US stocks fell sharply Tuesday following the news of Iran launching missiles at Israel.

The Dow Jones Industrial Average declined by 238 points, or 0.4%, while the S&P 500 slipped 1.1% and the Nasdaq Composite tumbled 1.9%.

West Texas Intermediate crude oil surged after reports that Iran fired missiles at Israel, according to the Israel Defense Forces.

The CBOE Volatility Index (VIX), often called Wall Street’s fear gauge, jumped above 20, reflecting heightened concerns among traders.

Iran’s missile attack sends shockwaves

The attack on Israel comes at a time when the global economy is already grappling with high inflation and fears of an economic slowdown.

Iran’s decision to launch missiles followed Israel’s military incursion into southern Lebanon, which targeted Hezbollah, an Iranian-backed militant group.

According to the Israel Defense Forces (IDF), the missiles were launched from Iran, prompting warnings for people to seek shelter immediately.

Financial markets have been quick to react, with the Dow falling sharply by mid-morning.

The S&P 500 dropped by 1.4%, and the Nasdaq followed suit, losing over 2% as investors scrambled to adjust their portfolios in response to the geopolitical developments.

Energy stocks benefited from the rising oil prices, but other sectors, such as technology and consumer goods, saw significant declines.

Impact of Middle East tensions on stock market

Historically, conflicts in the Middle East have had profound effects on global markets, especially on oil prices and defense stocks.

The latest missile attack has reignited these concerns, with investors bracing for possible supply disruptions in the energy sector, which could lead to even more volatility.

The broader market selloff reflects the uncertainty surrounding the potential ramifications of the conflict.

As tensions rose between Iran and Israel, defense stocks saw a notable uptick in early trading.

Major defense contractors, such as Lockheed Martin and Raytheon Technologies, experienced gains amid speculation that the conflict could lead to increased military spending.

In contrast, sectors more sensitive to consumer confidence, including retail and hospitality, were hit hard as investors shifted towards safer assets like gold and bonds.

Meanwhile, US crude oil prices surged over 5% on Tuesday following Iran’s missile strike on Israel.

Energy prices responded swiftly to the developments, with West Texas Intermediate (WTI) November contracts rising to $71.74 per barrel, a gain of 5.24%, while Brent December contracts climbed 5.03% to $75.31 per barrel.

Source: CNBC

Defensive strategies gain momentum

In light of the growing risks, investors have increasingly adopted defensive strategies.

Safe-haven assets such as gold saw a boost in demand, with prices rising by over 1% following the missile attack.

Bonds also benefited, as investors moved away from riskier assets like equities.

Meanwhile, exchange-traded funds (ETFs) focused on the defense sector saw an influx of capital as market participants sought exposure to companies likely to benefit from increased military spending.

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Samsung Electronics Co. is poised to significantly reduce its global workforce, with layoffs planned across Southeast Asia, Australia, and New Zealand.

Sources close to the situation told Bloomberg that approximately 10% of the company’s employees in these regions could be affected.

While job cuts will vary by subsidiary, similar reductions are anticipated in other international markets.

Samsung, a South Korean tech giant, employs more than 267,800 people globally, with over half of its staff—around 147,000—based overseas, according to its latest sustainability report.

However, there are no immediate plans for layoffs in its domestic market.

Private meetings inform employees of retrenchments

In Singapore, Samsung employees from various departments were reportedly summoned to private meetings with HR and management on Tuesday, where they were informed about the upcoming layoffs and severance packages.

According to one insider, the move is part of routine workforce adjustments aimed at improving operational efficiency.

“Some overseas subsidiaries are conducting routine workforce adjustments to improve operational efficiency,” a Samsung spokesperson told Bloomberg, adding that the company has not set a specific target for cutting certain positions.

Market struggles weigh heavily on Samsung’s performance

The planned layoffs come as Samsung faces significant challenges in the global market.

The company, the world’s largest producer of memory chips and smartphones, has seen its shares tumble by more than 20% this year.

Struggles in the artificial intelligence sector have particularly affected its performance, as the company finds itself lagging behind competitors.

Samsung has notably lost ground to SK Hynix Inc., a domestic rival that has taken the lead in producing high-bandwidth memory chips, essential components for artificial intelligence training alongside Nvidia Corp.’s AI accelerators.

Furthermore, Samsung has struggled to compete with Taiwan Semiconductor Manufacturing Co. in the production of custom-made chips for external clients.

Samsung’s Executive Chairman, Jay Y. Lee, grandson of the company’s founder, now faces the challenge of steering the tech giant through these difficult times.

Lee, who was recently acquitted of stock manipulation charges, has taken the helm at a critical juncture as the company fights to regain its competitive edge.

In response to the company’s recent setbacks, Samsung made a leadership change earlier this year, replacing the head of its chip division. Jun Young-hyun, the new chief of the chip business, has emphasized the need for a cultural shift within the company to avoid falling into a “vicious cycle.”

Workforce reductions, labor disputes add to Samsung’s troubles

Samsung has a history of reducing its workforce during difficult periods in the volatile memory chip market.

Earlier this year, the company reportedly trimmed 10% of its jobs in India and parts of Latin America.

However, the latest round of cuts is expected to impact less than 10% of its overseas workforce of 147,000.

The reductions will primarily target management and support roles, while the company aims to protect its manufacturing jobs.

In addition to workforce reductions abroad, Samsung has been embroiled in labor disputes at home.

The largest union representing the company’s employees in South Korea called for its first-ever strike in May, further complicating matters for the tech giant.

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Chinese stocks listed in Hong Kong surged dramatically, marking their largest rally in almost two years, as traders returned from a national holiday.

Fueled by stimulus-driven optimism, the Hang Seng China Enterprises Index shot up by as much as 8.4%, extending a remarkable 13-day winning streak.

Leading the gains were property developers, with a sectoral index rising by an unprecedented 31% in intraday trading, while a gauge tracking brokerage shares—a key indicator of risk appetite—soared 28%.

Meanwhile, mainland Chinese markets remained closed for a week-long holiday until October 8.

Government stimulus fuels investor confidence

This ongoing rally is largely credited to renewed confidence in China’s economy following the government’s introduction of significant stimulus measures last week.

Among the steps taken were interest rate cuts, an increase in liquidity for banks, and various forms of financial support for stock markets.

Additionally, home-buying restrictions in four major cities were relaxed, and the central bank reduced mortgage rates to stimulate the property sector.

Investment strategist Billy Leung from Global X Management in Sydney noted that these developments are pushing investors back into Chinese assets.

Bloomberg report quoted Leung as saying:

What we’re witnessing is a fundamental shift in investor sentiment. Hedge funds and mutual funds that had been underweight in Chinese assets are now increasing their exposure.

He also emphasized the broader market reversal in key sectors such as copper and Asia-Pacific currencies, driven by China’s economic recovery.

Valuations make Chinese stocks attractive to global investors

The appeal of Chinese stocks is further amplified by their relatively low valuations after a prolonged three-year downturn.

Even with the recent upswing, the Hang Seng China Enterprises Index is still trading at less than nine times its projected earnings over the next 12 months.

By comparison, the S&P 500 is trading at more than double that, according to Bloomberg data.

Signaling growing interest, hedge funds have been pouring into Chinese equities at an unprecedented pace.

Billionaire investor David Tepper has reportedly increased his exposure to China, while BlackRock Inc., the world’s largest asset manager, has also taken an overweight position in Chinese stocks.

Other major players, including US-based Mount Lucas Management, Singapore’s GAO Capital, and South Korea’s Timefolio Asset Management, are also making bullish moves on Chinese large-cap stocks and exchange-traded funds (ETFs).

China regains its position in emerging market indices

China’s rapid rally has also led to the recovery of its weighting in key emerging-market indices, a position it had lost over the last 10 months.

Data compiled by Bloomberg shows that by the end of September, China’s share of MSCI Inc.’s benchmark for developing-nation equities had risen to 27.8%, the highest level since November 2023.

In a client note, Sylvia Sheng, global multi-asset strategist at J.P. Morgan Asset Management, echoed this positive sentiment.

“We are becoming more optimistic about China’s economic outlook,” Sheng wrote.

She pointed to recent signals from Chinese authorities, including their increasing focus on supporting economic growth and stabilizing the troubled property sector, as pivotal in lifting market sentiment and sustaining upward momentum in equities.

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Chinese companies have poured more than $100 billion into overseas clean energy technology projects since the beginning of 2023, according to research from Australian group Climate Energy Finance (CEF).

The surge in investments is driven by a need to navigate tariffs imposed by the United States and other countries on Chinese-made products.

As the world’s largest producer and exporter of key green technologies such as solar panels, lithium batteries, and electric vehicles, China’s manufacturing capabilities lead the global market by a considerable margin.

The CEF report highlights that China dominates 32.5% of global electric vehicle exports, 24.1% of lithium battery production, and 78.1% of solar panel manufacturing.

Trade tensions escalate with major economies

Despite its leadership in cleantech, China’s growing influence has raised concerns among its trading partners, with allegations that it leverages surplus production to flood international markets and undercut competitors.

In response, the United States and Canada have imposed 100% tariffs on Chinese electric vehicles, while tariffs on solar panels and lithium batteries are set at 50% and 25%, respectively.

The European Union is also preparing to vote on similar trade measures in the coming days.

CEF analyst Xuyang Dong explained that Chinese private firms are ramping up foreign investments to mitigate these rising trade barriers.

Dong told Reuters:

The investments from Chinese private companies are largely driven by the need to circumvent trade barriers.

For example, electric vehicle giant BYD is investing $1 billion in a new plant in Turkey to avoid a proposed EU tariff of nearly 40%, while battery maker CATL is setting up factories in Germany, Hungary, and other countries.

China’s cleantech dominance sparks concerns of oversupply

China’s dominance in the cleantech industry is not without its challenges.

A separate study by the Grantham Institute in the UK projected that by 2030, two-thirds of China’s cleantech production capacity will exceed its domestic needs, forcing the country to seek additional export markets.

Solar production alone is expected to reach 860 gigawatts.

While this capacity surplus positions China as a formidable player in global cleantech, it also intensifies trade disputes, particularly in regions where domestic manufacturers are struggling to compete with China’s low-cost exports.

China criticizes tariffs, citing climate concerns

In response to the escalating tariffs, China has pushed back, arguing that restrictions on its exports will slow down global efforts to combat climate change.

Senior Chinese climate envoy Liu Zhenmin warned in March that decoupling from China’s manufacturing capabilities could increase the global cost of transitioning to cleaner energy by 20%.

As the world seeks to accelerate the shift to renewable energy, China’s cleantech investments and its role in the global supply chain remain central to the conversation.

However, ongoing trade tensions pose a significant challenge to the international cleantech market’s stability and future growth.

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Earlier this month, Apple was ordered to pay €14bn in back taxes to Ireland, following a long-standing legal battle with the European Commission.

The unexpected financial windfall is set to play a crucial role in Ireland’s infrastructure development, as outlined by the country’s finance minister, Jack Chambers, during his budget speech.

Chambers hailed the tax settlement as “transformational,” and emphasized that the funds would be invested in critical public infrastructure, including water, transport, energy systems, and housing.

The decision comes just weeks after Ireland lost its appeal in the European Court of Justice (ECJ), which ruled that the tech giant had benefited from unlawful tax breaks.

Ireland’s finance minister calls the revenue “transformational”

Speaking in the Dáil, Ireland’s parliament, Jack Chambers highlighted the impact of the court ruling:

The recent judgment from the court of justice for the European Union has provided the state with one-off revenue that has the capacity to be transformational.

He further underlined the importance of investing in infrastructure to secure Ireland’s future economic performance.

He warned, however, that the government would not use the tax windfall for short-term political gain.

“It is imperative that this revenue is not used for day-to-day expenditure or to narrow the tax base,” Chambers added, signaling that Ireland would avoid using the funds for giveaways ahead of the upcoming general election, expected in November.

The €14bn boost to Ireland’s infrastructure plans

Chambers outlined that the €14bn from Apple would be banked in two stages – €8bn this year and the remaining €6.1bn next year.

This additional revenue will give the Irish finance department a projected €105bn in tax revenue for 2024, boosting the country’s ability to invest in key infrastructure projects.

The windfall is being coupled with strong corporate tax receipts.

Ireland’s tax take has surged by 28% year-on-year, driven by multinationals like Apple and other tech companies.

The country expects to collect €38bn in corporate taxes for the year, half of which comes from its top 10 companies, including Microsoft, Intel, and Pfizer.

Chambers reiterated the government’s position that foreign investment was central to the success of such a small economy as Ireland’s.

“Our economic enterprise and industrial model is central to future progress. It has transformed our country from where we were 200 years ago.”

In addition to the Apple settlement, Chambers revealed that €3bn from the state’s sale of shares in Allied Irish Banks (AIB) – bailed out after the 2008-09 financial crisis – would also be allocated to infrastructure projects.

Apple’s €14bn tax repayment comes amid EU crackdown on tax deals

Last month, Apple lost a high-profile tax battle with the European Commission, as the ECJ ruled that Ireland had granted the company unlawful tax benefits.

The decision was seen as a significant victory for the European Commission in its broader campaign to curb so-called “sweetheart” deals offered to multinational corporations.

The European Union has long been concerned about how some member states, including Ireland, have used low tax rates to attract major corporations like Apple, Microsoft, and Intel.

The ECJ’s ruling forces Ireland to recover the lost taxes, which the Irish government had fought for years to avoid.

Why Ireland initially resisted the tax repayment

Ireland’s stance throughout the legal proceedings was that Apple should not have to repay the back taxes.

The government had argued that the favorable tax treatment was essential to making the country an attractive destination for foreign investment.

Ireland, which has one of the lowest corporate tax rates in the EU, serves as Apple’s base for operations across Europe, the Middle East, and Africa.

Though corporate tax rates are set by individual nations, the European Union has the authority to regulate state aid.

The ECJ ruled that by applying an exceptionally low tax rate to Apple, Ireland had effectively granted the company an unfair subsidy.

This decision represented a landmark victory for the EU in its efforts to ensure fair taxation across its member states.

Despite Ireland’s opposition to the ruling, the government now appears ready to move forward.

Chambers described the issue as “now of historical relevance only,” and confirmed that the process of transferring Apple’s assets to Ireland would begin.

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