Pressure piles on Fed for large rate cut
Apple likely to lower revenue forecast for iPhone launch quarter
President Donald Trump stepped up his attacks on the Federal Reserve, demanding a large cut in interest rates as the US central bank prepares for a meeting at which it is expected to lower borrowing costs by a quarter point. I would like to see a large cut, he told reporters on Tuesday at the White House, making one of his most direct public demands to date of the politically independent central bank and repeating a frequent call that it halt the gradual shrinking of its balance sheet.
I would like to see immediately the quantitative tightening stop, he said, adding the stock market and US growth would have been stronger if the central bank had not tightened policy in the past. I’m just very disappointed in the Fed. Policymakers are expected to lower rates for the first time in more than a decade at their two-day meeting in Washington starting Tuesday. They’ve signalled they are open to a quarter-point cut to sustain the record US economic expansion amid headwinds from slowing global growth an uncertainty stemming from Trump’s trade policies.
Meanwhile, Apple reports fiscal third-quarter results on Tuesday, but all eyes will be on its forecast for the fiscal fourth quarter. That’s when the Cupertino, California-based technology giant is expected to release new versions of its flagship handset. In the halcyon days of the smartphone industry, glitzy iPhone introductions would send Apple fans scurrying to stores to snap up the latest model. Nowadays, people are holding onto their devices for longer and growth has plateaued.
Analysts expect Apple revenue to be $61 billion (Dh223.87 billion) in the fiscal fourth quarter, down about 3 per cent from a year earlier. During the same iPhone-launch quarters in 2018 and 2017, revenue climbed 20 per cent and 12 per cent, according to data compiled by Bloomberg.
The major attraction in this year’s models lies in enhanced cameras: the two high-end models to replace the iPhone XS and iPhone XS Max will include three back cameras, up from two, and a successor to the iPhone XR will include a second back camera. Beyond additional cameras, the new iPhone models will look similar to the 2018 versions, which looked like the 2017 iPhone X. Apple is planning a more extensive revamp of the iPhone with an updated design, 5G connectivity, and new augmented reality cameras for 2020, Bloomberg has reported.
Apple has started ramping up iPhone production and is preparing suppliers to build between 75 million and 80 million units for the fiscal fourth quarter and the following holiday quarter, Bloomberg News reported last week. Analysts estimate Apple sold 70 million to 80 million new iPhones in the second half of 2018.
For its fiscal third quarter, Apple is expected to report revenue of $53.3 billion, in line with a year earlier, according to analyst estimates compiled by Bloomberg. Analysts see iPhone revenue of about $26.5 billion in the fiscal third quarter, down from $29.5 billion in the same quarter of 2018.
That will mean the iPhone business represents less than half of Apple’s total revenue in the period — something that hasn’t happened since 2012, according to data compiled by Bloomberg.
To some, that may be bad news. But Apple will likely highlight growing wearables sales and rising revenue from digital services. The company is expected to report record services revenue of $11.95 billion in the fiscal third quarter, according to analysts. Wall Street will also be looking for an update from Apple on trade tensions and the supply chain. On Friday, President Donald Trump slammed the brakes on Apple getting a tariff reprieve for its upcoming Mac Pro computer.
‘Given Apple’s reliance on China for sales and supply chain, we are eager to hear about management’s strategy for navigating the challenges,’ said Tom Forte, an analyst at D.A. Davidson & Co. Investors and analysts will also seek additional colour on the recently announced $1 billion purchase of Intel Corp.’s modem unit.