TOP NEWS SUMMARY: Amazon shares tumble 6% after sales disappoint

(Alliance News) - The following is a summary of top news stories ...

Alliance News 30 July, 2021 | 10:54AM
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(Alliance News) - The following is a summary of top news stories Friday.

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COMPANIES

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NatWest posted a swing to first half profit, helped by an impairment release. The Edinburgh-based bank posted total income of GBP5.32 billion in the first half of 2021, down 8.9% from GBP5.84 billion a year earlier. It swung to a pretax profit of GBP2.51 billion from a GBP770 million loss a year earlier. Profit was boosted by a net impairment release of GBP707 million, contrasting with a hit of GBP2.86 billion taken a year earlier. NatWest declared a 3 pence per share payout and also unveiled plans to buyback GBP750 million worth of shares in the second half of 2021. NatWest also said it aims to distribute a minimum of GBP1 billion per year from 2021 to 2023, via a combination of ordinary and special dividends. This means total shareholder distributions for 2021 will be a minimum of GBP2.9 billion, it said. NatWest largely retained annual guidance, though it now expects a net impairment release for all of 2021 and tipped risk-weighted assets to come in below its previous GBP185 billion and GBP195 billion range.

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UniCredit reported a "robust" first-half performance after a strong second quarter as it entered talks to acquire parts of Banca Monte dei Paschi di Siena. The Milan-based bank reported net profit EUR1.03 billion for the recent quarter that ended June 30, more than doubled from EUR420 million a year before and up 17% from EUR887 million in the first quarter. Underlying net profit of EUR1.10 billion also was doubled from EUR528 million a year before and up 25% from EUR883 million in first quarter. Total revenue reached EUR4.40 billion in the second quarter, up 5.5% from EUR4.17 billion a year before, though down 6.1% from EUR4.69 billion in the first quarter. Meanwhile, UniCredit late Thursday said it has entered exclusive discussions to acquire parts of troubled Italian bank MPS. In 2016, MPS was bailed out by the Italian government, who is now the majority shareholder. UniCredit said the Italian government's Ministry of Economy & Finance has approved the prerequisites for a potential transaction involving the commercial operations of MPS, within carefully defined perimeters and appropriate risk mitigation.

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BNP Paribas declared an additional payout amid a strong performance in the second quarter of 2021. The Paris-based bank said revenue rose by 0.9% in the three months to June 30 to EUR11.78 billion compared to the second quarter of 2020 and by 4.9% compared to the second quarter of 2019, driven by a "very good" performance in its Domestic Markets business area. BNP Paribas said its operating income was EUR3.79 billion, up by 31% compared to the second quarter of 2020 and up 20% compared to the second quarter of 2019. Pretax income rose very sharply, by 34%, to EUR4.19 billion from EUR3.13 billion in the second quarter of 2020. It was up by 24% compared to the second quarter of 2019. BNP Paribas declared a cash dividend of EUR1.55 per share. This dividend is in addition to the dividend of EUR1.11 per share paid out in cash on May 26 and raises the total cash dividends paid out in 2021 to EUR2.66.

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Swiss Re reported a swing to positive net income for the first half of 2021, with a very strong performance in its property and casualty businesses amid diminishing pandemic-related impacts. Net income for the first half was USD1.05 billion, swung from a USD1.14 billion loss a year prior. The insurance firm saw improvements in its net premiums earned and fee income, which lifted 7.6% to USD20.80 billion. Looking ahead, Swiss Re said it is "well positioned to continue to perform strongly". Much of its optimism can be attributed to a decrease in Covid-19 losses, which fell to USD870 million in the first half of 2021 from USD2.5 billion in the same period of 2020.

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International Consolidated Airlines posted first half revenue of EUR2.21 billion, down 58% annually from EUR5.29 billion. In the second quarter alone, revenue jumped 77% to EUR1.24 billion from EUR703 million. IAG's pretax loss narrowed in the first half to EUR2.34 billion from EUR4.22 billion. In the second quarter, the carrier's loss was trimmed to EUR1.12 billion from EUR2.33 billion. The group - which owns British Airways and Aer Lingus as well as Spanish carriers Iberia and Vueling - said passenger capacity in the second quarter was 22% of pre-virus levels. For the third quarter, its planned capacity is 45% below 2019's levels. It is not giving financial guidance for 2021. Chief Executive Luis Gallego commented: "In the short-term, our focus is on ensuring our operational readiness, so we have the flexibility to capitalise on an environment where there's evidence of widespread pent-up demand when travel restrictions are lifted. We welcome the recent announcement that fully vaccinated travellers from amber countries in the EU and the US will no longer have to quarantine upon arrival in the UK. We see this as an important first step in fully re-opening the transatlantic travel corridor."

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Education publisher Pearson booked just GBP4 million in pretax profit in the first half of 2021, down from GBP35 million a year before. Sales rose 7.0% to GBP1.60 billion from GBP1.49 billion, but a GBP181 million other net gain a year before turned into a GBP6 million loss this year. However, Pearson swung to GBP127 million in adjusted operating profit from a GBP23 million such loss a year before. Chief Executive Andy Bird said the company made "good strategic, operational and financial progress in the first half of 2021 leading to healthy revenue and profit growth in the period". He said Pearson is on track to meet current market expectations.

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Shares in Amazon.com tumbled after-hours in New York on Thursday even as it posted over USD100 billion in sales for its second quarter. Shares in the e-commerce titan fell 0.8% to USD3,599.92 in New York on Thursday and slumped as much as 7% after-hours. For the three months to the end of June, total net sales surged 27% to USD113.08 billion from USD88.91 billion a year ago. However, the market had been looking for a sales figure just above USD115 billion. Of the total revenue figure, product sales made up USD58.00 billion and services sales USD55.08 billion. Net income for the period jumped 48% to USD7.78 billion from USD5.24 billion, and diluted earnings per share advanced 47% to USD15.12 from USD10.30.

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T-Mobile US lifts guidance again after a strong second quarter. Reports postpaid net additions of 1.3 million for second quarter and 13% growth in revenue to USD20.0 billion. Net income of USD978 million rockets from just USD110 million a year ago. Core adjusted earnings before interest, taxes, depreciation and amortisation of USD6.0 billion was up 7% on a year ago. Firm had raised 2021 guidance in May, and bumps it up again on Thursday. Now sees full-year postpaid net customer additions between 5.0 million and 5.3 million, an increase from prior guidance of 4.4 million to 4.9 million. Core adjusted Ebitda expected between USD23.0 billion and USD23.3 billion, versus prior guidance of USD22.8 billion to USD23.2 billion.

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Robinhood had a rough start on Wall Street on Thursday, falling sharply in its Nasdaq debut after the fast-growing online trading app raised USD1.9 billion in an initial public offering. Trading under the ticker "HOOD," Robinhood Markets Inc ended at USD34.82, dropping 8.4% after entering the market at USD38. The stock was down another 1.5% in pre-market trade early Friday. The Silicon Valley firm, launched by two friends who met at Stanford University, has billed itself as an accessible and fun platform for young and first-time investors, scored outsized growth during the coronavirus pandemic. But the company, which now has a valuation of around USD29 billion, has also drawn scepticism over its business model and criticism from key regulators over its practices.

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MARKETS

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Stock markets were were lower in Asia and Europe, and Wall Street was called down, with the tech-heavy Nasdaq Composite pointed down 1.1%. Amazon.com was down 6.0% in pre-market activity, following second-quarter sales results that disappointed market expectations.

"It's saying something when you can report quarterly sales roughly equal to the annual GDP of Ukraine and 33% operating profit growth and still disappoint the market. You can see why Jeff Bezos would rather be jetting off into space," commented Nicholas Hyett, equity analyst at Hargreaves Lansdown.

"In all seriousness though, Amazon is increasingly bumping up against the law of large numbers – particularly in US retail. When you’re only selling USD1,000 of product a year, boosting sales by 40% is easy. When your annualised sales reach USD400 billion, finding an extra USD160 billion of sales is pretty difficult. It means Amazon's having to spend big to deliver future growth, and capital expenditure is soaring, moving the group to a free cash outflow for the first time in a while."

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CAC 40: down 0.2% at 6,624.80

DAX 30: down 0.8% at 15,509.40

FTSE 100: down 0.9% at 7,017.41

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Hang Seng: closed down 1.4% at 25,961.03

Nikkei 225: closed down 1.8% at 27,283.59

S&P/ASX 200: closed down 0.3% at 7,392.60

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DJIA: called down 0.3%

S&P 500: called down 0.7%

Nasdaq Composite: called down 1.1%

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EUR: up at USD1.1903 (USD1.1885)

GBP: firm at USD1.3975 (USD1.3967)

USD: flat at JPY109.52 (JPY109.54)

GOLD: soft at USD1,829.24 per ounce (USD1,829.48)

OIL (Brent): down at USD74.94 a barrel (USD75.51)

(currency and commodities changes since previous London equities close)

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ECONOMICS AND GENERAL

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A raft of eurozone data painted an improved picture of the single currency area's economy, with gross domestic product growth topping expectations and the unemployment ticking lower. According to Eurostat, eurozone GDP rose 2.0% quarter-on-quarter during the three months to June. It topped market expectations of 1.5% growth, according to FXStreet-cited consensus, and it follows a 0.3% decline in the first quarter. The eurozone's unemployment rate ticked down to 7.7% in June, from 8.0% in May. A smaller drop to 7.9% was expected, so the figure beat expectations. Unemployment numbers fell by 423,000 compared to May, Eurostat said.

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Separate figures from Eurostat showed consumer price inflation in the eurozone accelerated to 2.2% annually in July, from 1.9% in June. It topped expectations of a 2% hike in consumer prices. Core consumer price growth, so excluding food, energy, alcohol and tobacco, slowed to 0.7%, however, from 0.9% in June. The figure was also below market expectations of a 0.8% hike.

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Germany's economy grew at a slower pace than expected in the second quarter of 2021, according to estimates from Destatis. German gross domestic product rose 1.5% quarter-on-quarter in the three months to June. Annually, it rose 9.2% on a seasonally-adjusted basis. Quarterly growth of 2% was expected, and an annual jump of 9.6% was forecast, according to consensus cited by FXStreet. Although the second quarter figure missed expectations, it still represented a stark improvement from the first quarter's 2.1% quarterly GDP drop.

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The French economy remains more than 3% smaller than its pre-virus size, despite figures showing a second quarter bounce in gross domestic product. According to INSEE, the French economy grew 0.9% quarter-on-quarter in the three months to June. The French economy had tread water in the first three months of 2021, after plunging 8.0% in the whole of 2020. INSEE said French GDP is now 3.3% below its pre-virus level.

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The UK's retail vacancy rate increased in the second quarter of 2021, with shopping centres hit hardest by Covid-19 lockdown measures. According to the British Retail Consortium-Local Data Co monitor, the retail vacancy rate rose to 14.5% in the second quarter, from 14.1% in the first three months of 2021. Shopping centre vacancies rose to 19.4% from 18.4%, while high street vacancies tracked the overall rate, rising to 14.5% from 14.1%. In retail parks, the vacancy rate increased to 11.5% from 10.6%. "It comes as no surprise that the number of shuttered stores in the UK continues to rise, after retailers have been in and out of lockdown for over a year. While vacancy rates are rising across all retail locations, it is shopping centres, with a high proportion of fashion retailers, that have been the hardest hit by the pandemic," BRC Chief Executive Helen Dickinson said. "Almost one in five shopping centre units now lie empty, and more than one in eight units have been empty for more than a year. Retail parks have also been impacted from the loss of anchor stores and their vacancy rate is rising quickly."

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Japan's government will extend a virus state of emergency in Tokyo and impose the measure in four more regions on Friday, as cases surge a week into the pandemic-postponed Olympics. The Japanese capital reported a record number of new infections on Thursday as daily cases nationwide topped 10,000 for the first time. On Friday, Tokyo 2020 organisers reported 27 new cases related to the event – the highest daily figure yet – although they insist there is nothing to suggest a link to rising infections in Japan. Prime Minister Yoshihide Suga said the government is acting "with a sense of urgency" and would announce a decision Friday on widening anti-infection measures. Tokyo's current virus emergency, which shortens restaurant and bar opening hours and bans them from selling alcohol, is due to end August 22, but the government plans to extend it until the end of the month.

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US President Joe Biden on Thursday stepped up actions to combat the spread of the surging Delta variant of the coronavirus, asking every US federal worker to either declare they are fully vaccinated against Covid-19 or wear masks and be tested. "We have the tools to prevent this new wave of Covid from shutting down our businesses, our schools, our society as we saw happen last year," the veteran Democrat said in a speech on his administration's new initiatives. The White House said just ahead of the address that all four million federal employees and on-site contractors "will be asked to attest to their vaccination status." Those who do not declare they are fully vaccinated will be required to wear a mask on the job regardless of location, physically distance from co-workers, and "comply with a weekly or twice weekly screening testing requirement."

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By Tom Waite; thomaslwaite@alliancenews.com

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Amazon.com Inc 3,462.52 USD -0.74

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