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Ignatius Bose

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  1. With more and more companies moving to the cloud to outsource their computing requirements, Amazon.com Inc. (NASDAQ:AMZN) has emerged as a leader in the basic cloud computing space due to its scale of operations. The achievement is largely due to Amazon outspending its rivals in building data centres and an incredible ecosystem comprising of servers, storage, networking and other hardware to support firms with the raw computing components for a variety of needs, which would otherwise cost them a fortune to run it from an in-house data centre. The move is paying off for Amazon with the company reporting annual revenue of $15.5bn from its Amazon Web Services (AWS), constituting about half of its $32.4bn in total revenues. In terms of market share, AWS has expanded to capture about 27% of the total market with Microsoft Corp. coming a distant second at 15%. In a bid to meet the rising demand from businesses looking to deploy advanced capabilities including data analytics and artificial intelligence, Amazon is expanding its network of data centres in the Middle East, Italy, Indonesia and South Africa by scaling its availability zones across the twenty-plus geographical regions where it currently operates. With revenues from the global cloud computing infrastructure market expected to jump three-fold in the next three years, Amazon is well placed to continue being the most dominant player in the industry.
  2. Lloyds Banking Group Plc. (LON:LLOY) reported a pretax profit of £2.9bn in the first six months of the current year, below analysts’ expectations of £3bn after the bank raised its provisioning by an additional £550m to cover claims arising from the misselling of its payment protection insurance (PPI) scheme. The PPI dates back to more a decade when customers applying for a loan or line of credit were charged an additional sum which was clubbed with the interest to protect banks in the event customers default on payments. However, the scandal came to light in 2011 when customers claimed that they were not fully aware of the charge or that it was optional rather than mandatory, prompting the Financial Conduct Authority (FCA) to step in and issue a deadline of 29th August for customers to settle claims against lenders. As of May this year, the total claims paid out by banks amounted to £36bn, with Lloyds alone settling more than £20bn in claims of which £650m were settled this year, leading to a 7% drop in the bank’s pre-tax profits in H1 2019. With the bank expecting additional claims before the cut-off date in August, it is expected to have set aside about £1.1bn to settle any further disputes arising from the payment protection insurance scandal.
  3. Aston Martin reported a pre-tax loss of £78.8m in the first six months of the year, citing waning demand from dealers across Europe and the UK. The disappointing earnings announcement led to the shares of the luxury car manufacturer tumbling by more than 12% to £4.98 a share on Wednesday, extending its losses to more than a fourth in value since its £19 a share debut in October last year. In addition, the more than 100-year old company issued a profit warning last week, slashing its forecast for the year from 7,100-7,300 cars to around 6,500 amid deteriorating economic conditions and the uncertainty surrounding Britain’s exit from the European Union. The automobile industry in the UK is going through a major crisis with the Brexit uncertainty adding to their woes. According to the UK’s car industry body SMMT, investments in the sector fell from a seven-year average of £2.5bn-2.7bn to £90m in the first six months of this year and while the car industry in Britain is resonating the other industries against a no-deal Brexit, the one major deterrent facing all the businesses in the region is the ongoing Brexit uncertainty.
  4. According to The Wall Street Journal, based on information provided by a Federal Aviation Administration (FAA) official, an internal risk analysis carried out by the FAA following the first crash of the Boeing 737 MAX jet showed a high likelihood of a similar emergency occurring in the near future. Although the regulator’s analysis was not reported, based on the findings, it was decided that if the pilots were informed about the vulnerabilities in the malfunction of the onboard sensor and if they were aware of the risk and how to respond in the event of an eventuality, it was acceptable to allow the Boeing 737 MAX jets to continue operating while the airline manufacturer comes up with a permanent fix to the MCAS software. At 4.30pm GMT on Wednesday, shares of Boeing were trading flat at $347.55, down more than 2% from the session highs of $351.21.
  5. Investors and firms in the UK hurt from the currency manipulation by Barclays, Royal Bank of Scotland, JPMorgan, Citigroup, and Switzerland’s UBS have filed a class-action suit of £1bn with the Competition Appeal Tribunal. The investors have also brought in US law firm Scott+Scott, known for specialising in stock market litigations, to represent them. Earlier, in a US class action suit, the law firm secured more than $2.3bn in compensation from Barclays, Deutsche Bank, RBS, and UBS. The class-action suit was filed under the new UK law that came into force in 2015 where identical claimants would be included under the same claim, thereby reducing litigation costs while they share damages based on the losses suffered individually. The claim, led by the former chair of the Pensions Regulator Michael O’Higgins, seeks compensation from the banking cartel on behalf of pension funds and corporates which suffered millions of pounds in losses from the currency rigging by the five banks. According to O’Higgins, the claim will depend on the number of FX trades carried out by the banks in their UK operations and is likely to extend beyond £1bn.
  6. The Meatless Farm, Britain’s plant-based protein company, is expected to launch in the US next month and has already roped in Amazon-owned Whole Foods Market to distribute its products. The alternative meat market boom in the US is currently led by Beyond Meat and Impossible Foods whose protein-based products are sold by retailers and quite a few restaurants, including TGI Friday’s, Burger King and Cheesecake Factory. According to the founder of The Meatless Farm, Morten Toft Bech, while the firm would eventually venture into the US dining space, at the moment the focus is on making the products available at retail outlets, and its deal with Whole Foods includes bringing in additional retailers in the future. He also said that while Beyond Meat and Impossible Foods are pushing the burger agenda, the UK-based firm would be focusing on its mincemeat cooking ingredient. The Meatless Farm has signalled its global ambition and has already partnered with the Middle East supermarket chain Spinneys, pub chain Greene King and Sainsbury’s in the UK and a chain of retailers in Canada, as it readies for an additional £25m funding later this year. With former Kellogg’s executive Rob Woodall at the helm, the alternative meat firm views its competitors as the massive meat industry rather than Beyond Meat and Impossible Foods.
  7. Japan’s unemployment rate edged 0.1% lower to 2.3% in June, below analysts’ forecast of 2.4%, according to data from the Ministry of Internal Affairs and Communications. The drop in the unemployment rate was led by the addition of 67.01 million new jobs during the month, moderately higher than the 66.94 million new jobs created in the previous month. Japan raised its minimum wage from ¥848 an hour in fiscal 2017 to ¥874 per hour in the last fiscal. However, wage growth has fallen for five months in a row up to May with regular pay which accounts for a major portion of the monthly income dropping 0.6% in May while real wages which take inflation into account sliding 1% during the corresponding period. In a separate announcement, Japan’s Ministry of Health, Labour and Welfare said that the job to applications ratio dropped to 1.61 in June from 1.62 the previous month, indicating the ongoing labour crunch in the country mostly led by an increasingly ageing population.
  8. Beyond Meat’s (NASDAQ:BYND) second-quarter sales jumped almost four times to $67.3m from $17.4m a year back, but the company’s loss extended to $9.4m or 24c a share, from $7.4m during the corresponding period, beating FactSet consensus on revenue of $52.5m and losses of 9c a share. The sharp growth in sales was led by the protein-based alternative meat company advancing its foodservice points of distribution, adding new strategic customers and expanding sales of its primary offering, Beyond Burger. Following the earnings announcement, shares of the company fell 5.44% to settle at $222.13 on the NASDAQ on Monday as investors booked profits after a dream run with prices of the stock climbing as much as nine times from its IPO price of $25 a share. However, shares slumped more than 14 per cent in extended trading after the company said that it plans to sell an additional 3.25m shares in the secondary markets at an undisclosed price. Beyond Meat’s close to 900% rally has led to a horde of short-sellers betting against the astronomical gains in the stock in just over two-months. Based on data from analytics firm S3 Partners, shares of Beyond Meat were commanding a borrowing fee of 135.9% on Monday, with new borrowers being charged 150% of the stock price.
  9. On the eve of the Fed’s interest rate decision, when most Fed watchers expect the central bank to take small steps in easing the benchmark interest rates while it leaves the door open for additional cuts later this year, US President Donald Trump thinks otherwise. Taking to Twitter, the President said the Fed raised interest rates “way too early and way too much.” He said the loss in potential wealth creation measured in terms of debt is staggering in spite of Washington’s robust growth and while the Fed made all the wrong moves, the other countries; mostly referring to the European Union and China, played well against the US. He went on to tweet that he expects the Fed to cut more than 25 basis points on Wednesday. While very few economists would agree with Trump, markets overwhelmingly anticipate the Fed to cut a quarter percentage point as insurance to prolong the ongoing expansion which has lasted close to a decade following the 2007-2009 global financial crisis.
  10. Mylan N.V.’s (NASDAQ:MYL) confirmation that it is merging with Pfizer Inc.’s generic business Upjohn and the company’s better than expected second-quarter results pushed the shares of the generic drugmaker by more than 24% in US premarket on Monday. In a deal expected to close in the middle of next year, the combined company is projected to generate revenues in the $19-20bn range starting from 2020, which also include the $1bn in synergies. In addition to the merger news, Mylan’s Q2 earnings announcement earlier today beat analysts expectations with the firm reporting an EPS growth of $1.03 a share, about 8.5% higher than Zacks consensus estimate of $0.95c a share. While Upjohn would be combined with Mylan through a Reverse Morris Trust, the spin-off from Pfizer includes a $12bn debt which Upjohn will issue to shareholders of its parent as part of the deal. According to the chief executive of Mylan, Robert Coury, the merger would combine the assets of Mylan and the iconic brands of Upjohn to cater to the changing health needs of individuals worldwide while delivering attractive returns to shareholders for years to come.
  11. Based on data from the British Chamber of Commerce, about 60% of businesses in the UK were found to be recruiting new staff in the second quarter compared to 53% in the first three months of this year. The survey, comprising of more than 6,500 firms signals a robust labour market and comes a few days after Britain’s Office for National Statistics (ONS) showed that the unemployment rate in the UK was holding at 45-year lows in the three months to May 2019. While the ONS is expected to release the official unemployment rate for the second quarter on 13th August, the growth in hiring was largely on account of part-time employment, contract and agency work. Likewise, a survey by BBC found that the firms hiring were mostly small businesses with less than 250 employees with the percentage finding it easier to find the right people to fill open positions dropping from 73% in the first quarter to 64% in Q2. On the outlook for the next three months, about 63% of businesses said they may not hire more workers, while 30% expect to boost hiring and the remaining anticipate a job cut.
  12. Intel Corp. (NASDAQ:INTC) reported second-quarter earnings after market hours on Thursday, and while the revenues of the world’s largest chip manufacturing giant edged lower from a year earlier, the results beat Street estimates by a wide margin. Here are some of the key highlights of Intel’s revenue breakup: The company’s revenue dipped to $16.51bn in the second quarter from $16.96bn a year back with net income coming in at $4.18bn or 92c a share from $5.01 or $1.05. Analysts surveyed by FactSet were expecting Intel to report revenue of $15.68bn and earnings of 89c a share. Intel’s largest client computing or traditional PC segment reported a 1% revenue growth to $8.8bn, while analysts forecasted a 6.8% drop in revenue to $8.13bn. Revenue from its data centre group fell 10% to $5.0bn, better than the $4.89bn predicted by analysts. Revenue from its non-volatile business dropped 13% while revenue from the company’s “Internet of Things (IoT)” unit jumped 12%, again beating Street expectations. Shares of Intel settled at $52.50 on Thursday and are expected to surge upwards of 3% at the open on Friday, extending its gains to more than 10% this month alone. In the near-term, Intel could surge to $57.00-57.25 as long as prices do not settle below $52.00.
  13. The US economy expanded at a slower annual pace of 2.1% in the second quarter from 3.1% in the first three months of this year, beating economists expectations of a 1.9% reading. The key drivers of growth were led by consumer and government spending. While the former expanded by 4.3% in the three months to 30th June, from 1.1% in the first quarter, as people spent more on food, drinks, clothing cars and trucks, government spending surged 5% during the quarter, partly driven by the federal outlay following the partial shutdown earlier this year. Coming to the negatives, investment plunged by about 11% as businesses cut down on spending plans amid Washington’s trade dispute with China and a weakening global economy. Inventories, on the other hand, shrunk by $44.3bn, the most in a year, knocking off close to a full percentage point from the GDP numbers. The US trade deficit also exerted pressure on the GDP data with exports slumping 5.2% while imports edged marginally higher.
  14. In a move that is expected to unlock value for shareholders, Vodafone Group Plc. (LON:VOD) said on Friday that it would spin off its tower business operations in Europe into a new company that would eventually be listed on European bourses. According to the firm’s chief executive, Nick Read, the tower company comprising of 61,700 sites, which is the largest in Europe, would be functioning within the next 18 months with 75% of its operations spread across Germany, Britain, Italy and Spain. The world’s second-largest mobile operator announced the spinoff plans against the backdrop of its first-quarter earnings in which the company reported a smaller than expected revenue decline of 0.2%. While the company said that it would gradually improve on its weak top line, the firm maintained its full-year guidance for adjusted core earnings and free cash flow. Vodafone’s spinoff announcement received a thumbs-up from investors with the company’s shares soaring more than 10% on Friday, the biggest intra-day surge since November 2008. At noon in London, the stock was trading at 144.5p, up 9.5% for the session.
  15. UK real estate firm Foxtons Group Plc. (LON:FOXT) blamed Brexit-driven uncertainty for the sluggish demand in property prices in London and the rest of Britain as the key reason for the drop in revenues in the first half of 2019. Foxtons reported revenue of £51.1m for the first half of 2019 compared to £53m in the first six months of last year, a drop of 3.5% year on year while the sales revenue from which it earns commission fell 10% to £15.4m in spite of flat volumes. The company’s adjusted EBITDA of £5.4m was mostly unchanged from last year. The firm, however, reported a statutory loss of £3.2m from the £2.5m last year. Earlier in May, Foxtons issued a warning that property prices in Britain were sliding to record lows as Brexit worries and higher stamp duty property tax lowered demand for both residential and commercial properties. Although demand for lower-valued properties rose, the real estate firm was facing stiff competition from low-cost operators like Purplebricks. Following the earnings announcement, Foxtons is trading with losses of 1.2% in London on Friday. Year to date, the stock has returned about 8.5%.
  16. Tesla Inc. (NASDAQ:TSLA) reported a loss of $408m, or $2.31 a share, in the second quarter, marginally better than the $718m, or $4.22 a share, loss a year earlier. Adjusted for one-time items, EPS fell by $1.12 a share compared to a loss of $3.06 in the previous year. Sales, on the other hand, rose to $6.3bn from $4bn a year back, but still failed to beat Street consensus of $6.5bn and an adjusted quarterly loss of 35c. Not only did the earnings upset investors who were expecting a smaller loss after a record second-quarter sales, but the bad news was compiled with Chief Executive Elon Musk announcing the transition of Tesla’s CTO JB Straubel to an advisory role. Shares of Tesla, which fell 11% in aftermarket hours on Wednesday following the disappointing earnings announcement, extended its decline by another 2% on Thursday and were seen trading at $229.96, the lowest price since 2nd July. In the year to date, Tesla is down more than 30% compared to the 25% gains on the NASDAQ Composite Index.
  17. Unilever Plc. (LON:ULVR) announced a weaker than expected underlying sales growth in the second quarter, citing wet weather in Europe and weaker food inflation in India. The company’s underlying sales of 3.5% in Q2 2019 came in lower than analysts’ average estimates of 3.7%. Growth was mainly seen in emerging markets like Indonesia and the Philippines with sales surging 7.4% in the three months to 30th June, while in developed markets they fell 1.6% in the quarter. With ice cream making up about 13% of Unilever’s sales and Europe generally contributing to around a third of the total revenue in the second quarter, the group saw a slide in its turnover as a result of wet weather across the continent, with rainfall amplifying to three times the norm in April and May across most of Europe denting demand for the firm’s premier product. The company, however, maintained that its full-year sales forecast would come in at the lower half of the 3-5% range with operating margin likely to hit 20% in 2020. At 2.30pm GMT, shares of Unilever were trading more than 2% lower at 4,890p while the FTSE 100 was down about half a per cent at 7,466.
  18. In a defining moment for Boeing (NYSE:BA), the world’s largest aircraft manufacturer reported a record second-quarter loss of $2.9bn, as the worldwide grounding of its flagship 737 Max jets led to a pile-up in costs. While Boeing’s earnings beat market estimates of a loss in the $6.65-6.69 range, the company stated a more than 270% plunge in earnings; from $3.33 a share in Q2 2018 to a loss of $5.82 a share in the second quarter this year on the back of fewer deliveries. While Boeing’s losses are the largest in the history of the company, surpassing the $1.6bn loss during the financial crisis in 2009, the aircraft manufacturer’s revenue also slumped from $24.8bn last year to $15.8bn in the three months to 30th June. While Boeing’s losses from halting deliveries of the 737 Max jets were partially offset by an 11% growth in revenues from its services unit and defence business in addition to higher margins on the 787 Dreamliner, chief executive Dennis Muilenberg expects the 737 Max to return to service sometime in October. Failing that, the aviation giant could look at other options, including the complete suspension of production.
  19. Shares of Cobham Plc. (LON:COB) jumped around 35% on Thursday after US private equity group Advent International said it is buying the UK defence and aerospace group for £4bn ($5bn) in an all-cash deal. Advent’s offering values the defence major at 165p a share, representing a premium of more than 50% of the average share price over the last three months. Cobham is known for pioneering the air-to-air refuelling technology which is established in jets manufactured by Airbus and Lockheed Martin’s F-35 fighters. In addition, the firm also manufactures electronic warfare systems and communications for military vehicles. Earlier today, Cobham announced its H1 2019 results with the group revenue soaring to £1.03bn in 2019 from £924.5m same time last year. The firm also reported an underlying profit before tax of £98.9m in the first half of 2019 compared to £62.6m a year earlier with the underlying EPS rising from 2.0p last year to 3.2p in the six months to 30th June. However, the group’s statutory operating profit fell to £68.7m from £213.9m a year earlier while the underlying operating profit registered a more than 10% increase; from £95.5m to £107.1m in the corresponding period. At noon GMT, shares of Cobham were trading at 166p, in line with Advent’s offer price, bringing the year to date gains to about 70%.
  20. Germany’s flash manufacturing purchasing managers index slipped to 43.1 in July from 45.0 the previous month, highlighting the slowdown in trade from Europe’s export powerhouse. Noticeable declines were seen in new orders, employment and inventories although the flash services PMI coming in at 55.4 from 55.8, indicating that the services sector was holding up, at least for now. Economists from Barclays stated in a note to clients that while the survey data is worse than what’s essentially trending on the ground, the downside risks have heightened following the troubled US-China trade conflict, the uncertainty surrounding Britain’s exit from the European Union and the political tension in Italy, which are all likely to flare up again in autumn. Germany’s manufacturing output, which is the weakest it has been in seven years, could push the European central bank on Thursday to tweak its earlier guidance to hold interest rates at current levels until mid-2020, paving the way for an interest rate cut as early as September. Markit’s flash PMI reports are based on about 85% responses during the month with the final result updated in the first week of the upcoming month.
  21. AT&T’s (NYSE:T) total operating revenue surged 15.3% to $44.96bn in the second quarter, beating analysts’ expectations of $44.85bn from a Refinitiv survey. However, the net income of the second most-subscribed wireless carrier in the US dropped to $3.71bn or 51c a share from $5.13bn (81c a share) during the corresponding period, in line with market estimates. Excluding items, the firm’s EPS was in line with analysts’ expectations of 89c a share. The key highlight of AT&T’s result announcement was the net addition of 72,000 phone subscribers in the second quarter, beating Street estimates of 27,000 subscribers. However, in the premium segment, the company lost 778,000 subscribers in the three months to 30th June, extending the 544,000 lost subscribers in the first quarter. The premium segment includes DirecTV satellite and U-verse television, which directly competes with Netflix Inc. In other news, AT&T completed its acquisition of Time Warner for $85bn to create a new business division “WarnerMedia,” which includes assets such as Turner TV networks and HBO.
  22. The number of mortgages approved by Britain’s banks for new house purchases rose to a seasonally-adjusted 42,653 in June from 42,047 the previous month, based on the revised data from UK Finance. While the mortgage approvals came in below analysts’ expectations of 42,900, June’s figures are a notch below April’s two-year highs of 42,792. From the time Britain voted to leave the European Union in 2016, the country has witnessed robust consumer demand in spite of the housing market slowing down in London and the surrounding areas, prompting the chief economist of the Bank of England Andy Haldane to issue a statement saying that the housing market had bottomed out. On the other hand, loan approvals on dwellings for re-mortgaging rose from 28,748 in May to 28,806 in June while net mortgage lending too surged from £1.374bn to £1.579bn. With Boris Johnson taking over as the UK’s prime minister amid clear signs that the country would exit the European Union one way or the other, the outlook for the housing market, along with a host of other key macroeconomic figures, remains uncertain in the near-term.
  23. The European Central Bank is expected to announce its interest rate decision following its monetary policy meeting on Thursday. While policymakers are expected to leave interest rates unchanged for now, investors expect the central bank to give some indications that it could be moving back towards the easier monetary policy by laying the foundation for an interest rate cut and additional stimulus later this year. Markets expect the ECB to amend its forward guidance which pledges to hold interest rates at “present levels” until the first half of next year, building the case to slash its deposit rate, currently at minus 0.4%. The ECB is also expected to issue a statement about its willingness to restart its bond-buying program which it discontinued in December last year. With global central banks moving towards a softer monetary policy on the back of waning growth and falling inflation in spite of a tight labour market, the ECB’s tweak in its policy statement could signal a rate cut as early as September, a month before Draghi’s eight-year term expires in October. While some analysts see an outside chance of the ECB cutting rates on Thursday, citing that the macroeconomic conditions laid out by the central bank to have been met, a majority of market experts anticipate the ECB to cut by 10 basis points in September.
  24. Electric carmaker Tesla Inc. (NASDAQ:TSLA) will report its second-quarter earnings after the bell on 24th July with the Street heavily focused on the company’s margin growth. While the world’s biggest electric automaker did a great job by scaling up production and reporting record deliveries in the three months to 30th June, the financial impact of the discounts and the costs associated with ramping up production could impact margins and the stock in the near-term. Coming to the estimates, analysts predict Tesla to report a 60% jump in annual sales, to around $6.44bn with a GAAP loss of around $300m or $0.40 a share, a sharp improvement from last year’s loss of $3.06 a share. The strong performance comes on the back of Tesla’s three-fold rise in deliveries of its flagship Model 3 which helped lift the company’s total deliveries to a record 95,200 units in the second-quarter. While revenue growth was led by customers advancing their purchases ahead of the withdrawal of the tax incentive offered to the carmaker, analysts expect revenues to be constrained going forward. However, Tesla is likely to show a positive free cash flow for the quarter after last quarter’s disappointing FCF of -$920m. Since 2016, Tesla’s revenue growth has beaten Street estimates in all but two quarters and although the stock has underperformed most of its peers in the sector, the stock has rebounded close to 40% after hitting 29-month lows in May this year.
  25. Britain’s grocery sales dropped 0.5% year on year in the 12-weeks to 14th July 2019, according to the market research firm, Kantar. Sales declined across Britain’s big four supermarket group with Tesco (LON:TSCO), Sainsbury’s (LON:SBRY), Asda (NYSE:WMT) and Morrisons (LON:MRW) reporting lower sales in the region of 2.0-2.6% individually as they lost market share to German-owned discount stores Aldi and Lidl, who reported sales growth of 6.7% and 7.0% respectively. Based on Kantar’s review, while the heatwave last year heightened consumer demand for groceries with households shopping frequently and closer to home, this year people were making fewer trips to supermarkets leading to a sharp drop in sales. Likewise, consumer spending on alcohol dropped by about £75m this year, while sales of soft drinks and ice-cream fell by £56m and £55m respectively. At 10.30am GMT, shares of three of Britain’s four largest supermarkets slid following the grocery sales report, with Tesco and Sainsbury’s slipping more than 2.0% to 229.70p and 202.50p respectively, while Morrisons was trading at 204.20p, down about 0.80% for the day. Asda, a subsidiary of Walmart, was seen trading with gains of about half a per cent at $113.35 in the US pre-market session.
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