Apple delivered upbeat guidance for the rest of 2019 and beat analyst estimates for its fiscal third quarter, suggesting more momentum than expected even as iPhone sales shrink. The iPhone maker recorded revenue of $53.8bn in the quarter that ended in June, 1 per cent more than a year ago and ahead of the $53.4bn expected by analysts in a Refinitiv poll. Earnings per share were $2.18, down 7 per cent from a year ago but above analyst projections for $2.10 a share. Net income fell 12.8 per cent to $10bn. The Cupertino, California-based tech group said its fiscal fourth-quarter revenue should come in between $61bn and $64bn, versus estimates of just $61bn. The projection implies that Apple is optimistic for the September quarter, when it launches new services for video-streaming, gaming, and its first foray into credit cards. Shares in Apple rose more than 4 per cent in after-hours trading.
Wall Street put aside its worries about the gathering regulatory scrutiny of Google to drive the value of parent Alphabet up by more than $70bn on Thursday, after the internet company reported a strong rebound in its advertising growth. The company also stepped up its plans to return capital to shareholders with a massive $25bn stock buyback plan, as much as it has spent in the four years since it first began stock repurchases. The announcement reflects moves by some other big technology groups to return more cash to shareholders since US tax reform at the end of 2017 freed them to tap overseas cash holdings. Alphabet’s 9 per cent share price gain in after-market trading was the latest sign that investors are looking past the growing “techlash” to focus on the underlying strength of Big Tech’s business model. It came on a day when Facebook’s shares briefly got back to within 5 per cent of their record high, despite a $5bn fine the day before from the Federal Trade Commission and news of a US antitrust probe into the company.
SoftBank has said it plans to launch a second investment fund totalling $108bn, winning the backing from a new group of investors, including Microsoft, Standard Chartered and the sovereign wealth fund of Kazakhstan. The Vision Fund II follows a splurge of investments in Uber, WeWork and other technology companies in a span of two years through its first $97bn fund, which was mainly backed by the governments of Saudi Arabia and Abu Dhabi. Their names were absent from the long list of investors announced on Friday, but a person close to SoftBank said it was continuing talks for contributions to the Vision Fund II with the Saudi and Abu Dhabi sovereign wealth funds. In a statement, SoftBank said it would invest $38bn in Vision Fund II, more than the $28bn it invested in the first fund. It is also expecting investments from Apple and Foxconn, which are investors in the first Vision Fund.
Boris Johnson entered Downing Street on Wednesday and embarked on a remarkable bout of political bloodletting, as he created a hardcore team of Brexiters determined to take Britain out of the EU on October 31 and primed for an early election. Mr Johnson ripped apart Theresa May’s former cabinet — 15 senior ministers were sacked or resigned before they were axed — as he declared war on “the doubters, the doomsters, the gloomsters”. Standing on the steps of Downing Street he said “no ifs or buts” Britain would leave the EU in 99 days’ time and carried out a cabinet clear-out that made Harold Macmillan’s 1962 “Night of the Long Knives” seem modest by comparison. In a defiant and brutal speech outside Number 10, Mr Johnson did not even mention Mrs May by name, but lambasted her for her indecision. “After three years of unfounded self-doubt, it is time to change the record,” he said.
The White House has struck a two-year deal with Democratic party leaders in Congress to raise America’s $22tn borrowing limit, removing the threat of a US debt default and significantly raising federal spending. The deal — crafted by Democrat Nancy Pelosi, speaker of the House of Representatives, and Steven Mnuchin, the Treasury secretary — increases the so-called debt ceiling until the middle of 2021, meaning the next big budgetary stand-off would occur after next year’s presidential election. However, the budget increases, on top of sweeping tax cuts enacted by President Donald Trump in 2017, raised new concerns about a lack of fiscal discipline in the world’s largest economy. Boris Johnson is expected to be crowned Conservative leader on Tuesday, but he stands to inherit a party deeply divided on Brexit, its parliamentary majority on the brink of disappearing, and MPs on alert for an early general election. Allies of Mr Johnson, the Eurosceptic former foreign secretary, hope that their candidate will secure between 60 and 65 per cent of the vote when the result of the Tory leadership contest is announced. Although Jeremy Hunt, his rival for the leadership, has claimed the result will be “closer than people think”, Conservative MPs and bookmakers are unanimous in the view that Mr Johnson will succeed Theresa May. Mr Johnson would then enter Downing Street at about 4pm on Wednesday after Mrs May conducts her final session of prime minister’s questions in the House of Commons and tenders her resignation to the Queen at Buckingham Palace. The new prime minister is expected to form his cabinet on Wednesday and Thursday before setting out his vision for the country in a speech on Friday in the north of England. A tour of European capitals to discuss his demand for a new Brexit deal is likely to follow soon after. Iran seized two UK-linked tankers in the Strait of Hormuz on Friday, sharply escalating tensions in one of the world’s most important oil shipping lanes at a time militaries in the region have been on a hair trigger. The Iranian Revolutionary Guards said the UK-flagged Stena Impero was “seized by the guards’ naval forces” as it moved through the key Gulf waterway. Tehran insisted the tanker had “failed to observe the international maritime rules and regulations”. A second, Liberian-registered vessel — the Mesdar — was also “boarded by armed personnel”, according to the tanker’s British ship manager, Glasgow-based Norbulk Shipping. But late on Friday Norbulk said communications had been re-established and the ship was now “free to continue the voyage”. All crew were reported safe. The seizures come 24 hours after the US claimed to have shot down an Iranian drone that ventured too close to an American warship in the strait. Tehran has denied it lost a drone, but the incident is a sign of how naval deployments aimed at protecting tankers transiting the strait are raising the threat of military conflict. The USS Boxer was part of an American flotilla tasked with securing the shipping lanes when it fired on the drone. The Federal Reserve came under fire from Wall Street for sowing “confusion” in the wake of a market-moving speech by one of its top officials, highlighting the communications challenge facing the US central bank as it moves towards a historic interest rate cut. The furore over remarks by John Williams, the president of the Federal Reserve Bank of New York and a key monetary policymaker, comes at a sensitive time for economists and investors as they weigh the scale of the likely monetary easing coming later this month. Until Thursday, the consensus had been for a 25 basis point rate cut by the Fed, as a limited insurance policy against a weakening global economy and trade tensions. But the odds of a 50 basis point cut soared and US Treasuries rallied after Mr Williams laid out the case for “preventive” action in low interest rate and low inflation environments. Ursula von der Leyen secured narrow parliamentary backing for her appointment as European Commission president on Tuesday as deep scepticism from pro-EU parties forced her to rely on votes from far-right and populist MEPs. After a final appeal to the European Parliament, the former German defence minister won just 383 votes in favour of giving her the top job in Brussels — only nine more than the needed 374 to secure a majority. The margin is the narrowest backing ever received by a commission president since parliament was given the power to reject nominees under the 2008 Lisbon treaty. The narrow approval of Ms von der Leyen’s five-year mandate marks a victory for the EU’s national leaders over parliamentarians. Driven by France’s Emmanuel Macron, they faced down MEPs’ demand that one of the so-called lead candidates in May’s EU elections should get Brussels’ top job. Greece has hired banks to sell a new seven-year bond as the nation once at the centre of the eurozone crisis moves to take advantage of investors’ thirst for euro-denominated debt.Greek assets have been boosted further after the centre-right New Democracy party scored a sweeping victory in elections this month. Kyriakos Mitsotakis, the new prime minister, has promised to get the economy back on track, a vow that has been welcomed by investors and local companies. “A New Democracy-led government has the potential, given its more business-friendly economic agenda, to provide the needed reform and confidence boost to an economy that has significant space to grow at sustained (above 3 per cent) pace for several years,” Aditya Chordia, analyst at JPMorgan, said in a note to clients this weekend. Despite marked improvements in its economy, Greece still holds a speculative-grade rating with S&P Global, Moody’s and Fitch. The country’s benchmark seven-year bond was trading on Monday with a yield of 1.54 per cent, down from above 4 per cent in November last year. The fall in yield has pushed the gap between seven-year Greek and German debt — seen as a key barometer of the perceived risk of holding the paper — to around 1.8 percentage points, from 4 points late last year. Jay Powell, chairman of the Federal Reserve, has cemented the case for the US central bank to cut interest rates based on mounting risks to the US economic outlook, in dovish testimony to Congress that fuelled expectations for a rate cut this month. Despite a strong jobs report for the month of June and last month’s new truce in the trade war between the US and China, Mr Powell said “uncertainties about the outlook have increased in recent months”, particularly internationally. “Economic momentum appears to have slowed in some major foreign economies, and that weakness could affect the US economy. Moreover, a number of government policy issues have yet to be resolved, including trade developments, the federal debt ceiling, and Brexit. And there is a risk that weak inflation will be even more persistent than we currently anticipate,” Mr Powell said in prepared remarks. The S&P 500 index jumped as much as 0.8 per cent to 3,002.98, crossing the 3,000 threshold for the first time, before easing back to be 0.5 per cent higher at midday in New York. The Nasdaq Composite and Dow Jones Industrial Average also touched new records. Deutsche Bank has unveiled one of the most radical banking overhauls since the financial crisis, closing swaths of its trading unit, cutting 18,000 jobs and hiving off €74bn of assets as it calls time on its 20-year attempt to break into the top ranks of Wall Street. The struggling German lender confirmed it would close down its lossmaking equities trading business and shrink its bond and rates trading operations in a long-awaited announcement on Sunday afternoon. The axe will fall hardest on the investment bank, where the balance sheet allocated to trading will be slashed by 40 per cent. Job cuts will start first thing on Monday morning in London and New York, and three top executives have been replaced. The “sizeable workforce reductions” will “require uncomfortable decisions” chief executive Christian Sewing said in an internal memo to staff seen by the FT. British commandos seized a supertanker suspected to be smuggling Iranian oil to Syria in a night-time raid that has triggered a diplomatic row between Tehran and the UK. Hours after the operation at 2am off the coast of Gibraltar, Iran said it would not accept the “illegal” seizure of the tanker and summoned the British ambassador in Tehran to express its objections. Royal Marines boarded the Grace 1 from a naval helicopter and patrol boats in a joint operation with Gibraltar police. The government in the British overseas territory said it had “reasonable grounds” to believe the Panamanian-flagged vessel, with a capacity of 2m barrels, was violating EU sanctions by shipping crude to the Banyas refinery in Syria. The incident threatens to raise tensions between Tehran and the west at a critical time as Britain, France and Germany battle to save the 2015 nuclear accord that Iran signed with world powers. The global bond market enjoyed a powerful rally on Wednesday as investors bet that Christine Lagarde’s nomination to be the next president of the European Central Bank would extend an era of ultra-loose monetary policy in the eurozone. Bond prices have been on a tear since late last year, as central banks have switched to a more dovish stance and souring economic data has raised fears of a coming recession. Outgoing ECB boss Mario Draghi is readying interest rate cuts and a revival of the bank’s bond-buying quantitative easing programme, while the US Federal Reserve is also set to trim rates this summer, at least according to traders and investors. Ms Lagarde’s appointment, which has to be rubber-stamped by the European Parliament, is expected to bring more of the same accommodative monetary policy — rather than a shift to the hawkish stance of rival candidate Jens Weidmann, the Bundesbank president. European leaders have agreed a deal to fill the EU’s most important jobs, backing Christine Lagarde to lead the European Central Bank and Ursula von der Leyen to be president of the European Commission. On the third day of a gruelling summit in Brussels, EU leaders gave near-unanimous support for a package based around Ms Lagarde, France’s former finance minister who is now head of the IMF, and Ms von der Leyen, Germany’s defence minister. But the proposed deal remains unconfirmed because it is facing resistance from parts of the European Parliament, which must back Ms von der Leyen’s appointment. German Chancellor Angela Merkel had to abstain on the deal because of resistance from some of her party’s coalition partners in Berlin. The breakthrough among leaders ends five weeks of wrangling to fill the most important policymaking roles in the EU, which are all falling vacant at the same time. The bloc has never had to fill all its key roles within such a short period. American equity markets set a new high on Monday on renewed hopes of a US-China trade deal after Presidents Donald Trump and Xi Jinping agreed to resume negotiations. The S&P 500 index rose 0.8 per cent to close at 2,964.33, with technology stocks particularly in demand after Mr Trump signalled a reversal of his policy preventing US groups from selling software and equipment to the Chinese telecoms equipment maker Huawei. The Wall Street surge followed a brisk rally in Asia and Europe, and a strengthening of China’s renminbi. Mr Trump’s softer stance towards Huawei — which he had previously described as a threat to US national security — added to the optimistic reaction to the outcome of the talks between the two leaders after the G20 meeting over the weekend. “The biggest driver of investor relief is that the much feared 25 per cent tariff on an additional $300bn in Chinese imports has been put on hold as trade negotiations resume,” said Alec Young, managing director of global markets research at FTSE Russell. |
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March 2021
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