(Alliance News) - The following is a summary of top news stories Wednesday.
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COMPANIES
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Google-owner Alphabet late Tuesday hailed its investments as it reported a surge in quarterly earnings. Revenue for the third quarter of 2021 jumped to USD65.12 billion from USD46.17 billion a year ago. This 41% year-on-year revenue leap, along with the operating margin strengthening to 32% from 24%, resulted in net income surging 68% to USD18.94 billion from USD11.25 billion. Diluted earnings per share rose 71% to USD27.99 from USD16.40. Over half of the revenue total was made by Google Search & other, which soared to USD37.93 billion from USD26.34 billion. YouTube ads brought in USD7.21 billion, up from USD5.04 billion. "Five years ago, I laid out our vision to become an AI-first company. This quarter's results show how our investments there are enabling us to build more helpful products for people and our partners," said Chief Executive Sundar Pichai.
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Microsoft pointed to strength in its cloud offering as the personal computing and technology firm posted a sharp increase in first quarter earnings. Revenue in the three months ended September 30 rose 22% year-on-year to USD45.32 billion from USD37.15 billion a year earlier. Revenue topped CNN cited consensus of a smaller hike to USD44.0 billion. Net income, meanwhile, improved 27% to USD20.24 billion from USD15.88 billion. Pretax profit surged at the same rate to USD20.52 billion from USD16.12 billion a year prior. "Cloud strength" was a big driver in the bumper first quarter, Microsoft said.
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Twitter was pulled to a quarterly loss on a litigation charge,but the microblogging site expects growth in monetisable daily active users to remain strong into the final three months of the year. Revenue for the three months to the end of September jumped 37% to USD1.28 billion from USD936.2 million a year ago. However, the firm was hit by a USD765.7 million litigation settlement, versus nothing a year ago. This saw Twitter tumble to a net loss of USD536.8 million for the quarter, from income of USD28.7 million year-on-year. The company posted a diluted loss per share of USD0.67, turning from earnings of USD0.04. More positively, Twitter reported average monetisable daily active users reached 211 million, up 13% on a year ago and accelerating from 11% growth in the second quarter.
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Deutsche Bank reported surging profit in the third quarter, with the lender benefiting from reduced credit provisions, and it boasted it is ahead of its transformation targets. In the three months to September 30, Deutsche's pretax profit improved 15% to EUR554 million from EUR482 million a year before. The bank's credit loss provisions dropped to EUR117 million from EUR273 million the year before. The bank's CET1 ratio ended the third quarter at 13.0%, in line with Deutsche's guidance, versus 13.3% at the same point the year before. Its loan book ended the quarter at EUR456 billion, up from EUR433 billion a year earlier, while deposits increased to EUR586 billion from EUR575 billion. Deutsche said its Capital Release Unit - the firm's "bad bank" - reduced its risk-weighted assets to EUR30 billion, ahead of its 2022 year-end target of EUR32 billion.
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Banco Santander reported a return to profit in the first nine months of 2021, with its European and North American operations showing strength, and it has guided to "significantly outperform" its profit targets for 2021. In the first nine months of 2021, the Madrid-headquartered financial services firm recorded a pretax profit of EUR10.72 billion, compared to a EUR3.27 billion loss in the same period the year before. Net interest income rose 2.8% to EUR24.65 billion from EUR23.98 billion. Santander attributed the net interest income growth to higher average lending and deposit volumes and lower deposit costs. The bank pointed to its performance in the UK, Chile and Brazil as particularly strong. Total income increased 3.8% to EUR34.63 billion from EUR33.36 billion. Santander's fully-loaded CET1 ratio at the end of September was 11.85% compared to 11.57% the year before.
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BASF raised its annual sales and profit outlook after a strong third quarter of trading that saw volume growth in almost all major regions where the chemicals firm operates. Ludwigshafen, Germany-based BASF posted sales for the third quarter ended September 30 of EUR19.67 billion, up 42% from EUR13.81 billion a year previous. The rise was attributed mainly to higher chemical prices and volumes. Net income was EUR1.25 billion, swung from a EUR2.12 billion loss a year before. Volume growth was achieved in all major regions except for China, where the recovery was already in full swing in the third quarter last year, BASF highlighted.
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Chinese authorities have told Evergrande founder Xu Jiayin, once the country's richest man, to use his personal wealth to alleviate the embattled company's debt crisis, according to media reports. Last week, the group unexpectedly paid interest on an offshore bond just before a Saturday deadline, averting a default and giving it a much-needed reprieve. Evergrande also reported that it had resumed work on more than 10 stalled projects. But Bloomberg News reported Tuesday that Beijing has pushed Xu – also known as Hui Ka Yan in Cantonese – to dip into his own pocket to help pay off some of the company's debts, citing people familiar with the matter. However, it is unlikely that Xu's personal sacrifice would make much of an impact on Evergrande's liabilities of more than USD300 billion, with Bloomberg reporting his fortune at less than USD8 billion.
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UK engineering, design and information management software provider Aveva reported growth in the first half of its current financial year. Aveva said its revenue grew by 9% in the six months to September 30 on a pro forma organic constant currency basis. This increase drove significant margin leverage and growth in adjusted earnings before interest and tax, it said. For the first half of financial 2021, Aveva reported revenue of GBP332.6 million. The Cambridge-based company said all of its fee types grew, with a particularly strong contribution from the recently acquired OSIsoft business. Maintenance & Services revenue, meanwhile, increased at a low single-digit rate, while Subscription & Perpetual licence revenue grew at a mid- to high-teens rate, Aveva said.
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Mexican gold and silver miner Fresnillo expressed confidence in its full-year guidance amid a higher volume of ore processed and an increase in silver ore grades in the three months to September 30. The miner reported year-to-date attributable silver production of 40.2 million ounces in line with the prior year due to a higher ore grade at the San Julian disseminated ore body in Mexico and, to a lesser extent, the contribution of development ore from the Juanicipio mine, also in Mexico. Year-to-date attributable gold production of 600,900 ounces was up 8.5% year-on-year, primarily due to the higher volume of ore processed at Herradura mine in Mexico following the lifting of Covid-19 restrictions, which had resulted in lower volumes of ore deposited last year. Fresnillo said it remains on track to meet its 2021 full-year guidance of 53.5 million to 59.5 million ounces of silver and 675,000 to 725,000 ounces of gold.
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Shares in Wm Morrison Supermarkets were suspended from trading in London on Wednesday and will be cancelled on Thursday. Clayton, Dubilier & Rice's GBP7 billion takeover of Morrisons was approved by shareholders last week, with some 99% of Morrison shareholders backing the deal. Darktrace will replace Morrisons in the FTSE 100 index.
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Transport operator FirstGroup opened a tender offer for shares at 105 pence per share, to return up to GBP500 million to shareholders. FirstGroup shares were up 4.8% at 100.72p early Wednesday. Importantly, FirstGroup said activist shareholder Coast Capital Management has agreed to support the plan and tender all its shares. The buyback comes after FirstGroup sold its First Student and First Transit businesses in the US to EQT Infrastructure for USD3.12 billion earlier this year. Coast had opposed the sale, which it described at the time as a "destructive disposal", saying the price received was too low. Additionally, last week FirstGroup said it had sold its US coach business Greyhound Lines to a subsidiary of FlixMobility. This completed the company's refocus back on the UK.
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MARKETS
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The Nasdaq market in New York was called to outperform on Wednesday as a big week for big-tech earnings continues to deliver the goods. Microsoft shares were up 2.4% in pre-market trade, and Twitter was up 2.3%, though Alphabet was down 0.4%. In London, large-cap shares were slightly weaker ahead of a well-trailed UK government budget statement just after midday.
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CAC 40: down 0.4% at 6,742.10
DAX 40: down 0.4% at 15,691.09
FTSE 100: down 0.3% at 7,254.83
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Hang Seng: closed down 1.6% at 25,628.74
Nikkei 225: closed marginally lower, down 7.77 points at 29,098.24
S&P/ASX 200: closed up 0.1% at 7,448.70
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DJIA: called down 22.00 points, or 0.1%
S&P 500: called marginally lower, down 2.00 points
Nasdaq Composite: called marginally higher, up 4.75 points
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EUR: flat at USD1.1593 (USD1.1587)
GBP: down at USD1.3729 (USD1.3774)
USD: down at JPY113.61 (JPY114.25)
Gold: soft at USD1,787.64 per ounce (USD1,788.24)
Oil (Brent): down at USD85.22 a barrel (USD86.37)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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UK Chancellor of the Exchequer Rishi Sunak will hail a "new age of optimism" in his government budget on Wednesday, amid predictions he will have more money than expected to spend due to a fast bounce-back from Covid. Sunak is set to strike an upbeat tone as he talks up building a "stronger economy of the future", with the promise of rising wages, cash for the NHS and investment into regional transport projects. His statement to Parliament is due at 1230 BST. Sunak's spending plans are likely to be bolstered by forecasts of faster growth than predicted in the spring as the economy roars back into life since the lifting of coronavirus restrictions, according to analysts. The Office for Budget Responsibility, the independent body whose forecasts guide budget spending, is expected to up its growth outlook for 2021, cut its unemployment prediction and pencil in lower borrowing thanks to higher tax receipts.
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UK shop price deflation eased again in October, leaving consumers with the prospect of price rises during the festive period. The UK retail sector has faced pressure from supply chain issues and material shortages. The latest British Retail Consortium-Nielsen IQ shop price index was further proof that some of these costs are being passed onto the consumer. In October, shop prices declined 0.4% annually, easing from September's 0.5% fall. BRC Chief Executive Helen Dickinson commented: "Tight margins mean retailers may not be able to absorb all of these new costs, so prices will continue to rise. A BRC survey showed three in five retailers expect prices to increase in the run up to Christmas, and the ongoing labour shortages are making the situation worse."
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The number of patients with Covid-19 in hospital in the UK has climbed to its highest level for more than seven months. A total of 8,693 patients were in hospital on October 25, according to the latest UK government figures. This is up 11% from the previous week, and is the highest since 9,009 patients were recorded on March 9. The figures are still well below those seen at the peak of the second wave of coronavirus, however. Some 39,254 patients with Covid-19 were in hospital on January 18, the highest at any point since the pandemic began. Hospital numbers have been on a slow upwards trend since the third wave of the virus began at the end of May.
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Germany's outgoing economy minister says the country's long-term prospects are good, but warned that the economy would perform worse this year than previously expected. "Growth this year will be lower than we all imagined," Peter Altmaier told German radio, blaming the continuing shortage of raw materials and the increased energy prices for the slowdown. He said the stabilizing of international supply chains was a top priority, and that more microchips would also have to be produced in Europe to keep key industries working at capacity. However, he insisted that the prospects for the German economy were good, and predicted "a boom next year with over 4% growth."
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US President Joe Biden threw his weight behind the struggling Democratic candidate in Virginia's closely watched election for governor, urging a crowd to defeat Republican "extremism". Standing by Terry McAuliffe, whose slide in the polls has put Democrats on red alert for a wider Republican comeback in next year's midterm battle for Congress, Biden mocked the Republican opponent as an "acolyte of Donald Trump." On paper, McAuliffe, 64, should have a relatively easy run in a week's time against Republican Glenn Youngkin. Already a former Virginia governor and seeking to succeed the outgoing Democrat, McAuliffe is the closest thing to an incumbent in a state where Biden trounced Trump in the presidential election 12 months ago. Instead, Youngkin is tied with McAuliffe in the polls, eying an upset victory on November 2 that would energize his party's push to regain control of Congress in the 2022 midterms.
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Canadian Prime Minister Justin Trudeau named prominent former climate activist Steven Guilbeault as environment minister in a major post-election cabinet shuffle ahead of a key global climate conference. At a ceremony in Ottawa, Guilbeault was all smiles as he was sworn in alongside 37 other faces, including Anita Anand who was picked to lead a military plagued by sexual misconduct allegations, and Melanie Joly who was appointed foreign minister. His promotion comes just days before global leaders are set to gather in Glasgow, Scotland for the COP26 summit on climate change.
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Consumer prices in Australia increased in the third quarter of 2021, particularly for new dwellings and fuel, data from the Australian Bureau of Statistics showed Wednesday. The consumer price index for the quarter ended September 30 rose 0.8%, in line with the second quarter of 2021, driven by a 7.1% increase in the price of automotive fuel to record levels, and a 3.3% rise in new dwellings.
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Australia will lift a ban on citizens travelling overseas without permission, the government announced Wednesday, with the country's border set to open to skilled workers and international students by year's end. More than 18 months after Australia closed its international borders, fully vaccinated citizens will no longer have to seek an exemption to leave the country, a joint statement from the health and home affairs ministries said. It comes as the country's adult double-dose vaccination rate edged closer to an 80% target. Home Affairs minister Karen Andrews said that while Australian citizens were currently being prioritised, more travel restrictions – including for some non-citizens – would be eased as vaccination rates increased. "Before the end of the year, we anticipate welcoming fully vaccinated skilled workers and international students," she said.
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By Tom Waite; thomaslwaite@alliancenews.com
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