August 23, 2022
- Bank of Nova Scotia’s years-long turnaround of its Latin America-focused international unit faced a setback last quarter as the division’s lending margins contracted and non-interest revenue slipped. The unit’s total revenue came in at C$2.42 billion ($1.86 billion) in the fiscal third quarter, the Toronto-based bank said in a statement Tuesday. While that’s up 2.4% from a year earlier, it trailed analysts’ C$2.54 billion average estimate. Overall profit also missed expectations. Scotiabank has revamped its international business in recent years, shedding smaller and less-profitable operations while investing more in larger markets such as Chile. But in the three months through July, the unit’s net interest margin contracted by 1 basis point from the prior quarter, despite interest-rate increases in the region, while non-interest income slipped because of declines in “market-sensitive” revenue, the bank said.
- Rogers Communications Inc. is still waiting to see if it can win regulatory approval for a takeover of a smaller Canadian cable company, 17 months after it was first announced. The situation has handed a huge advantage to its two biggest rivals, according to an industry analyst. Canada’s largest wireless and cable firm agreed to a C$20 billion ($15.4 billion) deal to buy Shaw Communications Inc. in a friendly offer announced in March 2021. The country’s antitrust regulator is trying to block the transaction, delaying it. It’s now possible it won’t close until early 2023, if it closes at all — forcing Rogers to ask holders of M&A bonds on Monday if they’ll agree to relax the terms. The halting of the deal is “disproportionately favorable” to rivals BCE Inc. and Telus Corp., BMO Capital Markets analyst Tim Casey said. It has given them time to improve their 5G wireless and fixed-line networks to compete with Rogers, and their shares have outperformed since the Shaw merger was announced, Casey said in a report to investors.
- European equities were little changed as traders digested a slew of economic data, which offered insight about the likelihood of a recession in the 19-nation euro zone amid the looming energy crisis. The Stoxx Europe 600 Index was almost flat as of 9:22 a.m. in London. Media and health care led declines, while energy outperformed as the oil price rose. Among individual movers, A.P. Moller-Maersk A/S slumped after being among shipping stocks cut to sell by Citigroup Inc. The European stock benchmark is unwinding its recent rally as investors grapple with uncertainty about central bank policy, gas inflows from Russia and the extent of the economic slowdown. With the European Central Bank’s next meeting just over two weeks away, an account of the July meeting due on Thursday is set to offer some insight about policy. Traders are also anticipating comments from officials at the Economic Policy Symposium in Jackson Hole, Wyoming.
- US index futures wavered, Treasuries nursed losses and the dollar was steady as markets awaited more clarity on the Federal Reserve’s monetary policy path from the Jackson Hole central bankers’ symposium later this week. Futures on the the S&P 500 and Nasdaq 100 fluctuated after US stocks plunged the most in two months on Monday. The 10-year Treasury yield held above 3% and a gauge of the dollar hovered at a five-week high as investors also weighed new evidence that that soaring prices and the war in Ukraine are tipping the world into a recession. The Fed, meanwhile, is walking a tightrope in trying to contain price pressures while averting recession. The US purchasing managers’ index due later Tuesday will provide fresh clues on the outlook for the world’s biggest economy, after data from Europe to Asia showed weakening activity. Quantitative tightening by the US central bank is set to kick into gear next month, presenting another potential headwind for equities.
- Asian shares dropped as investors reduced bets on tech and other growth stocks amid receding expectations of slower monetary tightening by the Federal Reserve. The MSCI Asia Pacific Index fell as much as 1.2% to the lowest level in five weeks. TSMC, Sony and Samsung were among the biggest contributors to the drop. Benchmarks in most countries were in the red, with key measures in Japan, South Korea, Australia and the Philippine tumbling more than 1%. Expectations are building ahead of this week’s Jackson Hole central banker meeting that Federal Reserve Chair Jerome Powell will double down on the need to tame inflation. That’s helped cool the recent equity rally that was fueled by bets on slower interest rate hikes.
- Oil rose near $92 a barrel in New York after Saudi Arabia said OPEC+ may be forced to cut production to stabilize a volatile market. “Extreme” volatility and a lack of liquidity mean futures are increasingly disconnected from fundamentals, Saudi Oil Minister Prince Abdulaziz bin Salman told Bloomberg. That put a floor under prices in a bumpy session on Monday and prompted some Asian refiners to voice concerns about market uncertainty. Oil has seen a tumultuous period of trading since Russia’s invasion of Ukraine in late February upended flows. OPEC+ has reversed all of the output cuts made during the pandemic, but Prince Abdulaziz suggested the cartel may need to tighten production again when it meets next month to discuss supply targets.
- Gold steadied after a six-day run of losses as financial markets remained on edge ahead of a pivotal annual gathering of central bankers at Jackson Hole. Bullion rose as much as 0.4% as manufacturing surveys showed France unexpectedly joining Germany in recording a decline in factory activity. A recession in the 19-member euro zone is now more likely than not as energy costs spike following Russia’s invasion of Ukraine, according to analysts surveyed by Bloomberg. Spot gold was 0.2% higher at $1,739.02 an ounce as of 10:50 a.m. in London, after the longest streak of losses since June 2021. The Bloomberg Dollar Spot Index was flat after climbing 0.6% in the previous session. Palladium rose, while silver and platinum were little changed.
- Corn futures jumped to a six-week high as a US crop tour revealed how badly conditions have deteriorated following poor weather in key growing areas. Results from the tour’s first day show corn yields dropping significantly in the Western crop belt, where it’s been so dry in parts of Nebraska and South Dakota that corn plants aren’t producing ears of grain. Although rain has been more abundant in Eastern areas, corn yields in Ohio were are also running lower than 2021. The extent of damage in the US adds to the worsening outlook for other key producers, which has stoked food inflation. Drought in the European Union is cutting the crop there at double the rate predicted just last month. The Ukranian Grain Association also pared its corn outlook as Russia’s invasion prevents harvests on mined or occupied fields.
- Global banks stuck with $80 billion in unappealing M&A financing debt are trying new tactics to find buyers. In the case of the private-equity buyout of Citrix Systems Inc., they’re cutting the debt into smaller pieces to attract a wider pool of investors. Euro debt is being added to some financing packages, as in the case of ETC Group’s takeover. Tweaks are under consideration for deals up and down the industry, including CVC’s takeover of the Unilever tea business and Bain Capital’s buyout of French computer services company Inetum SA.
- Japan is set to more than double the number of people it will allow into the country and may scrap the need for a negative Covid-19 test to enter, as the last rich economy with stringent entry requirements still in place looks to join the rest of the world in easing pandemic curbs. The daily limit on tourists will be raised to 50,000 people as soon as next month from the current 20,000, broadcaster FNN reported, citing unidentified government officials. Authorities are also considering a gradual easing of testing requirements, such as initially exempting fully vaccinated people, the Nikkei newspaper reported earlier. Travelers currently need to submit negative results from a PCR test taken within 72 hours of departure to Japan. Before the pandemic, the country known for its vibrant cities and unique culture was in the midst of a tourism boom, with inbound visitors reaching a record in 2019. Airlines, hotels and retailers are all eager to regain the business they lost. The small trickle of foreigners allowed into Japan last year spent 120 billion yen ($872 million). In 2019, they spent 4.8 trillion yen, or forty times more, according to the Japan Tourism Agency.
- Zoom Video Communications Inc.’s results showed that its transition from an essential Covid-era tool to an enterprise business platform is going to take longer than expected. While Zoom said it’s generating a growing percentage of revenue from enterprise customers, the software maker didn’t add as many in the fiscal second quarter as analysts expected. The company also cut its annual revenue forecast, saying it’s losing sales from consumers and small business faster than anticipated. Zoom’s breakneck growth during the pandemic has cooled considerably as offices reopen and competition intensifies from Microsoft Corp.’s Teams video communications platform. Online sales to consumers and small businesses are expected to decline 7% to 8% this year, Chief Financial Officer Kelly Steckelberg said on a conference call after the earnings were announced.
- Apple Inc. plans to begin manufacturing the iPhone 14 in India about two months after the product’s initial release out of China, narrowing the gap between the two countries but not closing it completely as some had anticipated. The company has been working with suppliers to ramp up manufacturing in India and shorten the lag in production of the new iPhone from the typical six to nine months for previous launches, according to people familiar with the matter. Apple, which long made most of its iPhones in China, is seeking alternatives as Xi Jinping’s administration clashes with the US government and imposes lockdowns across the country that have disrupted economic activity. Analysts such as Ming-Chi Kuo of TF International Securities Group have said they anticipate Apple will ship the next iPhone from both countries at roughly the same time, which would have been a significant benchmark in Apple’s efforts to diversify its supply chain and build redundancy.
- The White House’s close allies are feuding over whether the administration should cancel up to $10,000 in student debt for millions of American borrowers, as President Biden nears a decision after months of delays. With the Inflation Reduction Act now signed into law, White House officials have in recent days revived discussions over student debt cancellation. They face an Aug. 31 deadline, which is when loan payments are set to resume after a pandemic-driven pause. Internal White House discussions have centered on temporarily extending that pause and simultaneously canceling $10,000 per borrower for those below an income threshold, but the president has not yet communicated a decision, according to two people familiar with the matter, speaking on the condition of anonymity to reflect private conversations. Another person familiar with the talks said $10,000 is among the options being considered.
- Germany has taken in about 1 million refugees from Ukraine since the start of the Russian invasion in February, according to the German interior ministry. And while a portion of those have traveled on to other European countries or returned home, the influx is still at about 700 a day. Ukrainian President Volodymyr Zelenskiy has warned that Russia “may try to do something particularly nasty, particularly cruel” as Ukraine prepares to celebrate Independence Day on Wednesday, which also marks six months since the invasion. Russian President Vladimir Putin called the car bomb that killed Darya Dugina, the daughter of a political ally, a “dastardly crime.” This came after Russia’s Federal Security Service accused Ukrainian special services of orchestrating the attack on Saturday. Ukraine has denied any role in the killing.
- Credit Suisse Group AG is shifting resources to win business from high-net-worth clients as the lender focuses more heavily on wealth management amid cuts to its troubled investment bank. The Swiss bank is reassigning advisers to its dedicated Private Banking International unit, led by Raffael Gasser, according to an internal memo seen by Bloomberg. The aim is to expand Credit Suisse’s coverage of global high-net-worth clients, the memo said. As many as one third of the relationship managers in Switzerland that don’t currently sit under PBI will be reassigned there, according to a person familiar with the matter. A stronger push in wealth management may involve broadening the definition of clients potentially covered under high-net-worth, and seeking part of a broader pool of the globally affluent. The changes will take place gradually over the next few months, the person said.
- London Gatwick airport said it will end capacity caps this month, bringing some relief to travelers as schedule reductions at the UK capital’s larger Heathrow hub continue through the winter season. Gatwick, controlled by French builder Vinci SA, has hired 400 security staff to help resolve a labor crunch while delegating other workers to address shortages at airport firms including airline baggage handlers, it said Tuesday. “With additional resources across the Gatwick operation in place no further moderation of flying programs is necessary,” the airport said in a statement, while upgrading its full-year passenger estimate to 32.8 million. The end to curbs provides a boost for low-cost giant EasyJet Plc, the hub’s biggest airline.
- JD.com Inc. reported stronger-than-projected revenue growth after consumers continued to flock to the country’s second-largest online retailer despite an economic slowdown. Sales hit 267.6 billion yuan ($39.1 billion) during the second quarter, beating the average forecast of 261.7 billion yuan. The Beijing-based company logged net income of 4.4 billion yuan, following three consecutive quarters of losses. Its shares rose more than 5% in pre-market trading in New York. JD and larger rival Alibaba Group Holding Ltd. are navigating a softer Chinese economy and Covid-related disruptions that are slowing growth in e-commerce and advertising. This month, Alibaba reported its first-ever revenue contraction since its 2014 listing, marking an end to an era of non-stop growth.
- Asian liquefied natural gas prices surged as a worldwide scramble to secure shipments adds to inflation fears across the region. The North Asian spot LNG benchmark jumped 10% to $61.025 per million British thermal units on Monday, the highest level since early March, when Russia’s invasion of Ukraine upended energy markets, according to traders. Prices have almost quadrupled from last year. Gas prices from Europe to the US are soaring as the world’s top consumers rush to secure supply and refill inventories before winter. Russia said it will stop its key Nord Stream gas pipeline for three days of repairs on Aug. 31, raising concerns it won’t return after the announcement of the work sent shockwaves across the globe.
- Twitter executives deceived federal regulators and the company’s own board of directors about “extreme, egregious deficiencies” in its defenses against hackers, as well as its meager efforts to fight spam, according to an explosive whistleblower complaint from its former security chief. The complaint from former head of security Peiter Zatko, a widely admired hacker known as “Mudge,” depicts Twitter as a chaotic and rudderless company beset by infighting, unable to properly protect its 238 million daily users including government agencies, heads of state and other influential public figures. Among the most serious accusations in the complaint, a copy of which was obtained by The Washington Post, is that Twitter violated the terms of an 11-year-old settlement with the Federal Trade Commission by falsely claiming that it had a solid security plan. Zatko’s complaint alleges he had warned colleagues that half the company’s servers were running out-of-date and vulnerable software and that executives withheld dire facts about the number of breaches and lack of protection for user data, instead presenting directors with rosy charts measuring unimportant changes.
- The National Archives found more than 150 sensitive documents when it got a first batch of material from the former president in January, helping to explain the Justice Department’s urgent response. The initial batch of documents retrieved by the National Archives from former President Donald J. Trump in January included more than 150 marked as classified, a number that ignited intense concern at the Justice Department and helped trigger the criminal investigation that led F.B.I. agents to swoop into Mar-a-Lago this month seeking to recover more, multiple people briefed on the matter said. In total, the government has recovered more than 300 documents with classified markings from Mr. Trump since he left office, the people said: that first batch of documents returned in January, another set provided by Mr. Trump’s aides to the Justice Department in June and the material seized by the F.B.I. in the search this month.
- Colgate-Palmolive Co. recently announced it will shell out $700 million for three US manufacturing facilities. The plants won’t crank out toothpaste or soap — they’ll make pet food. The investment is part of a plan by the world’s largest oral care company to grow its Hill’s Pet Nutrition unit, a line for dogs and cats acquired in 1976 that bills itself as “backed by science.” Executives see a favorable backdrop for wringing more sales from a brand that accounts for a fifth of Colgate’s revenue and over the past 12 months has driven about 70% of its growth. US consumers have developed a penchant for treating their furry companions like children, increasing spending on pets 27% between 2019 and 2021 to a record $123.6 billion, according to the American Pet Products Association. About one in five households welcomed a dog or cat during the first year of the pandemic, creating a fresh opportunity to lure customers.
- Malaysian state oil company Petroliam Nasional Bhd. has started inviting bids for its upstream assets in Africa, which could fetch as much as $3 billion, people with knowledge of the matter said. Petronas is working with an adviser to gauge interest in the portfolio, which includes operations in Chad, according to the people, who asked not to be identified because the information is private. The assets are likely to attract other international energy companies or financial investors, and could be sold piecemeal to different buyers, the people said.
“Do what is right, not what is easy nor what is popular.” —Roy T. Bennett
*All sources from Bloomberg unless otherwise specified