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Global smartphone sales fall in the fourth quarter

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A customer purchases the new iPhone X at an Apple store on November 3, 2017 in Palo Alto, California.

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A customer purchases the new iPhone X at an Apple store on November 3, 2017 in Palo Alto, California.

Global smartphone sales fell by 5.6 percent in the fourth quarter of 2017 — the industry’s first decline since 2004, according to a study from research firm Gartner.

Chinese smartphone makers Huawei and Xiaomi were the only vendors in the top five to experience year-over-year growth in the quarter, respectively by 7.6 percent 79 percent.

“Upgrades from feature phones to smartphones have slowed down due to a lack of quality ‘ultra-low-cost’ smartphones and users preferring to buy quality feature phones,” said Anshul Gupta, research director at Gartner. “Replacement smartphone users are choosing quality models and keeping them longer.”

“While demand for high quality, 4G connectivity and better camera features remained strong, high expectations and few incremental benefits during replacement weakened smartphone sales,” Gupta said.

Samsung maintained the number one spot for global sales, growing market share from the fourth quarter of 2016, despite a 3.6 percent dip. Apple sales fell 5 percent year over year and Oppo sales fell 3.9 percent.

All five top vendors grew in global market share in the fourth quarter of the 2017, widening the gap between the leaders and the rest of the industry.

Smartphones sales for all of 2017 increased by 2.7 percent from the previous year to 1.5 billion.

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Dow futures fall 100 points after a steep sell-off on Wall Street amid surging bond yields

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Stock futures were flat in overnight trading Thursday following a tech-led rout on Wall Street amid a surge in bond yields.

Futures on the Dow Jones Industrial Average rose just 30 points, while S&P 500 futures were little changed. The Nasdaq 100 futures dipped 0.2%.

All eyes will be on February jobs report, which is set to be released Friday morning. Economists expect to see that 210,000 payrolls were added in February, compared to just 49,000 in January, according to Dow Jones.

The move in futures followed a sharp sell-off triggered by Federal Reserve Chair Jerome Powell’s remarks on rising bond yields. He said the recent runup caught his attention but he didn’t give any indication of how the central bank would rein it in. Some investors had expected the Fed chair to signal his willingness to adjust the Fed’s asset purchase program.

The economic reopening could “create some upward pressure on prices,” Powell said in a Wall Street Journal webinar Thursday. Even if the economy sees “transitory increases in inflation … I expect that we will be patient,” he added.

“The market’s translation of ‘patient’ is that patient doesn’t mean ‘never,’ and that Powell is indicating that easy money will at a certain point come to an end,” said Mike Loewengart, managing director of investment strategy at E-Trade Financial. “So while the verbiage isn’t too far away from the Fed’s previous stance, it’s enough to move a jittery market south.”

The 10-year Treasury yield jumped back above 1.5% following Powell’s comments. The benchmark rate had stabilized earlier this week after a spike to 1.6% last week amid higher inflation expectations.

Tech stocks led the market decline as growth-oriented companies tend to be more vulnerable to higher interest rates. The Nasdaq Composite dropped 2.1% Thursday, bringing its losses this week to 3.6%. The tech-heavy benchmark also turned negative for the year and fell into correction territory, or down 10% from a recent high, on an intraday basis.

The S&P 500 and the Dow both fell more than 1% Thursday, headed for a losing week. Energy outperformed with a 2.5% gain in the previous session amid a jump in oil prices.

“Rates soared once again, which opened the door for more selling of technology stocks,” said Ryan Detrick, chief market strategist at LPL Financial. “The bright side is the economy continues to improve and leadership from financials and energy is something that suggests this isn’t a sell everything moment.”

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What is it and how does it work?

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A man counts 100 RMB notes with the Chinese flag in the background.

Sheldon Cooper | SOPA Images | LightRocket via Getty Images

GUANGZHOU, China — China is arguably leading the world in developing a national digital currency, a project it has been working on since 2014.

The People’s Bank of China (PBOC) has been spearheading work on the digital yuan, a so-called central bank digital currency (CBDC) that aims to replace some of the cash in circulation.

Real world trials are already underway in the world’s second-largest economy. Here’s what we know so far about the digital yuan or its official name — the Digital Currency Electronic Payment (DCEP).

What is the digital yuan?

It’s effectively a way for the central bank to digitalize bank notes and coins in circulation. The Chinese market is already very advanced in cashless payments. The digital yuan would be a way to speed that process up.

It will be legal tender in China and no interest will be paid on it.

“The use of cash is decreasing. Eventually cash will be replaced by something in digital format. That is one of the big drivers behind this,” Yan Xiao, project lead for digital trade at the World Economic Forum, told CNBC.

Why is it being introduced?

The PBOC sees a number of other benefits to the digital yuan.

In a separate article, Fan outlined how a CBDC could make payments more efficient and improve the transmission of monetary policy. Fan also argues that a digital yuan could help with financial stability through a system of “controllable anonymity.” This is where the payments would be anonymous to some degree, but data analysis tools could help the central bank catch illegal activities.

Another reason behind the PBOC’s efforts could be to increase competition in the payments space and reduce systemic risk. China’s digital payments arena is dominated by Alipay, which is run by Alibaba affiliate Ant Group, as well as WeChat Pay, run by internet giant Tencent.

“The existing system is owned by private companies. Should Alipay or WeChat pay goes bankrupt, which is extremely unlikely, it creates systematic risk,” Linghao Bao, analyst at Trivium China, told CNBC. “The biggest reason for them (the PBOC) to do this is to level the playing field. Another reason is maybe create a new platform payments system that will increase efficiency.”

How will the digital yuan work?

There are two aspects to the question: distribution and then eventually how it will be spent.

Distribution will be conducted via a so-called two-tier system. That means the PBOC will distribute the digital yuan to commercial banks. The commercial banks will be responsible for getting the currency into the hands of consumers. This could include services to allow consumers to exchange their coins and cash for digital yuan.

China has already given away millions of dollars worth of the digital currency in real-world trials in a number of cities including Shenzhen, Chengdu and Suzhou. These involve the local government handing out a certain amount of yuan via a lottery. Users usually have to download a separate app to receive the currency. JD.com, one of China’s biggest e-commerce players, was involved in the trial and allowed customers to purchase items with the digital yuan.

At this point, it’s unclear how users might actually hold and spend digital yuan when it is rolled out nationwide. The most popular form of mobile payment in China relies on so-called quick response (QR) codes. Users can display this barcode in their Alipay or WeChat app in a store and the merchant will scan it.

WEF’s Xiao says it’s likely commercial banks could integrate similar functionality into their apps. And that Alipay and WeChat Pay could have a section of their apps dedicated to digital yuan. Meanwhile, smartphone makers could also create digital yuan wallets for their devices.

“It will be interesting to see how phone companies seize the opportunity to become payments player in the market,” Xiao said.

The PBOC’s Fan also said that commercial banks already have the infrastructure to distribute the digital yuan and it’s better that they do it rather than the central bank.

“To build a separate system would be a tremendous waste of such existing resources,” he said.

So is this designed to compete with the tech giants?

In some regard, it’s designed to increase competition with Alipay and WeChat Pay but not to totally replace them.

“The way I see it is digital yuan is not direct competitor to Alipay or WeChat Pay but a new platform that allows other players to come in and compete with WeChat and Alipay,” Trivium China’s Bao said. “Those could be commercial banks or other payment companies.”

The PBOC’s Fan also said the proposed two-tier model can help to “avert disintermediation in the financial sector” because the central bank will not be competing with the commercial banks.

Is the digital yuan like bitcoin?

The PBOC’s Fan said the digital yuan would have “controllable anonymity.” This would involve those operating digital yuan wallets to disclose transactions to the PBOC as the “sole third party.” Users would have a “loose coupling of accounts” which means that their current bank account may not necessarily be closely linked to their digital yuan account.

It could be based on a phone number, according to WEF’s Xiao.

The PBOC says agencies operating digital yuan services should “submit transaction data to the central bank via asynchronous transmission on a timely basis.” That would allow the PBOC to “keep track of necessary data” in order to crack down on money laundering and criminal offenses.

Some commentators have raised concerns however that the digital yuan could be used to increase surveillance on citizens.

Renminbi internationalization

China has been pushing the internationalization of the yuan and some commentators have seen the digital yuan as a way to do that.

But currently, the digital currency has a domestic focus and international use is “not the immediate priority,” according to Trivium China’s Bao.

But the PBOC has begun laying the ground work for digital currency to be used in cross-border transactions. Last month, the PBOC joined central banks from Thailand, United Arab Emirates and Hong Kong to explore a digital currency cross-border payment project together.

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US oil production won’t return to pre-pandemic levels: Occidental CEO

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The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas.

Angus Mordant | Reuters

Occidental CEO Vicki Hollub said Thursday that she doesn’t envision U.S. oil production returning to pre-pandemic highs.

“I do believe that most companies have committed to value growth, rather than production growth,” she said during a CNBC Evolve conversation with Brian Sullivan. “And so I do believe that that’s going to be part of the reason that oil production in the United States does not get back to 13 million barrels a day.”

She believes companies will focus on optimizing current operations and facilities, rather than seeking growth at all costs. But she added that oil demand is recovering faster-than-expected, driven primarily by China, India and the United States.

“The recovery looks more V-shaped than we had originally thought it would be,” she said. The company’s initial forecast had demand returning to pre-pandemic levels by the middle of 2022. Now, Hollub believes demand will return by the end of this year or the first few months of 2022.

“I do believe we’re headed for a much healthier supply and demand environment” she said.

Her comments came after West Texas International crude futures, the U.S. oil benchmark, jumped more than 4% on Thursday to trade as high as $64.86 per barrel, a level last seen in January 2020.

She expects crude prices will be “a little better than where they are today” if her demand forecast for next year is correct, but she does not expect prices to go up “excessively” other than the short spikes that can occur from time to time.

OPEC and its oil-producing allies on Thursday decided to keep production levels largely steady into April, with Saudi Arabia also announcing that it would extend its voluntary one million barrels per day production cut.

The group first implemented unprecedented supply cuts in 2020 in an effort to provide a floor as oil prices tumbled to historic lows.

The energy sector has rebounded this year and is the top-performing S&P group by a long shot, but stock prices continue to hover well below prior highs as the focus on ESG investing, among other things, weighs.

Hollub reiterated Thursday that the company is working toward net zero carbon oil production through its heavy investments into carbon capture.

“We need to change the narrative .. it’s not fossil fuels that’s really the problem, it’s the emissions,” she said. “What we have to do is we need to get everybody focused on instead of trying to kill fossil fuels, we need to get everybody’s attention on how do we use oil and gas reservoirs to our advantage.”

“How do we use that to lower emissions all around the world, and that’s exactly our goal. Our goal is to be the company that provides the solution,” she said.

Shares of Occidental have surged more than 70% this year. The stock is still negative over the last year, however.

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