Bayer to Book Extra $4.5 Billion Provision for Roundup Litigation

Bayer made the announcement in an update to investors on how it plans to deal with Roundup-related lawsuits that have dogged the company since it acquired the brand as part of its $63 billion purchase of Monsanto in 2018.

The decision comes after a U.S. judge in May rejected Bayer’s plan to try to limit the cost of future class action over claims that Roundup causes cancer.

Thousands of users have alleged Roundup caused their non-Hodgkin lymphoma, but Bayer has said decades of studies have shown Roundup, and key ingredient glyphosate, are safe for human use.

Bayer said it would file in August a petition seeking a review of a ruling that went in favour of Roundup user Edwin Hardeman.

The German company said a ruling in its favour by the court would effectively end Roundup litigation. But it set aside the new provision should the court decline to hear the case or end up favoring the plaintiff.

(Reporting by Patricia Weiss; Writing by Tom Sims; Editing by Jane Merriman and Mark Potter)

Pandemic Drove Online Prices Higher

By Howard Schneider

The study, analyzing a trillion retail site visits across 18 product categories matched to the closely watched U.S. Consumer Price Index that measures general inflation, found that online prices jumped 2.3% in June on an annual basis.

Graphic: Cost of digital goods turns up: https://graphics.reuters.com/USA-ECONOMY/PRICES/lgpdwmjlnvo/chart.png

They had fallen an average 3.9% annually from 2014 to 2019 and began turning higher last year.

For consumers, online shopping “has been a bit of a haven. They can get different pricing,” said Vivek Pandya, lead analyst for Adobe Digital Insights. “Through the pandemic what we have seen is that is not so much the case.”

The online price of appliances, for example, jumped 2.3% in June, after declining an average of 2.6% annually from 2015 to 2019 Adobe found. Online apparel jumped 16.2% after a steady 1% annual decline in price before the pandemic.

Graphic: Online shopping meets the pandemic: https://graphics.reuters.com/USA-ECONOMY/PRICES/myvmnmbgypr/chart.png

Some prices continued falling. The cost of computers declined nearly 10% over the year, matching its average pace of decline before the pandemic. But in another key online category, electronics, the steady 9% annual drop in prices slowed dramatically, with the cost of goods falling just 2.5%

Overall, Pandya said he felt the experience of the last year, as online shopping surged in popularity and became more common for things like groceries and household staples, has made online retailers both more subject to demand and supply chain pressures in the economy, and given them less incentive to discount.

“As retailers find demand and they are against (supply chain) shortages, they are pricing at higher levels. And in some instances consumers will reckon with that and say they are getting convenience and will continue to absorb the cost,” he said.

That could be bad news for the U.S. Federal Reserve. Online retailing is regarded by some at the Fed as an important reason why inflation overall has remained low in recent years – with consumers just a glance at their phone away from finding the best price for a widening array of products.

If the pricing of online goods starts to behave more like that of goods in stores, it might make bouts of inflation more persistent – and not, as the Fed expects, only transitory.

Adobe developed its Digital Economy Index in 2014 but until now has updated it infrequently. It plans to release results monthly going forward.

(Reporting by Howard Schneider; Editing by Andrea Ricci)

S&P 500, Dow Scale All-Time Highs as Economy Picks Up Pace

By Sagarika Jaisinghani

Ford Motor Co jumped 5.9% to hit a more than three-week high as it lifted its profit forecast for the year.

Industrials Boeing Co and Caterpillar Inc, and banks including JPMorgan Chase & Co, Bank of America Corp and Citigroup Inc gained between 0.4% and 1%, a day after the Federal Reserve said it was not yet time to start withdrawing its massive pandemic-era monetary stimulus.

The central bank’s comments also assuaged fears that a rise in cases of the Delta variant would hurt a solid U.S. economic rebound. Data on Thursday showed gross domestic product increased at a 6.5% annualized rate in the second quarter, while jobless claims fell to 400,000 for the week ended July 24.

“What really stands out (in the GDP data) is consumption; it really means that consumers are carrying the economy,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

Trading on Wall Street in the past few months has also been dictated by rising inflation, and fears that higher prices would not be as transient as expected have recently knocked the benchmark S&P 500 off record highs.

Investors are now focused on the June reading of the personal consumption expenditures price index – the Fed’s main inflation measure, which is due on Friday.

“Once we have normalized our supply chains, there won’t be much of this inflation pressure, which can be achievable in the next six months, but the spread of the Delta variant is a wild card, which could derail the recovery process,” said Arthur Weise, chief investment officer at Kingsland Growth Advisors.

At 9:42 a.m. ET, the Dow Jones Industrial Average was up 0.49%, the S&P 500 was up 0.44%, and the Nasdaq Composite was up 0.36%.

Trading in the shares of technology behemoths Apple Inc, Amazon.com Inc, Netflix Inc and Google-parent Alphabet Inc was muted.

The group has tended to underperform the broader market during times of economic optimism, when investors prefer stocks such as mining and energy, which are expected to benefit more from a steady business recovery.

 

Graphic: U.S. reflation trade hurts Nasdaq, lifts Dow: https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkqakwpx/Pasted%20image%201627564664970.png

 

Facebook Inc fell 3.2% as it warned revenue growth would “decelerate significantly” following Apple’s recent update to its iOS operating system that would impact the social media giant’s ability to target ads.

KFC-owner Yum Brands Inc, on the other hand, gained 3.8% after beating expectations for quarterly sales.

China’s Didi Global jumped 14.4% after a report said it was considering going private to placate Chinese authorities and compensate investor losses since the ride-hailing firm listed in the United States. Didi denied what it called a “rumor” that it could go private.

Focus later in the day will be on shares of Robinhood Markets Inc, which is scheduled to start trading on the Nasdaq under the ticker “HOOD” after the company raised $2.1 billion in its initial public offering on Wednesday.

Advancing issues outnumbered decliners 3.36-to-1 on the NYSE and 2.52-to-1 on the Nasdaq.

The S&P index recorded 40 new 52-week highs and one new low, while the Nasdaq recorded 46 new highs and 10 new lows.

(Reporting by Sagarika Jaisinghani, Sruthi Shankar and Shashank Nayar in Bengaluru; editing by Uttaresh.V and Aditya Soni)

Foreign Funds Now Own 81% of All Shares Listed on Moscow Exchange

U.S. sanctions and increased debt issuance to fight the coronavirus crisis pushed foreign investors’ share of Russia’s OFZ treasury bonds to its lowest since 2015 earlier this year, but stocks have largely escaped the same fate, buoyed by rising oil prices in 2021.

Foreign funds held 80.7% of shares freely floated on the stock market as of July 1, the Moscow Exchange’s head of primary markets, Natalia Loginova, told media during a webinar. That was up from 65.6% in 2020, but slightly below 83.3% in 2019.

Loginova said investors from the United States and Canada accounted for 54% of the total, with 22% from the United Kingdom and 21% from the rest of Europe.

“We are talking about non-residents – large, global, institutional investors,” Loginova said, putting the foreign fund inflows down to the outperformance of the MSCI Russia index this year and relatively high dividend yields offered by many Russian companies.

The Moscow Exchange estimates dividend yields in Russia at the end of the year will reach 7.9%, higher than in other major emerging markets, such as Turkey, estimated at 5.1%, South Africa at 4.7% and China at 2.4%.

(Graphics: Russia leads other EM countries in dividend yield: https://graphics.reuters.com/RUSSIA-MOEX/jnvweglgovw/chart.png)

Russia has seen a flurry of initial and secondary public offerings since online retailer Ozon made a strong debut on the U.S. Nasdaq late last year, with depositary receipts trading in Moscow.

The central bank is preparing to simplify the regulatory environment and remove obstacles to incentivise IPOs, it said earlier this month, and the bourse is expecting more than 10 IPOs or SPOs by the end of 2021.

“We have a good IPO pipeline, the central bank’s measures are contributing to it, plus Ozon’s success story is attracting new issuers,” Loginova said.

UBS said in March that Russia was set for an IPO boom this year, which could raise at least $10 billion.

(Reporting by Elena Fabrichnaya; Writing by Alexander Marrow; Editing by Katya Golubkova and Susan Fenton)

Merck Sees Recovery in Non-COVID Vaccine Demand as Quarterly Sales Beat Estimates

By Manas Mishra and Carl O’Donnell

Sales of non-COVID-19 vaccines and physician-administered drugs are expected to recover as hospitals and clinics have started to adapt to the impact of the pandemic, Merck executives told investors.

Merck, which failed in its efforts to produce a coronavirus vaccine, expects to have late-stage data for its COVID-19 antiviral, molnupiravir, in October, Chief Financial Officer Caroline Litchfield said.

The U.S. drugmaker in June agreed to provide 1.7 million doses of the drug to the United States government for around $1.2 billion once it is cleared by regulators. It is also in supply talks with other countries.

Demand for Gardasil, its vaccine to prevent cancers linked to the human papillomavirus, recovered sharply in the second quarter as patients started to catch up on routine medical visits skipped at the height of the pandemic.

Gardasil sales jumped 88% to $1.23 billion, beating analysts’ estimates of $991.38 million.

Recent improvements in the supply chain for the vaccine will drive “very strong sequential and year-over-year growth for Gardasil in the back half of the year, especially in ex-U.S. markets,” said Franklin Clyburn, president of Merck’s human health business.

Sales of cancer immunotherapy Keytruda rose 23% to $4.18 billion in the quarter, in line with estimates.

The company’s top growth driver is on track to become the world’s best-selling drug by 2023.

Merck on Thursday said it had the financial flexibility to consider deals of all sizes and would focus on assets that could add to its strength in the cancer market.

“We want to build upon that strength and actually see ourselves as a company that over time can be a broad player across oncology,” said Merck’s new Chief Executive Officer Robert Davis on an investor call.

“One of the areas we continue to believe we do not need to go is to the very large synergy-driven deals. I think we have enough firepower in our own pipeline,” he added.

The company’s second-quarter sales rose 22% to $11.40 billion, beating estimates of $11.10 billion.

Merck reported adjusted earnings of $1.31 per share for the quarter, in-line with analyst estimates. Its share were down 1% in early trading.

(Reporting by Manas Mishra in Bengaluru; Editing by Shounak Dasgupta and Bill Berkrot)

Acquittal of Eni and Shell in Nigeria Case Faces Legal Challenge

In March, a Milan court acquitted the two companies and defendants in the oil industry’s biggest corruption case involving the $1.3 billion acquisition of a Nigerian oilfield a decade ago.

The Nigerian government said at the time it was surprised and disappointed by the verdict and would consider lodging an appeal.

The case revolved around a deal in which Eni and Shell acquired the OPL 245 offshore oilfield in 2011 to settle a long-standing dispute over ownership.

Prosecutors alleged that just under $1.1 billion of that amount was siphoned off to politicians and middlemen.

The court in Milan said there was no case to answer and acquitted the companies and all other defendants.

“We have always maintained that the 2011 settlement was legal. We will review the appeal that has been filed,” a Shell spokesperson said.

Eni said it acknowledged the appeal by the prosecutors and Nigerian government. “Waiting to read the reasons for the appeal; Eni confirms its total extraneousness to the contested facts,” a spokesperson said.

Last month, two prosecutors in the case were placed under official investigation by magistrates for allegedly not filing documents that would have supported Eni’s position. Italy’s justice ministry ordered an inquiry into the conduct of the pair.

(Reporting by Emilio Parodi; Additional reporting by Ron Bousso and Stephen Jewkes; Editing by Agnieszka Flak and Mike Harrison)

Spanish Court Drops Investigation Into Repsol Chairman in Alleged Spying Case

By Jesús Aguado

The investigating judge Manuel Garcia Castellon also dismissed an investigation against former Caixabank chairman Isidro Faine and the companies Repsol and Caixabank.

The High Court had put all of them under investigation as part of a probe into the alleged spying case.

Repsol’s spokesperson was not immediately available for comment. A Caixabank spokesperson declined to comment.

Castellon was investigating whether Repsol and Caixabank hired Grupo Cenyt, a security firm belonging to former police chief Jose Manuel Villarejo, to spy on the then chairman of construction company Sacyr, Luis del Rivero, in 2011 and 2012.

The alleged aim was to block a takeover bid for Repsol by Sacyr and Mexican state oil firm Pemex.

Repsol was then partly owned by Caixabank.

On Thursday, the court said “without evidence that the chairmen of the companies were directly involved in the events under investigation, it is not possible to put them under corporate supervision and oversight.”

The court also said in its ruling that both companies had adequate measures in place to prevent the commission of the offences under investigation.

Castellon was investigating Brufau and Faine for any possible links to bribery, in connection with both companies’ alleged dealings with Villarejo.

No formal charges had been brought as the probe was in its first phase.

The investigation is part of a wider inquiry, centered on Villarejo’s activities, that has roiled Spain’s corporate sector, causing some reputational damage, but with no clear impact on companies’ businesses so far.

(Reporting by Jesús Aguado; additional reporting by Emma Pinedo; editing by Inti Landauro and David Evans)

Textron Lifts 2021 Profit Forecast Again on Business Jet Strength

Business jet traffic has rebounded from COVID-19 pandemic lows more quickly than commercial flights in the United States, helped by wealthy leisure travelers and some would-be first time flyers avoiding airlines.

Textron expects to get back to production levels similar to 2019 by 2022. General Dynamics Corp said on Wednesday it would make more of its Gulfstream jets.

While Textron Chief Executive Scott Donnelly told analysts the higher demand “seems to be quite sustainable”, the maker of Cessna business jets is facing labor and supply chain challenges as factories struggle to meet surging orders.

“While we’ve experienced continued strong retail demand for our products, we have been impacted by our supply chain’s ability to fully meet this demand, and we continue to work through these production challenges,” Donnelly said.

He said Textron is bringing workers back to support growing production but echoed critics in suggesting hiring was a challenge due to expanded U.S. unemployment benefits.

“I think hiring will get easier as the year goes on, we get off some of these unemployment programs that are frankly, creating huge disincentives for people not to work,” Donnelly said.

The company said it expects 2021 adjusted earnings of $3.00 to $3.20 per share, compared to its previous forecast of $2.80 to $3.

Textron’s aviation unit delivered 44 jets, higher than the 23 a year earlier, and 33 commercial turboprops, up from 15 in 2020.

Sales in its aviation unit rose 55.4% to $1.16 billion in the second quarter.

Excluding items, the company earned 81 cents per share, above analyst estimates of 65 cents, according to Refinitiv data.

Revenue rose 29% to $3.19 billion, above analysts’ average estimate of $2.97 billion, according to Refinitv data.

Textron shares were indicated 1.3% at $70 ahead of opening.

(Reporting by Sanjana Shivdas in Bengaluru and Allsion Lampert in Montreal; Editing by Sriraj Kalluvila and Emelia Sithole-Matarise)

AstraZeneca Exploring Options for COVID-19 Vaccine Business

By Alistair Smout and Pushkala Aripaka

The review of the future of the vaccine comes after a series of setbacks in its race to produce a shot for the world. Executives emphasised it was too early to say what the decision on the vaccine’s future would be.

AstraZeneca agreed to work with the University of Oxford on its COVID-19 shot last year despite having no prior vaccine experience, taking on the project with a pledge not to make a profit during the coronavirus pandemic.

While a $39 billion dollar deal to buy rare drug firm Alexion is much more integral to the company’s business strategy, the COVID-19 vaccine has quickly become the public face of the company’s efforts during the coronavirus pandemic.

“A small group of people reporting into Mene (Pangalos, research chief) and myself are thinking about: is this a sustainable business?” AstraZeneca Executive Vice President and President of the BioPharmaceuticals Business Unit Ruud Dobber said, referring to the vaccines business.

“We need to have that discussion with our senior executive team, and then with the board of AstraZeneca. We are exploring different options, but it is far too early at this stage to conclude that (process).”

Dobber added that “before year-end, we will have more clarity”.

“Hopefully before the year ends, we will have a better view how to move forward in the next few years,” he said.

“If you ask me, is the vaccine business a sustainable business for AstraZeneca for the next five or 10 years, that big strategic question is under discussion.”

FAR TOO EARLY

AstraZeneca has been criticised by the European Union for its supply of shots, and is being sued by the bloc. The vaccine has also faced age restrictions due to rare clots linked to the vaccine and its application for U.S. approval is longer than expected.

Chief Executive Pascal Soriot said he had no regrets over getting involved in COVID-19 vaccines as the company has made an “enormous difference”.

It has delivered one billion doses around the world globally and is celebrated by the British government as a national success story of the pandemic.

Dobber said that AstraZeneca’s “number one commitment” was to deliver hundreds of millions of vaccine doses that were covered by current contracts.

“It’s not a distraction,” he said.

He added that the company would keep its pledge to deliver a broadly available and accessible vaccine. Soriot has said that the vaccine will always be kept affordable for low-income countries, even when the company moves away from a no-profit model.

Results released on Thursday showed sales of the vaccine in the second quarter more than tripled to $894 million from the first three months of the year.

But, unlike for rivals including Pfizer, it remains a drag on earnings overall, and Dobber said that if the vaccine business were to be sustainable, the company would have to stop making a loss on it.

“It doesn’t mean that moving forward we will not make a bit of profit,” Dobber said. “It’s not sustainable to do it without profits, but it’s too early now to speculate about that.”

(Reporting by Alistair Smout in London and Pushkala Aripaka in Bengaluru; Editing by Jason Neely, Josephine Mason and Jan Harvey)

Exxon Mobil’s Revenue to Nearly Double in Q2; Target Price $68

Exxon Mobil, an American multinational oil and gas entity, is expected to report its second-quarter earnings of $1.0 per share, which represents year-over-year growth of over 240%, up from a loss of $0.70 per share seen in the same quarter a year ago.

The U.S. largest publicly traded oil company would post revenue growth of over 90% to around $63 billion. The company has beaten earnings per share (EPS) estimates in three of the last four quarters.

Exxon Mobil shares have surged more than 40% so far this year.

Analyst Comments

“The shares of Exxon Mobil have observed a 10% decline in the past month as benchmark prices declined due to the easing of production curtailments by OPEC. The company is committed to maintaining a strong balance sheet and returning capital to shareholders in the coming years. Despite an uncertain demand-supply environment, the company’s second-quarter results are likely to benefit from high benchmark prices, assisting deleveraging plans. The second-quarter revenues are likely to grow by around 100% (y-o-y) resulting in strong earnings expansion over last year’s depressed number,” noted analysts at Trefis.

Exxon Mobil Stock Price Forecast

Sixteen analysts who offered stock ratings for Exxon Mobil in the last three months forecast the average price in 12 months of $68.73 with a high forecast of $90.00 and a low forecast of $55.00.

The average price target represents an 18.05% change from the last price of $58.22. From those 16 analysts, seven rated “Buy”, eight rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $84 with a high of $100 under a bull scenario and $41 under the worst-case scenario. The firm gave an “Overweight” rating on the oil and gas company’s stock.

“Improving FCF outlook and dividend sustainability. With a more constructive commodity price outlook, lower capital spending, and additional cash operating cost savings, the dividend is covered in 2021 and averages >100% over the next 5-years on our estimates. Improving dividend sustainability supports yield compression for Exxon Mobil (XOM) relative to CVX,” noted Devin McDermott, equity analyst at Morgan Stanley.

“Cost cuts defend the dividend. Exxon Mobil (XOM) reduced 2022-25 spending plans to $20-25 B from $30-35 B, improving dividend sustainability while limiting further pull on the balance sheet. Additionally, XOM is targeting $6 B in structural operating cost reductions which should put upward pressure on consensus FCF estimates.”

Several other analysts have also updated their stock outlook. Piper Sandler raised the target price to $69 from $63. Independent Research upped the price objective to $56.00 from $55.00. Jefferies lifted the stock price forecast to $58 from $55.

Check out FX Empire’s earnings calendar

Stocks Move Higher As Fed Stays Dovish

Fed Chair Jerome Powell Calmed Markets

Yesterday, the Federal Reserve left the interest rate unchanged and maintained the current pace of asset purchases.

As usual, Fed Chair Jerome Powell did his best to calm markets. He has once again reiterated that higher inflation was transitory and also added that the economy learned how to live with the virus, although the Delta variant of coronavirus remained a threat.

Most likely, the Fed will provide more details during the Jackson Hole conference in late August, but traders bet that the current pace of asset purchases will remain unchanged in 2021, which is bullish for stocks and bearish for the U.S. dollar.

Initial Jobless Claims Declined To 400,000

U.S. has just released Initial Jobless Claims and Continuing Jobless Claims reports. Initial Jobless Claims report indicated that 400,000 Americans filed for unemployment benefits in a week. Analysts expected that Initial Jobless Claims would total 380,000, so the report was worse than expected.

U.S. has also provided second-quarter GDP Growth Rate report which indicated that GDP increased by 6.5% quarter-over-quarter compared to analyst consensus which called for growth of 8.5%.

It remains to be seen whether the disappointing GDP report will hurt stocks today as traders may stay focused on the dovish message from the Fed. Currently, S&P 500 futures are gaining some ground in premarket trading.

Gold Rallies As U.S. Dollar Declines

Gold has finally managed to get away from the $1800 level as U.S. dollar gained strong downside momentum after Fed’s comments. The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has managed to get to the test of the support at the 92 level which was bearish for precious metals.

Silver has also enjoyed a strong rebound, and it is currently trying to settle above the resistance at $25.50.

Yesterday, gold mining stocks showed some strength, and they look ready for a strong start of today’s trading session.

For a look at all of today’s economic events, check out our economic calendar.

Mastercard Profit Beats Estimates on Overall Spending Boost

The company’s shares rose about 2% in premarket trading as the upbeat results rounded out a positive quarter from payment processors including Visa Inc and American Express Co.

Mastercard’s cross-border volumes, which track spending on its cards beyond the country of issue, rose 58% on a local currency basis, driven by a pickup in international travel.

Volumes had plunged 45% in the same period a year ago.

“International travel is still in the early stages of recovery and represents additional upside potential,” Chief Executive Officer Michael Miebach said in a statement.

Cross-border volumes were the biggest headwind for Mastercard last quarter as COVID-19 travel curbs and border restrictions dampened international spending. The metric tumbled 17% at Mastercard in the previous quarter compared with an 11% fall at Visa.

Consumer spending saw a spike during the quarter due to massive government stimulus packages, sending Mastercard’s gross dollar volumes, or the dollar value of the transactions processed, up 33% on a local currency basis to $1.9 trillion.

Net income, excluding exceptional items, rose to $1.9 billion, or $1.95 per share, from $1.4 billion, or $1.36 per share a year earlier.

Analysts on average had expected a profit of $1.75 per share, according to Refinitiv IBES data.

(Reporting by Sohini Podder in Bengaluru; Editing by Saumyadeb Chakrabarty)

Anglo American Pays Out Record $4.1 Billion to Shareholders for First Half

By Clara Denina and Zandi Shabalala

London-listed shares in Anglo, which have surged almost 80% over the last year, were up 5.2% at 1225 GMT, close to 13-year highs hit in May.

Soaring prices for most of Anglo’s products, including copper, iron ore and platinum group metals, helped to boost profits at the miner, which was hardest hit among its peers by COVID-19 lockdowns.

“I still don’t think it’s our finest hour, that is yet to come … From our point of view it’s a good milestone,” Chief Executive Mark Cutifani told reporters.

Surging commodity prices have boosted miners’ earnings and emboldened them to dish out higher shareholder payouts, with Rio Tinto on Wednesday being the first of the global miners to announce record dividends.

“The underlying investment case at Anglo American remains strong, with differentiated high quality growth, better diversification vs. peers and increasing shareholder returns adds to this compelling mix,” RBC Capital analysts said.

Cost increases, which knocked $200 million off underlying earnings before interest, tax, depreciation and amortisation (EBITDA), were likely to weigh on Anglo, but the miner’s shares remained inexpensive, the analysts said.

Underlying EBITDA rose to $12.1 billion for the six months to June 30, up from $3.4 billion in the same period last year, beating the average forecast of $10.9 billion from 12 analysts compiled by Vuma.

Anglo declared an interim dividend of 1.71 cents per share, up from 0.28 cents last year, totalling $2.1 billion, and a special dividend of 0.8 cents per share, or $1 billion. It also announced a $1 billion share buyback programme.

Net debt fell by 74% to $2 billion in the first half from a year earlier, while unit costs climbed 15%. Costs were still the lowest among its peers, Cutifani said.

“The de-levering process for Anglo is clearly complete, in our view, and sizable capital returns have commenced,” said Jefferies analyst Chris LaFemina, adding Anglo’s shares were poised to outperform between now and the end of the year.

Anglo in June spun off its South African thermal coal business into a new company, Thungela Resources, and agreed to sell its stake in Colombia’s Cerrejon, completing its move away from the most polluting fossil fuel.

Cutifani said discussions over potential increases in taxes and royalties in Peru and Chile, where Anglo has many of its copper operations, were more “sensible” than initial proposals.

The miner is expecting its Peruvian copper project Quellaveco to come on stream in 2022. The project is one of the few sizable ones in the pipeline in an industry hunting for more of the metal as the world moves to a lower carbon economy.

Anglo would focus on investing in its own mines and projects over mergers and acquisitions, Cutifani told a results call.

(Reporting by Clara Denina and Zandi Shabalala Editing by Sonali Paul, Bernadette Baum and Mark Potter)

German Unemployment Slides, Delivering EUR Support

Following German business and consumer sentiment figures this week, German unemployment was in focus this morning.

Unemployment

In July, unemployment slid by 91k, following a 39k decline in June. As a result of the decline, the unemployment rate fell from 5.9% to 5.7%. Economists had forecast a 22k decline and for the unemployment rate to fall to 5.8%.

Market Impact

Ahead of today’s unemployment figures, the EUR had fallen to a pre-stat and current day low $1.18388 before visiting $1.186 levels.

In response to today’s stats, the EUR fell to a post-stat low $1.18647 before climbing to a post-stat and current day high $1.18801.

At the time of writing, the EUR was up by 0.27% to $1.18743.

EURUSD 290721 Hourly Chart

Next Up

Prelim inflation figures from Germany ahead of 2nd quarter GDP and weekly jobless claims figures from the U.S. It could get choppy for the EUR if initial jobless claims tumble and GDP numbers beat forecasts…

Credit Suisse’s Archegos Post Mortem Slams Management; Profit Slumps

By Brenna Hughes Neghaiwi

The collapse of Archegos rocked Wall Street in March as its highly leveraged stock bets went sour, sending banks scrambling for the exit. In a $10 billion bloodbath, Credit Suisse was the biggest loser, a devastating double whammy for a bank already reeling from the insolvency of a key associate, Greensill Capital.

Archegos is still hitting Credit Suisse’s bottom line. Net profit of 253 million Swiss francs ($278.45 million) missed average forecasts for 334 million Swiss francs as it absorbed an additional $653 million loss from the fund’s collapse and amid a general slump in trading.

In a damning assessment of what went wrong, an independent review unveiled along with the results on Thursday repeatedly criticized the bank’s risk management practices, though it did add there was no evidence of fraudulent or illegal activity.

“The Archegos-related losses sustained by Credit Suisse (CS) are the result of a fundamental failure of management and controls in CS’s Investment Bank and, specifically, in its Prime Services business. The business was focused on maximizing short-term profits and failed to rein in and, indeed, enabled Archegos’s voracious risk-taking,” the 165-page review by law firm Paul Weiss, Rifkind, Wharton & Garrisson said.

(To read the report, click https://www.credit-suisse.com/about-us/en/reports-research/archegos-info-kit.html )

The bank said in response that it would “put risk management at the heart of our decision-making processes”.

Shares of the bank pared early losses to trade down 2.4% by 1045 GMT, taking their losses to 22% so far this year. The European bank index rose 1.8% and is up about 24% year to date.

Analysts had expected a nearly 600 million franc hole caused by more losses at Archegos and further weakness in the bank’s trading and advisory businesses to bring second-quarter net profit down to a quarter of its value a year ago.

Excluding Archegos and other significant items, Credit Suisse said pre-tax income would have dropped 11%.

Credit Suisse said action has been taken against 23 staff over Archegos, with nine fired and a total of $70 million in monetary penalties taken from all of them.

Under new Chairman Antonio Horta-Osorio, it is trying to turn the page after a swathe of investigations, executive changes, and divisional reshuffles. Management is promising to unveil a strategic overhaul by year-end.

An exodus of senior dealmakers and traders from its investment bank, and plans to reduce risk in its prime brokerage unit, have made the changes especially felt within that division.

The bank said on Thursday that a provisional capital buffer for Archegos has been removed, but a buffer for Greensill remained. It said it was in advanced talks with some creditors to recover some of the $10 billion of client investments linked to Greensill.

It also said it had been accruing for dividends during the quarter but the size of the payout had yet to be determined.

“Management provided some reassurance on the call suggesting this quarter’s focus was on dealing with the fall-out of Archegos and Greensill, but we could potentially return to a more ‘business as usual’ quarter as early as 3Q21,” Citi analyst Andrew Coombs wrote in a note.

LEADING WEALTH MANAGER WITH A CULTURE PROBLEM

Investors have been waiting to see whether troubles at Credit Suisse, which have also left clients in its asset management business directly exposed to potential Greensill losses, have affected prized relationships with the ultra-wealthy.

Credit Suisse on Thursday reported 7.3 billion francs in net asset outflows from its wealth management businesses, an indicator of a loss in business from rich clients, for the second quarter.

Chief Financial Officer David Mathers told journalists on a call that 4.2 billion francs of the outflows were related to its efforts to limit its risk in Asia.

“Operationally, CS has been able to meet expectations on the whole,” ZKB analysts said in a note, adding the headline profit miss was related largely to legal and restructuring provisions.

“However, net new money is showing signs of slowing down with outflows of 4.7 billion francs,” the analysts said, referring to the group-wide figure which includes flows for businesses outside wealth management.

Earlier this week, Credit Suisse appointed Goldman Sachs partner David Wildermuth as its new chief risk officer, as it seeks to turn the corner on recent scandals.

REVENUES FALL

A 41% fall in investment banking revenues showed the broader impact of the scandals to be slightly more pronounced than analysts anticipated, as its capital markets business posted a nearly 10% decline on an un-adjusted basis and its advisory revenues fell 37% “due to timing of deal closings”. That combined with the $653 million Archegos hit pushed investment banking to a pre-tax loss.

On the trading side, adjusted revenues from equity sales and trading fell 17% decline excluding Archegos. Fixed income sales and trading dropped 33%.

Trading revenues also fell at major U.S. and European banks in the second quarter compared to 2020 when unprecedented market volatility during the early months of the coronavirus pandemic helped drive record volumes.

Credit Suisse has said it wants to pare back its prime brokerage unit, which conducts business with hedge funds and was responsible for the Archegos ties.

The downcast earnings marked a notable contrast to the sunny outlook presented on the same day by Lloyds, which until April had been run by Credit Suisse’s new chairman. Nearer rivals, including UBS and Julius Baer, have also put Credit Suisse’s misfortune in stark relief, as frothy markets and high client activity levels have continued to help private bankers generate higher earnings off the rich.

($1 = 0.9086 Swiss francs)

(Reporting by Brenna Hughes Neghaiwi, editing by Kirsti Knolle, Michael Shields and Kim Coghill)

Latest Shift to Tech Leaves Cathie Wood’s ARKK in the Cold

By David Randall

The $22.4 billion ARKK fund is down 7.1% for July so far, putting it in the bottom 96th percentile rank among the 605 mid-cap growth funds tracked by Morningstar. At the same time, the S&P 500, with its heavy weighting in big technology-focused stocks, is up 2.4%, helped by a 5.8% gain in Apple Inc and a nearly 12% gain in Google parent Alphabet Inc. The fund is down 2.5% this year, compared with a 17.1% gain for the S&P.

ARK Innovation’s portfolio rallied amid last year’s economic lockdown thanks to bets on companies such as Zoom Video Communications Inc and Teladoc Health Inc.

This year, by contrast, kicked off with a powerful broad market rotation into value stocks that boosted shares of energy firms, banks and other companies expected to benefit from a vaccine-fueled economic rebound.

While worries over slowing growth and a COVID-19 resurgence have partially reversed that shift, investors’ recent preference for big tech and growth stalwarts suggests that, for now, few expect a return to the broad economic lockdowns that boosted the companies in Wood’s portfolio in 2020, said Dave Mazza, managing director at Direxion.

“People are finding comfort in the mega-cap names. While we might have seen peak economic growth there’s not a sense that we’re going to have a massive contraction in the economy” from further restrictions on travel or school closures, he said.

ARK did not respond to a request to comment for this story.

The United States leads the world in the daily average number of new infections, accounting for one in every nine cases reported worldwide each day. The U.S. Centers for Disease Control and Prevention recommended on Tuesday that Americans fully vaccinated against COVID-19 should go back to wearing masks in indoor public places in regions where the coronavirus is spreading rapidly. That has done little to boost the monthly performance of some of ARKK’s constituents. Shares of Zoom are down 4.5% this month, though they have pared losses in recent days. Spotify’s shares are down nearly 19% on concerns about slowing user growth rates. Shares of Tesla Inc – which make up nearly 10.5% of ARK Innovation’s portfolio and are its largest holding – are down 4.8% for the month to date, while shares of cryptocurrency company Coinbase Global Inc are down nearly 5% as bitcoin remains more than 30% below its April highs. Overall, seven out of the fund’s 10 largest positions are down for the month, with the 6% rally in Square Inc among its few winners. Despite ARK’s losses, investors appear to be sticking with Cathie Wood. The ARK Innovation fund brought in slightly more than $521 million in new inflows during the week ended July 21, its largest weekly gain since June 23, according to Lipper data.

At the same time, Wood earlier this month pared holdings of big Chinese companies such as Alibaba, Tencent and JD.com amid government crackdowns in the sector. That move has so far proven prescient – shares of Alibaba are down 13% for the month, while shares of Tencent are down nearly 24% over the same time.

“Investors who piled in to the long-term thematic ETF continue to stick with it despite continued underperformance in 2021 in hopes that 2020 success will be repeated,” said Todd Rosenbluth, director of fund research at CFRA.

(Reporting by David Randall in New YorkEditing by Ira Iosebashvili and Matthew Lewis)

Diageo Organic Sales Blow Past Estimates on Strong U.S Demand

Organic net sales, which excludes the impact of acquisitions and foreign exchange, rose 20% in North America, the company’s biggest market, where consumers traded up to more premium spirits including Tequilas and higher-end versions of Johnnie Walker Scotch whiskey.

Turkey and Northern Europe also contributed to the strong performance, with sales growing more than 20%, driven by demand for scotch whiskies.

Organic net sales in Africa rose 20%, fueled by Guinness and spirits such as Smirnoff vodka.

Overall, organic net sales rose 16% for the year ended June 30, higher than the 13.7% analysts had expected, according to company-supplied estimates.

The maker of Tanqueray Gin also said it expects the organic net sales momentum to continue into fiscal 2022, but with some “near-term volatility”.

The company sees travel retail remaining under pressure.

(Reporting by Siddharth Cavale in Bengaluru; Editing by Sriraj Kalluvila)

BAE Systems Raises Dividend, Launches New Buyback on Strong Outlook

The plan from BAE, which builds combat ships, submarines and fighter jets, to increase returns for investors stands out at a time when many companies have suspended their dividends to conserve cash and ride out the impact of COVID-19.

Defence has been one of the few sectors largely unaffected by the coronavirus pandemic, with governments sticking to military and security commitments, and in some cases raising them. BAE’s main customers are the U.S., UK and Saudi Arabia.

For the full-year, BAE said it expected underlying earnings per share to grow by 3% to 5% over last year’s result, despite the strengthening of the pound against the dollar and even if the higher exchange rate continues, representing an improvement on previous forecasts.

BAE Systems said that it derived confidence from ongoing projects, as its facilities delivered over 900 electronic warfare systems to the F-35 fighter jet programme, and automation improvements helped it ramp up production of combat vehicles.

For the half-year ended June 30, BAE said it would pay an interim dividend of 9.9 pence per share as well as commence a 12-month share buyback programme. Underlying earnings per share rose 25% to 21.9 pence in the period, it said.

($1 = 0.7177 pounds)

(Reporting by Sarah Young; Editing by Kate Holton)

Lloyds Restores Dividend as Profits Recover on Brighter Outlook

By Iain Withers and Lawrence White

Lloyds posted pretax profit of 3.9 billion pounds ($5.4 billion) for the six months to June, ahead of the 3.1 billion pound average of analyst forecasts compiled by the bank.

The bank had posted a first-half loss of 602 million pounds the previous year, after setting aside billions to cover potential bad loans due to the COVID-19 pandemic.

Lloyds also announced a 0.67 pence interim dividend, a day after rival Barclays unveiled more than $1 billion worth of shareholder payouts.

The bank confirmed the acquisition of digital savings and retirement group Embark, adding 410,000 customers and 35 billion pounds of assets.

Like rivals, Lloyds is looking to expand in wealth management amid a pandemic-driven savings boom, to make up for squeezed margins from record low Bank of England rates.

The bank released 656 million pounds of its bad loan provisions, after upgrading its economic forecasts following a rapid rollout of COVID-19 vaccines in Britain.

But its results were weighed down by 425 million pounds of “remediation charges”, including compensation for historic fraud at its HBOS Reading branch and a previously disclosed fine for misleading insurance customers.

Lending increased by 7.5 billion pounds as the economy began to open up during the period, but was again outstripped by growth in deposits – up 23.7 billion pounds as customers continued to build up savings.

Lloyds is in the midst of a shake-up of its top team after long-standing boss Antonio Horta-Osorio left in April to become chairman of Credit Suisse.

Finance director William Chalmers is running the bank before HSBC veteran Charlie Nunn takes the helm next month. Nunn and chairman Robin Budenberg – who stepped into his role in January – are expected to devise a refreshed strategy for the bank.

($1 = 0.7178 pounds)

(Reporting by Iain Withers and Lawrence WhiteEditing by Rachel Armstrong and Mark Potter)