Apple falls on fines and interest rates give GBP a pounding

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Apple Sinks From A Barrage of Fines and Lawsuits

Apple Inc (AAPL) is hitting the news headlines for the wrong reasons.

Just recently on the March 4, the European Commission fined the Cupertino-based company €1.8 billion ‘for abusing its dominant position on the market for the distribution of music streaming apps to iPhone and iPad users (‘iOS users’) through its App Store. Apple’s monopolistic position is causing users to pay higher prices.

This week, the US Justice Department filed a ‘civil antitrust lawsuit against Apple for monopolization or attempted monopolization of smartphone markets in violation of Section 2 of the Sherman Act.’

These are some very serious lawsuits and fines. Undoubtedly all these legal entanglements are causing investors to take a dimmer view of the tech company.

Moreover, the iPhone maker has to contend with slower sales in China. In its latest 10-Q (quarterly filing), the once-largest company reported a quarterly sales drop of 13 percent in Greater China year-on-year. That’s a greater shrinkage than many had anticipated.

Taken together, it is quite clear that the tech company is facing increasing headwinds in 2024. Apple’s share price has encountered stiff resistance at $200 – and possibly another at $180. These unfavourable expectations are causing its share price to slowly unwind last year’s rally. While prices have bounced off the broad $165-170 sideways support in October; this time, a positive catalyst is needed to reverse the broad toppy formation and to prevent a further technical deterioration.

Lower UK Interest Rates Weakens the Pound

Even though the Bank of England has maintained the policy base rate at 5.25 percent yesterday (Thursday), it is preparing the groundwork for rate cuts later this year.

In a follow-up interview with the Financial Times, the governor of the central bank opined that the tight monetary policy has worked in clamping down the overall inflationary pressure and the wage spiral. While this statement may have a grain of truth in it, the fact that the UK economy is in a minor recession in the second half of 2023 could have played a greater role in pulling prices lower.

The Swiss National Bank has already pre-empted other central banks by cutting its policy rate by 25 basis points yesterday. With the herd mentality strong among the global monetary institutions, it will not be long before modest rate cuts in Europe and US are put into effect.

Marketwise, the prospect of lower interest rates have dented traders’ opinion on Pound Sterling, which has taken a knock against the Dollar.

The rate has been rising modestly in the run-up to the March MPC meeting, hitting the 1.280 resistance. The latest corrective drop, however, pulls the rate right back into the 1.25 range. Will it break this level? Possibly, although a couple more attempts are needed to do so. If this floor goes, the next one is observed at 1.22.

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