Business

MEXICO CITY — Mexico said on Friday its economy, the second-biggest in Latin America, showed signs of recovery in the third quarter after it relaxed pandemic control measures that had triggered an unprecedented slump.

Gross domestic product (GDP) rebounded 12 per cent in the July-September period from the previous quarter, the most since record-keeping began several decades ago, according to an official preliminary estimate.

Compared with a year earlier, GDP was down 8.6 per cent, national statistics institute INEGI reported.

"Our economy is recovering," said President Andres Manuel Lopez Obrador.

"Our forecast is coming true that we would fall due to the pandemic, but rebound quickly, like a V," he told reporters.

The economy suffered a record 18.7 per cent plunge in the second quarter from a year earlier after the country was semi-paralysed by lockdown measures.

Mexico has registered more than 90,000 coronavirus deaths — one of the world's highest tolls.

The government imposed lockdown measures at the end of March and started gradually reopening the economy in June.

A rise in employment in September and October means the labour market could return to pre-pandemic levels by the end of the first quarter of 2021, Lopez Obrador said.

'Second wave' 

Analysts, however, struck a more cautious tone, saying that the economy still faces a difficult path ahead.

"The recovery is far from complete," said Gabriela Siller, an economist at Banco BASE, noting that Mexico was still in the grips of the pandemic.

"A second wave [of infections] is likely to slow down the recovery," she warned.

The Mexican economy has now posted six straight quarters of year-on-year declines, something not seen since 1983 during a severe financial crisis, Siller noted.

Some analysts have criticised Lopez Obrador for not spending more to boost the economy, particularly the private sector, in the face of the coronavirus outbreak.

The left-wing populist says his priority is helping ordinary Mexicans with social aid and loans while avoiding saddling the country with increased debt.

Last month, the central bank warned that the economy was in danger of shrinking by 12.8 per cent for the whole of 2020 if the pandemic worsens.

The International Monetary Fund has urged Mexico to do more to boost the economy with fiscal and monetary stimulus.

It forecasts that Mexican GDP will shrink 9 per cent in 2020 before rebounding 3.5 per cent in 2021.

The government announced a $14 billion investment plan this month in cooperation with the private sector to boost the economy through infrastructure projects.

NEW YORK — Pressured by a prolonged commercial travel downturn and the hit from 737 MAX, Boeing on Wednesday announced additional job cuts that will lower headcount by 30,000 positions over two years.

The aircraft manufacturer, which has been in belt-tightening mode throughout 2020 in the wake of the coronavirus on top of the 737 MAX crisis, plans to eliminate around 7,000 more jobs through the end of 2021. 

The latest announcements will shrink headcount down to 130,000 from 160,000 in January of this year, a drop of nearly 19 per cent in less than two years.

"The global pandemic continued to add pressure to our business this quarter, and we're aligning to this new reality by closely managing our liquidity and transforming our enterprise to be sharper, more resilient and more sustainable for the long term," said Chief Executive Dave Calhoun.

A sharp drop in commercial plane travel has prompted airlines to cancel plane orders or defer deliveries, crimping Boeing's revenues. 

On top of that, the company's finances have been under pressure due to the grounding since March 2019 of the Boeing 737 MAX, which is nearing regulatory approval to resume service after a lengthy oversight process with air travel authorities.

In the third quarter, Boeing reported a loss of $449 million, compared with profits of $1.2 billion in the year-ago period as revenues fell 29.2 per cent to $14.1 billion.

Calhoun has emphasised that while Boeing faces a difficult medium-term environment, it expects airline demand to eventually return and that the company is well positioned in the defence and space business, which is steadier than commercial travel.

Calhoun has taken steps in 2020 to bolster its cash position since the coronavirus devastated the travel market. 

Besides two voluntary layoff programmes and involuntary job cuts, these have included suspending dividend payments, trimming commercial plane production and announcing a decision to consolidate manufacturing of the 787 Dreamliner plane to one venue from two in a cost-saving move.

The company has also taken steps to raise cash in the face of the difficult market, undertaking a $25 billion bond offering in the spring that averted the need to take advantage of a US government program that had been established for the company.

Boeing did not announce additional reductions in commercial plane production. 

The company said it made "steady progress" to return the MAX to service following the lengthy grounding. 

Earlier this month, the top European air safety regulator said he expected that the planes could start flying before the end of the year. 

The head of the US Federal Aviation Administration also signaled the plane could soon be cleared, while emphasising that work still had to be completed before final approval. 

Shares in Boeing fell 0.8 per cent to $154.01 in pre-market trading.

LONDON — European and US stock markets tanked on Wednesday while oil prices plunged as investors braced for the apparently imminent introduction of tighter lockdown measures to combat soaring coronavirus infection rates, dealers said.

In afternoon deals, Frankfurt was down 4.5 per cent and Paris stocks shed 4.2 per cent, while London lost 3.1 per cent, with sentiment plagued by an alarming surge in COVID-19 cases in Europe and the United States — and a spike in deaths.

Wall Street’s main indices also slumped, with the Dow down 3.1 per cent in late morning trade.

More than 500,000 new coronavirus cases were reported worldwide on Tuesday in a new record, according to a tally compiled by AFP.

The euro dived against the dollar while oil prices tumbled on deepening demand fears, with the main US contract down more than 5 per cent.

France was expected to present tougher restrictions as doctors warned many hospitals are just days away from being overrun with patients.

Media speculation was rife that France would announce a second lockdown, one day after officials announced 523 coronavirus deaths in 24 hours — the highest daily toll since April.

‘Grim’ 

“Grim. That’s the only word that can describe the markets on Wednesday,” said Spreadex analyst Connor Campbell.

“Investors’ COVID-19 fears [are] attacking stock prices in ways not seen since the start of the Western phase of the pandemic back in March.”

“They are not wrong to be worried”. 

French President Emmanuel Macron is likely to announce a month-long national lockdown in France, he added.

German Chancellor Angela Merkel is also seeking drastic new curbs, including fresh shutdowns hitting leisure, sports and the food and drink sectors, in crisis talks with Germany’s regional leaders.

The upsurge in coronavirus fears comes as investors have essentially given up on the chances of a new stimulus package out of Washington.

With US lawmakers unlikely to agree any new rescue package before Tuesday’s presidential election, analysts said the new wave of virus infections and lingering uncertainty over the vote mean equities will face a wobbly few days.

Some experts have already warned of a double-dip recession as new restrictions choke off the recovery seen in the third quarter of the year.

‘Double whammy’ 

“The double whammy of fears of further lockdowns crimping any tentative economic recovery in the UK and Europe, and a follow through of overnight weakness from the US based partly on the lack of further stimulus, have had a negative impact on investor sentiment,” Interactive Investor analyst Richard Hunter said.

The impact of this year’s lockdowns and travel restrictions was laid bare on Tuesday as the World Tourism Organisation said the sector had seen a 70 per cent collapse in business, leading to a $730 billion loss in revenues, while the UN’s trade body said foreign direct investment was likely to slump 40 per cent.

“If global economies aren’t going to be functioning as fully as had been hoped, for any number of reasons, then the hoped-for earnings recovery just might not live up to the currently lofty expectations,” said analyst Patrick J. O’Hare at Briefing.com.

“There is an ample basis for buyers to keep to the sidelines, creating lower bids that have the potential to feed even lower prices,” he added.

NEW YORK — Advanced Micro Devices said on Tuesday it had struck a deal to buy computer chipmaking rival Xilinx in a $35 billion megadeal that consolidates the sector which is being transformed by the global pandemic.

The tie-up will help AMD ramp up its challenge to Intel for personal computer chips and broaden its portfolio to products for data centers, industrial systems and other sectors.

“The combination will create the industry’s leading high performance computing company, significantly expanding the breadth of AMD’s product portfolio and customer set across diverse growth markets where Xilinx is an established leader,” a statement said.

AMD revenue has climbed this year, with the COVID-19 pandemic fuelling demand for computers and video game consoles as people rely on the Internet to work, learn, and play more at home.

“Our acquisition of Xilinx marks the next leg in our journey to establish AMD as the industry’s high performance computing leader,” AMD Chief Executive Lisa Su said.

Under the agreement, Su will lead the combined company as CEO and Xilinx president and CEO Victor Peng, will join AMD as president responsible for the Xilinx business and strategic growth initiatives.

Xilinx, founded in 1984, is known for adaptive chip processing systems used in an array of industries including telecommunications, automotive and defence.

The deal follows another blockbuster tie acquisition by US-based Nvidia for British-based Arm, the dominant player in mobile chipmaking.

The combined AMD-Xilinx with create a company with an enterprise value of some $135 billion and 13,000 engineers.

California-based AMD separately reported its third quarter profit more than tripled from a year ago to $390 million as revenue grew 56 per cent to $2.8 billion.

The company saw growth in chips for computer gaming graphics applications and in its Ryzen chips for personal computers.

AMD said it sees ongoing momentum and growth in revenue of around 40 per cent for 2020.

The acquisition of Xilinx could bolster AMD as the industry seeks processors for new 5G technologies such as automated driving systems and for artificial intelligence for systems being developed by giants like Google, Amazon, Microsoft or Samsung for cloud computing and data centers.

The deal “is not coming out of weakness for AMD, it’s coming out of strength”, said Patrick Moorhead of Moor Insights and Strategy in a Six Five podcast.

The deal has been approved by boards of both firms and the companies expect regulatory approval sometime next year.

AMD shares slipped four per cent in premarket trade on the news while Xilinx rose 10 per cent.

LAHORE, Pakistan — Pakistan's first metro line began operations on Monday in the eastern city of Lahore.

 Stretching 27 kilometres and dotted with more than two dozen stations, the Chinese-backed "Orange Line" will cut travel time across the perennially congested city in Punjab province from two-and-a-half hours by bus to 45 minutes on the metro.

"This project will provide world-class facilities to the public in Lahore," Punjab's Chief Minister Usman Buzdar said during an inauguration ceremony on Sunday.

The line's opening follows years of delays, in a country that needs public transport and modern infrastructure.

The metro cost approximately 300 billion rupees ($1.8 billion). 

However, critics blasted the project for endangering numerous historical sites across Lahore.

Despite the delays and controversies, authorities are hopeful the new line will reduce traffic congestion in the city of more than 11 million, where commuters frequently spend hours in cars or buses daily due to grinding traffic.

Officials expect about 250,000 people will be able to travel on the metro system daily. Much of Pakistan suffers from poor public transport infrastructure making daily commutes in urban areas difficult and costly for many low-wage workers.

Beijing has been steadily pouring cash into Pakistan, investing more than $50 billion as part of the China-Pakistan Economic Corridor that has upgraded infrastructure, power and transport links across the country.

Chinese news agency Xinhua praised the opening of the metro line, calling it the beginning of "a new stage for the South Asian country in the public transportation sector".

AMMAN — Arab Bank Group reported net income after tax of $215.2 million for the nine months of 2020, compared to $668.9 million for the same period last year, recording a drop of 68 per cent.

In a statement, the Arab Bank Group attributed the drop to the build up of higher provisions, driven by current and envisaged economic conditions.

According to Nemeh Sabbagh, the increased provisions booked across the Group are in accordance with the guidelines of International Financial Reporting Standard #9, and as per the bank’s internal expected credit loss model, and include general provisions built due to the current economic situation in Lebanon.

The results also reflect the deterioration in the macroeconomic environment in the region and globally, the statement added, in addition to lower revenues because of the impact of the COVID-19 outbreak, lower market interest rates and weakening oil prices.

The Group’s net operating income stood at $808 million, recording a drop of 22 per cent as a result of a decrease in net interest and commission income, in addition to a drop in the profit of the bank’s associates in the Arab Gulf countries.

Customer deposits grew by 8 per cent to $37.5 billion compared to $34.7 billion, while loans grew by 2 per cent to reach $26.7 billion compared $ 26.1 billion, said the statement.

In the statement, Sabih Masri, chairman of the Board of Directors said the pandemic has had, and continues to have, a significant impact on businesses around the world.

Sabbagh added that the global and regional banking sectors will continue to face challenges because of the economic contraction, the higher cost of risk, and lower interest rates.

He noted that growth in the Arab Gulf countries has also declined sharply due to the plunge in oil prices. 

The Group maintains robust capital base with equity of $9.3 billion and with a capital adequacy ratio of 16.7 per cent calculated in accordance with Basel III regulations, it indicated. It enjoys high liquidity with a loan-to-deposit ratio of71.1 per cent, while credit provisions held against non-performing loans continue to exceed 100 per cent.

SAN FRANCISCO — Big Tech is bracing for a tumultuous week marked by quarterly results likely to show resilience despite the pandemic, and fresh attacks from lawmakers ahead of the November 3 US election.

With backlash against Silicon Valley intensifying, the companies will seek to reassure investors while at the same time fend off regulators and activists who claim these firms have become too dominant and powerful.

Earnings reports are due this week from Amazon, Apple, Facebook, Microsoft, Twitter and Google-parent Alphabet, whose combined value has grown to more than $7 trillion dollars.

They have also woven themselves into the very fabric of modern life, from how people share views and get news to shopping, working, and playing.

Robust quarterly earnings results expected from Big Tech will "highlight the outsized strength these tech behemoths are seeing" but "ultimately add fuel to the fire in the Beltway around breakup momentum", Wedbush analyst Dan Ives said in a note to investors.

The results come amid heightened scrutiny in Washington of tech platforms and follow a landmark antitrust suit filed against Google which could potentially lead to the breakup of the internet giant, illustrative of the "techlash" in political circles.

Meanwhile, Senate Republicans have voted to subpoena Jack Dorsey and Mark Zuckerberg, the chief executives of Twitter and Facebook respectively, as part of a stepped-up assault on social media's handling of online political content, notably the downranking of a New York Post article purported to show embarrassing information about Democrat Joe Biden.

CEOs of Twitter, Facebook and Google are already slated to testify at a separate Senate panel on Wednesday examining the so-called Section 230 law which offers liability protection for content posted by others on their platforms.

Business models questioned 

The four giants drawing the most scrutiny — Apple, Amazon, Facebook and Google — have been wildly successful in recent years and have weathered the economic impact of the pandemic by offering needed goods and services.

Google and Facebook dominate the lucrative online ad market, while Amazon is an e-commerce king.

Apple has come under fire for its tight grip on the App Store, just as it has made a priority of making money from selling digital content and services to the multitude of iPhone users.

The firms have stepped up lobbying, spending tens of millions this year, and made efforts to show their social contributions as part of their campaign to fend off regulation. 

"For the most part, tech companies know how to do this dance," said analyst Rob Enderle of Enderle Group.

"They don't spend a lot of time bragging about how well they have done any more."

Ed Yardeni of Yardeni Research said the outlook for Big Tech may not be as rosy as it appears.

"For one, regulators at home and abroad are gunning to rein in some of the largest US technology names," Yardeni said in a research note.

"Also, the COVID-induced tech spending enjoyed over the past six months won't likely be replicated."

Ebbing ads? 

Of interest to the market short-term will likely be whether backlash about what kind of content is left up and what is taken down by online titans causes advertisers to cut spending on the platforms.

Organisers of a Facebook ad boycott vowed early in the third quarter to continue their campaign, saying the social network's top executives failed to offer meaningful action on curbing hateful content.

At the same time, political conservatives have accused Facebook and others of political bias as social platforms step up their content moderation. President Donald Trump has threatened new regulatory measures which could impact the business models of platforms.

Pandemic punch 

Economic and social disruption from COVID-19 also looms over tech firms, which benefitted early in the pandemic as people turned to the internet to work, learn, shop and socialise from home.

"Performance will be best for those providing solutions for people working at home," analyst Enderle said.

Amazon, Google and Microsoft each have cloud computing divisions that have been increasingly powering revenue as demand climbs for software, services and storage provided as services from massive data centres.

Amazon has seen booming sales on its platform during the pandemic, and viewing surge at its Prime streaming television service.

Enderle expressed concern that with COVID-19 cases and a lack of new stimulus money in the US, tech companies could reveal in forecasts that they are bracing for poorer performance in the current quarter. 

"The second wave of the pandemic has got a lot of folks spooked," Enderle said,

"Those stimulus checks aren't going out and people are afraid of what is happening with their jobs; so that cuts spending and buying confidence."

Even though Microsoft is well positioned in a booming video game market with a new Xbox console coming in November, its arrival could be soured if people worried about money cut back on such luxuries.