6:48 AM ET Fri, 19 April 2019
China’s economy might get more attention, but India’s is outpacing its neighbor in economic growth. In fact, India came in as the world’s fastest growing large economy during 2018, according to the IMF. India’s prime minister faces criticism for a lack of job creation and the workforce remains largely in the informal sector. This year, India faces an important election. Beyond recent tensions with Pakistan, the economy is a key campaign issue.
Google stops some business with Huawei, may hit smartphones business
Richard Yu, chief executive officer of Huawei Technologies Co., speaks as he presents the P30 series smartphone during a Huawei Technologies Co. launch event in Paris, France, on Tuesday, March 26, 2019.
Marlene Awaad | Bloomberg | Getty Images
Google’s move to stop licensing its Android mobile operating system to Huawei could deal a huge blow to the Chinese tech giant’s ambitions to become the top player in smartphones globally.
The U.S. tech conglomerate has suspended business activity with Huawei that involves the transfer of hardware, software and key technical services. Google made the move in order to comply with Washington’s decision to put Huawei on the so-called “Entity List,” meaning American firms need to get a license to sell products to the Chinese firm.
It means Huawei can no longer license Google’s proprietary Android operating system and other services that it offers. Instead, Huawei is now only able to use a public version of Google’s operating system through the Android Open Source Project. It means future Huawei phones will not have the Google services that users have come to expect on Android devices.
“We are complying with the order and reviewing the implications,” a Google spokesperson said on Monday. “For users of our services, Google Play and the security protections from Google Play Protect will continue to function on existing Huawei devices.”
Huawei declined to comment when contacted by CNBC.
It’s a huge blow to the Chinese firm, which relies heavily on Android for the smartphones it sells outside of China. Within China, the company uses a modified version of Android that doesn’t have Google apps pre-installed because the search giant’s services are blocked there. But in markets outside of China, Huawei’s smartphones run Android complete with Google apps.
Just over 49%, of Huawei’s smartphone shipments in the first quarter of 2019 were to international markets outside of mainland China, according to Canalys. Huawei was the second-largest smartphone maker by global market share in the first quarter. The company has previously laid out its ambitions to become the top player in smartphones by 2020. But the latest move by Google could put a dent in that.
“It will be like an instant kill switch for Huawei’s ambition to overtake Samsung in the global market,” Nicole Peng, vice president of mobility at Canalys, told CNBC by phone on Monday.
Huawei relies on key components from several other American suppliers for everything from smartphones to its networking equipment. It counts over 30 American firms among its “core suppliers.” Some of those suppliers, including Qualcomm and Intel, have told employees they will not sell to Huawei until further notice, according to a Bloomberg report on Monday.
Is Huawei prepared?
Huawei, for its part, says it has been preparing for the sort of situation it now faces. In March, the company said that it had developed its own operating system for its consumer products if there came a time it was not able to use Google’s or Microsoft’s.
And just last week, the Nikkei Asian Review reported that Huawei told some suppliers six months ago that it wanted to build up a year’s worth of crucial components to prepare for any issues related to the U.S.-China trade war. Huawei has been developing its own chip technology, as well.
While Huawei has been able to reduce its reliance on American suppliers for some components, experts said that might not be enough because it still needs other parts from U.S. firms. And analysts have also cast doubt on the viability of Huawei’s own operating system.
Neil Shah, a research director at Counterpoint Research, said Huawei will have to rely on third-party Android app stores outside of China because Google Play will not be installed by default. That could be a problem.
“This makes a clear disadvantage for Huawei’s own (operating system) vs the Android (operating system) shipped on Samsung or other phones firstly in terms of lack of all the apps available on the Google Play store, quality of apps (some might be dated), potentially less secure as they will not be screened by Google or follows Google’s monthly secure patches and overall user-experience of the store,” Shah said.
“So all the apps from US players will not be available out of the box and users will have to sideload it or Huawei will have to make it available via third party or own branded Android compatible app store which is going to be a humongous task for Huawei,” he added.
JP Morgan says prices are only supported in the near term
Oil prices jumped on Monday after Saudi Arabia indicated a possible rollover of output curbs amid political supply risks, but that support is likely to be short-lived due to fundamental changes in the energy industry, an expert said on Monday.
“It’s alright to talk about supply-side risks, but that’s sort of near-term … I don’t think expectations for oil prices have actually gone up,” said Scott Darling, J.P. Morgan’s head of Asia Pacific oil and gas research.
That’s because of the rise of U.S. shale energy and slowing demand due to global economic uncertainties, Darling told CNBC’s “Squawk Box.” J.P. Morgan expects OPEC to extend its oil output cuts to 2020.
Oil prices jumped on Monday after Saudi Energy Minister Khalid al-Falih indicated there was a consensus among OPEC and allied oil producers to continue limiting supply.
Falih said the main option discussed at a ministerial panel meeting during the day was for a rollover of the output curbs agreed by OPEC and non-members in the second half of 2019. Still, he said, “things can change by June.”
OPEC, Russia and other non-member producers, an alliance known as OPEC+, agreed to reduce output by 1.2 million barrels per day from Jan. 1 for six months, a deal designed to stop inventories building up and weakening prices.
Brent crude futures were at $73.23 a barrel at 12:06 p.m. HK/SIN, up $1.02, or 1.4%, from their last close. Brent closed down 0.6% on Friday.
J.P. Morgan’s forecast for Brent crude is $75 per barrel by the end of the second quarter of 2019. For the full year, however, Brent crude will average $71 a barrel for 2019 and will weaken to $60 a barrel from 2021, said Darling.
Darling’s comments come as the market expects Iranian oil exports to drop further in May and Venezuelan shipments could fall again in coming weeks due to U.S. sanctions.
Moreover, tensions between Saudi Arabia and Iran are running high after last week’s apparent attacks on two Saudi oil tankers off the UAE coast and another on Saudi oil facilities inside the kingdom.
Riyadh accused Tehran of ordering the drone strikes on oil pumping stations, for which Yemen’s Iran-aligned Houthi group claimed responsibility. The UAE has blamed no one for the tanker sabotage. Iran has distanced itself from both sets of attacks.
The attacks come as the United States and Iran spar over Washington’s tightening of sanctions aimed at cutting Iranian oil exports to zero, and an increased U.S. military presence in the Gulf over perceived Iranian threats to U.S. interests.
Still, the current price support is likely short-lived due to the rise of U.S. shale energy, which has shortened the market cycle for oil, according to the J.P. Morgan expert.
“It’s difficult to make a case why oil prices materially move up from here,” said Darling.
—Reuters contributed to this report.
What exit polls tell us about Narendra Modi’s chances
Prime Minister of India Narendra Modi waves his hand after casting his vote during the presidential election, at the Parliament House on July 17, 2017 in New Delhi, India.
Sonu Mehta | Hindustan Times | Getty Images
Exit polls from India’s month-long parliamentary elections suggest that Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) and its allies are set to form the government again. Political consultancy Eurasia Group, however, said that election watchers should exercise some caution around those predictions.
Local Indian media reported that exit polls predicted a clear majority for the BJP-led National Democratic Alliance. It is expected to win nearly or above 300 seats in India’s lower house of parliament, or Lokh Sabha as it is known, according to the Economic Times.
“The exit polls released are in line with our belief that Modi’s BJP will be the single largest party, while it will have to rely on allies to form the government,” Akhil Bery, South Asia analyst at Eurasia Group, said in a note on Sunday. “However, it is important to recognize that exit polls in India have not had the best history in predicting the elections.”
More than 8,000 candidates contested for a total of 543 seats in the elections. The polls spanned over seven phases, which began on April 11 and ended on May 19. To form a government, a party or a coalition needs to win 272 seats. Votes are set to be counted on May 23.
Bery pointed to previous elections where exit polls either completely missed the mark or failed to accurately predict an outcome.
In 2004, when the NDA was expected to win between 230 and 275 seats, they ultimately won only 187 seats and were unable to form the government, he said. In the 2014 elections, while exit polls predicted that the NDA would win, only one of them was able to accurately forecast the extent of Modi’s victory, according to Bery.
Still, the scale of the NDA’s projected seat count would mean that “every exit poll would need to be extremely wrong for a NDA coalition not to return,” he added.
In April, before the elections began, opinion polls stated that Modi and his coalition were expected to win by a very slim majority. But some analysts pointed out that exit polls, despite being inaccurate in some cases, have a better track record than opinion polls.
Indian markets cheered the exit poll numbers on Monday as the benchmark Nifty 50 jumped 1.71% in morning trade while the Sensex was up 2.1%.
In the currency market, the Indian rupee strengthened against the U.S. dollar, trading at 69.60 at 12:06 p.m. HK/SIN — that was comparatively stronger than the 70.20 level the currency pair traded at late last week.
The rupee’s strength was reflective of a “higher likelihood of a strong mandate for the incumbent coalition and prospects of policy continuity,” according to analysts from Citi.
Ahead of this week’s final election results, Sonal Varma, managing director and chief India economist at Nomura, highlighted three likely scenarios, and their ramifications on India’s policy and economic paths. In the event that the NDA is able to form a government with a clear majority, there would be policy continuity, she said.
“Rural reflation, infrastructure spending, streamlining of the goods and services tax, direct tax reforms and the consolidation of public sector banks are likely to be key priorities,” Varma wrote in a Monday note.
If the NDA’s power is reduced, the pace of reforms will likely slow, she added. On the other hand, a government led by the Indian National Congress and its allies could potentially lead to “policy paralysis” and stall progress on key reforms like the goods and services tax, Varma said.
Opposition mocks exit polls
The exit polls have predicted it is likely the BJP may have made major gains in the eastern states of West Bengal and Odisha.
West Bengal, particularly, had been an important battleground for Modi because it sends 42 elected representatives to the lower house of parliament. Progress in West Bengal was said to help the BJP offset some of the seats it expected to lose in India’s most politically important state — Uttar Pradesh.
Opposition parties, however, have dismissed the results from the exit polls. West Bengal’s chief minister, Mamata Banerjee, who is also a bitter rival of Modi, said on Twitter that the fight was not over.
Meanwhile, Congress spokesman, Sanjay Jha, called the exit polls “almost laughable.”
— Reuters contributed to this report.
World5 days ago
Auto tariffs threat on Europe could be Trump ‘Trojan horse’: Expert
World6 days ago
Markets send clear signal to US and China on the trade war
World1 week ago
YouTube faces existential threat from the EU’s new copyright directive
Politics4 days ago
LABOUR CRISIS: Ex-minister QUITS ‘cult’ party after 45 years over Corbyn anti-Semitism row
World4 days ago
China media taking an aggressive tone on new tariffs
World6 days ago
Next European Commission President: candidates and process
World5 days ago
DoubleLine’s Gundlach warns of recession, ‘cocktail of economic risk’
Politics4 days ago
With eye on China, Trump escalates cybersecurity battle with executive order