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Fiat Chrysler (NYSE:FCAU) Sees Weakness in Asia

By
Carol Harper
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Fiat Chrysler Automobiles NV (NYSE:FCAU)

After the spin-off of Ferrari NV (NYSE:RACE), Fiat Chrysler Automobiles NV (NYSE:FCAU) has reported its quarterly numbers for the fourth quarter. The automaker saw weaknesses in Asia as well as Latin America, offset by enhanced numbers in Europe and strong sales out of North America. Though its bottom line dipped 40.2% in the fourth quarter, its adjusted net profit more than doubled.

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Outlook For 2016

For 2016, Fiat Chrysler issued revenue guidance of €110 billion, the same as last year. The Italian automaker expects adjusted net profit to grow 11.8% to €1.9 billion from €1.7 billion. However, it sees adjusted EBITDA growing at only 4.2% to €5 billion from €4.8 billion. The company hopes to maintain its net debt at €5 billion.

One of the most concerning areas in the last year for Fiat Chrysler was Asia Pacific. However, the automaker expects Jeep manufacturing localization in China to boost its profitability in the second half of the current year. It also expects to continue to gain in North America this year. After the launch of Levante, the company sees Maserati performance improving.

Adjusted Profit Doubles In 4Q

Fiat Chrysler suffered a serious drop in net income to €251 million from €420 million in Q4 last year. Excluding any adjustments however, net income more than doubled to €1.12 billion from €529 million.

North America was key to its operations since close to 85% of its profits came from that regionm fueled by increased sales of jeep SUVs. Operating margin also advanced 7.1% as the automaker has focused on closing the gap with its competitors.

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Anthem (NYSE:ANTM) Misses on Guidance and Net Income

By
Carol Harper
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Anthem Inc (NYSE:ANTM)

Anthem Inc (NYSE:ANTM) reported earnings for the fourth quarter that fell short of consensus by three cents a share. However, the company’s revenue came in line with predictions for the same period. The company reiterated its earnings outlook for fiscal year 2016 while it expects to improve its strategy once its acquisition of Cigna Corporation (NYSE:CI) is completed in the second half of this year.

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Outlook below Expectations

Anthem Inc (NYSE:ANTM) provided earnings and other guidance for fiscal year 2016 earlier this month. The company has reaffirmed it now. Accordingly, the health insurance firm is looking at delivering minimum earnings of $10.80 a share, which is ten cents short of the Capital IQ consensus expectations. The company sees its membership at between 38.8 and 39 million for 2016.

As far as the fully insured membership is concerned, the company is looking to close the year with 14.6 – 14.7 million while self-funded membership is predicted between 24.2 and 24.3 million. The firm expects to deliver operating revenue of $80 to $81 billion. That was well short of the $85.57 billion that analysts were looking for. Anthem is also looking to achieve more than $3.0 billion operating cash flow.

Revenue Growth In Q3

Q3 was not much better than the current quarter. Last quarter, Anthem reported 6.6% year over year growth in revenue to $20.2 billion. That was better than the Capital IQ consensus of $19.89 billion revenue. The problem was that adjusted net income per share dropped 38.7% to $1.14. On a GAAP basis, net income plummeted 64.3% to $180.9 million while earnings dropped 62.2% to 68 cents a share for the third quarter.

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Capital Outflow In China Continues Apace

By
Carol Harper
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Yuan

When an economy is not performing as expected, it is natural for foreign investors to pull cash out. China witnessed this last year when $1 trillion of capital exited the country. That is obviously giving some sleepless nights to international investors as to what Chinese President Xi Jinping will do now.

Capital Controls?

One of the options being considered is $10 trillion worth of comprehensive capital controls, though historically these have only caused longer term damage. Reports indicate that some of China’s trading partners were in favor of such an option. Chief among the proponents is Bank of Japan Governor, Haruhiko Kuroda, who urged the country to enforce such policies.

The second biggest economy in the world is getting a number of unsolicited advice from its trading partners and commodity producers around the world. Many of its investors were counting on a smooth transition towards a sustainable economy from a high-speed export economy. Many expected the transition to be anchored by consumer spending and services, but a smooth transition is now in doubt.

Capital Exodus Due to Opportunities Abroad

As China has grown since 1990, its stock market has experienced several major sell-offs that ended up reducing wealth by as much as $1.8 trillion. The current selloff is not even the most extreme, though it could get much worse. There does not appear to be any quick fix to address the issues governing its economy currently.

Given that, there is bound to be capital flight, which is nothing but a reflection of available opportunities in rest of the world. In the modern economy where market forces have the upper hand, that is not necessarily a bad thing. Corporations in China spent around $61 billion last year on foreign acquisitions which are taking them to fresh markets and allowing them to move up the ladder. That’s $61 billion not spent domestically, but investment is still a good thing from a market perspective regardless of its direction. Aside from corporate moves, some individual Chinese were also engaged in transferring money abroad on uncertainty around the Yuan as the threat of dramatic devaluation looms large.

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Shell (NYSE:RDS.A) Gets A Big Boost With 80% Investors Backing BG Group Deal

By
Carol Harper
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Royal Dutch Shell plc (ADR) (NYSE:RDS.A)

At a time when the global oil price is trading at a 12-year low, Royal Dutch Shell plc (NYSE:RDS.A) expressed its own confidence in the industry by getting 80% of its shareholders to back its acquisition of BG Group PLC (OTCMKTS:BRGYY). Most of the votes were cast by proxy and other investors met in The Hague.

Victory for Ben Van Beurden

The winning percentage clearly showed that Shell’s CEO, Ben Van Beurden, was able to prevail over naysayers and convince shareholders of the expected gains from the acquisition. The vote came on the back of some analysts predicting the global oil price to continue to drop down to as low as $10 a barrel. Given such a background, it was undoubtedly a victory for Van Beurden.

Van Beurden said that the acquisition would lift cash flow in addition to improving dividend outlook. He also pointed out that BG Group’s growing production would lift its falling output. Now the deal needs approval from BG Group shareholders before being sent to court for approval, which is expected to happen in mid-February.

Largest LNG Trader

Shell’s acquisition would also turn the company into the largest liquefied natural gas trader in the world. The company has agreed to allocate 0.4454 of its B Shares, as well as a payment of 383 pence for every BG Group share in April last year. This meant offering a premium of 50% as the total transaction value was pegged around $70 billion at the time.

As oil prices started dropping in the last year, Shell’s valuation of the deal also dipped to $51 billion, reflecting its own share price. The company indicated that the slump might be a prolonged one thus suggesting that it would need a longer time than it initially thought to turn a profit on the acquisition. The oil firm said that at $50 per barrel it would be able to add to operating cash flows.

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Fed Policy Statement To Lead Headlines In U.S. Today

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US markets had a weak open today with the Dow Jones 138 points, nearly a full percent, while S&P 500 futures slipped 0.5% so far. The Nasdaq 100 is the worst of the bunch, down 1.15% in the first hour of trading.

The Fed Clue

The key factor that will drive the U.S. markets today will be commentary from the Federal Reserve as it will conclude its two-day policy meeting. Investors will dissect every word as usual for any change in tone from the central bank in its monetary policy tightening stance. Mostly, it is expected that the Fed will step up rates gradually on the back of tepid growth in global markets and lackluster domestic economic growth in the fourth quarter.

Apart from the Fed’s policy statement, market participants will also look forward to new home sales data, which will be published later today. The U.S. Energy Information Administration will also issue its weekly report on oil supplies, which will be significant for the market as every oil update generates new swings.

Indication from Saudi Arabia and Russia over a possible output cut had supported the oil rally yesterday, but it appears to have fizzled out today.

Mixed global cues

Meanwhile, European stock markets are feeling pressure as oil prices retreat from the previous day’s gains. The Fed policy meeting is also weighing on European markets. On the other hand, most of the Asian indices except Shanghai finished the day on a positive note. The Shanghai Composite Index registered a 0.5% fall and breached its 13-month low. Analysts have noted that China is now giving priority to stabilizing the Yuan and strengthening its economy, steering away from its earlier efforts at inflating stock market sentiment.

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Oil Prices Trade Around $31 as No Word on Output Cut

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SONY DSC

The faintest hint from oil producing nations on possibly curbing oil output had world markets cheering yesterday. However, the optimism was short-lived as the fundamental picture of oversupply remains unchanged.

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Markets were abuzz with speculation after reports indicated that Saudi Arabia and Russia have expressed theoretical interest in cutting supplies. Russia’s second largest oil company stressed the urgent need to cut production while OPEC’s call for cooperation from other oil exporting nations also beefed up hopes of a longer term resolution to the oil glut.

There is as of yet no confirmation that oil exporting nations will strike a deal though, giving no real direction to the markets. Kuwait has stated that any output cut is unlikely until and unless all oil producing nations work in tandem.

On the back of these developments, oil is witnessing steep price swings, touching a high of $32 per barrel yesterday. Today, Brent crude was trading near $31.14 while U.S. Oil futures for March delivery slipped 3.28% to $30.40.

U.S. oil companies cut spending

Amidst the oil weakness, three of the largest U.S. shale oil companies, Hess Corp (NYSE:HES), Continental Resources, Inc (NYSE:CLR) and Noble Energy, Inc (NYSE:NBL) have significantly trimmed their 2016 capital spending budget, with cuts ranging between 40% to 66%. One has even stated that profits could come only when oil rebounds by more than 20%. This has led analysts to project a spending cut of 38% by the sector as a whole for 2016.

The U.S. government estimated that domestic crude production will decline by nearly 700,000 barrels per day by the end of 2016 to 8.5 million barrels per day.

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No Business As Usual For Microsoft’s (NASDAQ:MSFT) Research Arm

By
Andy Parker
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Microsoft Corporation (NASDAQ:MSFT) is overhauling its research arm with the goal of quicker technological development and delivering products quickly to customers before competitors can replicate them. Microsoft research teams have often been criticized for not bringing their products to life and this is what Satya Nadella, Microsoft’s CEO, is looking to change.

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Nadella has had some critical successes on that score already. During Nadella’s first month as CEO back in February 2014, he became interested in a project that used artificial intelligence and speech recognition to translate a live conversation to another language. Nadella told the research team in charge that he needed this tool combined with Skype and that it should be ready in three months’ time.

The company’s research group was set in isolation from the product team, and the Skype translator was designed within the set period.

In order to integrate its research wing with the rest of the company, Microsoft moved more than half of its research staff to a new group called MSR NExT. This group was to focus on high impact projects rather than pure research. The move was made back in September 2014.

Recent Microsoft innovations have not only helped Skype but have been useful for a variety of products. These include Cloud productivity tools in Office, faster servers running Bing and the development of HoloLens, the world’s first holographic computer.

Microsoft’s latest innovation is a new feature for Cortana. Microsoft is planning to release an update of the digital assistant. This will give Cortana the ability to scan e-mails for various tasks users have set themselves to accomplish.

The overhaul comes at a time when Microsoft is in a race with both Alphabet Inc. (NASDAQ:GOOGL) and Facebook Inc. (NASDAQ:FB) to develop technologies relevant to people’s lives, not exactly a simple task even in the tech age where new technologies are developed seemingly every day.

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Barclays (NYSE:BCS) Confirms Support For Apple Pay

By
Andy Parker
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Barclays PLC (ADR) (NYSE:BCS) has announced that it will be teaming up with Apple Inc. (NASDAQ:AAPL) in support of the latter’s payment service, Apple Pay.

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The decision by the bank is good news for Apple because it will allow the payment service to have a deeper footing in the UK. The service was launched in Britain in July 2015, but its adoption has been relatively small, and progress has been slow. The bank had previously been indecisive about linking its cards with Apple Pay.

Barclays Bank CEO, Ashok Vaswani, made the announcement that finally made the bank’s stance clear on the matter. He announced that the bank will officially launch its support services with Apple by April. Mr. Vaswani revealed through email that the bank will launch support services for Apple Pay in the next 60 to 75 days if things go as planned. Barclays will, therefore, begin to offer card support any time from mid-March to early April.

Barclays’ delay in initiating its services has been rather disappointing to Apple Pay and Barclays customers. The bank now hopes the launch date will not be too late to warrant the migration of customers to other banks. Barclays is yet to reveal the reason for the delay in adoption of Apple Pay, but the bank has been working on its own payment services.

One such service is bPay, launched in 2015. It also launched a near-field communication (NFC) payment service available to Barclays cardholders, not forgetting its joint operations with mobile payment firm, Zapp.

Barclays was the only bank among the four major British banks that was yet to support the NFC payment service. Now that it is, Apple Pay should benefit from an increased customer base.

The bank’s involvement will also encourage customers to trust the new service. One of the major hurdles faced by Apple Pay at the beginning of its launch was a slow adoption rate because it was a new service in the market and people did not trust it. However as banks offered support, the process of adoption by customers became much easier.

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Global Markets Mixed, Eyes On The U.S.

By
Andy Parker
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Better-than-expected earnings reported by some of the major U.S. companies along with improved sentiment kept Asian markets relatively calm today. The only exception was China’s Shanghai Composite Index, which reversed from steep losses of 4% to finish the day only slightly lower.

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Shanghai extends losses

The Shanghai Composite Index fell 0.52% or 14.23 to 2,735.56. Today marks the second consecutive day of losses for the index as concerns of capital outflows from the region are firming up. According to analysts and market participants, Beijing is now focusing on the yuan’s stability rather than driving up stock markets.

In the rest of Asia, Hong Kong’s Hang Seng rose 1.02% or 191.65 to 19,052.45. Japan’s Nikkei 25 closed 2.72% higher to to 17.163.92. Up ahead in the week, investors will be paying attention to the monetary easing stance of the Bank of Japan, which kept rates unchanged at its last meeting.

Europe trading lower

In Europe, major indices were trading mildly lower during the late Asian hours. Oil prices seem to be dictating the movement of European markets as U.S. Oil Futures are back in $30 per barrel range. Crude Brent has also shed gains and is trading around the $31 level. Both the FTSE 100 and DAX are down by 0.39% and Euronext 100 was trading 0.27% lower at 856.58 today.

After a mixed reaction coming from Asian and European markets, it remains to be seen how U.S. markets will open today, considering extreme volatility this week so far. A rally in oil prices and strong corporate earnings kept the momentum up in U.S. markets yesterday. The Dow Jones Industrial Average inched closed 1.8% higher at 16.167.23 while S&P 500 Index too surged 1.41% to 1,903.63.

Apple Inc. (NASDAQ:AAPL) dominated the headlines after reporting $18.4 billion in profits but witnessed sluggish iPhone sales growth.

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Alphabet (NASDAQ:GOOGL) Pulls Google Glass From Social Media

By
Andy Parker
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Alphabet Inc (NASDAQ:GOOGL) has shut down several of its social media accounts linked with its Google Glass. Alphabet’s aim was to popularize the eyeglasses to customers by use of Twitter, Facebook, Google+ and Instagram. On Google+ there was a message stating that they had fun hanging with explorers and users can get in touch or submit questions concerning Google Glass on the support page.

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Google Glass, unveiled about four years ago, has not gained as much success as Alphabet hoped for. The move is a sign that Google is trying to move on from the failed Google Glass consumer launch.

Most industry observers have noted that Google Glass was most suited for business and enterprise rather than the consumer space. Reports in September claimed that the company had hired new engineers to work on a new project named ‘Project Aura’ aimed to transforming Google Glass for businesses and organizations.

The new design of the high tech glasses could be useful in factories, warehouses, and hospitals among other places of business.

The closure of Google Glass Social Media pages is a clear sign of the end of the consumer version, for now. The head of Google X research lab had since stated that initial hype over the glasses had been overblown since there was only a prototype at the time rather than the finished product. This seemed to imply that the final product was enterprise-oriented than for individual use.

When Google Glass was first introduced, people greeted it with much excitement. It presented the ability to access email by use of its eyelevel screen and to record videos using a tiny camera. Over time, it ran into problems, and people mocked it due to its shortcomings.

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