Missed Delivery

FedEx's weak quarter

Image source: Ninja Artist, Picsfive, Luca Lorenzelli - Shutterstock

What's going on?

FedEx dropped off a disappointing quarterly update late on Tuesday – and investors were none too happy with the service, sending its shares down 13% on Wednesday.

What does this mean?

FedEx’s revenue and profit last quarter fell short of investors’ expectations. A continued slowdown in global economic growth was partly to blame – along with the protracted US-China trade war, whose import taxes (a.k.a. tariffs) have made cross-border shipping a lot more expensive and in turn discouraged spending.

And the pressures on FedEx are only rising: new tariffs this month may crimp global trade further, and there’s now an Amazon-shaped hole in this year’s profit. No surprises, then, that FedEx delivered a damning forecast for the rest of 2019: it’ll earn less than investors estimated, and less than the company itself previously predicted.

Why should I care?

For markets: Nobody’s home.

On Wednesday, shares of Kuehne + Nagel and DHL-owner Deutsche Post – FedEx’s Swiss and German rivals – fell by 3% and 1% respectively. That’s probably because parts of Europe are bearing the brunt of the US-China back-and-forth. China represents almost 35% of the eurozone economy, and its own economic slowdown has likely led to a reduction in shipping – and therefore less business for the region’s logistics companies. Likewise, shares of Denmark’s Maersk – the world’s largest container shipping firm which has remained seaworthy even after anticipating rough seas earlier this year –  sank 2% on Wednesday.

Zooming out: Don’t leave with the neighbor.

The UK is mostly insulated from the trade war: its own geopolitical tussle with Europe is keeping it busy. Depending on the outcome, the country may yet strike a trade deal with the US before China does. And Britain might need it: DIY chain Kingfisher reported weak results on Wednesday thanks to lagging consumer spending – despite average product prices in the UK rising at the slowest rate since 2016 last month.

Originally posted as part of the Finimize daily email.

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