Gold Remains Near 2-Month Lows Ahead of US Jobs Data

Gold stayed near its 2-month low on Thursday, with market players taking a close look on the U.S. nonfarm payrolls data scheduled to be released on Friday.

Investors are awaiting the release of the US jobs data to gather fresh cues on the timing of a potential interest rate hike by the U.S. Central Bank.

“With Friday’s US payrolls data looming large, we are seeing ranges tighten (for gold) and skew to the downside as anticipation builds for a potential September interest rate hike” said Sam Laughlin, a precious metals trader with MKS PAMP Group.

Most analysts anticipate that the U.S. job data will reveal a jobs growth of 180,000 in August, followed by a 255,000 increase in the preceding month. 

A positive U.S. jobs data report would strengthen the expectations for a possible U.S. rate increase in September, following the hawkish signals from the Central Bank officials in the recent days. 

Spot gold moved 0.1% lower to $1,306.81 an ounce by 07:00 am GMT. On Wednesday, it hit its lowest since June 24 at $1,304.91 per ounce on Wednesday. 

U.S. Gold Futures declined 0.1% to trade at $1,310.10 an ounce. 

Gold for December delivery on the Comex division of the NYMEX slipped $1.10, or 0.08 percent, and was valued at $1,310.30 per ounce by 07:07 GMT.

On Wednesday, the price of the precious metal declined to as low as $1,306.90, its lowest price since June 24, after positive private sector U.S. employment data boosted speculations that the U.S. Central Bank is on its way to increase interest rates at its September meeting. 

The yellow metal is highly sensitive to the movement of the U.S. interest rates. An increase in the interest rates weakens the demand for the gold, while strengthening the dollar in which it is priced. 

Also, a stronger U.S. dollars lessens the appeal for the precious metal, and makes dollar-denominated assets such as gold more expensive to holders of other major currencies. 

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Cisco to Plunge on the Release of NSA Spying Tools, 7% Layoff

[This market update and analysis is taken from: FSM News.]

The stock of Cisco Systems Inc. (NASDAQ: CSCO), the largest networking company in the world, is poised for a significant decline due to the mysterious release of spying tools created by the US National Security Agency’s elite group of hackers and the massive 7-percent job cuts.

Impact of NSA Hacking Tools Leak on Cisco

A cache of highly sophisticated hacking tools codenamed Buzzdirection, Epicbanana, 

Egregiousblunder, and Extra Bacon, among others appeared online just recently, and Cisco products were deemed vulnerable to these. ExtraBacon particularly targets Cisco Adaptive Security Appliance firewall.

This latest news can be considered as an international scandal as the multibillion dollar tech corporation’s networking equipment are used by countless of critical state agencies and large companies all over the world. With these hacking tools leaked out into the internet for all to see, anyone from a basement hacker to a professional spy could gain access to them now. Until these cybersecurity flaws are patched, many computer systems, especially those utilizing Cisco products, may be in jeopardy.

Having said that, we believe that the CSCO stock is set to plunge. As shown in the chart below, the company’s stock is trading in the red for two consecutive sessions. As of the time of writing, the stock is trading at $30.72, down by 1.29 percent or 0.40 points. Our analysis shows that if Cisco breaks down the support at the $30.12 level, it could drop much further.

Cisco: A Layoff Machine

In addition to the leak of NSA hacking tools, reports that Cisco will layoff 5,500 employees or 7 percent of its total workforce also casted a grim shadow over the company. CSCO shares tumbled by 1.5 percent during after-hours trading due to this restructuring move, despite reporting fourth quarter earnings results that beat estimates.

On August 14, 2014, the networking corporation also reduced its workforce by 6,000 or around 8 percent of its global workforce despite posting a profit growth of 18 percent. After the announcement, CSCO shares traded nearly 3 percent lower as shown in the chart below.

During the same period in 2013 (August 14, 2013), the company stunned the tech industry when it also announced job cuts of 4,000 positions, even though it managed to top the analysts’ forecasts for that quarter. The result of this move is also a decline in Cisco’s stock.

(Chart taken from Yahoo! Finance)

Basically, every summer starting 2011 to 2014 and then this 2016, the multinational tech giant reveals massive reductions in the workforce. (July 2011= job cuts involving 6,500 employees; July 2012= a reduction of 1,300 positions.)

In general, when companies implement massive layoffs, it typically suggests weakness. With this, it is unsurprising that the company’s stock is moving to the downside each time it announces massive layoffs. Aside from serving as an indicator of weakness, some corporations also execute job cuts in order to minimize their expenses and increase revenues.

According to Adam Cobb, a management professor at Wharton, “Layoffs may look good on paper because they have an immediate effect on costs. Yet in reality there are a lot of costs that layoffs impose on firms that might not show up on an income statement quite as clearly.”

In short, some companies implement this as a strategy to respond to short-term pressures of ramping up profits, achieving earnings targets and making next quarter’s number.

Future Outlook on Cisco Stock

The recent online leak of NSA hacking tools, including one that specifically targets Cisco ASA software, coupled with the substantial reduction in the workforce should lead to a further decline in the networking company’s stock. Having said that, a Sell position is definitely recommended.

Source: www.fsmnews.com

Oil Prices Rally Over Output Freeze Calls

On Monday, oil futures traded higher as members of the Organization of the Petroleum Exporting Countries signaled for another probable discussion with the oil kingpins to reduce production.

As the over glut supply concerns persist, speculation arose in the market that the OPEC was planning to convince the major oil kingpins to cut their respective output.

Matt Smith of Clipper Data noted that OPEC members, including Venezuela, Ecuador and Kuwait are said to be behind this latest reincarnation. However, Mr. Smith was likely not convinced by the new effort of the members of OPEC.

“But just like previous endeavors, it seems doomed to fail, given key OPEC members (think: Saudi Arabia, Iraq, and Iran) persist in their battle for market share, ramping up exports apace.”

Meanwhile, aside from the glut supply concerns, the ramp up of oil drilling in the U.S. added to the factors which push the output even higher.

Based on the records of the Baker Hughes, the oil rigs operating in the U.S. met its highest since March. The data came after the rally of dollars over the strong job data last Friday.

Brent futures was up by 7 cents to change $44.34 per barrel while the U.S. West Texas Intermediate crude futures advanced 10 cents to $41.90 per barrel.

On the other hand, the demand for oil remains strong since 2015 and has continued for the last two quarters of 2016. The weekly report of the U.S. stockpile data would be closely watched by the oil experts alongside with the supply and demand levels released by the International Energy Agency.

In China, the trade balance surplus last July came at $52.31 billion higher than the estimated $47.6 billion. The imports decreased 12.5 percent, while exports lost 4.4 percent.

An analyst forecasted a possibility of a drop of demand between 1.1  percent to 1 percent from the second half of the year to the start of 2017 as the oil market digested the domino effect brought by Brexit. “In July following the UK Brexit vote, the IMF downgraded global growth by 10 basis points (bp) in 2016 and 20 bp in 2017. This has negative implications for demand.”

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Pfizer Beats Estimates over Upbeat Sales of Newer Drugs

American global pharmaceutical corporation Pfizer surpassed the forecasted profit of the market analysts on its recent second quarter earnings report. Due to the significant contribution of sales of the newly developed drugs, Pfizer posted revenue of $13.15 billion.

Advancing for almost 11 percent, the pharmaceutical company managed to beat the expected $13.01 billion declared by the analysts. Driver of this growth was the upbeat sales of the generic medicines which accumulated $6.04 billion, increasing for almost 15.7 percent.

Adding to this, the company had $7.11 billion total sales of the array of patent-protected drugs. This was in-line with the acquisition of the Hospira which had a total sale of $1.14 billion from its wide selection of drugs and equipment primarily used in the hospitals.

Moreover, Pfizer’s Ibrance made $514 million, beating the expected $496 million and almost three times higher than the $140 million from the same period in 2015. The company also exceeded the 2 cents per share concluded by the analysts from its cancelled transaction with Allergan when it announced 64 cents per share.

However, the total net income of Pfizer was down by 33 cents to $2.02 billion. The pain medicine Lyrica fell short from the expected $1.16 billion as it earned $1.05 billion while Prevnar vaccine gained $1.26 billion lower than the forecasted $1.58 billion.

Most of the investors kept their attention on the speculated split up of the company. Based on reports, Pfizer has been considering dividing the corporation into a research-driven treatment sector and to an older products specialist sector.

Pfizer Recent Acquisition

Recently, Pfizer completed the $150 million deal with Gene Therapy Firm Bamboo to expand the influence of the pharmaceutical company in the biotechnology. Mikael Dolsten, Pfizer’s head of research and development, stated ‘The field of gene therapy research has made tremendous strides in recent years, and we are pleased to be able to further enhance our leadership position in this area through this transaction with Bamboo.”

The company believed that the gene therapy holds the promise of bringing true disease modification for patients suffering from devastating diseases.

Jude Samulski, Bamboo’s chief scientific officer and a co-founder of the company added that recent acquisition represents a significant step toward bringing Bamboo’s portfolio into the clinic and, ultimately, potential new medicines to patients.

Pfizer Stock Performance

As the market watched closely on the earnings report of Pfizer, the shares of the stocks stayed flat at $37.21 moving away from the pre-market loss of 1.23 percent to $36.85. It has a market capitalization of 228.86 billion and a dividend yield of 3.22 percent.

Currently, the stock has a price earnings ratio of 30.57 with consensus price target of $39.07.  Pfizer has a 52-week high of $37.39 and its 52-week low stands at $28.25. It has an average trading volume capacity of 24.47 million shares.

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Samsung Highlights Smartphone’s Revenue

After the biggest quarterly earnings report for the last two years, Samsung Electronics seemed can’t get enough with the scheduled release of its Samsung Gear S3 smartwatch and Galaxy Note7.

Recently, the South Korean  multinational electronics company reported revenue growth of 5 percent to 50.94 trillion won. The operating profits of the company increased by 18 percent to 18.4 trillion won.

Samsung gained on the strong revenue brought by the mobile division led by the upbeat sales of smartphones. The segment’s operating margin rose by 16.2 percent on an annual basis with a solid 570 basis points. Adding to this, the  Edge version of the S7 had a warm acceptance in the market, stressing the friendly market price.

Clearly , the struggle of Apple to accumulate more profit on its iPhones was an advantage  to Samsung. Aside from the fact that Samsung offers lower price than Apple, the specs of its latest units went head to head with iPhones.

For the third quarter, the Korean company forecasted an increase of its ASPs as the market is looking forward to the launch of its phablet Note device next month and its latest gadgets in the coming months.

Further, the revenue of the semi conductor sector of  Samsung increased 6 percent to 12 trillion won on an annual basis. The said segment of the company experienced a headwind as the demand fro value-added memory products rallied alongside with the higher non-memory sales.

Samsung found support on its superior manufacturing capabilities despite the expected slump of PC and smartphone shipments soon. The company has placed its attention on the improvement of the V-NAND SSD and high-density mobile/server DRAM and has started maximizing its potential to practice 20-nm node technology.

Greg Roh, an analyst at HMC Investment shared ‘It will be harder for Samsung in the third quarter because of the stronger won and an increase in marketing costs. The key point will be whether components ‒ like semiconductors ‒ will be able to make up for the loss in profits from finished products.

The revenue for the non-memory semiconductor business advanced 27 percent to 3.57 trillion won on an annual basis, an evidence of the firm demand for high-megapixel sensors and  the 14-nm processors nowadays.

On the other hand, Samsung’s display unit lost 3 percent as the LCD business struggle to attain growth due to the demand for small size OLED panels.  As the LCD price falls, the operating margins drastically dropped 2 percent to 600 bps on an annual basis

.

Meanwhile, Samsung noted the strong sales of its television and component sales in the second quarter. ‘Looking ahead to the second half of 2016, the company expects its solid performance to continue mainly driven by earnings increase in the component business due to sales growth in high value-added products.’

Samsung is expected to launch its Gear S3 smartwatch in September. Tech experts predicted the specs of the new smart watch is not far from the previous Gear S2, thus, it will be run using Tizen OS with an ability to directly connect to the Internet without the intercession of a smart phone.

Moreover, the company was reported of filing a trademark called Samsung Cloud Together to be incorporated with the Galaxy Note 7 smartphone. The newest smartphone of the company is ecpected to have Gorilla Glass 5 protection with a USB-C to microUSB adapter.

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Can Go Pro Sustain Upbeat Earnings Report?

Go Pro Incorporated surpassed the expectations of the market analyst on its second quarter report disclosed recently. The manufacturer of action cameras posted a quarterly sales of $220.8 million, higher than the expected $194 million by the Wall Street analysts.

Though the stock beat the market expectations, it was till down by 47 percent compared to its quarterly sales a year ago. It was down by 52 cents per share, lower than the forecasted 58 percent  per share. The company did not release its third quarter forecast, however, experts believed it might lose $26 cents per share for the next quarter.

Meanwhile, Go Pro announced a full year revenue of $1.35 billion to $1.5 billion for the rest of the year. The estimates of the company was contradicted by the market analysts with their $1.34 billion sales prediction this year.

Go Pro Product Refresher

GoPro founder and CEO Nick Woodman sounded optimistic in the trend of the company for the rest of 2016.“GoPro is well-positioned for the second half of the year. We now have a simple product line, a clean retail channel and clear indications of strong consumer demand.” Woodman said.

“In the second quarter, revenue was up 20% sequentially to $221 million. We shipped 759,000 units, an 8% increase quarter-over-quarter, and our average selling price increased 11% sequentially. Second quarter revenue was down 47% year-over-year, largely due to continued channel inventory reductions of nearly 35% sequentially.”

In the middle of the strong competition with Garmin and Sony, Go Pro indicated its intention to become net income profitable on a GAAP and non-GAAP in the last quarter of 2016. Further, the company aims to go away from costly inventory as much as possible before the release of the new line of products in the fourth quarter.

Reports indicated that the company is gearing for its Hero 5 camera family and Karma flying camra drone soon. Go Pro clarified the details of these producr refresh it said “Hero 5 and Karma will contribute to the largest introduction of products in our history, all in time for what we believe will be GoPro's most exciting fourth quarter, ever -- a quarter where we expect to return to profitability.”

Go Pro Stock Performance

Shares  of Go Pro Incorporated advanced 1.21 percent in the ore market session and settled at $11.57, jumping 2.21 percent. Currently, the  American technology company has a market capitalization of 1.59 billion after disclosing the second quarter earnings report.

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Malaysia Airlines To Purchase Boeing 737 MAX

Malaysia Airlines signaled a possibility of acquiring Boeing units as part of its growth measure after the market opened on Monday.

According to the reports circulated in the media, the Malaysian Airline System Berhad will likely announce a plane order of Boeing B737 MAX later this week, Wednesday to be exact. The rumor came after the acquisition of Vietjet Air of 100 Boeing 737 MAXs, which cost $11.3 billion almost two months ago.

Prior to the report, Former MAS chief executive officer (CEO) Christoph Mueller has declared the intention of the company to purchase long-range narrow body aircraft in 2018 as it plan to expand its fleet probably in the sub-five hour routes in the Asian region.

Malaysia Airlines Chief Executive, Peter Bellew, admitted that the company was having a business negotiation with Bombardier, Airbus and Boeing. Mr. Bellew said ‘News should be confirmed next week…looking at new and second-hand lease or buying the aircraft.”

In-line with this, the airline firm may take an order of the new Airbus A321neo. Boeing’s B737 MAX and AirBus A321neo are among the long-range narrow body models available in the market.

On the other hand, Boeing hasn’t released an official statement regarding the possible order of Malaysian Airlines. Ken Morton, Boeing communications director, said that they do not want to comment or speculate on future sales or customer discussions in respect to the policy of the company.

Boeing and Airbus have been on strict competition among the aircraft manufacturers. Airbus generated 100 new orders of A3210 neo from Air Asia BHD, worth $12.6 billion. The two companies failed to accumulate a large number of orders at the at the Farnborough International Airshow compared to the past Airshow events.

At the same event, announced the recent upgrade of Boeing 737 Max. The narrow body jetliner will be stretched, whereas 12 more seats in two-class configuration will be added. If the plan of Boeing materializes, the company may acquire higher revenue.

Before the week ended, shares of Boeing lost 0.04 percent to $133.47 after opening much lower at $ 131.75. It had a price earnings ratio of 18.03 with a market capitalization of $84.98 billion. The stock has a dividend yield of 3.27 percent and its 50-day moving average was 130.44 while its 200-day moving average was 127.62.

The American airplane manufacturer has a 12-month low of 102.10 and a 12-month high of 150.59. Currently, the company operates under five segments namely Network & Space Systems, Boeing Capital, Global Services & Support, Defense, Space & Security and Commercial airplanes. Aircrafts which are sent to various airline industries are made under the Commercial Airplanes division.

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