US stock futures trade lower as China’s growth slows

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When will the partial government shutdown begin to weigh on the markets?

Crossmark Global Investments’ Victoria Fernandez on the state of the markets, the outlook for Federal Reserve policy and the potential market and economic impact of the partial government shutdown.

Equity futures are indicating a lower open when the markets resume on Tuesday on concerns about China’s growth.

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U.S. markets are closed on Monday for the Dr. Martin Luther King Jr. Holiday.

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    Equity futures are trading in a shortened electronic session.The Dow Jones Industrial Average futures were lower Monday by 0.4 percent. The SP 500 slipped 0.4 percent and the Nasdaq Composite was off 0.5 percent.

    China’s 2018 growth slowed to the lowest in nearly three decades, which puts pressure on Beijing to add more stimulus.

    The economy cooled in the fourth quarter under pressure from lower domestic demand and the U.S. tariffs on Chinese goods.

    Fourth-quarter gross domestic product (GDP) grew at the slowest pace since the global financial crisis, easing to 6.4 percent on-year as expected from 6.5 percent in the third quarter, the National Bureau of Statistics said on Monday.

    That pulled full-year growth down to 6.6 percent, the slowest annual pace since 1990.

    In Asian markets on Monday, China’s Shanghai Composite ended the day 0.6 percent higher on hopes the government will added more stimulus to boost growth.

    Hong Kong’s Hang Seng also shrugged off the data to finished the day up 0.4 percent.

    Japan’s Nikkei rose to more than a one-month high, adding 0.3 percent on the day.

    In Europe, stocks closed out the day lower.  London’s FTSE traded off by 0.1 percent, Germany’s DAX was down 0.7 percent and France’s CAC slipped 0.3 percent.

    Earnings season kicks into high gear this week, with six Dow companies and 56 members of the SP 500 posting their October-through-December results. Among the big names we’ll hear from are IBM, Ford, Comcast, United Technologies and Intel.

    U.S. stocks closed higher Friday — their fourth consecutive weekly gain — after China reportedly offered to increase its imports from America over a six-year-period to reduce the trade imbalance between the two nations.

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    Equities also got a lift from a Wall Street Journal report that the Trump administration was considering rolling back tariffs on Chinese goods to ensure that current trade negotiations – set to end March 1 – are successful.

    All three major equity averages have now climbed at least 10 percent since they bottomed on Christmas Eve. All three indexes have now notched their biggest four-week gain since 2011.

    Oil rises as investors latch on to OPEC cuts, supply outlook

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    Oil market braces for cold

    PRICE Futures Group’s Phil Flynn on the impact of the bitter cold weather on energy prices.

    Oil prices rose on Monday, reversing earlier losses, as investors latched on to positive supply-side drivers for the market, although concern about the wider economy simmered in the background after data pointed to a slowdown in China.

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    Brent crude oil futures were up 12 cents at $62.82 a barrel by 1520 GMT, while U.S. crude futures were up 9 cents at $53.89 a barrel.

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      Analysts said a more robust backdrop for financial markets, together with the prospect of slower crude production growth, were the major drivers behind the rally in oil.

      “The stock market performance is one of the reasons why oil keeps marching higher. There also seems to be a general belief that the agreed cut in OPEC+ production will be sufficient to balance the market,” PVM Oil Associates said in a note.

      Global equities fell after data pointed to a slowdown in Chinese economic growth in 2018 to a 28-year low. The numbers fed concern that the outlook for global growth may be darkening, particularly given U.S.-China trade tensions.

      But stocks are still up nearly 8 percent so far this month, which in turn has given oil investors more confidence to bet aggressively on a rise in crude prices.

      “It remains quite likely that the trade spat with the U.S. has played a part in this latest slowdown,” CMC Markets chief market analyst Michael Hewson said.

      “But investors should also factor in that it simply isn’t possible for the Chinese economy to grow at the pace that it has over the last 10 years, in the next 10 years.”

      While there is concern that a slowing global economy could impact oil demand, production cuts implemented by the Organization of the Petroleum Exporting Countries are likely to support crude oil prices, analysts said.

      “You can’t justify oil prices at these levels. We’re looking basically at an average of almost $70 a barrel for Brent in 2019,” ING commodities strategist Warren Patterson said.

      “I am getting increasingly concerned about how tight the market will be going into 2020.”

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      A separate report from China’s National Bureau of Statistics on Monday showed crude oil refinery throughput in 2018 climbed to a record 12.1 million barrels per day (bpd), up 6.8 percent from the previous year.

      In the United States, energy companies cut the number of rigs drilling for oil by 21 in the week to Jan. 18, taking the count down to 852, the lowest since May 2018, energy services firm Baker Hughes said on Friday.

      (Additional reporting by Henning Gloystein in SINGAPORE; Editing by Dale Hudson and Louise Heavens)

      Companies consider IPO workaround as shutdown drags on

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      Will the partial government shutdown delay IPOs in 2019?

      PwC Partner and Head of Financial Services Neil Dhar on the potential impact of the partial government shutdown on the IPO market.

      Some companies looking to go public this year are contemplating a workaround as the partial government shutdown drags on into its fourth week.

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      At least two biotech companies are weighing alternative options while the SEC remains largely closed, people familiar with the matter told The Wall Street Journal this week.

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        During the IPO process, companies typically have regular exchanges with the SEC, which ultimately gives them the greenlight to move forward. However, there is another legal option that would allow businesses to bypass some parts of the standard process, pick a price and then move directly to market at that price 20 days later.

        While the method is legal, it could invite increased risk as it’s difficult to predict how the market will act during those 20 days. Normally, companies are priced the day before a listing. Also, as noted by the Journal, it raises concerns the companies could be more susceptible to regulatory, or other, challenges later on.

        A number of companies are rumored to be considering an IPO in 2019, including ride-sharing companies Uber and Lyft, workplace messaging company Slack and apartment marketplace Airbnb.

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        For businesses that are looking to go public in early 2019, the deadline to do so is typically mid-February, according to the Journal, since it allows them to use financial results through the third quarter of 2018.

        The partial government shutdown – the longest in U.S. history – has entered its fourth week, affecting hundreds of millions of workers. The political infighting was triggered by a disagreement over funding for a wall along the country’s southern border. Over the weekend, the president appeared to offer Democrats an olive branch in the form of temporary protection for some undocumented immigrants in exchange for the $5.7 billion he wants to build the wall. House Speaker Nancy Pelosi, D-Calif., however, did not bite on the offer.

        EU fines Mastercard $648M over cross-border barriers

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        The European Commission said on Tuesday it had fined Mastercard 570.6 million euros ($648.3 million) for limiting the possibility for merchants to benefit from better conditions offered by banks elsewhere in the European Union.

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        “By preventing merchants from shopping around for better conditions offered by banks in other member states, Mastercard’s rules artificially raised the costs of card payments, harming consumers and retailers in the EU,” European Competition Commissioner Margrethe Vestager said in a statement.

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          The Commission granted Mastercard a 10 percent fine reduction for cooperating with its investigation.

          The fine is the latest in a series of actions over the past decade that the Commission, acting as the antitrust regulator for the 28-member European Union, has taken to reduce card fees for merchants.

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          It has, for example, taken decisions to make legally binding commitments by Visa Europe to cap the levels of interchange fees for all debit and credit card transactions within the European Economic Area.

          It has also looked into the fees charged on card payments made by tourists visiting the European Union.

          ($1 = 0.8801 euros)

          (Reporting by Philip Blenkinsop)

          Stocks trade lower on IMF global growth outlook

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          It is conceivable that the Fed needs to ease in another year or so, Ray Dalio says

          Bridgewater Associates founder Ray Dalio on the outlook for Federal Reserve, concerns over U.S. debt and the current market environment facing investors.

          U.S.stocks are trading  lower as markets return to trading amid worries about global economic growth and concern about Brexit.

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          The IMF predicted the global economy to grow at 3.5 percent in 2019 and 3.6 percent in 2020, down 0.2 and 0.1 percentage point, respectively, from last October’s forecasts.

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            Markets were closed Tuesday for the Dr. Martin Luther King Jr. Holiday.

            All three major indexes are trading lower.

            Johnson Johnson on Tuesday forecast 2019 sales that fell short of analysts’ estimates after reporting better-than-expected fourth-quarter profit and revenue.

            The company said it expects 2019 sales in the range of $80.4 billion to $81.2 billion, compared with the average analyst estimate of $82.69 billion, according to IBES data from Refinitiv.

            Arconic Inc shares slumped more than 20 percent after the aluminum products maker said it was no longer pursuing a sale.

            Also on Monday, China’s 2018 growth slowed to the lowest in nearly three decades, which puts pressure on Beijing to add more stimulus.

            The economy cooled in the fourth quarter under pressure from lower domestic demand and the U.S. tariffs on Chinese goods.

            Fourth-quarter gross domestic product (GDP) grew at the slowest pace since the global financial crisis, easing to 6.4 percent on-year as expected from 6.5 percent in the third quarter, the National Bureau of Statistics said on Monday.

            That pulled full-year growth down to 6.6 percent, the slowest annual pace since 1990.

            In Asian markets on Tuesday, China’s Shanghai Composite ended the day  1.2 percent lower.

            Hong Kong’s Hang Seng ended the session down 0.7 percent.

            Japan’s Nikkei closed down 0.5 percent on the day.

            In Europe, London’s FTSE traded lower by 0.8 percent, Germany’s DAX slipped 0.6 percent and France’s CAC was off 0.6 percent.

            U.S. stocks closed higher Friday — their fourth consecutive weekly gain — after China reportedly offered to increase its imports from America over a six-year-period to reduce the trade imbalance between the two nations.

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            Equities also got a lift from a Wall Street Journal report that the Trump administration was considering rolling back tariffs on Chinese goods to ensure that current trade negotiations – set to end March 1 – are successful.

            Online travel agencies ‘taking advantage’ of hotels, says Dubai start-up

            Online travel agencies (OTAs) such as Booking.com and Expedia are taking advantage of hotels, according to the co-founder of direct hotel bookings platform BookedHappy.

            Speaking to Arabian Business ahead of the platform’s launch, Charlotte Gossage said agencies’ powerful marketing tools have “intimidated” hotels and prevented them from lowering rates on their own websites.

            The platform, which is set to launch next week, aims to bring business back to hotels through direct bookings. It will include hotel deals on the platform, but refer customers to hotel websites to enable direct bookings.

            “Some hotels are slowly realising that even in an OTA contract, a hotel brand can give a lower rate. I think OTAs are taking advantage of their powerful position and intimidating hotels by preventing them from giving lower rates than them, when in fact, hotels can give lower rates through direct bookings,” Gossage said.

            “OTAs have so much marketing power behind them that hotels also show guests that they rely on OTAs. So we all feel comfortable going through the agencies,” she said.

            The founder said OTAs have largely affected hotel bottom lines due to high commission charges.

            “OTAs told hotels, ‘Oh, we’ll help you to get your rooms filled,’ and then they took control. So hotels got a bit complacent, but room rates were at a four year low last year and hotels’ bottom line is really being affected,” she added.

            Gossage claimed hotels give OTAs up to half a million US dollars in commission every year.

            “I wouldn’t be surprised if some hotels were giving half a million dollars to Booking.com a year. But if you look at Booking.com and see how many bookings have been made, keeping in mind that the average room rate is around [$100], even 15 percent commission is a lot of money,” Gossage said.

            The founder also said hotels should work harder to get guests to book directly through their websites by improving them and offering extra perks.

            “The problem is that all hotel websites are cookie cutters and don’t stand out. Hotels can stand out more and that’s what we’re trying to do,” she said.

            “If customers book directly through hotel websites, they’re most likely to get extra perks such as a room upgrade. According to case studies we’ve conducted, families with kids are more likely to get a nicer room if they book directly with a hotel as opposed to through OTAs,” she added.

            In September last year, a Netherlands-based start up told Arabian Business it is also aiming to “give business back to hotels” through a 0 percent commission model that takes on online travel agencies such as Booking.com and Expedia.

            Bidroom boasts a 0 percent commission model and relies on annual subscriptions and memberships for profit.

            Co-founder and CEO Michael Ros said the concept offers both hotels and guests more value for money by eliminating agency charges.

            “The hotels are very happy with us, because they’re getting their control back. Other booking platforms charge such high commission. So we give them their business back, plus direct reservations, so all the hotels came on board with us,” he said.

            “Because we don’t take commission, we create a win-win situation for both guests and hotels. If we don’t charge commission, hotels save a lot. And if we give on behalf of that back to guest, the guest is happy to save 10%. Hotels earn much more on reservations, so they’re more willing to give better discounts on room rates. We’re also a closed platform, so prices are not public,” Ros added.

            For all the latest travel news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

            UAE denies reports of 747 touching down on Fujairah Corniche

            UAE authorities have denied social media rumours that a commercial plane in distress landed on the Fujairah Corniche and clarified that it was there for commercial purposes before being shipped to Bahrain.

            On Monday night, social media was abuzz with rumours about the wingless Boeing 747 after pictures and video were taken of the aircraft being transported by trucks along the corniche.

            According to the state-run WAM news agency, the Fujairah government has clarified that the out-of-service aircraft was there with the government’s knowledge “for commercial purposes”.

            In the coming days, WAM added, the aircraft will be transported to Bahrain.

            Additionally, UAE officials have urged local residents to avoid spreading rumours on social media that are based on incorrect information.

            Once in Bahrain, the aircraft will be used as the centrepiece of a recently announced 100,000 square metre underwater theme park.

            Earlier this week, Bahraini authorities said that the 747 will be the largest aircraft ever submerged.

            In a report, the Bahrain News Agency said that the site is being designed as a dive experience.

            Other features will include a submerged replica of a traditional Bahraini pearl merchant’s house, artificial coral reefs and other sculptures that have been placed underwater as a safe haven for coral growth and as a habitat for marine animals.

            For all the latest transport news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

            Emirates, WhatsApp among most popular brands in Middle East

            In 2018, UAE-based carrier Emirates, fast food chain Al Baik and messaging service WhatsApp generated the most positive ‘buzz’ or perception in the UAE, Saudi Arabia and Egypt respectively, according to the annual YouGov BrandIndex Buzz Rankings.

            The report measures the public’s perception of brands on a daily basis across a range of metrics including whether people have heard positive or negative news about a brand during the previous two weeks.

            In the UAE, electronic giant Samsung saw a surge in popularity, climbing up to second position from sixth last year. Samsung Galaxy created a lot of positive noise with the launch of its new phone, the Samsung Galaxy Note 9, leading to a rise in its Buzz score and improving from tenth in the 2017 rankings to fifth in 2018.

            While its competitor Apple and its iPhone handset retain their places in the top ten rankings, they dropped from fourth and third last year, to sixth and seventh, respectively.

            In Saudi Arabia, however, Samsung Galaxy lost its spot in the top 10 rankings, while iPhone saw a drop in its rank from third to sixth this year. Meanwhile, Chinese tech giant Huawei showed significant improvements in its Buzz score in kingdom, where it is the second most improved brand, and in the UAE, where it is the third most improved. 

            The YouGov BrandIndex also revealed the ten most improved brands of 2018.

            In the UAE, Coca-Cola ranked number one with a rise of +7.5 points to its Buzz score, going from +6.5 in 2017’s rankings to +14.0 in 2018’s.

            Beverage brands particularly resonated well with consumers in Saudi, with four included in the top 10 improvers list. On the other hand, fast food chains and food brands fared well with consumers in Egypt, while Netflix also generated positive Buzz in the country as well as in the UAE, becoming the second most improved brand of the past year in both countries.

            For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

            Malls should give local designers space, charge less rent, says Rami Al Ali

            Shopping mall operators should offer more space at lower rents to local designers, according to Dubai-based designer Rami Al Ali, whose couture and ready-to-wear creations are sold in department stores such as Bloomingdales and Harvey Nichols across the Gulf region.

            Speaking to Arabian Business, Ali said local designers in the GCC do not receive enough support.

            “[Local designers] should be given more space in the malls, and should not be charged the same rent as other, bigger businesses. The fees should be in line with the size of the business,” he said.

            “There should also be certain government funding for small businesses,” he added.

            Space for local designers was added in the UAE through projects such as the Dubai Design District (D3), which was opened in 2015 and was aimed at helping emerging designers showcase Middle Eastern talent to a global audience.

            However, while the area added space, it offered little footfall, Ali said. The creation of the Dubai Design and Fashion Council (DDFC) had little impact too.

            “D3 was great, but what did it add to the creative community except for space? There’s not much to create footfall in that area anyway, so it’s all an individual effort at the end of the day. At the same time, they created the DDFC, but what came out of it? There was a big hype around it when it was established five years ago, but nothing has happened,” he said.

            The district claims to house over 6,000 working individuals occupying 85 percent of the space. Yet it is home to only two retail stores dedicated to local designers, according to its website. The majority of the rest are stacked with international products, with rent averaging $50 per sq ft, according to real estate marketplace Property Finder.

            Ali urged the local community to encourage local talent to prevent young designers from leaving to fashion hubs such as Paris.

            “When I talk to young designers, they say, ‘The minute I get money, I’m going to Paris,’ because there isn’t enough support in the region. We need to put more trust in our local talent and product,” he said.

            For all the latest fashion trends from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

            Etisalat becomes first MidEast company to break $10b brand portfolio value

            Etisalat has become the first Middle East group to break the $10 billion barrier in terms of wider portfolio value, the company announced on Tuesday.

            With the achievement, Etisalat won the “most valuable portfolio brand” title from brand consultancy Brand Finance.

            Around the world, Etisalat’s portfolio includes brands such as Etisalat Misr, Mobily, Ufone, Maroc Telecom, PTCL and Etisalat Afghanistan, and in the last year has seen 8 percent growth.

            For the second consecutive year, Etisalat also retained its positon as the most valuable consumer brand in the Middle East and Africa.

            “We are proud to achieve the recognition as the most valuable portfolio brand and the first Middle Eastern brand to break the $10 billion barrier in terms of wider portfolio value in the MENA region,” said Saleh Abdullah Al Abdooli, CEO of Etisalat Group. “Thanks to the UAE leadership’s support, vision and encouragement that helped Etisalat achieve this significant milestone surpassing some of the top renowned regional brands.”

            Etisalat attributes its success in 15 markets to its efforts to develop customer loyalty programmes, sports sponsorship commitments and in using digital technology to empower societies.

            “It is a real testament to the leadership of the UAE that Emirati brands are leading the charge for the Middle East amongst the world’s most valuable brands,” said Brand Finance CEO David Haigh.

            For all the latest tech news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.