Intel shares dip amidst leadership and software scrutiny
Intel (INTC) shares have fallen in the wake of a leadership reshuffle and mounting pressure from rivals and consumers.
The company’s shares fell 3.5 percent from 54.43-49.81 USD between the end of last week and Monday’s opening, a seven-week low which followed status downgrades by bearish analysts from Nomura and Bernstein.
Much of the turbulence surrounding the firm has been attributed to the resignation of CEO Brian Kzanich, and his alleged infraction of the company’s non-fraternization policy. While the company has appointed CFO Robert Swan as their interim leader, analysts forecast under-performance, with Knzanich’s short four years in office putting their structural issues in the spotlight.
Another issue that has been brought to light in recent days is Intel’s failure to quell pressure from rivals. In particular, the firm are in a race to develop a 10 nanometre chip for the next generation of WIndows laptops. The DOW Jones member is already at risk of missing the opportunity to provide the chip for Asus’ next model, which will be built to accommodate the Snapdragon 1000 from Qualcomm. The Snapdragon not only runs on a lower wattage but offers a 7nm fabrication – while Intel are struggling with 10nm.
Further, nothing has been done to address the elephant in the room – the TLBleed vulnerability and Intel’s seeming unwillingness to patch the issue. Put simply, a TLBleed is a security phenomenon that occurs when two programs are running at the same time, and one program is able to extrapolate data from the other – this can include the ability to detect when a sensitive operation is taking place.
Going forwards, Intel is seeking to mitigate some of these uncertainties with the appointment of Window Snyder as security executive. However, analysts remain bearish while predicting the success of Intel shares. Recent trade tensions in the global market have adversely affected technological firms – the curtailment of Chinese investment has hit US firms Micron Technology (MU) and Skyworks Solutions (SKWS) hard – which does not bode well for Intel shares in the coming weeks.
American Express wins legal battle and shares rally
On Monday, American Express won an eight year legal battle, which saw its shares rally 2.2 percent.
A Supreme Court ruling of 5-4 concluded that Amex’s merchant restrictions did not violate federal antitrust laws, which is a significant victory not only for the credit card company but other companies such as Google, Amazon and Uber, who use a similar two-sided model.
The US Department of Justice – with the backing of 17 states – first brought the case against Amex, Mastercard and Visa in 2010, on the basis that merchants have no bargaining power when using their services. While Mastercard and Visa both settled with the government before the start of the trial, Amex chose to fight their case. As well as criticism of their two-sided model which charges both merchants and consumers for their payment services, a case was made against their efforts to stifle competition, by placing restrictions on merchants which prevented them from promoting other payment services, which charged them lower fees.
“Both sides of the two-sided credit-card market — cardholders and merchants — must be considered,” wrote Justice Clarence Thomas, delivering the majority verdict.
Amex’s services were deemed to display legitimate practice on the basis that there was quid quo pro between the burden felt by merchants and the rewards enjoyed by consumers who use Amex payment services. It was ruled that for the government’s case to stand, they would have to prove that price increases for merchants also harmed card-users.
Against allegations of constraining free competition, Amex representatives claimed that merchant restraint played a crucial role in its ability to offer its customers rewards, prevented merchants from undermining its two-sided platform and ensured its customers a ‘frictionless’ experience.
Upon receiving the verdict, an Amex spokesperson said, “The Supreme Court’s decision is a major victory for consumers and for American Express. It will help to promote competition and innovation in the payments industry.”
While this is a significant result for two-sided platforms – with Amazon connecting buyers and sellers and Google connecting advertisers and search engines – it should be noted that the Supreme Court said the need to look at both sides of a market may not be a universal rule. This approach was deemed necessary in the trial in question, as credit card sales unavoidably intimate a link between the merchant and consumer at the moment of a transaction.
China enters bear market as trade war prevails
For the first time since the 2015 slump, the Chinese economy displays a direction of downward travel, as the Shanghai Composite (SHCOMP) enters the bear market and drops 20 percent from its January high.
Since January, Chinese stocks have dropped 1.6 trillion USD in value, with a recent amalgamation of a devalued yuan and heated tariff disputes with the US, fueling a downward spiral. Last week, Chinese stocks plunged nearly 4% in one day with Trump’s announcement of further tariffs on 34 billion USD of Chinese goods, to be implemented on the 6th of July.
The significance of yesterday’s figures though, was that the 0.5% dip in the Shanghai Composite signified that the Chinese economy was – bucking its usual trend – entering the bear market. Yesterday’s dip was sparked by the continued sell-off of US stocks, which was intensified by new restrictions put in place by the US treasury. New measures mean that a block has been placed on companies with more than 25 percent Chinese ownership, from buying US firms which provide ‘industrially significant technology’, such as electric vehicles, aerospace technology and robotics.
Despite the best efforts of the Chinese government and banks to spark market liquidity – by lowering bank reserve limits and freeing up 108 billion USD into the market – technology firms across the world have and will continue to suffer as a result of protectionist policies. These tensions and their ramifications are set to continue into the second half of the year.
“Partly due to Xi’s aggressive rhetoric, Trump probably won’t be able to back down, or else he will look weak. Note his tactics are almost always to raise the ante, not to back off,” said Michael Every, Senior Asia-Pacific strategist at Rabobank.
Analysts at investment bank, Nomura, commented, “We believe the Chinese economy has yet to bottom out, and the situation could worsen before getting better”.
The difficult reality to contend with is that China is a major player, like the US. Coining the anecdote from the 2008 crash, ‘when America sneezes, the whole world catches a cold’, whether China or the US fairs worse from these trade tensions is almost inconsequential; the burden of their ill fortune will be shared by their vast trade networks. It has been said that the US expects President Xinping to retaliate to the next round of US tariffs, and President Trump has earmarked a further 450 billion USD of Chinese goods for tariffs.
Car industry warns of 860,000 job losses surrounding Brexit uncertainty
The Society of Motor Manufacturers and Traders (SMMT) has warned Theresa May 860,000 job losses unless the government “rethinks” Brexit negotiations.
Car manufacturers released a lengthy statement for the prime minister and warned that manufacturers including BMW, Honda (NYSE: HMC) and Nissan (TYO: 7201) would move production out of the UK.
“With decisions on new vehicle models in the UK due soon, the government must take steps to boost investor confidence and safeguard the thousands of jobs that depend on the sector,” the statement said.
The UK’s car industry employs 856,000 people in Britain, which could be at risk if the government does not remain in the customs union.
Michael Hawes, chief executive of SMMT, said: “The current position, with conflicting messages and red lines goes directly against the interests of the UK automotive sector which has thrived on single market and customs union membership.”
“There is no credible ‘plan B’ for frictionless customs arrangements, nor is it realistic to expect that new trade deals can be agreed with the rest of the world that will replicate the immense value of trade with the EU. Government must rethink its position on the customs union.”
“There is no Brexit dividend for our industry, particularly in what is an increasingly hostile and protectionist global trading environment. Our message to government is that until it can demonstrate exactly how a new model for customs and trade with the EU can replicate the benefits we currently enjoy, don’t change it,” he added.
Car manufacturer BMW (ETR: BMW) has warned the government that it will close its UK production sites if components are caught up in customs delays following Brexit. BMW employs 8,000 people in the UK.
Health Secretary Jeremy Hunt said over the weekend that threats from businesses surrounding Brexit were “completely inappropriate” and affected Brexit negotiations at a critical time.
Carpetright swings into loss, shares fall 2pc
Carpetright has reported a £70.5 million annual loss and falling sales as the retailer continues to struggle throughout the “very difficult year”.
The troubled retailer swung into a loss following the costs of a restructuring program, which involves the closure of 92 stores, and weak sales.
Wilf Walsh, chief executive of the group, said the retailer is working on a recovery plan.
“After a difficult trading year impacted by reduced consumer spend, increased competition and the legacy of an unsustainable, over-rented store portfolio – the CVA and recapitalisation offers us the chance to rebuild Carpetright, which remains the clear market leader in floor coverings with outstanding consumer brand awareness,” he said.
In the year to 28 April, Carpetright sales fell 3.6 percent.
The group’s loss is compared to a £900,000 pretax profit a year earlier.
Earlier this year, the group agreed to a Company Voluntary Arrangement (CVA), allowing it to close stores and reduce rent by up to 50 percent on 113 more stores.
David Madden, an analyst at CMC Markets, said: “Carpetright has had a difficult few months. Things have gone from bad to worse in 2018, as the company had more than its fair share of profit warnings, which has taken its toll on the share price.”
“The good news is that the CVA has given the company some much-needed breathing space.”
Carpetright is among several high street retailers who are going through a difficult period.
Maplins fell into administration in February and closed all 200 stores. Last week, House of Fraser announced plans to close half of its stores. Up to 6,000 jobs are set to be axed as a result of the House of Fraser closures.
Mothercare (LON: MTC) and Poundworld have also reported disappointing results this year.
Shares in Carpetright (LON: CPR) fell two percent on the news.
Grayling remains “optimistic” for Heathrow vote
Transport secretary Chris Grayling has said he is “cautiously optimistic” about the parliamentary vote on Heathrow’s third runway.
The Conservative government is expecting significant support from the Labour party after the Unite union called on Labour MPs to vote in favour of the controversial third runway.
“I’m cautiously optimistic. It’s never over until it’s over and the vote has actually happened, but there is strong support from across the political spectrum for this,” Grayling told BBC Radio 4’s Today programme on Monday.
“It’s not usual for me to find myself campaigning on the same side as Len McCluskey of Unite, but he is right in arguing that this is a project that can make a real difference to Britain.”
Len McCluskey, the leader of Unite, said the third runway would be important in creating hundreds and thousands of new jobs in the UK.
When asked about the effects of the runway for climate change, Graylin said: “We’ve talked about climate change right the way through, and the airports commission, which started this work for us, looked very carefully at the issue of climate change.”
“The big difference that is being made in the aviation sector is technology. The new generation of aircraft are quieter, they are much more fuel-efficient.”
When questioned about who was paying for the runway, Grayling made clear that it would not be the taxpayer.
He said: “This is very clearly a private sector project. The taxpayer is not going to be paying for the expansion of Heathrow airport.”
“Some of it Heathrow will pay for, some of it the private sector will pay for, some of it the government will pay for. If you look at Crossrail, if you look at HS2, which are very much an important part of the package, these are things we’re doing already.”
Boris Johnson, who remains an opponent of the Heathrow expansion, is in Afganistan and will not be present for the vote.
The foreign secretary previously pledged to “lie down … in front of the bulldozers”.
BIG Partnership profits spike
Following a lucrative year for advertisement and integrated account initiatives, Scottish PR firm, The BIG Partnership, reported its ‘best year ever’.
The firm saw its most successful year since its inception in 2000, with revenues increasing to 8.8 million GBP and profits peaking at 1.4 million GBP. Following an 11 million GBP take-over by five board members last year, the company recruited 27 new staff and with recent profits, its 107 staff enjoyed a bonus windfall of 250,000 GBP.
After expanding operations and opening a new office in Dundee, the firm recorded a digital revenue increase of 51% within a year, with its Manchester office reporting doubled profits on the year before.
The BIG Partnership provides services for 300 clients, ranging form creating online content, videos, social media advertising and optimising results for search engines, to providing integrated accounts across digital, design, public relations and marketing.
In light of recent success, director Alan Barr commented, “This year has been the strongest in our history and we have continued to invest heavily in our people.” He added, “We have strong momentum as we start our new financial year and will be unveiling some further senior hires very soon.”
Looking forwards, the PR firm have confirmed plans to take on 20 new personnel within the next year, including 15 senior positions and a “heavy hitter” as senior creative director.
FTSE drops as trade war escalates
The FTSE 100 dropped 0.9 percent today, in the midst of Sino-US tariffs.
The next set of US tariffs on 34 billion USD of Chinese goods will be implemented on the 6th of July, with a further 450 billion USD of tariffs earmarked, should China choose to retaliate. In addition, the US has put a block on companies with more than 25 percent Chinese ownership from investing in US firms which provide ‘industrially significant technology’, for instance aerospace, electric cars and robotics. As a counter-measure to this, the Chinese government has reduced the reserve limits on Chinese banks, which could free up as much as 108 billion USD into the economy.
The escalation of this conflict has already had an impact on European economies and in the UK, high street retailers and consumer confidence have been knocked. However, following a rally towards the end of last week – spurred by oil prices and a drop in the value of the pound – the UK economy is now bearing the brunt of the trade war, as the FTSE 100 dropped 70 points.
The recent downturn comes as British estate agents and tech firms face off trade war fears. Countrywide dipped over 20 percent this morning and Micro Focus faced a similar fate to its counterparts in Europe and the US, with a share price dip of 4.99 percent.
There “are signs that the rise in uncertainty associated with the first protectionist steps and the ratcheting up of rhetoric have already been inhibiting investment” said The Bank of International Settlements chief executive, Agustin Carstens.
Nick Campling, co-head of Mirbaud Securities added that, “the time has probably come whereby all things very exposed to global trade flows will begin to under-perform perhaps quite sharply”.
Looking to the future, recent protectionist measures by China and America most likely mark a point of no-return that will adversely affect the global economy. The FTSE 100 will have to look realistically at its ability to inspire trade in the international sphere and consumer confidence at home, in the wake of the US-China trade war and the looming Brexit deal.
Red Emperor Resources share price soars following large oil prospect acquisition
Shares in Red Emperor Resources (LON:RMP) soared on Monday after the company announced it is set to acquire a large oil prospect acquisition in Alaska.
Shares have jumped over 100 per cent after the company announced it had formed a consortium with “well-funded and experienced” JV partners” to commence drilling in early 2019.
Red Emperor’s working interest in the prospect will be 31.5 per cent in the prospect leases, and the company will be fully funded to meet its share of commitments associated with the deal.
Red Emperor’s Managing Director, Greg Bandy, commented: “We are delighted to have been able to negotiate such an exciting new acquisition alongside quality consortium partners 88 Energy and Otto Energy. We would also like to thank Otto’s technical team for their hard work in generating the prospect and working with us to get this deal done. The impending drill program represents a significant opportunity for Red Emperor to gain exposure to one of the most prospective oil provinces in the world.”
Gracjan Lambert, the firm’s Chief Executive, commented: “I am extremely pleased to have joined the company as CEO on the back of such exciting news. I look forward to our continued success building on the acquisition of this high-quality asset.”
Red Emperor Resources is a natural resources exploration company, founded in 2007 and headquartered in Australia.
Alongside its latest acquisition in Alaska, the firm has interests in South East Asia and the Republic of Georgia.
Red Emperor Resources is currently listed on the AIM market of the London Stock Exchange.
Shares in the company are currently trading +105.78 percent as of 13.51PM (GMT), as investors react to the announcement.
Harley-Davidson shares sink on EU tariff warning
Shares in Harley-Davidson (NYSE:HOG) dropped in pre-market trading on the New York market, after the group highlighted the major impact EU tariffs will have on production.
The motorcycle-maker said that it had already made plans to move some manufacturing out of America, after the EU tariffs rose from 6 percent to 31 percent on Monday. This will add around $2,200 to the price of a US-exported motorcycle, having a serious effect on their competitiveness in the EU market.
“Harley-Davidson expects ramping-up production in international plants will require incremental investment and could take at least 9 to 18 months to be fully complete”, the company said in a statement released on Monday.
It is the “only sustainable option” to ensure Harleys can still be sold in Europe.
“Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe,” it concluded.
The news will come as a blow to Harley workers in the US, although it is not yet clear how many jobs could be at risk. Many of the jobs at stake could be at their Wisconsin plant, a state who voted firmly in favour of Trump in the 2016 presidential election on his promise to bring back jobs to America.
Shares in Harley-Davidson fell almost 2 percent in pre-market trading in New York, with traders estimating that the $100 million annual cost of Europe’s new tariffs is likely to hurt the group’s annual results.