Business

LONDON — Stock markets nervously traded sideways on Thursday as investors all but gave up hope that a US-China trade war could be nearing its end.

Fears over the stand-off between the world's two biggest economies added to jitters over the state of the world economy which had inflicted heavy losses on equities on Wednesday, including the worst one-day fall this year on Wall Street's Dow.

"Every time investors find the strength to pick themselves up off the floor, the trade war delivers another blow and knocks them down again," said Craig Erlam at Oanda.

"This morning that came in the form of reports that China is threatening retaliation against Trump's tariffs that are due to come into force on 1 September."

'Huge shake down' 

The yield on the 10-year US Treasury bond slid on Wednesday below the yield on the two-year note, an "inversion" that has been a reliable harbinger of recession for decades.

"The slew of negative news has seen a huge shake down in global equity markets, and money has poured into government bonds," noted David Madden, analyst at CMC Markets UK.

European stocks gave up an early attempt at a rebound, while US stocks managed to claw back a tiny part of Wednesday's heavy losses at the New York opening bell, having plunged around 800 points, or 3.1 per cent, the previous day.

"US stocks have overcome early choppiness and are higher in early action, modestly trimming yesterday's plunge that came amid heightened global recession concerns," Charles Schwab analysts said. 

'More sinister' 

The trade war has hammered global demand, with data this week showing China's industrial output had struck a 17-year low, while investment and retail sales have also slowed in the world's second biggest economy.

"US-China trade tensions have metastasised into something more sinister by affecting global growth to such a large degree that bond markets are pricing-in a high probability of a worldwide recession," warned Stephen Innes, managing partner at VM Markets.

Weeks of pro-democracy protests in Hong Kong have added to the uncertainty, with Beijing referring to increasingly violent demonstrations as "terrorism", stoking fears of a Chinese crackdown.

Economists have warned for months that trade tensions threatened investment and dampened global sentiment, which was already suffering owing to China's economic slowdown and fears over Brexit's impact on Britain and Europe, where the German economy is showing signs of contraction.

The pound climbed against the dollar and euro as data showed British retail sales rose unexpectedly by 0.2 per cent in July.

"The UK's retail data surprised the investors by posting an upbeat reading and traders pushed the [pound] currency higher," said Naeem Aslam, chief market analyst at Think Markets.

He warned, however, that "there is no light at the end of the Brexit tunnel" so far.

NEW YORK — After some false starts, CBS and Viacom announced on Tuesday they will combine to form the latest media empire in a wave of mergers driven by the need for companies to reformulate themselves for the streaming era.

The new company will have more than $28 billion in revenue and comprise brands such as MTV, Comedy Central and Showtime, as well as Paramount Pictures and publisher Simon & Schuster.

The transaction will bolster their ability to develop original programming that can win subscribers to premium channel, score well with advertisers and resonate with audiences in international markets, the companies said.

The deal recombines two entities that were under the same corporate umbrella until they were broken apart in 2006 by Sumner Redstone, chairman emeritus of National Amusements, which holds almost 80 per cent of both companies.

The deal comes on the heels of other large transactions in media, including Disney's $71.3 billion acquisition of key assets from Rupert Murdoch's 21st Century Fox, and AT&T's $85 billion purchase of Time Warner.

"I am really excited to see these two great companies come together so that they can realise the incredible power of their combined assets," said Shari Redstone, who will chair the new company, ViacomCBS.

"My father once said 'content is king,' and never has that been more true than today," she said in a statement. "We will establish a world-class, multi-platform media organisation that is well-positioned for growth in a rapidly transforming industry."

The two companies failed in their earlier attempts to pull off a merger, due in part to opposition from former CBS chief executive Les Moonves, who was ousted in September 2018 amid sexual harassment allegations.

Joining forces will allow them to bolster investment in premium entertainment and boost their global reach, with broadcast networks in Britain, Argentina and Australia and content in 45 languages, the companies said in a press release. The deal also should result in $500 million in annual savings.

"The more scale you have, the more clout you have when [you] go to in to negotiate with distributors or even with direct-to-consumers," said Tuna Amobi, analyst at CFRA Research. "It gives them a better chance to compete."

Streaming era 

The traditional media industry is battling to deal with the rise of Netflix, Hulu and other streaming ventures that erode the position of conventional cable packages and broadcasters unveil "over-the-top" options.

CBS itself has launched its "All Access" service which provides on-demand programming for $5.99 per month with limited commercial interruptions or $9.99 per month for ad-free service.
In November, Disney plans to launch a new "Disney+" service at a starting price of $6.99 monthly that offer its films and television shows as well as the library it acquired through the Fox deal.

Under the all-stock transaction in the latest tie-up, existing CBS shareholders will own 61 per cent of the company, while Viacom shareholders will own 39 per cent. Bob Bakish, chief executive of Viacom, will assume that post in the newly-combined company, while Joe Ianniello, acting chief executive at CBS, will become chairman and CEO of CBS, overseeing CBS-branded assets.

Shares of Viacom fell 5.6 per cent to $30.75, while CBS rose 1.4 per cent to $48.70. 

SAN FRANCISCO — Samsung on Wednesday unveiled a new-generation Galaxy Note large-screen handset starting at $950 and said it will work closer with Microsoft so that services function better across its array of devices.

The Note 10 "phablet" which is set for release on August 23, comes in two sizes, with the larger beginning at $1,100. The price puts the model at the premium end of a cooling global smartphone market.

The latest generation Note was introduced at a media event in New York by DJ Koh, head of IT and mobile communications, who touted it as "the world's most powerful mobile device".

"Every element of the Galaxy Note 10 was designed to help users achieve more," Koh said.

"Whether they're finishing a big project for work, capturing and editing a video, or playing their favorite mobile game, the Galaxy Note 10 will help them do it faster and better."

Samsung's introduction of the first Note some eight years ago is credited with sparking a "phablet" trend of large-screen mobile devices that combine capabilities of smartphones with the screen size of tablet computers.

The unveiling of Note 10 and Note 10+ included an on-stage appearance by Microsoft Chief Executive Satya Nadella and an announcement by Samsung that it will be working more closely with the US maker of the Windows operating systems and related software.

Microsoft has long worked with companies behind Windows-powered computers or laptops.

"For years applications were built for single devices, but in a world of 5G, cloud and AI [artificial intelligence] we get to rethink it all," Nadella said.

"Our ambition is to help people be productive on any device, anywhere. We are very excited about this partnership."

Versions of Note 10 will be compatible with 5G ultra-fast telecommunications networks that promise to enable stunning new experiences on smartphones or tablets.

Both Note models come with the trademark "S Pen" for writing on screens and gesture controls. The smaller has a 6.3-inch screen while the larger measures 6.8 inches.

Samsung also unveiled a new Galaxy notebook computer, billed as super-slim and ultra-light, with a mobile data chip from Qualcomm and built-in Microsoft Windows software.

Samsung executives called the Galaxy Book S a laptop with the "essence of a smartphone". It will hit the market in September at a starting price of $999.

MECCA, Saudi Arabia — In the Saudi city of Mecca, dotted with fast food eateries and stalls selling Chinese-made trinkets, vendors are ready to cash in on the annual hajj pilgrimage.

"Business is going very well," said Faisal Addais from his stall close to the Grand Mosque — Islam's holiest site.

"The customers are foreigners and speak all languages," added the 41-year-old Yemeni, who sells religious souvenirs.

To overcome linguistic challenges, sales are often conducted with the help of a calculator.

Potential customers stroll past the stalls and shops, while pigeons coo at their ankles on the bustling thoroughfare.

Retailer Ali said his sales were expected to "increase five-fold" during Hajj, which this year is expected to attract 2.5 million worshippers from Saudi and across the world between Friday and Tuesday. 

Completing Hajj is one of the five pillars of Islam and every Muslim with the means is obliged to undertake it at least once in their lives.

The pilgrimage draws vendors to the holy city, the majority peddling religious wares.

They include Chinese-made replicas of the Kaaba, a black structure inside the Grand Mosque towards which Muslims around the world pray, as well as call to prayer alarm clocks and water said to be holy.

"The religious and mercantile dimensions have always been linked in Mecca," said Luc Chantre, author of several books about the pilgrimage in the modern era.

Malls replace bazaars 

"When they had come from far away, pilgrims needed to trade to finance their stays — and some even went home in profit," Chantre told AFP.

"What's new is that these vast multistorey malls have replaced the old bazaars around the Grand Mosque."

Air-conditioned shopping centres near the Grand Mosque are home to leading luxury brands which welcome a constant stream of pilgrims — except during prayer times.

Beyond the religious souvenirs, visitors to Mecca can pick up highly-coveted Saudi gold, watches, clothes and more.

The city's restaurants and fast food outlets, either in narrow side streets or on main arteries, are deluged by worshippers around the clock.

As well as the five-day hajj, Muslims also travel to Mecca year-round to undertake the umrah, a lesser pilgrimage.

Mecca is unlike Christian pilgrimage sites such as Lourdes in France and Mexico's Basilica of Our Lady of Guadalupe where "trade is linked exclusively to souvenirs and religious offerings", said Chantre. 

Mecca's nearby city of Jeddah is the traditional home of western Saudi Arabia's mercantile families, partly owing to its vast port.

Religious tourism brings the conservative kingdom billions of dollars annually — an important revenue source as the oil-rich nation seeks to diversify its economy.

LONDON — The price of gold on Wednesday briefly rose above $1,500 per ounce, a key level last breached six years ago, as investors sought shelter from the fallout of a raging US-China trade war. 

At about 13:35 GMT, gold, a safe-haven favourite, jumped to $1,500.25 per ounce, the highest point since April 2013 and 1.7 per cent higher than late Tuesday.

Investors also sought safety in bonds on Wednesday as they shunned riskier assets such as stocks for the relative safety of government debt.

Official rate cuts from three central banks, including a surprisingly aggressive one by the Reserve Bank of New Zealand, served as a stark warning that a worsening US-China trade conflict is shaking confidence in global growth.

As bond prices surge, their yield or returns to investors fall, with benchmark 10-year government paper in the US and elsewhere dropping to multiyear lows.

French and German bond yields, already in negative territory, even set new record lows, highlighting how safety is now the first priority in the markets. 

“Nobody wants to be vulnerable, everybody is in risk aversion mode, and all ingredients are in place to push yields lower,” Aurelien Buffault, bond manager at Meeschaert, told AFP.

The US-China trade war is the main reason to worry about growth, analysts said, but the outlook for a no-deal Brexit is also weighing on sentiment.

‘Rates falling everywhere’ 

Markets now believe that the world’s key central banks will cut interest rates further to stave off, or at least alleviate, any coming recession, analysts said.

Crucially, the hefty cut by remote New Zealand may be a precursor to deeper US Federal Reserve easing, suggested Ipek Ozkardeskaya, Senior Market Analyst at London Capital Group.

“The surprise rate action from the RBNZ can only spur expectations of a similar size cut from the Federal Reserve,” she said.

US Treasury yields showed a fall of 0.102 percentage points on the day, outdone among developed economies only by New Zealand yields following the rate cut, and Italy.

Ten-year yields elsewhere eased by 0.05 points or more.

“Rates falling everywhere,” observed analysts at Moneycorp.

“They may not exactly be competing but the world’s central banks all seem to be pointing in the same direction towards lower rates. In every case there is concern, to a greater or lesser degree, about the global economy,” they said.

Commodity markets followed the logic of economic worry, with safe-haven investment gold surging and oil, the fuel of economic growth, falling.

“We see the ongoing steep rise in the gold price as an expression of the high risk aversion among market participants,” said Commerzbank analysts.

“Gold is quite clearly still in demand as a safe haven in the current market environment.”

Oil extended already steep weakness after the US Department of Energy reported a surprise increase in inventories — a sign of flagging demand.

European stocks had a rollercoaster session which started on an upbeat note but then turned sour when US stocks fell sharply at the New York opening bell “with escalated US-China trade concerns continuing to weigh on sentiment”, Charles Schwab analysts said.

But as Wall Street came off its morning lows, European equities regained their poise to close mostly higher.

LONDON — Global stock markets breathed a sigh of relief on Tuesday after Beijing appeared to de-escalate a conflict with the US over the level of its currency.

Equities had tumbled on Monday, with the biggest losses seen on Wall Street — in what analyst Fawad Razaqzada at Forex.com called "a bloodbath" — after China allowed the yuan to slide against the dollar, effectively weaponising the currency as a riposte to a new round of US tariffs on Chinese goods.

Tensions have escalated since last week, when US President Donald Trump announced fresh tariffs on Chinese goods from September 1 that would subject virtually all of the $660 billion in annual merchandise trade between the two economies to punitive duties.

The yuan's slump fuelled speculation that Beijing is allowing its currency to devalue to support exporters and offset Trump's threat to hit $300 billion in Chinese goods with 10 per cent tariffs.

Escalation? 'Not just yet' 

But on Tuesday, investors relaxed somewhat after the People's Bank of China fixed the yuan at a higher level against the dollar than analysts had expected, signalling a degree of detente after Washington slapped the "currency manipulator" label on China.

"Markets are relieved with the PBOC's decision to weaken the yuan at a slower pace, a sign that we might not just yet see the peak escalation in the US-China trade war," said Edward Moya, an analyst at OANDA.

Still, he said, "continued yuan depreciation should be expected, albeit at a staggered pace".

US equities were higher at the Wall Street opening bell, as were most European markets, after Asia pared early losses.

"Sentiment appears to be easing a bit as China took measures to stem the slide in its currency," Charles Schwab analyst said.

Analyst Michael Hewson at CMC Markets called the twist in the US-China standoff "this latest game of trade war cat and mouse" and said that "good sense has long since ceased to be an arbiter of future policy moves where the US and China are concerned".

The yuan broke above 7 yuan to the dollar on Monday, a level investors see as a key threshold in the Chinese currency's value.

The yuan stood at 7.0226 in the European afternoon Tuesday after hitting a fresh 11-year low at 7.0602 in Asian trades.

In Europe, investors also welcomed unexpectedly strong German factory orders, said David Cheetham, chief market analyst at XTB trading group.

SHANGHAI — The Chinese yuan fell to its lowest level against the dollar since August 2010 in morning trade on Monday, fuelling speculation that Beijing is allowing currency depreciation to counter threatened US tariffs.

The offshore currency weakened to 7.1085 to the dollar, days after US President Donald Trump announced a plan to impose fresh tariffs on another $300 billion in Chinese goods, sharpening trade war tensions between the world's two biggest economies.

The onshore yuan also tumbled, hitting 7.0307 in Monday morning trade to reach its lowest level since 2008.

Both the onshore and offshore yuan breached the 7.0 level against the dollar, which investors see as a key threshold in currency value.

Trump has frequently accused China of artificially devaluing its currency in order to support its exports — charges long denied by Beijing.

The US president jolted global stock markets last week when he issued the threat of more tariffs just a day after US and Chinese trade negotiators revived talks aimed at ending the year-long dispute.

The extra 10 per cent duties Trump threatened to implement from September 1 would mean he has now targeted virtually all of the $500 billion in goods America buys from China every year.

Currency instability 

China on Friday threatened to retaliate to any new US tariffs — it has already imposed its own duties on $110 billion in American goods, almost all of the products it imports from the country.

A report from Bloomberg News said China has also asked its state-owned enterprises to stop buying US farm goods, in a further sign of escalating tensions.

The yuan is not freely convertible and the government limits its movement against the US dollar to a 2 per cent range on either side of a central parity rate which the People's Bank of China (PBOC) sets each day to reflect market trends and control volatility.

The daily central rate was at 6.9225 per dollar on Monday, 0.33 per cent weaker from Friday.

"It appears that the tariffs hike suggests the return of tit-for-tat moves and a suspension of trade talks, and the PBOC sees no need to keep the yuan stable in the near term," Ken Cheung, a senior currency strategist at Mizuho Bank, told Bloomberg News.

In a statement on Monday morning, the PBOC said the exchange rate against the US dollar had been "affected by unilateralism and trade protectionism measures and the imposition of tariff increases on China".

The central bank said the yuan remained "stable and strong against the basket of currencies" and said it would "resolutely crack down on short-term speculation and maintain stable operation of the foreign exchange market and stabilise market expectations".

It went on to say that it had the "experience, confidence and ability to keep the RMB exchange rate basically stable at a reasonable and balanced level".

Julian Evans-Pritchard, senior China economist with Capital Economics, said the PBOC has "effectively weaponised the exchange rate" by linking the currency with the US trade war.

"Given that their goal is presumably to offset some of the impact from additional US tariffs, they are likely to allow the currency to weaken further, probably by 5-10 per cent over the coming quarters," said Evans-Pritchard.

SEOUL — The world's biggest smartphone and memory chip maker Samsung Electronics reported second-quarter net profits slumping by more than half in the face of a weakening chip market, and as a trade row builds between Seoul and Tokyo.

The flagship subsidiary of the sprawling Samsung Group has enjoyed record profits in recent years despite a series of setbacks but is now struggling with chip prices falling as global supply increases.

Net profits in the three months to June were 5.18 trillion won ($4.38 billion), Samsung Electronics said in a statement on Wednesday, down 53 per cent year-on-year.

"The weakness and price declines in the memory chip market persisted... despite a limited recovery in demand," it said.

In mobile phones, it achieved "stronger shipments on new mass-market models but was overall weighed down by slower sales of flagship models and increased marketing expenses", it added.

The results come hours after Apple, one of Samsung's main rivals, delivered better-than-expected results as growth from services helped offset weak iPhone sales.

The US firm has been shifting focus to digital content and services as sales of its flagship device weaken.

Facing hardware challenges of its own, Samsung launched its top-end S10 5G smartphone earlier this year after South Korea won the global race to commercially launch the world's first nationwide 5G network.

But in April it was embarrassingly forced to delay the release of its new and hotly anticipated Galaxy Fold phones after reviewers provided with early devices reported screen problems within days of use.

A simmering dispute between South Korea and Japan, which has seen Tokyo impose restrictions on chemical exports crucial to the South's world-leading chip and smartphone companies — is also expected to affect Samsung Electronics' key products.

"The company is facing challenges from uncertainties not only in business areas but also from changes in the global macroeconomic environment," it said.

Two of the chemicals and materials targeted by Tokyo, hydrogen fluoride gas and photoresists, are essential to making memory chips, while the third, fluorinated polyimide, is used for high-spec TV screens and smartphone displays, including folding models.

In the second half, Samsung Electronics said it "expects persistent uncertainties in the memory business", while "overall sluggish demand in the broad smartphone market may limit upside potential" as competition increases.

Second-Quarter profits were ahead of expectations, HMC Investment Securities Analyst Greg Roh told AFP, although smartphone sales lagged behind consensus forecasts.

He expected similar profits in the July-September period before sales pick up in the fourth quarter, but added: "One big variable is the trade spat with Japan."

The South Korean firm had spent nearly eight years developing the Fold as part of its strategy to propel growth with groundbreaking gadgets. 

While the model was not the world's first folding handset, the smartphone giant hoped it would help spark demand and potentially revive a sector that has been struggling for new innovations.

The firm earlier this month announced it has "made improvements" to the device and would release it in September, but analysts say its delivery is likely to be affected by the Seoul-Tokyo trade dispute.

"Because of the volume of chemicals required within the semiconductor manufacturing process, it is unlikely that the major chip suppliers will be able to find suitable quantities from suppliers outside of Japan," said Len Jelinek, executive director of semiconductor research at IHS Markit.

Tokyo's move has raised international concern about the effect on global tech supply chains and the possibility of price hikes for consumers worldwide.

TOKYO — Japanese car giant Toyota said on Friday its first quarter net profit rose thanks to solid sales and cost cutting efforts, but it revised down full-year profit partly due to a stronger yen.

The maker of the Camry sedan and Prius hybrid reported net profit of 683 billion yen ($6.4 billion) in the April-June period, up 3.9 per cent from a year before.

The company forecast full-year net profit would rise 14.2 per cent to 2.15 billion yen, down from the previous forecast of 2.25 billion yen.

It cited a stronger yen but Executive Vice President Moritaka Yoshida said foreign exchange was not the only issue.

"It's not just about foreign exchange but because of the whole environment," he said.

"Competition is expected to be very fierce," he added, saying the automaker could not afford to be "complacent".

Toyota said its operating profit climbed 8.7 per cent to 742 billion yen, citing efforts to lower raw material costs, a strong sales push and a weaker yen against the dollar during the period.

Sales grew 3.8 per cent to 7.64 trillion yen.

Toyota said its group sales units expanded to 2.7 million in the first quarter from 2.6 million the previous year.

Satoru Takada, auto analyst at TIW, a Tokyo-based research and consulting firm, said: "Toyota is displaying a firm performance compared to its domestic rivals, as the auto industry is facing tough business conditions."

"A potential risk is the impact of the US-China trade war. A foreign exchange loss is also among its concerns," he told AFP before the earnings were announced.

Brexit worries 

The business environment for companies like Toyota has also been clouded by the US-China trade war and continued uncertainty from Brexit.

Yoshida said the company will continue to keep its eyes on "the potential impact on [its] businesses".

"We want to continue to produce more vehicles locally, and this could be a countermeasure" to the potential impact of the US-China trade war, he added.

Toyota executives have said previously there would be no way to avoid a negative impact in the event of a no-deal Brexit.

Its assembly plant in Burnaston in central England, which produces 600 vehicles per day, would be affected.

The plant operates under the company's famous "just-in-time" system, holding limited stock on site and relying on flexible imports of millions of component car parts from the EU.

Toyota shares were down 2.83 per cent before the lunch break but trimmed the losses in the afternoon session after the results were announced.

Honda on Friday said its net profit in the first quarter dropped 29.5 per cent to 172 billion yen due to the impact of foreign exchange and the increase of selling, general and administrative expenses.

Operating profit fell 15.7 per cent to 252 billion yen while sales dipped 0.7 per cent to 4 trillion yen.

Honda revised down its net profit for the year ending March 2020 to 645 billion yen from 665 billion yen. 

Toyota's crisis-hit rival Nissan reported last month a plunge in quarterly net profit as it struggles with weak sales and fallout from the arrest of its former chief. It also announced 12,500 job cuts.

Nissan's bottom line profit dropped to 6.4 billion yen for the three months to June.