Undeterred by tariffs, trade war and political turmoil, large-cap technology stocks put in eye-catching performances this week. Facebook, Amazon, Netflix and Alphabet (Google) – the so-called FANGs – all hit record highs.
The FANGs are often expanded to FAANGs through the inclusion of Apple. Together, these five companies now have a bigger market capitalisation than the FTSE 100 or China’s Hang Seng.
Away from the tech sector, market performance was less positive. Most global markets were down for the week to Thursday’s close. Both the UK’s FTSE 100 and Wall Street’s S&P 500 fell around 1.0%, while the FTSE World Europe (ex UK) dropped 2.5%.
Tit for tat
The sell-off was prompted by an intensification of Sino-US trade hostilities. Beijing announced that it would impose tariffs on imports of food and cars from the US. The Chinese authorities also said that they were considering tariffs on US crude oil. On Monday, oil futures fell to their lowest level since April.
Later on Monday, President Trump threatened to impose further tariffs amounting to US$200 billion unless China agreed to withdraw its tit-for-tat measures. Most global indices fell in response, with particular weakness in the Shanghai and Shenzhen markets.
Beyond China, emerging markets were generally weak, as investors absorbed the implications of the tensions between Beijing and Washington and the potential for the US dollar to strengthen further this year.
This wasn’t a great week for car-makers. Germany’s Daimler cut its guidance for 2018 and warned that its profits would be adversely affected by China’s new levies on cars imported from the US. Daimler’s Mercedes-Benz plant in Alabama exported 60,000 sports utility vehicles to China last year; if China goes ahead, these would be subject to 40% tariffs. Daimler shares fell heavily towards the end of the week, coming close to their lowest levels for two years. Shares in Daimler’s European peers BMW and Volkswagen also suffered declines.
Meanwhile, Rupert Stadler, the chief executive of Audi, was arrested in Munich at the start of the week. Mr Stadler is facing allegations of involvement in Volkswagen’s diesel-emissions scandal – the revelation that some Volkswagen cars were activating emissions control only during laboratory tests and not in general use. He has been a member of that company’s board since 2010. The former head of Volkswagen, Martin Winkerhorn, is facing four charges over his alleged role in the events.
Politicians under pressure
Politicians came under pressure on both sides of the Atlantic this week. In the US, a widespread outcry over the separation of immigrant children from their parents resulted in President Trump signing an executive order to forbid the practice. The administration’s ‘zero tolerance’ approach to illegal immigrants remains in place, however.
In the UK, Prime Minister Theresa May faced an uncomfortable vote on Parliamentary approval of the final Brexit deal. A last-minute compromise prevented a rebellion within Mrs May’s Conservative Party, however, allowing the EU (Withdrawal) Bill to pass through the House of Commons by 319 votes to 303.
Meanwhile, President Macron of France responded angrily to a teenager who addressed him by the nickname Manu. A finger-wagging Mr Macron told the boy that even if he wanted to lead a revolution, he should still address the president as ‘sir’ or ‘Mr President’.
The pound fell to its lowest level against the dollar on Wednesday ahead of the Parliamentary vote on the Brexit process, but rallied sharply on Thursday to end the week stronger against most currencies. Although the Bank of England’s Monetary Policy Committee left interest rates unchanged on Wednesday, three of its members voted for a rate rise. This was taken as a sign that rates could rise in the near future, spurring the surge in sterling.
And finally …
It has all the makings of a top-notch murder mystery: mysterious deaths, hulking villains and an exceptionally cunning disguise. Scientists studying Kenya’s Mara River have long been perplexed by occasional incidents in which thousands of fish suddenly die. Local people were concerned that pesticides were being washed into the river from farms upstream. But, after a long investigation, the culprits turned out to be other river-dwellers: the Mara’s 4,000-strong hippopotamus population.
How were the hefty herbivores hurting the fish? Well, by answering the call of nature. Hippo dung comes in huge quantities – and leads to massive amounts of bacterial activity. This depletes the oxygen in the water, albeit generally just in the pools in which the hippos wallow. But after heavy rains, the hippo muck gets washed into the wider river. This reduces its oxygen levels, with fatal consequences for fish.
To gather data on the dangerous defecators, scientists used a robot boat disguised as a crocodile (a creature that hippos tend to leave well alone). They discovered that the periodic piscine perishing isn’t bad news for everyone. Carrion birds and crocodiles feast on the dead fish, cleaning up the river and allowing the cycle to begin all over again. Hippo poo, it seems, plays an important role in the Mara’s ecosystem – something that mankind had previously overlooked. So it wouldn’t do to be too hippo-critical …