Global News July 28, 2015

  1. Bloomberg News
  2. Global News July 28, 2015

Bloomberg News

Oil enters a bear market. Brent closed on Monday in London 20 percent below the peak it reached in May to meet the common definition of a bear market. Despite the recent drop, there is no sign of tightening supply with U.S. and OPEC production continuing to pump record output.

Big oil companies hit. Oil giant BP Plc reported a 64 percent decline in second quarter profit to $1.3 billion, well below the average $1.7 billion estimate of 17 analysts surveyed by Bloomberg. BP blamed the decline on $600 million in writedowns due to the conflict in Libya. Norway’s Statoil beat estimates with net income excluding financial and other items falling less than expected to 7.2 billion kroner ($878 million). Shares in BP were trading nearly 2 percent higher and Statoil were up over 3 percent at 11:00 a.m. BST.

U.K. GDP. The U.K. reported its 10th straight expansion this morning with GDP growth in the second quarter reported at 0.7 percent, in line with expectations. Growth was driven by the services and the oil industry while manufacturing declined 0.3 percent during the quarter.

– China volatility. China’s Shanghai Composite Index closed down 1.7 percent after a volatile session that saw it drop as much as 5.1 percent and gain 1 percent. Analyst Tom DeMark predicts that the Shanghai index will drop to 3200 over the next three weeks as the current sell-off mirrors the 1929 Wall Street crash.

– ECB Approves Greek Proposals for Market Reopening, Official Says. The European Central Bank has given approval to Greece’s proposals for the reopening of the country’s financial markets, a spokeswoman for the Athens Stock Exchange said today in a telephone call.

The timing of the reopening will be decided by Greece’s finance ministry, in a decree that will also decide any trade restrictions and ground rules for trading, said the spokeswoman, who asked not to be named in line with policy.

European Stocks Rebound as Melrose, Hikma Rally Amid Takeovers. Melrose Industries Plc surged 10 percent after agreeing to sell its Elster business to Honeywell International Inc. RSA Insurance Group Plc rallied 14 percent as Zurich Insurance Group said it’s evaluating a potential offer for the company. Hikma Pharmaceuticals Plc jumped 8 percent after saying it will buy Boehringer Ingelheim GmbH’s Roxane unit. Orange SA and Statoil ASA rose 2.5 percent or more after earnings that beat estimates.

The Stoxx 600 is rising after it fell 5.1 percent in the past five days, giving up more than half of a rally sparked by Greece’s agreement with creditors. Commodity producers led gains among industry groups today, rebounding from an 11 percent slump over the past seven days.


CNN Money

– China’s stock market continues its dramatic slide. The Shanghai Composite closed down 1.7% after recovering from a 4% loss in early trading. The Shenzhen Composite shed 2.2% over a volatile trading session. The losses build on an 8.5% decline on Monday for the benchmark Shanghai index, its worst performance in eight years. The smaller Shenzhen market, which is heavy on tech stocks, closed down 7%.

Chinese stocks have stumbled dramatically over the past two months. The first signs of trouble came in June, after the Shanghai Composite peaked at more than 5,100 points, a gain of roughly 150% over the previous 12 months. When the bubble burst, the index lost 32% of its value in just 18 trading sessions.

In other efforts to smooth volatility, the People’s Bank of China has cut interest rates to a record low, and illegal short sellers have been threatened with jail.

Move over Toyota! Volkswagen winning global sales race. Volkswagen has stolen Toyota’s crown to become the world’s top carmaker by sales — at least for the year so far.
Volkswagen (VLKAF) sold 5.04 million vehicles from January to June, a slight dip from a year earlier. That compares to 5.02 million sold by Toyota (TM) over the same period. Group sales dropped 1.5% due to a weaker performance by its Toyota and Daihatsu brands.

Automakers are being challenged by softening conditions in markets like China and Russia, and Volkswagen is cautious about the outlook.

U.S. companies with the most to lose in China. Several blue chips are betting heavily on the Chinese consumer. According to data from FactSet Research, 10 firms in the benchmark S&P 500 index generated at least 30% of their sales from China last year. So far, the U.S. stock market has largely shrugged off concerns about what’s going on in China.

The company with the most exposure? Mobile chip company Skyworks Solutions (SWKS). It had more than two-thirds of its revenue from China last year. In fact, many of the companies doing big business in China are chip firms that are major suppliers to smartphone makers. Nearly half of Qualcomm’s (QCOM, Tech30) sales were from China.

Smaller mobile chip companies Avago (AVGO) and Qorvo (QRVO) also had about half of their revenue from China. Semiconductor manufacturers Micron (MU), Texas Instruments (TXN) and Altera (ALTR) all reported more than 30% of sales from China last year.