Markets pause

Global markets were mixed on Thursday, taking a breather after a two-day rally on the back of rising oil prices. The most-talked about commodity this year rose briefly above $50, a seven-month high before retreating slightly. European markets managed to put together some gains, led by insurers and automakers. US stocks were mixed, despite good economic data which showed durable goods orders rise and jobless claims fall. A measure of pending home sales rose to a 10 year high, as did new home sales – a sign that demand for housing remains robust.

The biggest mover on the day was Abercrombie & Fitch, but unfortunately the move was downwards. Shares in the US retailer fell a massive 17.5% as sales and revenues fell unexpectedly. Analysts had been expecting a rise in sales after the company reported its first quarterly gain in three years in the preceding quarter. Its best performing brand, Hollister, had flat quarter-on-quarter sales growth. Abercrombie has been hit hard by changing consumer preferences, declining mall traffic and an intensely competitive environment, as it joins a growing list of retailers reporting a weak start to the year.

Robot Time

Robots have been around for many years, some performing basic tasks such as taking appointments or operating phone switchboards and others charged with more complex tasks. Perhaps one of the oldest and most emblematic image is that of robots used in virtually all car assembly lines nowadays. Alongside robots, artificial intelligence was also developed, albeit at a slower pace.

The last few years have seen many major global companies throw their weight behind developing smart­er  products or robots, aimed at ‘cutting out the middleman’ – humans in this case – in favour of a cheaper and supposedly more stable and reliable asset. This is happening across all types of industries - from manufacturing to services and, recently, also in the automotive space. The like of Google, Apple, Toyota, Nissan, Ford and a multitude of tech and auto companies are working on developing the concept of a driverless car.

In China, Foxconn has replaced 60,000 human workers – that’s a whopping 55% of their workforce – with robots, as it seek to drastically reduce its labour costs in the face of rising costs and slowing growth. As many as 600 companies in Kunshan – the region where Foxconn operates – have similar plans according to a government survey.

Developing AI undoubtedly does present higher upfront costs, but machines are seen as potentially leading to personnel cost savings over the long term. With the high pressures and strict deadlines placed on many manufacturers like Foxconn which assemble much of the world’s consumer technology products, ‘employing’ robots alleviates some of the ethical issues surrounding the industry.

Foxconn has been heavily criticized for years for inadequate working conditions. A series of suicides at its manufacturing facilities a few years ago led to the installation of anti-suicide nets and several consecutive salary increases. Foxconn employees have complained of being overworked, underpaid and of sleeping in less-than-ideal dormitory conditions. The company has however recently worked to improve working conditions.

Pizza Hut is also experimenting with robots. Partnering with SoftBank Robotics and MasterCard, the pizza chain run by Yum Foods will be testing their customers’ ‘appetite’ for robot order-takers in some of its Asia-based restaurants. Pepper – the robot has a name – will be taking orders and can also interact slightly with customers. The humanoid which is the size of a small child and have a touchscreen on its chest will be reserved if a customer seems hesitant to interact with the robot, but will pick up cues from customers who are more confident and will be more responsive.

This article was issued by Andrew Martinelli, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd. has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.