Market Beats | iPhone Sales Drop 18% in China; Trump Plans to Tax Canada and Mexico on Feb 1st; Brevan Howard Cuts 7% Global Traders; Adidas Full Year Profit Beats Forecast; Blackstone Buys Hotel Eventi in Manhattan; NY Governor Plans $13.5mn Budget to Ban Phones in Class

—— iPhone Sales Drop 18% in China; Trump Plans to Tax Canada and Mexico on Feb 1st; Brevan Howard Cuts 7% Global Traders; Adidas Full Year Profit Beats Forecast; Blackstone Buys Hotel Eventi in Manhattan; NY Governor Plans $13.5mn Budget to Ban Phones in Class

1. iPhone Sales Drop 18% in China

Apple Inc. experienced a significant decline in iPhone sales in China during the December quarter, with sales dropping by 18.2%, according to Counterpoint Research. This downturn has caused Apple to lose its leading position in what is its second-largest market globally. A year prior, Apple’s flagship handsets were the top sellers in China, but they have now fallen behind Huawei Technologies Co., relegating Apple to third place in the world’s largest smartphone market.

This decline in China contributed to a global drop of 5% in iPhone sales during the crucial holiday shopping season. The latest generation of iPhones had initially launched strongly in China but lost momentum due to limited access to some of their new features. Notably, many of the artificial intelligence enhancements introduced with the new models are not currently available in China. Apple is actively seeking a local partner to provide the necessary on-device and cloud AI infrastructure, with discussions ongoing with major companies such as Baidu Inc. and Tencent Holdings Ltd., as well as startups like Zhipu AI. However, no agreements have been finalized.

Meanwhile, Huawei has capitalized on this opportunity, regaining the top spot for the first time since the US imposed sanctions on it. Counterpoint analyst Mengmeng Zhang highlighted that Huawei’s sales rose 15.5% year-over-year, propelled by the launch of its mid-end Nova 13 series and high-end Mate 70 series. This rebound for Huawei marks a significant shift in the competitive dynamics within the Chinese smartphone market.

______

2. Trump Plans to Tax Canada and Mexico on Feb 1st

President Donald Trump announced intentions to implement previously hinted-at tariffs of up to 25% on imports from Mexico and Canada starting February 1. He justified the move by claiming that these nations, which are among America’s largest trading partners and closest neighbors, have allowed substantial flows of undocumented migrants and drugs into the United States.

Speaking to reporters in the Oval Office, Trump articulated his reasoning for the tariffs, saying, “We’re thinking in terms of 25% on Mexico and Canada, because they’re allowing vast numbers of people across the border. I think we’ll do it Feb. 1.” This statement follows remarks made during his inaugural address earlier in the day, where he emphasized a shift in economic policy with a focus on using tariffs and taxes on foreign countries to benefit American citizens.

While he did not specify which countries would be targeted in his speech, his comments to reporters clearly identified Mexico and Canada as the subjects of the forthcoming tariffs.

______

3. Brevan Howard Cuts 7% Global Traders

Brevan Howard Asset Management has reduced its trading staff by about 7% following underperformance by two of its main hedge funds last year compared to peers. This reduction resulted in the dismissal of approximately a dozen traders from the firm’s global offices, which include New York, London, and Abu Dhabi. This information comes from sources familiar with the situation who requested anonymity due to the private nature of the details.

Following the cuts, Brevan Howard’s trading team now numbers almost 150. These dismissals are part of the firm’s regular biannual review process, during which it previously made similar reductions.

The decision places Brevan Howard alongside other industry players such as Bridgewater Associates and Two Sigma Investments, which have also recently reassessed their staffing levels after periods of significant growth. Under the leadership of CEO Aron Landy, Brevan Howard has expanded significantly, managing $35 billion in assets up from $6 billion in 2019, and growing its workforce from 150 to over 1,000 employees.

Brevan Howard, a macro trading firm, is known for its dynamic management of a diverse array of asset classes and is considered a multistrategy hedge fund. The firm has seen strong demand from investors seeking stable and diversified returns and is known for its high turnover of traders, actively competing for top talent and not hesitating to release underperformers.

______

4. Adidas Full Year Profit Beats Forecast

Adidas AG has reported stronger-than-anticipated results, buoyed by the continued popularity of retro sneakers such as the Samba and increased sales from its remaining Yeezy inventory.

The German sportswear giant announced an operating profit of €57 million ($59 million) for the fourth quarter, leading to a total annual operating profit of €1.3 billion—surpassing the company’s own forecast from October. Adidas achieved currency-neutral revenue of €6 billion for the quarter, exceeding analyst expectations, which averaged €5.3 billion. Following this announcement, the company’s American depositary receipts rose by 5.5% after trading hours in Europe.

Under the leadership of Chief Executive Officer Bjorn Gulden, Adidas has been focusing on a fundamental approach centered on sports and the development of new footwear and apparel. This strategy aims to narrow the competitive gap with Nike Inc., which has recently faced struggles.

After a challenging 2023, exacerbated by the termination of its lucrative Yeezy partnership with Ye, formerly known as Kanye West, Adidas is optimistic about achieving growth in 2024.

______

5. Blackstone Buys Hotel Eventi in Manhattan

Blackstone Inc. has reached an agreement to purchase the Kimpton Hotel Eventi in New York City, capitalizing on the strong travel demand that continues to make Manhattan hotels a prime target for property investors. The alternative asset manager is set to acquire the 292-room hotel from DLJ Real Estate Capital Partners for approximately $175 million, as confirmed by a Blackstone representative.

This acquisition is part of a broader trend of heightened investor interest in Manhattan’s hotel market, where booking levels are nearing those seen in 2019. Contributing to the appeal are zoning changes that have curtailed new hotel developments, thus limiting new supply and enhancing the value of existing properties. This dynamic has led to a flurry of activity, with recent purchases including the 1 Hotel Central Park and the Thompson Central Park.

The purchase of the Kimpton Hotel Eventi follows Blackstone’s recent investment spree in New York, including a $200 million acquisition of a four-property retail portfolio in SoHo. Additionally, last year, Blackstone extended its lease and expanded its office space at its Manhattan headquarters.

Michelle Gelshteyn, a managing director at Blackstone, emphasized the firm’s commitment to New York City and the favorable conditions in the hotel market. “This transaction reflects our longstanding conviction in New York City and growth in travel,” she stated. “Hotel demand in New York is nearing pre-COVID levels while no new hotel construction permits have been filed in the last three years, creating a compelling backdrop for fundamentals.”

______

6. NYC Mayor Unveils $114.5bn Budge Plan

New York City Mayor Eric Adams has unveiled a proposed budget of $114.5 billion for the fiscal year starting July 1, which reflects an increase of over $2.5 billion from the current budget approved last June. This proposal, which now awaits City Council approval, marks a shift in focus from previous budgets under Adams’ administration, which primarily concentrated on agency savings and spending cuts.

For the first time since his tenure as mayor began, Adams’ budget doesn’t revolve around cost-cutting measures. He attributes this change to prudent fiscal management by his administration and a strong economy. However, critics argue that the increase in spending is the result of years of overly conservative budgeting practices.

A key factor contributing to the ability to allocate additional funds for social services is the lower-than-expected expenses for migrants. The city has welcomed over 230,000 migrants since April 2022, with the administration spending $6.91 billion on related costs from July of that year through December. This amount is significantly lower than the projected $12 billion that was anticipated to be spent by July of this year. This surplus has enabled more flexible spending in other areas of the budget.

______

7. NY Governor Plans $13.5mn Budget to Ban Phones in Class

New York Governor Kathy Hochul has proposed allocating $13.5 million in her upcoming budget to assist school districts in enforcing a classroom ban on cell phones. This initiative aims to create a distraction-free learning environment for students. The budget allocation, pending legislative approval, is intended to cover the expenses associated with implementing the ban, such as acquiring materials to securely store phones during school hours.

The proposed ban would impact approximately 2.5 million students across New York’s 4,400 public schools. Governor Hochul, who advocated for this policy last year, highlights its potential benefits for both mental health and academic performance by mitigating the distractions caused by excessive screen time.

This concern is supported by findings from a Pew Research Center survey, which indicates that 70% of high school teachers and one-third of middle school teachers view student distraction by cell phones as a significant issue in their classrooms.

______