Markets worldwide surged on the back of Apple’s outstanding earnings on Tuesday night. We’ll take a look at those earnings, specifically China’s growing influence on Apple’s bottom line, as well as mixed news out of Europe.
In recent quarters, China has surged to become Apple’s second biggest retail market. iPhone sales in China quintupled year-over-year. China sales represented $7.9 billion of Apple’s $39.2 billion overall sales, or 20% of that total. China’s importance to Apple will continue to increase as China’s urban classes become increasingly wealthy, and iPhone sales will augment further once Apple and China Mobile (CHL, quote) reach an agreement. Apple is no longer a developed market story; its popularity in China makes it an emerging market growth play as well.
David Cameron’s government was hit with a devastating blow as the United Kingdom officially slid back into recession for the first quarter of 2012. While not a member of the euro zone, the UK is a member of the European Union and its economic performance is indicative of overall slowing growth for the region. News of this recession is problematic for Cameron’s administration as implementing more austerity measures to remedy the country’s debt problems will become increasingly difficult. This data makes the United Kingdom ETF (EWU, quote) less attractive going forward.
Investors (including the author of this post) have spent the past few weeks fretting over the likelihood of Francois Hollande’s ascension to the French presidency. However, Hollande valiantly attempted to calm the nerves of observers in the finance community with his speech this afternoon.
His emphasis on a combination of austerity and growth is increasingly resonating with other European leaders who are witnessing the detrimental effects of excessive austerity. As well, today’s more explicit proposals concerning the creation of eurobonds and banking regulations may give investors looking for concrete fixes and not mere band-aids some solace (whether he can convince Germany on these matters is another story).
While his taxation platform still leaves a lot to be desired (a 75% tax on the highest earning bracket will surely incite a number of companies to move operations elsewhere), this could be a case of election-time pandering to the French middle class by castigating France’s one-percenters. Investors should be on the lookout for further clarification on these issues, as signs of acquiescing on taxation or a further willingness to compromise with Germany could bolster French markets (EWQ, quote).
In this interesting chart, The Economist is able to illustrate the importance of mobile banking in African countries. While banking by phone is not particularly popular in the United States, it is a boon to African middle class consumers, many of whom are unable to access physical banks on a regular basis due to infrastructure impediments. Investors looking to play this trend may actually want to look to Visa (V, quote). Research from Trefis indicates that Visa’s acquisition of Fundamo gives the country an advantage in the mobile banking sector over its competitors.
Disclosure: Author and immediate family are long AAPL; Author is short EWQ