Oil rises on European stock draw despite demand slowdown forecast

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 Oil rises on European stock draw despite demand slowdown forecast

Oil prices rose more than $ 1 a barrel on Friday, helped by declining European stocks and OPEC production, despite the International Energy Agency reporting a minimal increase in demand since the 2008 financial crisis.

Futures for Brent LCOc1 crude oil rose $ 1.15, or 2%, to $ 58.53 a barrel. West Texas Intermediate (WTI) CLC1 crude oil futures were up $ 1.96, or 3.7%, to $ 54.50 a barrel.

"Despite the IEA’s further decline in oil demand, oil prices are trading slightly higher, as the IEA’s head announced earlier that demand was declining, and the agency still expects an increase in reserves by 2H19,” said a UBS analyst. Giovanni Staunovo.

The IEA said that global oil demand in May since January has grown most slowly since 2008, which was facilitated by growing signs of a slowdown in economic growth and an intensified trade war between the United States and China.

Graphics: rising global oil demand - tmsnrt.rs/2YFYbzG

Oil prices rose after Euroilstock data showed that the total reserves of oil and oil products in 16 European countries in July were slightly lower than in June.

However, crude oil prices lost about 20% from the peak values ​​of 2019 reached in April.

Over the week, Brent lost more than 5%, while WTI fell about 2% after markets this week were undermined by an unexpected increase in US crude oil reserves and fears of a slowdown in demand amid a deepening China-U.S rate. trade war.

Despite a weekly decline, hedge funds increased their net long futures and options positions in the US by the week of August 6, the US Commodity Futures Trading Commission (CFTC) said Friday.

Graphics: OPEC supplies and not included in OPEC - tmsnrt.rs/2MPdnD7

The Russian Ministry of Energy said the IEA estimates are largely in line with its own forecasts, and that Moscow took into account the possibility of lower oil demand when it extended an agreement to reduce production with the Organization of Petroleum Exporting Countries.

Saudi Arabia, the de facto leader of OPEC, plans to keep its crude oil exports below 7 million barrels per day (barrels per day) in August and September to restore market balance and help absorb global oil reserves, an official spokesman for Saudi oil said Wednesday.

"Saudi Arabia seems to be redoubled its efforts to curb global supplies in response to a sell-off this week,” said John Kilduff, partner at Again Capital Management.

However, oil production in Russia rose to 11.32 million barrels per day from August 1 to 8, compared with 11.15 million barrels per day in July, two industry sources familiar with the data from the Ministry of Energy told Reuters.

The level is higher than Moscow’s obligations under an agreement to reduce production with OPEC.

OPEC, Russia and other producers, an alliance known as OPEC +, agreed in July to extend their supply cuts until March 2020 to raise oil prices.

U.S. energy companies this week reduced the number of oil rigs operating for the sixth week in a row, cutting six rigs and lowering their total to 764, the lowest level since February 2018, Bakers Hughes energy services from General Electric Co (GE.N ) The firm said on Friday.


Aurora partners with Fiat Chrysler over self-driving tech

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The deal with one of the Big Three will expand the scope of Aurora’s activities, "by allowing us to offer a variety of solutions for strategic clients in the areas of logistics, transit and other uses,” the Palo Alto California company said in a brief statement.

In addition to fleets, automakers and others are interested in self-driving technology for commercial applications, such as vans.

Financial terms of the transaction were not disclosed.

Aurora already has a partnership with Volkswagen AG, Hyundai Motor Co. and Chinese Byton to develop and test automatic drive systems for a wide range of applications for car manufacturers, car fleet owners and others.

The company is one of dozens of startups, automakers and large technology companies working on self-propelled vehicle systems that seek to capitalize on the huge changes in the transport industry caused by machine learning developments.
Fiat Chrysler is already partnering with Waymo, the standalone Alphabet machine that delivers Chrysler Pacifica hybrid minivans for the Waymo driverless fleet that currently operates in Arizona.

In February, Aurora said it raised $ 530 million in new funding.


Under tariff threat, Mexico less attractive to companies avoiding China trade war

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News about the tariff plan trump shook the Mexican peso and questioned the future ratification of the new North American trade agreement, a treaty revised during several months of painful negotiations previously required by the US president.

Just at the time when companies thought that a bargain made Mexico a tempting production alternative to China, Washington ’s new threats once again unbalanced.

Take the recent experience of the Tecma Group, an outsourcing company, in which there was a surge in interest from companies planning to move to Mexico, as Trump raised tariffs to 25% by $ 200 billion in Chinese goods.

According to Alan Russell, its chief executive officer and chairman, Tecma, which operates about 75 factories in Mexico, was "weekly" contacted by companies selling goods from furniture to ink pens looking for a way from China to Mexico.

Now, after Trump promised to introduce rising tariffs of 5% on all Mexican exports to the United States from Monday, if Mexico does not restrain the flow of migrants to the US border, these expected investments risk being frozen, says Russell,

"The board of directors is not going to say:" Yes, let's do it ”under the conditions of a 25 percent tariff,” said Russell.

Few figures are available to assess how widespread the transition to Mexico is from China. But evidence that Mexico is becoming the leading US trading partner as China exports less to the United States, combined with unconfirmed data, shows a significant trend.

Fuling Global Inc., a specialized plastics and paper manufacturer that launches manufacturing operations in the northern Mexican city of Monterrey, suffered a similar blow.

The company said in an April letter that the planned plant "will help reduce a significant portion of China-U.S exposure." trade changes. "

Now it sounds outdated, but the company downplays concerns about Trump's latest change.

"Whatever we do in Mexico, this is for the long-term strategic growth of our company ... If we produce in Mexico, we will save a lot on freight and this will shorten the time for delivery. This is a huge advantage, ”said CFO Gilbert Lee.

If Trump copes with his tariff threat, Lee said that Fuling and his customers will initially bear the burden of costs, but ultimately "consumers will have to pay for it."

Similarly, the camera maker GoPro Inc decided in early May to transfer most of its products to the USA to Mexico from China in order to "shield us from possible tariffs,” then CFO Brian McGee told investors.


A GoPro spokesman said that the company is currently "closely following” the continuation of negotiations on an immigration transaction.

As a sign that such cases were part of a wider surge of interest in manufacturing in Mexico, the Southwestern McQuly Bi-national Industrial Association said that in the past six months, about 10 firms that expressed interest in investing in Mexico heard it, compared to 3 4 previous months, according to Gustavo Gonzalez, the president of the organization.

In fact, according to the US Census Bureau, Mexico overtook China and Canada in the first quarter of 2019 and became the main US trade partner for products.

Supplies from Mexico to the United States rose 5.4% in the first quarter, while shipments from China decreased by 13.9%.

UBS Bank said Mexico gained market share from China, selling products from the US tariff list for September 2018.

Companies already established in Mexico are concerned, but they say that it is too early to assess the impact of the new dispute.

They include manufacturers such as LG Electronics, which migrated a few years ago to build TVs in Mexico using imported components and send them to the United States without tariffs according to NAFTA.

The potential of US tariffs on all imports from Mexico can shake this supply chain and others like it.

Tariff uncertainty may induce companies to suspend their investment decisions in Mexico, said Gabriela Sony, investment director at UBS Global Wealth Management in Mexico.

"But if this is only 5% of the tariff instead of 25%, it may not change the game, because the peso has also depreciated,” she said.


Renault rift with Nissan widens over governance, casts shadow on alliance

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Renault, which owns 43.4% of the Japanese firm, made it clear that it would not allow Nissan to formally adopt the revised management structure at the shareholders meeting on June 25 - unless Renault is represented on the new Nissan committees.

The request, conveyed in a letter from Renault chairman Jean-Dominique Senar a few weeks before the meeting, could destroy the new structure created after several months of discussion by an external committee and previously supported by Senard. Nissan responded to one of its most outspoken statements against its main shareholder, calling this demand "most regrettable."

"Nissan received a letter from Renault stating its intention to abstain from voting,” the statement says.

"Nissan considers Renault’s new position on this issue to be the most regrettable, since such a position contradicts the company's efforts to improve corporate governance.”

The split exposes the deep tension between the two automakers, the union of which was under pressure after the arrest of former chairman Carlos Ghosn in November. What is now at stake may be even more than their extensive alliance, which includes Mitsubishi Motors.

Renault and Fiat Chrysler Automobiles (FCA) are looking for ways to reanimate a rolled-out merger plan and get Nissan approval for this deal, Reuters reported on Monday. Therefore, Nissan is ready to convince Renault to significantly reduce its 43.4% share, two people told Reuters.

By abstaining from voting for management, Renault will effectively block the new management system, which includes three committees, since approval requires two-thirds approval. Nissan recently said it would abstain from voting on the FCA-Renault merger, although FCA and Renault later blamed the failure of this deal on the French government.

"The rights of Renault as a 43.4% shareholder in Nissan must be fully recognized, and at least one or two directors proposed by Renault must be members of each of the three committees,” says a letter to Renault, a copy of which is being considered. Reuters.

"As proposed now, it looks like it is not."

A source at Renault said the Senard letter was motivated by concerns about Renault’s underrepresentation on the new Nissan board of directors that appeared after Gosn’s arrest, who is currently awaiting trial and denies financial misconduct against him.

"This is not a final abstinence, and the position of Renault can still change,” said a source. "At the moment, Renault was not sure about the proper representation of the committee as the main shareholder of Nissan."

Renault has not yet received specific information about the proposed composition of each of the committees, another source with knowledge of the issue told Reuters.

A source at Nissan said that Renault CEO Thierry Bollor expressed a desire to participate in the work of the new Nissan committees to oversee the appointments and compensations of the executive bodies, as well as the planned corporate governance audit committee.

But such a move will raise concerns about a possible conflict of interest, as this will give Renault the right to vote in Nissan’s salaries and corporate governance, a Nissan source said.
"This is a shocking behavior on the part of a shareholder who has been saying for several months that he has supported us in strengthening our corporate governance,” said a Nissan source.

The source added that even if Renault blocks the committees, Nissan will still try to create similar management structures and make them as mandatory as possible.

French Finance Minister Bruno Le Mare in Tokyo after the G20 meeting at the weekend, told reporters that the solution to both problems is solved by the leadership of both companies. The French government owns 15 percent at Renault.

The split could put further pressure on Nissan’s chief executive Hiroto Saikawa, who is increasingly confronted with Renault.

The Japanese news agency Jiji previously quoted the words of Saykawa: "We are preparing for a meeting of shareholders and discuss the necessary issues at the appropriate time. If there are differences of opinion (with Renault), then I would like it to be talked about. ”

In March, an external team appointed by Nissan recommended the formation of three committees to improve corporate governance. According to this proposal, Renault directors will have the right to work on the nominating committee, but will be suspended from the work of the remuneration and audit committees.

Both companies struggled to reestablish their relationship after Gosna’s arrest revealed growing tensions, including Nissan’s long-standing concerns about the capital structure of the alliance.

Nissan seems to have remained largely unaware of the mergers between Renault and Fiat Chrysler, who tried to work together to create the third largest automaker.


Budget airlines the flavor of South Korean aviation market, Jeju travel booms

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The route between Jeju and Seoul has actually become the busiest in the world, as travelers like Bo-Ming flock to the southern resort island, luring them with cheaper fares from low-cost carriers. The 28-year-old barista would pay 22% more if she flew Korean Air Lines Co Ltd.

"On my previous trips to Jeju, I took both full-service airlines and low-cost carriers, but I don't think there is a big difference when it comes to services,” she told Reuters after her flight in less than one hour. in jeju.

Korean low-cost carriers (LCC) occupied most of the domestic market since Jeju Air Co Ltd launched five Q400 turboprop aircraft in 2005, which gave an impetus to major players such as Korean Air and Asiana Airlines Inc. brands.

Jeju Air is the No. 3 South Korean airline by revenue, serving 6 local and 66 international flights with 42 Boeing 737-700 aircraft. In November, she placed an order for $ 4.4 billion for 50,737 MAX aircraft.

According to the Jeju Tourism Association, the growth of low-cost airlines caused a sharp increase in the number of trips to Jeju: the number of tourists increased almost three times to 14.3 million. Compared to 5.3 million. In 2005-2018. tmsnrt.rs/2WEa5b8

According to OAG, in 2018, five South Korean carriers accounted for 61% of the travel market in Jeju.

"Not so long ago, many South Koreans felt that air travel was a luxury, but perceptions changed as budget carriers brought us lower fares, which made travel more affordable,” said a representative of the Korean International Airport in Jeju. for company policy.
In the wider North Asia, LCCs took off more slowly than in other parts of the world, in part because of China’s slow policy, Japan’s domestic duopoly and Cathay Pacific’s dominance in the Hong Kong market.

But South Korea, which hosts the prestigious annual meeting of the International Air Transport Association in Seoul this weekend, is special, and local startups such as Jeju, with the financial support of the government of Jeju Island, are encouraged to grow.

In March, the country's Ministry of Transport issued licenses for the aviation business to three additional budget carriers, which further led to industry overflow and increased competition.
53% of the domestic market of air carriers, such as Jeju and Jin Air Co Ltd, are ahead of 9% of LCC penetration in Japan and 13% in China, according to the CAPA Aviation Center.

Internationally, South Korean LCCs expanded rapidly to routes to nearby destinations, such as Japan, Vietnam and China, with specialized aircraft, and their market share increased to almost 57 percent on international routes to Japan in 2017, from 44 percent in 2016 year, according to the Ministry of Transport.

"We should not underestimate how important the role of low-cost carriers are on this route,” said Pak Son Bong, a senior analyst at Houl Financial Investment in Seoul.
Due to the fact that over the past five years, the volume of aircraft of budget carriers of the country has tripled, the outdated airlines Korean Air and Asiana feel the heat.

Korean Air's operating income fell by more than 40 percent to 640 billion won ($ 537 million) in 2018 from 1.1 trillion won in 2016, while Jeju Air's operating income almost doubled to 100 billion won during this period.

The budget division of Korean Air, Jin Air, was subjected to strong pressure due to public outrage at the behavior of its founding family members, while the largest shareholder, Asiana, financially put its stake on sale.
Their efforts meant benefits for independent low-cost carriers such as Jeju Air and Eastar Jet, as they expand their long-haul routes, such as Busan-Singapore, to attract more customers.

"For long-haul routes, customers tend to look for more premium services that previously could be found with full-service carriers. We now provide business-class services at more competitive prices, ”said Lee De-Woo, deputy general director of Jeju Air.


Coke Zero Sugar, new flavors lift Coca-Cola results; shares rise

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The world's largest beverage producers, Coca-Cola and PepsiCo Inc, respond to changing consumer tastes, tweaking ingredients and experimenting with new flavors that are more targeted at health conscious consumers.

These efforts helped restore soda sales after years of recession.

CEO James Quincey (James Quincey) said that sales of Coke Zero Sugar showed double-digit percentage growth, while its new orange-vanilla soda Coke also became a hit.

Sales of carbonated beverages rose by 1% due to strong performance of the Coke brand, while smaller packages of flavored water and sports drinks of immediate consumption led to an increase in sales by 6%.

Quincey is trying to make Coca-Cola a "complete beverage company” by adding coffee, tea, smoothies and flavored water to a portfolio that traditionally offers carbonated drinks.

She recently made a major bet on coffee, buying Costa Coffee for $ 5.1 billion, and is preparing to launch ready-to-sell Costa products in stores.

"They are making progress with innovation as a whole ... for many of these innovations it’s still early, but we really like the increasing attention that the company pays to its main brands as well as its coffee products,” Edward Jones analyst John Boylan said.
Organic sales of Coca-Cola, which exclude the effects of fluctuations in exchange rates and acquisitions, rose by 6 percent, driven by price increases and bottle purchases due to uncertainty with Brexit.

Revenue rose 5 percent to $ 8.02 billion, and the company adjusted 48 cents per share.

Analysts had forecast earnings of 46 cents per share and earnings of $ 7.88 billion, according to IBES from Refinitiv.

In the second quarter, the company predicted a 6 percent increase in comparable revenues, mainly due to acquisitions and asset sales, but said it continues to be affected by a stronger dollar.
He maintained his organic sales growth forecast for 4 years throughout the year.

"We expect that this year the company will exceed the forecast for 4 percent organic growth, which is due to innovation, increasing global market share and price impact,” writes Guggenheim Partners analyst Laurent Grande.


LVMH shares hit record high as China demand boosts luxury group

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The group, which owns other labels, including Christian Dior and Krug Champagne, sets the bar high for competitors who pursue the same clientele, although not everyone gets the same benefit as Chinese spending moves from the capitals of foreign stores to homes.
The LVMH's solid impulse, however, was still enough to raise stocks across the sector, despite fears of a deterioration in the Chinese economy.

French groups rose 4.3 percent in the second half of the day after they reached a record high early in the day, which helped raise the rankings of such companies as the owner Gucci Kering, Hermes, Burberry and Moncler.
LVMH reported ahead of schedule on Wednesday. First-quarter revenue rose 16 percent to 12.5 billion euros ($ 14.10 billion), up 11 percent over the same period, eliminating currency fluctuations and the effect of acquisitions or disposals.

In general, slower growth is expected when LVMH competitors report numbers for the first quarter, and the group "should be above the average this year,” analysts say at SocGen, as the bank raised the company's rating to "buy” from "hold”.

LVMH’s bullish comments about the appeal of its brands to Chinese consumers were even more supported by its actions during a conference call with analysts on Thursday.
"In the case of the Chinese, the business is really getting stronger and stronger,” said CFO Jean-Jacques Gioni about LVMH Louis Vuitton, the main driver of profits, adding that it also sold well to Japanese and American customers.

Guiony confirmed that Chinese buyers, who still mostly buy luxury goods on foreign trips and which account for more than a third of sales in this sector, are gradually spending more on home lawn, which is partly stimulated by the government’s efforts to reduce fuel consumption by reducing VAT or import duties.

Shopping in nearby areas, such as Hong Kong or Macau, was hit hardest by this trend, he added, while Chinese spending in Europe remained high, despite constant street protests in France.

"There is stability in Europe, demand is growing in China, and a decline is observed outside China in the rest of Asia,” said Gioni.


U.S. business borrowing for equipment falls 24 percent in February: ELFA

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Last month, companies signed up for new loans, leases and lines of credit for $ 5.9 billion against $ 7.7 billion a year ago. The fall was 18 percent compared with the previous month.

"The monthly volume of new business declined for the first time in almost two years ... The fundamentals of the US economy seem to be holding on,” said ELFA Executive Director Ralph Pett.

"As the Fed keeps interest rates unchanged, these and other economic data will be monitored in the coming months to better understand the fall in equipment financing in February."

Washington-based ELFA, a trade association that reports economic activity in the equipment financing sector worth $ 1 trillion, reported that the number of loans approved in February was 76 percent, compared to 76.1 percent in the previous month.

US business borrowing data was based on a survey among 25 members, including Bank of America Corp., BB & T Corp., CIT Group Inc. and financial subsidiaries Caterpillar Inc., Deere & Co, Verizon Communications Inc., Siemens AG, Canon Inc. and Volvo AB. ,

The equipment and finance leasing fund, a non-profit subsidiary of ELFA, said that the March confidence index is 60.4 against 56.7 in February. Any reading above 50 indicates a positive outlook.

Deutsche Bank merger talks heighten uncertainty for U.S. staff

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The future of banking presence in the United States in the field of trade and investment has already been questioned, as some shareholders are calling for additional cuts in addition to those announced last year, and speculation intensified after the confirmation of the merger talks on Sunday.

It is expected that the German government, which owns a 15 percent stake in Commerzbank, will retain a stake in the merged business if the transaction is completed. Some employees fear that this may cause the bank to focus on its domestic market.

Both banks warn that the outcome of the negotiations remains uncertain, and the process may drag on for months. At the same time, key employees could compete with Wall Street banks and hedge funds, which would further weaken a business that has been ineffective for many years. In recent months, several bank executives have ceased operations in the United States.

"We do not know what is happening. Everything is in the air, ”said one senior employee of the bank’s US equity department who asked not to be named because of the sensitivity of the issue.

Chief executive Christian Shiving on Sunday reminded employees that Deutsche intends to remain "a global bank with a strong business in capital markets,” and a source familiar with this issue said that the merger will not change the bank’s commitment to a strong US presence. ,

Deutsche Bank declined to comment on Wednesday.

German Finance Minister Olaf Scholz, who is reportedly a supporter of the merger, previously stressed the need for the German banking sector to support German companies that want to go abroad for export.

After the financial crisis of 2007-2009. Deutsche maintained a broad presence on Wall Street, despite the fact that European competitors, such as Credit Suisse Group AG, significantly reduced the amount of investment banking operations in the United States.

Deutsche Bank's US business brought about half of its income to its total investment banking unit, which includes corporate and investment banking, as well as trade, even though it had a relatively high cost of capital.

However, due to judicial and regulatory investigations of past misconduct, businesses fought against Wall Street rivals.

Last May, Deutsche said it would reduce the number of staff around the world to below 90,000 from 97,000. This included a 25 percent reduction in sales of stocks and jobs, much of which was in New York, where it was lagging behind competitors.

According to banking analysts, job cuts in the United States will not cause the same political breakthrough that both banks will face if they fire jobs in Germany.
Even if Deutsche Bank maintains its operations in the US mostly intact after a deal with Commerzbank, some employees fear that payments and bonuses will decrease because the combined organization will face a negative reaction from German taxpayers if its remuneration is deemed excessive.

Commercebank, which specializes in personal and commercial lending, usually pays its employees less than Deutsche Bank. If the German government had retained a stake in the unified union, lawmakers would most likely have argued that it should tightly control wages.

Sources said traders in Deutsche Bank shares in the US are already under pressure, as some get significantly lower bonuses by 2018.

This contributed to a decrease in morale, which was aggravated by the departure of senior employees, including Brad Kurzman, co-chairman of the equity trading department in North and South America, who leaves at the end of this month, sources said.

The recent efforts to recruit college graduates, which senior management proclaims as a confirmation of the bank’s long-term commitment to the sales department, have done little to ease concerns, they added.
One employee, who asked not to be named, said that further desertions are considered probable, as employees hope to prevent further reductions in the event of a Commerzbank transaction.

(This story corrects a typo in the first paragraph.)


Volvo expects electric car margins to match conventional vehicles by 2025

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Global automakers are planning to increase the cost of electric vehicle technology by $ 300 billion over the next five to ten years, but recognized that higher parts costs and limited use in the early years will be profitable.

Volvo invests about 5 percent of its annual income, which is just over $ 1 billion a year, in the production of cars without electric cars and electric cars, and promised to release five all-electric cars to the market in the next few years.

He demonstrated the first, less than a month ago, made by the luxury brand Polestar, competing with the 3 Tesla model. This year, he also plans to launch an electric compact SUV under the Volvo brand, so that the company will receive 50% of its sales from all-electric cars by 2025.

"It’s very difficult to say whether we’ll have the same margin in 2025 as in 2015 ... because electric cars are very expensive,” said CEO Hakan Samuelsson told Reuters on the sidelines of the company's security exhibition. in Gothenburg.

"But I would be absolutely sure that we would have the same profit with electric vehicles as conventional combustion vehicles in 2025."

Samuelsson said lowering the cost of components such as batteries and lowering profits on conventional cars would help bring people closer together.


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