This is an audio transcript of the FT News Briefing podcast episode: ‘Apple and Tesla start 2023 on the wrong foot’

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, January 4th, and this is your FT News Briefing.

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The UK says the country’s health service is overwhelmed but is getting properly funded. Tesla and Apple stocks took a beating on the first trading day of the new year. Plus, retail investors are pouring into the commodities market and it may have some unintended consequences.

Madison Darbyshire
So there are people who are not sure that allowing people to bet on what is essentially the livelihood of farmers is the right thing to do.

Marc Filippino
I’m Marc Filippino and here’s the news you need to start your day.

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Downing Street has admitted that some people could find it very difficult to access the NHS this winter. UK Prime Minister Rishi Sunak is giving a speech today. He’ll try to set out his vision for the country in 2023 as it faces a health crisis that’s getting worse. Downing Street has said Sunak was confident the NHS had the funding it needed. Health leaders said the NHS is facing the worst crisis in its history. Reports show that waiting times for admission to emergency departments have reached unprecedented levels. And analysts told the FT that the combination of healthcare workers strikes, the pandemic and a decade of budget cuts means that it doesn’t take much to push the system over the edge.

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Tesla stock fell more than 12 per cent yesterday. It seems the market was responding to Monday’s news that the electric car maker’s new vehicle deliveries fell short of Wall Street expectations last quarter. Tesla said it delivered 15,000 fewer new vehicles than Wall Street had pencilled in. Tesla struggled a lot with production in 2022. It closed its largest plant located in Shanghai for an extended period of time. And vehicle deliveries coming up short might not have come as a huge surprise for chief executive Elon Musk. Last month, he warned of stormy weather ahead as higher interest rates weigh on demand.

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Apple is also starting off the new year on the wrong foot. The tech giant’s market value fell below $2tn on Tuesday. Now, that valuation doesn’t sound so bad, unless you’re Apple. It’s graded on a different curve because it became the first company to hit a $3tn valuation this time last year. The FT’s Patrick McGee explains what’s going on.

Patrick McGee
So I would have said three months ago that Apple’s fall in market cap in 2022 was really almost nothing to do with Apple. Right? it was that you had persistently high inflation, a looming recession, and just a more risk-averse environment amongst investors. The last three months have been totally different. Apple’s supply chain operations are basically in disarray, and this is all due to a Covid outbreak in a place called “iPhone City” in Hunan Province in China. It’s their biggest iPhone factory. And analysts are now expecting that the lucrative holiday quarter where Apple is expected to produce record revenues will instead not meet last year’s levels which will break a 14 quarter growth cycle. So really, the whole game has changed for Apple in just the last three months. And you’re seeing that reflected in the market caps at $1tn in one year, which is remarkable for a loss.

Marc Filippino
And Patrick, what about the latest developments in China? It’s just lifted its really tight zero-Covid restrictions for the first time in years after protests pretty much forced the government’s hand.

Patrick McGee
That’s a great question. So no doubt it’s going to just mean total uncertainty, right? I quoted someone I think we published this story on Christmas Day saying the next two to six months are gonna be a real challenge, probably the biggest challenge yet for the entire Covid-19, you know, era, if that’s what it is. On the long term, I think that’s probably going to be good for Apple’s operations in China. But the next six months, you could be rocked by absenteeism across the supply chain. And Apple orchestrates that supply chain like nobody else. I mean, I was speaking to an expert who said the idea of just-in-time manufacturing, which you tend to associate with the automotive industry, it’s more of an aspiration in the automotive industry, this person said. But it’s the day to day reality for Apple. So if they’re missing anything in the supply chain because of absenteeism in the next few months, it will be keenly felt and investors are pretty worried about what that means for the next six months.

Marc Filippino
OK, so what does Apple do now? I mean, like I said, a $2tn valuation is nothing to sneeze at. And Apple is still the world’s biggest tech company.

Patrick McGee
So even though Apple has sort of outperformed its peers on a 12-month horizon, it’s really underperformed the market and its peers over the last three months in particular. So, look, Apple’s valuation is still obviously very strong, but the focus on its supply chain concentration in China is just being more and more central to the outlook for the company. And there’s really just a lot of attention on Apple’s Achilles heel, which is that Apple’s manufacturing is very concentrated in just a few regions in China. There’s a sense in which it really needs to diversify. And that’s such an easy sentence to say it’s such a complex reality. It’s difficult to even convey in language how difficult that’s going to be for Apple.

Marc Filippino
Patrick McGee is based in San Francisco and covers Apple for the FT.

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The global stock market had a terrible 2022, but not commodities. Things like oil and wheat actually outperformed stocks and bonds in the past year. So retail investors are pouring into commodities markets to try and cash in. But the FT’s Madison Darbyshire explains why that’s a risky move.

Madison Darbyshire
Commodities, as we saw, are highly vulnerable to things like wars. When there was the war in Ukraine was one of the things that really brought a lot of investor attention to commodities, because suddenly we were concerned about wheat supply chains and where the world’s grain was gonna come from. And people started to think about these markets from a financial perspective.

Marc Filippino
Now, with all these retail investors piling into commodities, you report, Madison, that this could actually hurt other market participants like airlines and farmers. Why is that?

Madison Darbyshire
Yeah. So what we’ve seen in the past few years is that retail investor attention can get highly concentrated and really have a lot of impact on price. So we’re seeing that with the meme stocks — they were able to really drive up prices in very specific corners of the market. There is fear that this could potentially disrupt markets because if retail investors were to pour in to, say, wheat futures, those are derivative products that farmers really rely on in order to secure prices and protect against future price risks. And so there are people who are not sure that allowing people to bet on what is essentially the livelihood of farmers is the right thing to do.

Marc Filippino
So what could we expect from commodities markets?

Madison Darbyshire
Well, it’s really hard to say what we can expect from commodity markets because they are so volatile. These markets can be very complicated and very specialised. And most retail investors don’t have specialist knowledge of commodities. They, they’re looking at them as an investment that has increased in value in the last year rather than decreased. But what we’re seeing is more and more investment providers are providing access because there’s so much appetite for it. So we’re going to continue to see retail investor participation in this market. And the hope is that it doesn’t become such a big part of investor portfolios that it could do real harm.

Marc Filippino
That’s the FT’s US investment reporter Madison Darbyshire.

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Before we go, here’s a good example of that volatility in commodities that Madison was just talking about. US natural gas prices plunged more than 11 per cent yesterday. Going into winter, Russia restricted gas supplies to Europe and investors worried that this would create energy shortages and send high prices ripping through the global energy market. But it is unusually warm in North America and Europe this winter, and people don’t need as much energy to heat their homes. So it’s a bit of a relief when it comes to concerns over a crisis.

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You can read more on all of these stories that have taken. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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