Breakfast News: China Considers Trade Talks

Breakfast News: China Considers Trade Talks

1. China mulls tariff dialogue

China's Commerce Ministry says the country is contemplating starting trade talks with the U.S., in early signs that tensions could be easing between the two sides. Futures on the S&P 500 moved higher, with Hong Kong's Hang Seng index jumping over 1.5%.

• "The first rain after a long drought." John Gong, a former consultant to China's Commerce Ministry, said the change in tone suggests this is a green light from the very top of the leadership in China.
• "It should show its sincerity and be prepared to correct its wrong practices and cancel the unilateral tariffs." At the same time, the warning was reiterated that the current 145% import tariffs needed to be removed to move talks forward.

2. Tech titans struggle to impress

Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) both fell over 3% after the market closed, despite beating analyst expectations with quarterly earnings. Key divisions in the companies underperformed, with tariff concerns also raised.

• Import tax to cost $900 million in the quarter ending in June: Tariff levies were flagged by Apple CEO Tim Cook, but there was some optimism as it revealed the majority of its devices shipped into the U.S. in the quarter ending in June will originate from India and Vietnam, not China. The services division's revenue fell short of estimates.
• Second-quarter guidance underwhelms: Amazon Web Services (AWS) revenue grew by 17% compared to the same period last year, but this was less than expected. A sluggish 6% increase in online sales revenue didn't help either, with the outlook for coming months not inspiring investors.

3. Nvidia in rare public spat

Nvidia (NASDAQ: NVDA) and Amazon-backed Anthropic publicly clashed over the U.S. administration's policy moves regarding chip export restrictions, spelling potential trouble as Anthropic heavily relies on Nvidia hardware to train its artificial intelligence (AI) models.

• "American firms should focus on innovation and rise to the challenge, rather than tell tall tales." Nvidia hit back at accusations from Anthropic that Chinese chip-smuggling tactics included hiding products in prosthetic baby bumps and being packed next to live lobsters.
• "America cannot manipulate regulators to capture victory in AI." The tension comes as Anthropic backs tighter export controls, whereas Nvidia is more negatively impacted by the trade disruption and therefore more vocal about the use of regulation in the sector.

4. Next Up: Jobs and Buffett

Nonfarm payrolls for April are forecast to hit 130,000, a fall from the 228,000 gained in March. The unemployment rate is due to hold steady at 4.2%, with average hourly earnings expected to tick modestly higher to 3.9% versus 3.8% previously.

• Beating the S&P 500 by 100.8% over the past five yearsOne of the earliest Stock Advisor recommendations from 2007: Berkshire Hathaway (NYSE: BRK.B) will report on Saturday, with investors keen to see the impact on earnings caused by the stock market volatility. Core operating businesses are expected to do well, with insurance performance being closely watched.
• Earnings are expected to fall by 15% versus last year: ExxonMobil (NYSE: XOM) is slated to release earnings before the market opens, and shareholders are eager to get an updated outlook, given the biggest monthly decline in oil prices since November 2021.

5. Foolish fun

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, and Nvidia. The Motley Fool has a disclosure policy. This image and article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned.