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The following is a summary of top news stories Wednesday.
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COMPANIES
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Nintendo reported a drop in sales and profit in its first quarter as semiconductor supply issues hampered production of its Nintendo Switch gaming console.Sales for the three months to June 30 fell 4.7% to JP¥307.46 billion - around $2.31 billion - from JP¥322.65 billion a year before, the Kyoto, Japan-based video game company said. Operating profit decreased 15% to JP¥101.65 billion from JP¥119.75 billion. Nintendo flagged that supply issues in the period, particularly semiconductors, meant that Nintendo Switch hardware sales were down 23% while software sales fell 8.6%.
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US video game maker Electronic Arts said it delivered strong results in the first quarter with growing player network engaged in new games and live services. For three months to June 30, net revenue was up at $1.77 billion from $1.55 billion in the same quarter prior year. First quarter net income stood at $311 million, or $1.11 per share, up from $204 million, or $0.71 EPS, a year prior. Looking ahead, EA expects second-quarter net bookings between $1.73 billion and $1.78 billion, while net income is expected to be $220 million to $242 million and diluted EPS between $0.78 to $0.86.
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Kao, a Tokyo-based chemical and cosmetics company, said sales in first half of 2022 rose 8.7% to JP¥733.90 billion from JP¥675.18 billion a year before. Net income fell to JP¥39.76 billion, however, from JP¥53.46 billion. Kao said it expects the ‘severe’ business environment to continue in third quarter and, though it plans to implement price increases, has revised full-year forecast down. Kao now expects full-year operating income of JP¥145.0 billion, cut from a prior forecast of JP¥160.0 billion. However, this would still be above JP¥143.5 billion in 2021.
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Pharmaceutical firm GSK launched an offer to repurchase all of its exchangeable senior notes due 2023, of which $280 million worth are outstanding.
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AXA unveiled a €1 billion share buyback after an increase in half-year profit. Revenue for the first six months of 2022 rose 2.4% to €55.14 billion from €53.87 billion year-on-year. This was driven by the Paris-based insurance company's Health arm, where revenue rose 13%, with strong growth across all geographies, particularly in France. Property & Casualty revenue edged up 1% and Asset Management recorded 4% growth. The revenue growth lifted net income 2.8% to €4.11 billion from €4.00 billion. AXA approved a €1 billion share buyback, to start as soon as possible and complete by February 2023. In the first half of 2022, AXA completed two share buyback programmes for a total amount of €2.2 billion.
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Societe Generale reported a loss in the second quarter, owing to its exit from Russia, but saw income drive higher thanks to a surging Global Markets business. In the three months to June 30, the Paris-based bank recorded a net loss of €1.23 billion, swinging from a €1.62 billion profit the year prior. Pushing the bank into the red, it noted, was the mammoth €3.3 billion loss absorbed following the disposal of Rosbank and its insurance subsidiaries in Russia. SocGen also noted its cost of risk - or credit impairments - was increased in the quarter, rising to €217 million from €142 million the year before. Net banking income rose 13% to €7.07 billion from €6.26 billion, which the bank said was ‘driven by an excellent performance by all the businesses.’
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BMW said pretax profit in second quarter of 2022 slumped 36% to €3.05 billion from €4.79 billion. Earnings per share dropped to €4.30 from €7.23. Revenue, however, rose 22% to €34.77 billion from €28.58 billion. The Munich-base auto maker benefited from better ‘product mix’ and higher prices for its vehicles, which partially offset the fall in the number of vehicles sold. Automotive deliveries drop 20% year on year to 563,187 from 702,441. Notes 17% of those sales were electric vehicles, which is up from 12% a year prior. Unit sales in the second half should be ‘solidly higher’, it says, but would ‘not fully compensate for lost volume’ in the first half, meaning deliveries of its vehicles would now be ‘slightly below’ last year.
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The UK Competition & Markets Authority said it has provisionally cleared NortonLifeLock's acquisition of Avast, after an in-depth probe of the £6 billion deal. ‘The CMA's investigation has found that the supply of cyber safety software to consumers is rapidly evolving. Providers of both paid-for and free services are continually developing and improving their products over time to meet different and changing customer needs,’ the watchdog said. The enlarged firm still faces stiff competition, including ‘main rival’ McAfee, the CMA explained. In addition, Microsoft's own in-house cybersecurity applications in the Windows operating system are ‘increasingly important alternatives for consumers’.
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Rolls-Royce said the Spanish government has approved the €1.7 billion sale of its ITP Aero subsidiary to a consortium of investors led by Bain Capital Private Equity. Back in September last year, the engineering group announced the €1.7 billion sale as part of its disposal programme to help rebuild its balance sheet. ITP Aero was founded in 1989 for the European defence programme Eurofighter. It is an aeronautical engine company, currently responsible for maintaining engines for the Spanish armed forces.
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UK housebuilder Taylor Wimpey reported a rise in interim profit as it trimmed expenses. Revenue in the half-year that ended July 3 came in slightly lower, however, at £2.08 billion, down 5.4% from £2.20 billion a year earlier. Pretax profit rose 16% year-on-year to £334.5 million from £412.5 million. Net operating expenses were 15% lower at £189.9 million. Taylor Wimpey completed 6,790 homes during the half, excluding joint-ventures, down 7.0% year-on-year but ahead of guidance. ‘The housing market continues to be resilient despite inflationary pressures in the wider economy and recent rises in the Bank of England base rate. There remains good availability of attractively priced mortgages, and we continue to see a healthy level of demand for Taylor Wimpey homes reflecting the quality of our homes and locations nationwide,’ it said.
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Advanced Micro Devices said it saw its eighth straight quarter of record revenue in the second quarter, prompting the semiconductor maker to raise its third quarter guidance. For the three months to June 30, revenue was $6.55 billion, up 70% from $3.85 billion in the second quarter last year. Second-quarter net income was $447 million, or $0.27 earnings per share, down from $710 million, or $0.58 EPS, last year, primarily due to lower net income and a higher share count as a result of the Xilinx acquisition. Looking ahead, the Santa Clara, California-based firm expects third quarter revenue to be $6.7 billion, plus or minus $200 million, an increase of 55% year-on-year, led by growth in the Data Center and Embedded segments.
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Coffee house chain Starbucks said that for the third quarter ended July 3, net earnings dropped 21% to $912.9 million from $1.15 billion the same period a year before, driven by higher store operating and product & distribution costs, with inflationary pressures and investments in labour. Diluted earnings per share dropped 19% to $0.79 from $0.97, despite net revenue growing 8.7% year-on-year to $8.15 billion from $7.50 billion. Global comparable store sales rose 3%, driven by an 6% increase average ticket, but this was partially offset by a 3% drop in comparable transactions.
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Airbnb was back in the black in the second quarter as demand for travel rebounded, prompting the online lodging platform to launch a substantial share buyback programme. For the three months to June 30, revenue up 58% at $2.01 billion up from $1.34 billion in the second quarter last year. Second quarter net income at $379 million, or $0.56 diluted earnings per share, swinging from a loss of $68 million, or $0.11 loss per share, last year. The San Francisco, California-based firm also announced a $2 billion share buyback programme.
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PayPal shares jumped after revenue for the second quarter of 2022 rose above expectations, even as the company swing to a loss for the period on higher costs, including a transaction expenses. In addition, PayPal said it has renewed its commitment to capital return with a new $15 billion share repurchase authorisation. The group has also entered an information sharing deal with Elliott Investment Management to collaborate over a range of capital return opportunities. For the three months ended June 30, PayPal posted a net loss of $341 million, compared to a profit of $1.18 billion the same period a year prior. PayPal's diluted loss per share was $0.29 compared to a profit of $1.01. This was in spite of new revenue rising 9.1% year-on-year to $6.81 billion from $6.24 billion a year prior, as total payment volumes increased 9% to $339.8 billion. The stock was up 11% in the New York pre-market on Wednesday.
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US retail investment platform Robinhood announced drastic staff cuts, citing the cryptocurrency market crash among the reasons. Robinhood Chief Executive Vlad Tenev said in a blog post that the online broker, which touts itself as an investing platform for the common man, would be ‘reducing our headcount by approximately 23%’. Tenev said the cuts were company-wide but would particularly affect Robinhood's operations, marketing and program management roles. The company did not initially provide further details about the number of expected terminations. US media reported that some 780 employees have already been laid off. In April, Tenev had already announced a 9% cut to the company's workforce, but he said Tuesday that ‘did not go far enough’.
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MARKETS
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Investor worries about the ramped-up tensions between China and the US was supporting the dollar, while Brent oil slipped back below $100 a barrel, having rallied above in Asian trade, with market attention on an OPEC+ producer meeting taking place on Wednesday.
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CAC 40: up 0.3% at 6,426.90
DAX 40: up 0.3% at 13,484.25
FTSE 100: marginally higher, up 2.69 points at 7,411.80
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Hang Seng: closed up 0.4% at 19,767.09
Nikkei 225: closed up 0.5% at 27,741.90
S&P/ASX 200: closed down 0.3% at 6,975.90
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DJIA: called up 0.4%
S&P 500: called up 0.4%
Nasdaq Composite: called up 0.4%
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EUR: soft at $1.0189 ($1.0195)
GBP: down at $1.2177 ($1.2210)
USD: up at JP¥133.17 (JP¥131.80)
GOLD: down at $1,765.56 per ounce ($1,778.85)
OIL (Brent): soft at $99.10 a barrel ($99.99)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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US House Speaker Nancy Pelosi pledged Washington's support for Taiwan during a visit to the island that has drawn Beijing's ire. ‘Today, our delegation...came to Taiwan to make unequivocally clear: we will not abandon our commitment to Taiwan, and we're proud of our enduring friendship,’ Pelosi said at a joint press conference with Taiwan's President Tsai Ing-wen. ‘Today, the world faces a choice between democracy and autocracy,’ Pelosi said, as she praised Taiwan as ‘one of the freest [democracies] in the world, proudly to be led by a woman president.’ ‘Now more than ever, America solidarity with Taiwan is crucial. And that is the message we are bringing here today,’ Pelosi said. She arrived in Taiwan on Tuesday despite stern warnings from Beijing, making her the highest-level US official to visit the island in 25 years.
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China rolled out curbs on the import of fruit and fish from Taiwan while halting shipments of sand to the island in the wake of Pelosi's visit. China's Customs Administration said it will suspend some citrus fruits and fish imports from Taiwan over alleged ‘repeated’ detection of excessive pesticide residue and positive coronavirus tests on packages. In a separate notice, the Commerce Ministry added it would also ‘suspend the export of natural sand to Taiwan’ from Wednesday, without providing details. It is not the first time Beijing has taken aim at Taiwan's exports. China banned pineapple imports from the island in March 2021, citing the discovery of pests, in a move that was widely seen as politically driven.
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Japan has expressed concern to China over its military drills in waters around Taiwan, the top government spokesman said Wednesday as Pelosi visits the island. Beijing has said its military exercises this week will include long-range live ammunition shooting in the Taiwan Strait, which separates the democratic island from mainland China. ‘The maritime areas announced by the Chinese side as those to be used for military exercises...overlaps with Japan's exclusive economic zone,’ Japan's Chief Cabinet Secretary Hirokazu Matsuno told reporters. Parts of Japan's southernmost island region Okinawa are close to Taiwan, as are islets at the centre of a long-running dispute between Tokyo and Beijing.
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China's services sector saw strong growth in July, as reduced Covid restrictions allowed for ‘more normal’ working conditions. The seasonally adjusted headline business activity index picked up in July, rising to 55.5 from 54.5 in June. ‘Notably, the rate of output expansion quickened to a 15-month high as new order intakes also rose at a faster pace,’ Caixin said. ‘Despite the improved trends in output and overall orders, firms cut their staffing levels further, while backlogs fell slightly.’ Despite the improvement in the services industry, the seasonally adjusted composite output index fell to 54.0 in July from June's 18-month high of 55.3 - owed to slowing manufacturing production growth.
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The OPEC+ group of major oil exporters meets Wednesday to discuss its output strategy after US President Joe Biden lobbied Saudi Arabia to boost production to tame energy-fuelled inflation. The cartel led by Saudi Arabia and Russia has resisted US pressure to ramp up production significantly so far after Moscow's invasion of Ukraine sent oil prices soaring. After cutting production in 2020 in response to falling prices during the Covid pandemic, OPEC+ began to modestly raise production last year and has renewed the policy every month. Its output is supposed to have returned to pre-Covid levels but only on paper as members of the 23-nation group have struggled to meet their quotas.
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The eurozone's private sector started the third quarter in the doldrums, dragged down by the manufacturing sector and stoking fears of recession. July's S&P Global composite purchasing managers' index dropped to a 17-month low of 49.9 points in July from 52.0 in June. New business slumped. Save for declines seen during Covid-19 lockdowns, new business intake fell at the fastest pace since 2013. The eurozone services PMI faded to 51.2 points in July from 53.0 in June. July's figure was six-month low.
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Eurozone factory price growth ticked up slightly faster than expected in June, while separate figures revealed a difficult month for the retail sector in the single currency bloc. Statistics body Eurostat reported that industrial producer prices were up 1.1% in the eurozone in June compared with a month before, accelerating from a 0.5% monthly rise in May and just slightly above consensus, according to FXStreet, of 1.0% growth. Annually, producer prices soared 35.8%, slowing a touch from growth of 36.2% in May. Retail sales fell 1.2% month-on-month in June, undershooting forecasts of zero growth and reversing May's rise of 0.4%. On an annual basis, sales dropped 3.7% in June, vastly underperforming against forecasts of a 1.7% decline, and again swinging from a 0.4% rise the month before.
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Germany's services economy slipped into contraction territory in July, with future prospects taking a hit from gas supply worries and rising interest rates. The services PMI fell to 49.7 points in July from 52.4 in June. The composite PMI slumped to 48.1 points in July from 51.3 in June.
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Germany reported a surprisingly large trade surplus in June, as exports, including those to Russia, increased markedly on a monthly basis. According to Destatis, the EU's largest economy recorded a trade surplus of €6.4 billion in June, up sharply from €800 million in May. May's figure was downwardly revised from €1 billion. June's number came in sharply above an FXStreet-cited forecast of €200 million. According to Destatis, exports climbed 4.5% in June from May to €134.3 billion. Exports were expected to have risen by just 1%, according to FXStreet. Imports grew by a more modest 0.2% on-month to €127.9 billion in June, falling short of expectations for a 1.3% increase. Exports to Russia were 15% higher in June from May, Destatis noted. Exports to other EU nations were 3.9% higher on a monthly basis.
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The UK services sector expanded at the slowest pace in 17 months, amid meek new business despite firms stepping up hiring. The latest S&P Global/CIPS UK services PMI faded to 52.6 points in July, from 54.3 in June. The tracker has registered above the 50.0 no change mark for 17 months in-a-row, though the latest PMI figure was the weakest since February 2021. The composite PMI similarly weakened, declining to 52.1 points in July from 53.7 in June. It was the slowest rate of expansion since February 2021.
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