Business

LONDON — Wall Street's record rally petered out on Wednesday, and stocks elsewhere slid as the banning of China Telecom from the United States and Germany's growth outlook downgrade weighed on sentiment.

Both the Dow and S&P 500 edged up at the opening bell from their record closes, but then fell back.

"The restraint is owed partly to a belief that the stock market seems ripe for a consolidation period after a huge move this month," said Briefing.com analyst Patrick J. O'Hare.

"The lacklustre action yesterday — after more good earnings news — was a testament to that belief," he added.

Wall Street, and global markets generally, have rebounded from drops in September when investors took fright at surging inflation and the prospect of tighter monetary policy.

A strong corporate earnings season has provided some much-needed support to investors in recent weeks as companies showed resilience in the face of supply snarls, surging commodity and wage costs, as well as spiking COVID-19 cases.

But long-running friction between Washington and Beijing continues to cast a dark shadow over trading floors, with the two sides locked in a stand-off over a range of issues including Taiwan, national security, technology, trade and Hong Kong.

China Telecoms ban 

Focus was also on the tech sector after the US Federal Communications Commission cancelled the operating licence of China Telecom's US unit on Tuesday, saying it "raised significant national security and law enforcement risks".

The move came after a clampdown by former US president Donald Trump on other giants including Huawei and China Mobile.

It "seems to dampen previous hopes that the US-China relations may be turning for the better", said Jun Rong Yeap of IG Asia.

Most of the rest of Asia was also in the red as a forecast-beating jump in Australian core inflation added to broad fears about soaring global prices.

Investors are also keeping tabs on the crisis in China's property sector with several developers struggling to meet their debt obligations, while industry giant Evergrande faces a new deadline at the end of the week to avoid a default.

In Europe, a downgraded government growth forecast of 2.6 per cent for Germany this year, largely owing to bottlenecks in global supply chains, dampened sentiment.

The Frankfurt DAX fell 0.3 per cent and in Paris the CAC shed 0.2 per cent.

Meanwhile, the British government upgraded its 2021 growth forecast to 6.5 per cent as it unveiled a budget but failed to help London stocks, with the FTSE 100 dropping 0.3 per cent.

Oil markets slid Wednesday as data showed a big gain in US inventories of crude and petrol.

"The question being asked is have we reached the potential tipping point that might trigger demand destruction?" said CMC Markets analyst Michael Hewson.

Crude prices have been striking multiyear highs on expectations of surging demand and concerns over supplies.

All eyes will be on the European Central Bank on Thursday when it updates its monetary policy amid expectations that major central banks will begin winding down their huge cash stimulus injections and raise interest rates before the end of the year as the economy recovers and inflation surges.

SAN FRANCISCO — Facebook announced over $9 billion in quarterly profits on Monday, hours after a US news collective published a deluge of withering reports arguing the company prioritises its growth over people's safety.

The social media giant has been battling a fresh crisis since former employee Frances Haugen leaked reams of internal studies showing executives knew of their sites' potential for harm, prompting a renewed US push for regulation.

Facebook released results showing its profit in the recently-ended quarter grew to $9.2 billion — a 17 per cent increase — and its ranks of users increased to 2.91 billion.

Facebook executives said on an earnings call that the tech titan would have brought in even more money if not for Apple updating its iPhone operating system to thwart advertisers tracking app users for ad targeting without permission.

"Overall, if it wasn't for Apple's iOS 14 changes, we would have seen positive quarter over quarter revenue growth," Facebook chief operating officer Sheryl Sandberg said of the iPhone software tweak made in the name of protecting privacy.

Hours earlier, new reports blamed CEO Mark Zuckerberg for his platform bending to state censors in Vietnam, noted Facebook allowed hate speech to flourish internationally due to linguistic shortcomings and said it knew its algorithm fuelled toxic polarisation online.

"These damning documents underscore that Facebook leadership chronically ignored serious internal alarms, choosing to put profits over people," US Senator Richard Blumenthal, a Big Tech critic, said in a statement.

News organisations like The New York Times, The Washington Post and Wired were among those that have now received access to the set of internal Facebook documents that Haugen originally leaked to US authorities and which were the basis of a damning Wall Street Journal series.

Facebook has assailed the reporting as an effort to cast the social network used by billions of people in an inaccurate light.

"Good faith criticism helps us get better, but my view is that what we are seeing is a coordinated effort to selectively use leaked documents to paint a false picture of our company," Zuckerberg said in an earnings call.

Haugen, who testified on social media before British lawmakers on Monday, has repeatedly said the company puts its continuous growth, and thus profits, before the well-being and safety of users.

"Facebook has been unwilling to accept even little slivers of profit being sacrificed for safety, and that's not acceptable," she told the lawmakers, adding that angry or hate-fuelled content "is the easiest way to grow" the social media platform.

Facebook has been hit by major crises previously, but the current view behind the curtain of the insular company has fuelled a frenzy of scathing reports and a renewed push from US lawmakers to crack down on social media.

The Washington Post story out on Monday said Zuckerberg had personally signed off on a push from Vietnam's authoritarian government to limit the spread of so-called "anti-state" posts.

A report from Politico called the documents a "treasure trove for Washington's anti-trust fight" against the platform, revealing internal employee chats about Facebook global dominance.

One of Monday's reports, from website The Verge, plunged into the company's own worries for its future.

WASHINGTON — The US government is once again nearing the limit on how much debt it can take on, a familiar deadline that will force the country's political elite into high-stakes negotiations over averting a default.

The world's largest economy has never failed to meet a debt payment before, and though standoffs like these have become familiar in Washington, Democrats and Republicans are expected to eventually reach a compromise before the limit may be reached in December.

The looming deadline comes as Democrats appear near an agreement to unilaterally pass a social services spending plan backed by President Joe Biden, as well as an infrastructure bill that has attracted some Republican support.

But calls are growing to put an end to the legal limit, with several economists saying the brinksmanship is unnecessary and potentially damaging.

Democratic House Speaker Nancy Pelosi, who will play a major part in forging any compromise with Republicans, acknowledged "a number of plans" to eliminate the debt ceiling in a Sunday interview with CNN.

International Monetary fund (IMF) Chief Economist Gita Gopinath said it was "highly unproductive to have the situation of brinksmanship with respect to the US debt ceiling" and described it as "something that should be reformed".

Two Democratic House lawmakers have introduced legislation to transfer the authority to raise the debt limit to the Treasury secretary.

"The problem with the debt ceiling is that it does nothing to address the problem of government debt and only serves as a political tool for political parties," said Brendan Boyle, one of the bill's sponsors.

Treasury Secretary Janet Yellen has signaled support for reforming the limit.

"I believe it's very disruptive to put the president and myself, the Treasury secretary, in a situation where we might be unable to pay the bills that result from those past decisions," she told a House committee last month.

Steve Pressman, an economics professor at Monmouth University, described the debt limit as forcing lawmakers to essentially make the same decision twice: one to approve the spending, the second to raise the borrowing ceiling to pay for it.

"It is all political now, which is another good reason... [to] just get rid of this stupid thing," he said. "We're just spending too much time and too much effort on it."

Only a few countries have a similar debt control mechanism. In Denmark, it's set so high "that there was no way within the next century that they would approach it", Pressman said.

Four Democratic House and Senate lawmakers have proposed legislation abolishing the ceiling altogether.

"We should eliminate the debt limit to permanently lift the threat of default from our economy and focus on the urgent work the American people expect Congress to do," said Michael Bennet, one of the Senate sponsors.

'Remove the threat' 

Earlier in October, Steny Hoyer, the number-two Democrat in the House of Representatives, told colleagues in a letter "the House will explore options to remove the threat that the debt limit poses over the long term, now that Republicans have demonstrated a willingness to weaponise it for partisan purposes".

A bill to end the limit could be considered as soon as this month, he said.

Democrats and Republicans have already begun negotiations to avoid a default, hoping to forge a compromise like the one they agreed to earlier in October to temporarily raise the ceiling.

An agreement could suspend the limit for months or even years, or raise it by a certain amount.

Before the agreement was reached earlier this month, Republicans had refused to vote for a debt limit increase, saying that since Democrats controlled Congress, they would have to do it unilaterally, though they later agreed to a short-term increase.

Democrats could raise it with their votes alone using the lengthy reconciliation process, but on Sunday Pelosi said, "We would still rather have bipartisanship."

NEW YORK — Online payments giant PayPal has said it is not seeking to buy Pinterest, ending days of speculation that had prompted shares in the image-sharing site to soar.

Bloomberg had reported last week that the two California-based companies were discussing an acquisition price of $70 per share, which would value Pinterest at about $44 billion taking into account the total outstanding shares.

At this price, it would have been the biggest ever acquisition of a social media company, but reports at the time had said a deal was not certain. 

PayPal said in a statement late Sunday that "in response to market rumors regarding a potential acquisition of Pinterest by PayPal", the company "is not pursuing an acquisition of Pinterest at this time".

PayPal's shares rose 6.7 per cent to $256.50 in premarket trading on Monday, while Pinterest was down 10.8 per cent to $51.80.

Launched in 2009, Pinterest is a popular source of visual inspiration for everything from wedding planning to recipes and home decoration.

The site went public in 2019 and had revenues of $1.69 billion in 2020, up 48 per cent. 

But like many social networks it is looking to boost traffic as well as the monetisation of its content.

Pinterest last week announced a range of new features, including a TikTok-like video feed called "Watch" intended to help users discover new content.

It also announced a $20 million fund to pay creators, as social media giants battle to attract high-profile internet personalities who will draw users to the site.

PayPal has meanwhile been looking to expand through acquisitions, announcing the purchase of Paidy, a Japanese specialist in credit purchases online, in early September. 

The company has more than doubled its market capitalisation, thanks to the explosion of online commerce during the pandemic, and now exceeds $300 billion.

Buying Pinterest would have consolidated its position in e-commerce, as shoppers increasingly look to buy items online that they have discovered via social media sites like Instagram.

FRANKFURT — Germany's business climate worsened in October for the fourth month in a row as supply chain woes weighed on the country's export-driven economy, according to survey data published on Monday.

The Ifo institute's closely watched indicator fell to 97.7 points in October from 98.9 points in September, its lowest standing since April. 

"Supply problems are giving businesses headaches," Ifo President Clemens Fuest said in a statement, describing the bottlenecks as "sand in the wheels of the German economy". 

The upheaval caused by the pandemic has given rise to global shortages in everything from timber to semiconductors and plastics.

Germany's key automotive sector has been particularly hard hit by a lack of computer chips, a key component in conventional and electric vehicles, forcing several German carmakers to pause production.

Only in construction did the business climate improve, according to the Ifo survey, while sentiment in manufacturing, services and trade deteriorated. 

Growth could be "much weaker" in the coming months, according to Fritzi Koehler-Geib, chief economist at German public lender KfW.

"Material bottlenecks and disruptions in the global transport system have been a burden for longer than originally expected and will probably only ease in the coming year," Koehler-Geib said.

Earlier this month, German economic institutes, including Ifo, revised down their forecast for growth in 2021 due to global supply chain disruptions to 2.4 per cent from their earlier prediction of 3.7 per cent made in April.