France postpones tech tax, Amazon asks court to pause Microsoft's work on JEDI deal
Catch up on the top industries and stocks that were impacted, or were predicted to be impacted, by the comments, actions and policies of President Donald Trump and his administration with this weekly recap compiled by The Fly:
1. TECH TAX POSTPONED: French President Emmanuel Macron has agreed to postpone until the end of this year a tax that is to be levied on big tech companies, such as Google (GOOGL), Apple (AAPL), Facebook (FB) and Amazon (AMZN), averting a trade war, The Wall Street Journal's Bojan Pancevski and Sam Schechner reported earlier this week. According to U.S. and French officials, Macron reached out by phone to President Trump on Sunday seeking a way to end the threat of tariffs while they work out a broader accord on digital taxation. As part of the truce, Macron agreed to postpone until the end of 2020 a tax that France levied on big tech companies last year, one U.S. official said, adding that in return, the U.S. will postpone retaliatory tariffs this year.
2. JEDI DEAL: Amazon has filed a motion in court to pause the U.S. Department of Defense and Microsoft (MSFT) from carrying out the up to $10B Joint Enterprise Defense Infrastructure, or JEDI, contract until a court rules on its protest of the contract award, Reuters' Jeffrey Dastin reported. In a statement, Amazon's cloud division Amazon Web Services said, "It is common practice to stay contract performance while a protest is pending, and it's important that the numerous evaluation errors and blatant political interference that impacted the JEDI award decision be reviewed."
Wedbush analyst Daniel Ives noted that the action is on the heels of the formal protest that AWS has launched within the Department of Defense/federal courts around the JEDI procurement process with hopes to change the outcome. AWS claims it did not win the JEDI contract as a result of Trump's repeated public and private attacks against Amazon and, specifically, around Jeff Bezos. While this will cause noise and delay to the official start of the JEDI deal, Ives firmly does not believe this will change the decision.
3. GUIDANCE ON MEDICAID BLOCK GRANTS: The Trump administration is planning to release guidance as soon as this month for granting states waivers to convert Medicaid funding to block grants, The Wall Street Journal's Stephanie Armour wrote, citing two people familiar with the matter. Approving state waivers to change Medicaid funding to block grants would be among the administration's most controversial moves to reshape Medicaid, a federal-state program that provides health coverage to one in five low-income Americans, the author added.
Commenting on the news, Cantor Fitzgerald analyst Steven Halper told investors that "conventional wisdom" suggests that if the federal government were to move away from the current match program to block grants, states would reduce spending and eligibility levels for its Medicaid programs. Accordingly, block grants are viewed negatively by investors, Halper noted. However, on the flip side, states could adopt managed care for more of their populations. All of the companies the analyst covers in managed care have some exposure to Medicaid. Centene (CNC) is most exposed followed by UnitedHealth Group (UNH) and CVS Health (CVS). However, Halper recommends taking advantage of any pressure in managed care shares given this development. CVS, Cigna (CI) and Centene are his top picks within the group.
4. MIDDLE EAST PROJECTS: Siemens' (SIEGY) CEO Joe Kaeser told CNBC at the World Economic Forum in Davos, Switzerland that President Trump would support the company's role in reconstruction projects in countries like Iraq and Syria. "I said 'look, we have good American workers working for us in the U.S., if we go to Iraq, if we go to Syria, if we help rebuild that country, then I want to be treated as a U.S. company going out and helping those people to get back in line'," Kaeser noted, adding that "He said 'well that is a fair point -- if you create jobs, you're part of us.' It didn't look like that in Iraq, as you know was a bit bumpy, but there was good commitment, and that is comfortable."
"Week in Review" is The Fly's weekly recap of its recurring series of "Trump Effect" exclusive stories.