Business

LONDON — World stock markets were slightly firmer on Monday, mostly posting modest gains after initial doubts on news that China's economy grew at its weakest pace in nearly three decades as US President Donald Trump's trade war hit home.

Wall Street opened little changed to weaker after its record-breaking run, with the market still counting on the US central bank to cut interest rates sooner rather than later despite recent strong jobs data.

Investors were also waiting to see earnings from JPMorgan Chase and the other banks, as well as other major companies such as Netflix, United Continental and Johnson & Johnson.

In Europe, London's benchmark FTSE 100 index closed 0.34 per cent higher and Frankfurt's DAX 30 put on 0.52 per cent while the Paris CAC 40 edged up 0.10 per cent.

"It was a day without much movement. The markets are really just waiting for a stronger lead on the macroeconomic data front," Yann Azuelos of Mirabaud France told AFP.

Asian equities initially stumbled but then staged a recovery as traders digested Chinese second-quarter gross domestic product (GDP) numbers.

China's economy expanded 6.2 per cent in the second quarter, the slowest headline reading since the early 1990s, official data showed. The outcome was in line with forecasts and within the government's target range.

"There's no doubt in anyone's mind that the trade war is a major contributing factor here," noted Oanda analyst Craig Erlam.
"The Chinese data, while confirming slowdown fears, seems to be lifting basic resource stocks," Erlam said.

"A decent rebound in industrial production is naturally driving this, easily exceeding expectations, and along with retail sales and investment figures, arguably indicates that worst fears are not being realised."

The GDP number, nevertheless, highlights the negative impact the US tariffs stand-off is having on China, as leaders also try to recalibrate its growth model from exports and state investment to one driven by consumer spending.

Observers pointed out that the weakness raised the chances of further monetary easing measures from the central People's Bank of China, with investors also tracking the progress of the latest trade talks between Washington and Beijing.

Fed rate cut 

Amid concerns about the possible impact, some expect the US Federal Reserve (Fed) will cut borrowing costs at the end of the month, though there is speculation about how far it will go.

While bank boss Jerome Powell's congressional testimony last week flagged a reduction, data indicating inflation remains reasonably healthy has kept investors guessing.

"The Fed is under pressure to cut the interest rate this year," noted ThinkMarkets analyst Naeem Aslam.

BEIJING — China’s Fosun Group is considering nearly a billion dollar rescue of embattled British tour operator Thomas Cook, the Hong Kong-listed conglomerate confirmed on Friday.

The Chinese company said in a stock market announcement that there are “ongoing advanced discussions” about a capital injection which would see a debt-for-equity swap at the British travel agency, which has struggled with its debt pile.

The deal would equate to a £750 million ($940 million) rescue of the London-based firm.

Fosun Group is already a minority investor in Thomas Cook — with a stake of around 18 per cent — and owns French luxury holiday resort group Club Med which it bought for more than $1 billion in 2015.

The plan, which is still subject to the approval of shareholders and regulators, would involve Fosun’s tourism group taking a controlling stake in Thomas Cook’s tour operating business and a minority share in its airline arm.

The British firm in May revealed that first-half losses widened on a major write-down, caused in part by Brexit uncertainty that has delayed summer holiday bookings.

In a note to the London stock exchange ahead of the market opening Friday, Thomas Cook said the “new money that would provide sufficient liquidity to trade over the Winter 2019/20 season and the financial flexibility to invest in the business for the future”.

The group had total debt of about 1.9 billion pounds as of March 31, according to data compiled by Bloomberg, and its shares have tumbled 87 per cent over the past 12 months.

“Fosun is hoping that Thomas Cooks’ brand name and global reach will expand its business among wealthy Chinese tourists,” Andrew Collier, managing director at Orient Capital Research, told Bloomberg News. 

“Bondholders are expecting this synergy to work, otherwise they wouldn’t convert debt to equity.”

Shares in Thomas Cook dived almost 40 per cent in early London trade Friday, having risen 20 per cent earlier in the week on rumours of a Fosun bid. 

“Thomas Cook’s largest shareholder Fosun is in advanced talks with management over a deal that would effectively hand over the company to the Chinese firm. Shareholders face significant dilution — basically it’s wipe out time, said Neil Wilson, chief market analyst at Markets.com.

The Shanghai-based Fosun Group conglomerate has been on a buying spree in recent years, and taking control of Thomas Cook would significantly expand its business in Europe.

As well as tourism it has interests in property, finance, pharmaceuticals, steel, and entertainment.

It is one of China’s so-called “grey rhino” companies — along with Wanda, HNA and Anbang — that have come under growing scrutiny in the last few years from mainland authorities wanting to crack down on debt-fuelled foreign acquisitions.

WASHINGOTN — It started as a simple sales promotion, but Amazon's Prime Day has now morphed into a major phenomenon joined by scores of retailers jockeying with the US colossus for a bigger slice of the e-commerce pie.

Amazon's Prime Day, now in 17 countries, will be held over Monday and Tuesday, highlighted by a pre-recorded Taylor Swift video concert and promotions across a range of products and services from the e-commerce leader.

Rival retailers including Walmart, Target and eBay are offering their own versions of the blockbuster event.

According to the tracking group RetailMeNot, some 250 retailers will be offering promotions that aim to expand their market share ahead of the key back-to-school shopping season.

"Mid-July used to be one of the sleepiest times for retailers, and Prime Day has really reshaped the dynamics," said Andrew Lipsman of the research firm eMarketer.

Prime Day sales for Amazon are expected to hit $5 billion this year, up from $3.2 billion in 2018, which at the time represented its biggest ever global shopping event, JP Morgan analyst Doug Anmuth says in a research note.

"While the numbers are impressive, we believe there are also additional benefits of Prime Day across Amazon's ecosystem as it allows Amazon to better gauge customer demand for the second half [of the year], acts as a critical peak-day test to ready fulfilment centres and logistics for the holiday season and brings in new Prime members well ahead of the holidays."

Amazon began the event in 2015 across nine countries to promote its Prime subscription service. The original event brought in more revenue than "Black Friday", the key shopping day opening the holiday season in November.

Online rival eBay is calling its event "Crash Day", poking fun at technical glitches that Amazon has experienced in past years.

"If history repeats itself and Amazon crashes that day, eBay's wave of can't-miss deals on some of the seasons top items will excite customers around the world," eBay said.

Walmart meanwhile is expected to launch big online promotions for electronics, appliances and other items over a four-day period starting Sunday, touting the fact that, unlike Amazon, it does not require an annual membership.

Target, another large retail group, has announced it will offer discounts on hundreds of thousands of items ranging from furniture and apparel to "must-have kitchen appliances" on its website.

Others expected to join in the promotion include retailers such as Macy's, Nordstrom, Best Buy and even the Google Store.

A survey of US consumers by research firm Adlucent found 75 per cent will be shopping for deals on Prime Day — many comparing prices between Amazon and other retailers to get the best price.

"Although Amazon was one of the first to create a sensational cyber holiday of its own, it's no longer acting alone, as competitors have begun to respond in force," the group said in a report.

Amazon is facing a walkout in at least one of its US warehouses over working conditions, and it has drawn scrutiny from antitrust enforcers over its vast reach.

Now one of the world's biggest companies with its retail, music and video streaming, cloud computing and other services, Amazon is the undisputed leader in e-commerce, although not quite as dominant as previously believed.

eMarketer recently revised down Amazon's share of US online commerce to 37.2 per cent from a prior estimate of 49 per cent, following data released in Chief Executive Jeff Bezos's shareholder letter on third-party sales on the platform.

Still, eMarketer said it expected the number of US households that subscribe to Prime to jump 8.6 per cent this year to 65 million — meaning more than half of American homes will be on the programme.

"Prime membership is the fulcrum on which Amazon's commerce flywheel spins," Lipsman said.

Lipsman said Amazon is facing more competition around Prime Day but has been successful in using the event to underscore the value of the subscription programme and promote its smart speakers, media and other offerings.

"Amazon typically gains significant market share during the event," he said.

PARIS — France on Thursday became the first major economy to impose a tax on digital giants, with parliament passing the legislation in defiance of a probe ordered by President Donald Trump that could trigger reprisal tariffs.

The new law aims at plugging a taxation gap that has seen some internet heavyweights paying next to nothing in countries where they make huge profit.

The legislation — dubbed the GAFA tax — an acronym for Google, Apple, Facebook and Amazon — was passed by a simple show of hands in the Senate upper house after previously being passed by the national assembly lower chamber.

But the French move drew an angry response from Trump even before the legislation was passed, with the president ordering an investigation that the French economy minister said was unprecedented in the history of French-US relations. 

The law will levy a 3 per cent tax on total annual revenues of the largest tech firms providing services to French consumers.

“The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies,” US Trade Representative Robert Lighthizer said in a statement.

But French Economy Minister Bruno Le Maire France rejected the US reaction on Thursday, saying “threats” were not the way to resolve such disputes.

“Between allies, I believe we can and must resolve our differences in another way than through threats,” he told the French senate ahead of the vote.

“France is a sovereign state and it alone decides on its taxation mechanisms and it will continue to do so,” he said.

Unfair trade practices? 

Le Maire said he was warned about the so-called Section 301 investigation during a “long conversation” with US Treasury Secretary Steven Mnuchin on Wednesday, saying it was the first time such a step had been taken in the history of French-US relations.

This type of investigation is the primary tool the Trump administration has used in the trade war with China to justify tariffs against what the United States says are unfair trade practices.

The measure was initially adopted by the lower house on July 4.

Last month, top G-20 finance chiefs meeting in Japan agreed there was an urgent need to find a global system to tax Internet giants like Google and Facebook but clashed over how to do it.

But they welcomed a set of proposed measures laid out by the Organisation for Economic Co-operation and Development, a forum for advanced economies.

“We will redouble our efforts for a consensus-based solution with a final report by 2020,” they said in a statement.

Washington has been pushing through the G-20 for an overarching agreement on taxation.

Such a move is supported by Google which believes it would mean Silicon Valley tech giants would pay less tax in the US and more in other jurisdictions, in a departure from the longstanding practice of paying most taxes in a company’s home country.

The section 301 investigation, which is being run by the US trade representative’s office, has said it will hold hearings to allow for public comment on the French tax issue for several weeks before issuing a final report.

The move was applauded by the Computer & Communications Industry Association (CCIA) which said the French law would retroactively require US internet giants to turn over a percentage of their revenues from the start of 2019. 

“This is a critical step toward preventing protectionist taxes on global trade,” CCIA official Matt Schruers said in a statement, calling on France “to lead the effort toward more ambitious global tax reform, instead of the discriminatory national tax measures that harm global trade”.

DOHA — The US and Qatar have agreed a raft of contracts worth billions of dollars during a visit to Washington by the Gulf state's emir, including an $8 billion deal on a petrochemical project.

Qatar Petroleum and US energy giant Chevron Phillips Chemical inked the deal to develop a "world class" petrochemical plant in the US Gulf Coast region, Doha's state-owned petroleum company said on Wednesday.

Qatar's Energy Minister Saad Al Kaabi and Chevron Phillips Chemical head Mark Lashier signed the agreement on Tuesday at the White House.

US President Donald Trump and Sheikh Tamim Bin Hamad Al  Thani attended the signing ceremony held in front of US flags and the Qatari colours, according to an image published by Chevron Phillips Chemical.

The plant, scheduled to be onstream in 2024, will boast the world's largest ethylene cracker with a capacity of 2 million tonnes per year, Qatar Petroleum said.

Trump and Sheikh Tamim reiterated their "commitment to further advancing the high-level strategic cooperation between our two countries", according to a joint statement carried on Wednesday by Qatar's official QNA news agency.

"We discussed our extensive and increasing economic partnership, including these mutually beneficial transactions," they said.

Sheikh Tamim, who arrived in the US on Monday, also met with Treasury Secretary Steven Mnuchin and National Security Adviser John Bolton, according to Qatari state media.

Qatar's defence ministry has committed to acquiring advanced surface-to-air NASAM and Patriot missiles made by US arms manufacturer Raytheon, the statement said, without providing further details.

National carrier Qatar Airways will purchase five Boeing 777 freighters and large-cabin aircraft from US business jet maker Gulfstream Aerospace, it added.

The airline Tweeted an image of its chief executive Akbar Al Baker and Boeing chief executive Kevin McAllister signing the deal as Trump and Sheikh Tamim looked on.

"The US and Qatar are partners, allies, and friends. We look forward to continue that friendship, for the prosperity and happiness of our two peoples," Sheikh Tamim Tweeted.

PARIS — France announced on Tuesday it would impose new taxes on plane tickets of up to 18 euros per flight, joining other EU states seeking to limit the environmental impact of air travel.

The government said that the funds from tickets for flights originating in France would be used to create less-polluting transport options as concerns grow about carbon emissions from planes.

The move, which will take effect from 2020, will see a tax of 1.5 euros ($1.7) imposed on economy-class tickets on internal flights and those within Europe, Transport Minister Elisabeth Borne said.

It will rise to 9 euros for within the European Union in business class, three euros outside the EU in economy class and a maximum 18 euros for flights outside the European Union in business class, she added.

The new measure is expected to bring in some 180 million euros a year which will be invested in greener transport infrastructure, notably rail, she said. 

"France is committed to the taxation of air transport but there is an urgency here," she said.

It will only be applied on outgoing flights and not those flying into the country, Borne added.

Flights to the French Mediterranean island of Corsica and also the French overseas departments — which are hugely dependent on air links for their existence — will be exempt, she said.

'Penalise competitiveness' 

Shares in Air France fell sharply, down almost 4 per cent to trade at 8.54 euros. Its German competitor Lufthansa also traded lower with its shares falling 2.50 per cent to 14.8 euros.

Air France slammed the measure, which it said would "strongly penalise its competitiveness" at a time when it needed to invest, notably in renewing its fleet, to reduce its carbon footprint.

A similar tax was introduced in Sweden in April 2018, which imposed an added charge of up to 40 euros on every ticket in a bid to lessen the impact of air travel on the climate.

Sweden has seen the development of a movement called "flight shaming" (flygskam) spearheaded by 16-year-old schoolgirl Greta Thunberg who has become a symbol of the fight against climate change.

The industry has been under fire over its carbon emissions, which at 285 grams of CO2 emitted per kilometre travelled by a passenger far exceed all other modes of transport.

Road transportation follows at 158 and rail travel is at 14, according to European Environment Agency figures.

"The sector is under considerable pressure," Alexandre de Juniac, the chief executive of the International Air Transport Association (IATA), admitted at a meeting of the industry body in June.

‘Won't deter from flying' 

So-called ecotaxes have met with heavy criticism from the IATA.

It argues that the effectiveness of such taxes is "doubtful" and said "no government that introduced a ticket tax has been able to demonstrate that such tax reduced CO2 emissions".

The industry is already subject to the EU carbon emissions trading system and, from 2020, to a new global mechanism called the Carbon Offsetting and Reduction Scheme for International Aviation. 

Andrew Murphy, aviation expert with the NGO Transport & Environment in Brussels which presses for cleaner transport, said that the tax was far from unique in Europe with similar measures in Britain, Germany, Norway, Italy, as well as Sweden.

"I don't think that because there is a 18 euro tax it will deter anyone from flying," he told AFP. "It will have some minor impact on demand."

French President Emmanuel Macron is seeking to cast himself a champion of the fight against climate change and ensuring that the 2015 Paris accord on fighting global warming is respected.

He went into this month's G-20 summit in Japan declaring that climate change was a "red line" and emerged with a statement from 19 of its members endorsing the Paris agreement — but without the United States after President Donald Trump pulled out of the agreement in 2017.

Macron is aware he needs to tread carefully on climate issues after rising fuel taxes — which aimed to help France meet its Paris climate accord goals — helped spark the yellow vest street protests against his government last year.

AMMAN — Saudi Seasons has recently announced the simultaneous launch of Taif and Souda Seasons summer festivals slated for August 2019, to emphasise the country’s competitive tourism strategy and highlight its historical and traditional elements, as well as its produce of roses, fruit, and honey, according to a statement of the organisers.

The upcoming festivals will include fun activities for all ages, and is designed to attract Saudi, Arab and international families to participate.

The joint launch of Taif and Souda Seasons under the umbrella of the Saudi Seasons follows the country's efforts to diversify the Saudi economy by focusing on the tourism sector. 

LONDON — World stock markets were softer on Monday on investor disappointment over the fading prospects of substantial cuts in US interest rates following better-than-expected jobs data last week, traders said. 

Taking their cue from an earlier sell-off in Asia, European stock markets were lower across the board as deep reductions in US borrowing costs appeared to be off the cards, at least for now.

Among the leading European indices, the blue-chip CAC 40 in Paris and the DAX 30 in Frankfurt were both down by just under half a per cent in mid-afternoon trade, while London’s FTSE showed a loss of around 0.1 per cent.

On the other side of the Atlantic, Wall Street opened down by around 0.3 per cent and headed lower in early trading.

“Global equities are quietly softer across the board on softer-than-expected German data, follow-through on Friday’s falling Fed rate cut blues, and a plethora of regional stories that added to the risk-off tone,” said OANDA analyst Edward Moya. 

“Deutsche Bank’s mixed review on their radical overhaul, [Turkish President] Erdogan’s sacking of his central bank chief, uncertainty on how quickly Iran will raise their nuclear enrichment programme, and Morgan Stanley’s downgrade of investment guidance on global stocks are keeping markets in the red,” Moya said.

While the dollar was steady against its main rivals, it surged against the Turkish lira after President Recep Tayyip Erdogan sacked the head of the country’s central bank following months of tensions over high borrowing costs.

Erdogan has repeatedly railed against high interest rates and called for them to be lowered to stimulate growth.

The US jobs data on Friday suggested that the world’s top economy is in better shape than anticipated and would not need substantial rate cuts to be kick-started.

Investors had been hoping that the Fed would cut US borrowing costs by as much as half a percentage point at its next policy meeting later this month, but such a likelihood now appears to be fading. 

Traders said investors’ focus would now switch to the congressional testimony of Fed chief Jerome Powell this week, with investors hoping he will provide some forward guidance on the bank’s plans.

Also up this week will be the release of minutes from the Fed’s June meeting, while US and Chinese officials are working to schedule top-level trade talks.

SEOUL — Samsung Electronics said on Friday it expects operating profit to tumble 56 per cent for the second quarter of this year in the face of a weakening chip market.

The world's largest maker of smartphones and memory chips has enjoyed record profit in recent years despite a series of setbacks, but is now struggling, with chip prices falling as global supply increases while demand weakens.

Operating profit for the April to June period is forecast to reach around 6.5 trillion won ($5.6 billion), down 56 per cent from a year earlier, the firm said in a statement.

Revenue is expected to fall 4.2 per cent to 56 trillion won. Samsung is scheduled to report final results later this month.

The firm is the flagship subsidiary of the giant Samsung Group, by far the biggest of the family-controlled conglomerates that dominate business in the world's 11th largest economy, and it is crucial to South Korea's economic health.

Samsung's share price was down 1.2 per cent in early trade. 

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 made a high-profile decision to push back the release of its new Galaxy Fold phones after reviewers provided with early devices reported screen problems within days of use.

While Samsung's device was not the first folding handset, the smartphone giant was expected to help spark demand and potentially revive a sector that has been struggling for new innovations.

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

The firm is yet to announce its new release date. 

 Tokyo factor 

Samsung supplies screens and memory chips for its own smartphones and Apple, and server chips for cloud companies such as Amazon.

But it is also one of the South's major semiconductor manufacturers that are being affected by Tokyo's recent restriction of exports to South Korea.

The measures — which raises the stakes in a protracted dispute over South Korean court rulings requiring Japanese firms to compensate victims of a wartime forced labour policy — are expected to significantly slow the export of several key materials used by Samsung.

Tadashi Uno, display research director at IHS Markit, said an end-product that could be affected by Tokyo's newly announced restrictions is Samsung's Galaxy Fold.

"The display of the Samsung Galaxy Fold — now in pre-order status in the United States — is produced utilising fluorinated polyimide film from Sumitomo Chemical, which is a Japanese electronic materials firm," he said. 

"South Korea-based Kolon Industries could act as an alternative supplier for the Samsung foldable smartphone display."

Samsung is also set to unveil its latest phablet, the Galaxy Note 10, in New York next month, but analysts say it's unclear whether its cutting edge products would do well in the global market.

"Unlike South Korea, many countries are still without 5G network," said CW Chung, an analyst with Nomura Securities in Seoul, told AFP.

"And this gives overseas customers fewer reasons to buy a 5G phone, which also happen to be quite expensive."

NEW DELHI — Prime Minister Narendra Modi on Friday hailed a “new chapter for India” as his re-elected government unveiled what he called a “green” budget aimed at reviving growth and creating a $5-trillion economy.

India was recently leap-frogged by China as the world’s fastest-growing major country, with unemployment in Asia’s third-biggest economy at its highest since the 1970s.

In the first budget since Modi won a second term by a landslide in May, Finance Minister Nirmala Sitharaman said she wanted to boost foreign direct investment (FDI) and infrastructure spending.

“The government will examine suggestions of further opening up FDI in aviation, media, and, insurance sectors in consultation with stakeholders,” said Sitharaman.

Sitharaman, 59, also said India’s public sector banks would be injected with $10.2 billion to tackle bad loans.

A sudden collapse of India’s shadow banking sector in 2018 and bad loans had resulted in a liquidity crunch in Asia’s third-largest economy. 

Sitharaman said that nearly 20 million new houses would be constructed by 2022 and that all rural household would have drinking water by 2024.

She also announced that the central government deficit to 3.3 per cent of gross domestic product in fiscal 2019 from 3.4 per cent in fiscal 2018. 

This would be achieved by divestments, including of Air India, increased excise duties on petrol, diesel, precious metals and tobacco, and higher taxes for those earning between 20 million and 50 million rupees ($290,000-730,000).

Moody’s said in a research note, however, that achieving a lower fiscal deficit while maintaining support for growth and incomes would be “very challenging”.

“We expect the economy to grow relatively slowly, despite the government’s income support measures,” Moody’s analyst Gene Fang said.

Electric cars 

In a country with some of the world’s most polluted cities, the budget also included tax breaks for individuals on the purchase of electric cars.

The government aims to invest in infrastructure and other incentives for electric vehicles to reduce carbon emissions and air pollution.

It also wants to increase the use of rivers for transportation, with the volume of cargo on the Ganges set to almost quadruple over the next four years.

“Sitharaman’s budget focused on something for every industry including tax relief for startups and thrust on infrastructure spending,” Mumbai-based independent economist Ashutosh Datar told AFP.

The government on Thursday predicted India would rebound and grow at 7 per cent this year and also outlined plans on how to meet the target of doubling its economy by 2025 to $5 trillion. 

The annual growth in the last fiscal year dipped to 6.8 per cent from 7.2 per cent in 2017-18, too slow to create enough jobs for the more than a million Indians entering the labour market every month, economists say.

India is ranked as the world’s sixth-biggest economy just behind Britain and ahead of France. The US and China occupy the first and second spots with $19 trillion and $12 trillion.

On Thursday, India’s chief economic advisor K.V. Subramanian laid out a strategic blueprint for achieving India’s growth goals through a “virtuous cycle” of savings, investment and exports.

Modilauded Sitharaman’s plans it as a “green budget focusing on environment, electric mobility and solar sector”.

“This budget is a roadmap for new India and is one of hope. It will transform agriculture sector of the country,” Modi said.