Tech Week continues today, with Apple and Yahoo! releasing their quarterly earnings, and the big question is how many iPhone 6s Apple just sold (the average estimate: 65 million). Tomorrow, Facebook reports its quarterly earnings, following a brief outage/outrage this morning that prompted panic among many a social media addict. There is also some turmoil in Russia today, as the Kremlin reacts to a credit downgrade to “junk” status.
What to watch for today: The U.S. Federal Treasury is meeting today and tomorrow, and will make its interest-policy announcement tomorrow. There’s no rate hike expected immediately, but, at the last meeting, just a word change—a pledge to be “patient” from Janet Yellen—pushed an extended market rally. There will also be numbers from the U.S. on durable goods and new home sales, giving insight into the health of the American housing market.
Rate cutting begins at Canada’s big banks. Last week, it looked as though a rate cut by the Bank of Canada hadn’t had an immediate impact on mortgage rates for average borrowers. But the banks appear to have been merely biding their time: RBC cut both its five-year and 10-year fixed rates, to 2.84 per cent and 3.84 per cent, respectively. TD, Scotiabank and National Bank of Canada have also cut their rates. The Bank of Canada’s governor said last month that the country’s housing market is over-priced by as much as 30 per cent, so expect much debate on the effect on an already frothy housing market.
Russia gets downgraded to junk status. S&P announced the downgrade yesterday, saying it was the first time since 2004 that the country’s bonds were seen as “below investment grade” (junk). The ruble fell 7.5 per cent on the news, although it has since bounced back by more than one per cent, and yields for Russian bonds skyrocketed. It’s already a messy day for the Kremlin: The country’s leadership has set out an “anti-crisis plan” to freeze spending and return the budget to a surplus. The country still has strong currency reserves, and debt-to-GDP is nothing compared to Greece’s (for example), but the fall has been swift, as oil prices and sanctions have routed the ruble, and even the government says Russia will see a recession this year.
Political tensions are high today, as well, as the leaders of all 28 EU countries released a joint statement promising more sanctions after a sharp uptick in separatist violence in Ukraine. Today is also the 70th anniversary of the liberation of Auschwitz by Soviet troops. Putin was not invited.
How many people have bought an iPhone 6? That’s the question, as Apple prepares to release its quarterly earnings later today. The numbers are expected to be huge: The average estimate for iPhone sales is expected to be 65 million phones (via Bloomberg), fuelled by the release of the iPhone 6. That’s the equivalent of everyone in France getting a new iPhone, or, to put it in Canadian terms, every Canadian outside the GTA getting at least two new iPhones, just in the last three months (let’s all contemplate the world we live in for a moment).
This would cement Apple’s crown: The revenue from iPhones alone could be similar to the combined expected revenue of Microsoft and Google, or so Business Insider has predicted. Let’s revisit that idea at the end of the week.
Yahoo! weighs tax laws. Yahoo! is also reporting quarterly earnings today, but the big question it’s expected to answer is how it’s going to get rid of some of its $40-billion share in Chinese e-retailer Alibaba—without paying billions of dollars in tax. Bloomberg estimates selling off its share could require a $14-billion capital gains tax, but some (legal) finagling could help it get around the bill.
Don’t discount Microsoft yet. The software company’s profits fell in the second quarter by 11 per cent, coming in around expectations, while revenue increased by eight per cent amid restructuring and layoffs. While the appeal of desktop PCs appears to be weakening, Microsoft’s real push is in cloud software, where revenue more than doubled over last year.
The original It Girl (or, at least, her CEO) is falling out of favour. That’s right: Barbie. Yesterday, Mattel’s chief executive was booted after the toymaker’s sales fell by six per cent over Christmas, and profits fell by $400 million. Mattel is known for its Hot Wheels and Fisher Price toys, but Barbie is its long-time cover girl. But the original blond has been losing her share of the doll market for years. Why? The best explanation should come from your first-grader, but one of the reasons is probably the popularity of iPads for kids.
Need to know:
TSX: 14,797.83 (+18.48 points), Monday
Loonie: 80.23 (-0.26 cents), Monday
Oil (WTI): $45.03, Tuesday morning