” across countries like Zambia and the Democratic Republic of Congo, packed with minerals critical to battery production and other renewable energy parts.

What’s happening: The region is the latest focus of a global power struggle between the U.S. and China, and China seemingly has the advantage.

• While the U.S. is pouring hundreds of millions of dollars into revitalizing an old rail line linking African mines to a port on the Atlantic Ocean — in an area called the Lobito Corridor, Bloomberg says the U.S. is “late to the game.”
• China began building rail lines heading east from the Copperbelt in the 1970s.
• The country’s Belt and Road Initiative has subsidized nearly $1 trillion of infrastructure projects across developing nations. And African governments have taken on some $160 billion in loans directly from China in the last 20 years.

Why it matters:

The Lobito Corridor railway project offers a quick route to the U.S. and Europe for supplying important metals and minerals. It’s also a test run for the $600 billion of spending the U.S. and its allies hope to allocate toward similar projects globally in the next five years.

• Though, as Bloomberg reports again, “It’s not just infrastructure that China has dominated. Much of Congo’s copper production is controlled by Chinese companies.”

New gold rush: So, it’s not just infrastructure that needs to be installed to ensure critical minerals can flow to the U.S. and Europe; private companies may also need to invest more in African mining.

• On that note, the issue has caught the eye of a few big names, including Bill Gates and OpenAI’s Sam Altman, who have invested in a company called KoBold Metals that’s racing to tap into its massive copper deposits in northern Zambia.
• As China’s domestic economy has slowed in recent years and struggled to bounce back from the pandemic, so has lending through its Belt and Road Initiative, particularly across Africa, leaving an opportunity for the U.S. to fill the gap.

Watch Bloomberg’s mini-documentary for more

💼 Sharp U.S. Hiring Slowdown Signals Cooling Economy

Gif by aimtech on Giphy

Hiring slowed down rather abruptly in October, a sign that the economy may finally be cooling off after a scorching hot spring and summer of hiring.

Here’s the lowdown:

• U.S. companies added 150,00 jobs last month, down from September’s gain of 297,000, per the U.S. Labor Department. It’s the smallest gain since June, partly due to the United Auto Workers strike.
• The unemployment rate rose to 3.9% from 3.8%. (Recall it was 3.4% in January, the lowest since 1969.
• The healthcare and government industries added more than 50,000 jobs each, while transportation and warehousing lost the most.

Does the Fed get confirmation? Maybe Jerome Powell smiled when he saw the job numbers, pleased to see evidence that the interest-rate increases have started to impact the labor market. As we know, higher borrowing costs are supposed to slow things down, hiring included.

• On Wednesday, Powell referenced the cooling labor market as a reason they might not have to lift lifts anymore.
• “What we’ve seen is a very positive rebalancing of supply and demand, partly through just much more supply coming online,” Powell said this week. That brings down wage growth “in a kind of gradual way.”

Cooler wage growth is “another sign that the economy’s strength in the third quarter is likely to unwind in the fourth,” per an economist. “With wage growth also continuing to slow, it is increasingly hard to imagine the Fed hiking interest rates any further.”

From The Wall Street Journal

The greatly-awaited recession of 2023 hasn’t materialized as many forecasters predicted.

The economy has been solid, as we’ve been writing, from GDP to consumer spending to hiring. Perhaps it’s the strong labor market that’s boosted consumer spending in the face of higher rates and inflation.

The strong labor market is good news for anyone looking for a job or higher wages: The share of working-age folks either working or looking for a job is near its highest level in over 20 years.

Water out of the bathtub: The job market next year likely won’t be as bananas as in 2021 and 2022.

• The number of new hires is down. So is the number of people who voluntarily quit their jobs. There’s less turnover broadly as many employees decide that now might not be an ideal time to make a big career or job change.
• One economist commented, “Headcount is growing, but that’s because the water is draining out of the bathtub more slowly, not because there’s a lot of new hiring.”

Read more

TRIVIA ANSWER

According to Bloomberg, after the amount of negative-yielding debt globally hit $18 trillion in 2020, there’s now just $20 billion worth of bonds with below-zero yields.