Tag Archives: World economy

Asia’s developing economies are set to grow faster than China’s

Chinese laborers working at a construction site at sunset in Chongqing, China.

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Asia’s developing economies may be showing signs of recovery, but the Asian Development Bank (ADB) cut its growth forecasts for them yet again — thanks to China’s prolonged zero-Covid policy.

But this will be the first time in more than three decades that the rest of developing Asia will grow faster than China, the Manila-based lender said in its latest outlook report released Wednesday.

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“The last time was in 1990, when (China’s) growth slowed to 3.9% while GDP in the rest of the region expanded by 6.9%,” it said.

The ADB now expects developing Asia — excluding China — to grow by 5.3% in 2022, and China by 3.3% in the same year.

The [People’s Republic of China] remains the big exception because of its intermittent but stringent lockdowns to stamp out sporadic outbreaks.

Both figures are further downgrades — in July, for example, it slashed its growth forecast for China to 4% from 5%. The ADB attributed that to sporadic lockdowns from the nation’s zero-Covid policy, problems in the property sector, and slowing economic activity in light of weaker external demand.

It also lowered its 2023 forecast for China’s economic growth to 4.5% from April’s 4.8% outlook on “deteriorating external demand continuing to dampen investment in manufacturing.”

Recovery not helping

Though the region is showing signs of continued recovery through revived tourism, global headwinds are slowing down overall growth, the ADB said.

For the region, the ADB now expects emerging Asian economies to grow by 4.3% in 2022 and 4.9% in 2023 — a downgraded outlook from July’s revised predictions of 4.6% and 5.2% respectively, according to its latest outlook report released Wednesday.

The latest updates to the Asian Development Outlook also predicted that the pace of rising prices will accelerate even further to 4.5% in 2022 and 4% in 2023 — an upwards revision July’s predictions of 4.2% and 3.5% respectively, citing added inflationary pressures from food and energy costs.

“Regional central banks are raising their policy rates as inflation has now risen above pre-pandemic levels,” it said. “This is contributing to tighter financial conditions amid a dimming growth outlook and accelerated monetary tightening by the Fed.”

China the ‘big exception’

“The PRC remains the big exception because of its intermittent but stringent lockdowns to stamp out sporadic outbreaks,” the ADB said, referring to the People’s Republic of China.

In contrast to that, “Easing pandemic restrictions, increasing immunization, falling Covid-19 mortality rates, and the less severe health impact of the Omicron variant are underpinning improved mobility in much of the region,” it added in the report.

Read more about China from CNBC Pro

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Ukraine slams Germany for failing to send it weapons

Soldiers drive a “Marder” infantry fighting vehicle of the German armed forces Bundeswehr during the informative educational practice “Land Operation Exercise 2017” at the military training area in Munster, northern Germany.

Afp Contributor | Afp | Getty Images

Ukraine’s relations with Germany have soured this week, with Kyiv asking why Berlin reneged on its promise to provide heavy weaponry.

Tensions over Germany’s provision of Leopard tanks and infantry fighting vehicles to Ukraine — or lack thereof — came to a head this week when Ukraine’s Foreign Minister Dmytro Kuleba publicly asked why Berlin was backtracking on a pledge made to send these weapons to Ukraine.

“Disappointing signals from Germany while Ukraine needs Leopards and Marders now — to liberate people and save them from genocide,” Kuleba said on Twitter, adding that there was “not a single rational argument on why these weapons can not be supplied, only abstract fears and excuses.”

“What is Berlin afraid of that Kyiv is not?” he added.

The Marder is a German infantry fighting vehicle designed to be used alongside Leopard battle tanks in combat.

Kuleba’s comments came as Ukraine launches counterattacks against Russian forces in both the south and northeast of the country. Ukraine’s counterattack in the northeast Kharkiv region was hailed as a particular success, with Russian forces withdrawing from towns and villages across the region, almost completely de-occupying it.

A new Leopard 2 A7V heavy battle tank Bundeswehr’s 9th Panzer Training Brigade stands during a visit by German Defence Minister Christine Lambrecht to the Bundeswehr Army training grounds on February 07, 2022 in Munster, Germany.

Sean Gallup | Getty Images News | Getty Images

Ukraine is largely reliant on Western weapons systems to fight Russian forces. And its allies in the West, NATO members essentially, have individually sent Ukraine a vast range of military hardware.

In April, Germany promised to give Leopard tanks and Marders to Ukraine. Rather than deliver them directly, it proposed a swap scheme. The intention was that NATO members, Poland or Slovakia for example, could send Ukraine older Soviet-era tanks (such as Leopard 1s), and Germany would then replenish their stocks with its own more modern equivalent weapons (such as Leopard 2s).

Germany justified the proposal to send older weapons by saying Ukraine’s forces were used to Soviet-era weapons, and that it should only supply weapons they know how to use.

The only problem with the plan is that this exchange of weapons has largely failed to materialize and Germany is now facing a backlash from critics, both within Germany and externally — and not least of all, from a disappointed Ukraine.

One of the arguments is that they are afraid of further escalation — but that’s an invalid argument because it’s like, an escalation to what? It’s bad enough as it is.

Yuri Sak

Ukrainian defense ministry official

Yuriy Sak, an advisor to Ukraine’s Defense Minister Oleksii Reznikov, told CNBC on Wednesday that Kyiv doesn’t understand Berlin’s reluctance to send it weapons that could prove decisive on the battlefield.

“It’s difficult to read their minds, but Germany’s words, during the last seven months on a number of occasions, have not been matched by their actions. And this is disappointing because there was a moment in time when they made this commitment that they would provide Ukraine with these tanks, it was a moment of hope and promise that we looked forward to,” he noted.

“If they’re afraid of some nuclear strikes or some other attacks on the nuclear power plant in Zaporizhzhia, which could result in major tragedy, it’s another story but as far as the situation on the battlefield is concerned, we don’t understand the logic behind it. It could be some internal political games as well,” he noted.

Kyiv wants weapons, Germany has them

Ukraine’s need for more weapons comes as the war enters what could be a definitive phase in which the balance shifts in Kyiv’s favor.

Russia was seen to have been taken by surprise by Ukraine’s latest counterattacks, having redeployed some of its most effective fighting units to southern Ukraine after Kyiv signaled over the summer it would launch a counteroffensive to retake Kherson.

After what seemed like a brief period of stunned silence as it took in Ukraine’s rapid victories and advances in the northeast, Russian forces have begun their response to those wins, launching an intense series of attacks on energy infrastructure in the northeast, as well as missile strikes on the south.

All the while, Ukraine’s President Volodymyr Zelenskyy has called on Ukraine’s international allies to continue sending weapons to Ukraine, saying this is when it needs them most to maintain the momentum.

And it’s weapons like Germany’s Leopard tanks, and Marder infantry fighting vehicles, that Ukraine says could change the balance of the war definitively.

Among Ukraine’s NATO allies, Germany — the self-professed “leader of Europe” — has attracted criticism and even ridicule for its military assistance to Ukraine. Just before Russia launched its invasion on Feb. 24, Germany’s offer to send thousands of helmets to Ukraine was met with derision.

Analysts say that criticism is not entirely deserved, however, noting that after the U.S. and U.K., Germany has been one of the biggest donors of weapons to Ukraine.

Stijn Mitzer and Joost Oliemans run a Dutch open-source intelligence defense analysis website and keep a tally of weapons Germany has delivered to Ukraine.

They note on their site that, to date, these deliveries include a number of Gepard SPAAGs (self-propelled anti-aircraft guns), man-portable air-defense systems (known as MANPADS, they’re portable surface-to-air missiles), howitzers and anti-tank weapons, as well as hundreds of vehicles and millions of rounds of ammunition. The German government has also published a list of the military equipment it has sent to Ukraine, right down to 125 pairs of binoculars it has donated.

German Chancellor Olaf Scholz observes damages as he visits with French President Emmanuel Macron, Romanian President Klaus Iohannis and Italian Prime Minister Mario Draghi, as Russia’s attack on Ukraine continues, in Kyiv, Ukraine June 16, 2022.

Viacheslav Ratynskyi | Reuters

But when it comes to German tanks and infantry fighting vehicles, Germany has ostensibly dragged its feet, with no decision on the supply of such hardware, let alone deliveries, made despite Ukraine’s specific requests from Kuleba and other officials since March. Analysts say Germany’s good intentions have just not come to fruition.

“Germany has … attempted to entice other countries to send their heavy weaponry to Ukraine in a programme known as ‘Ringtausch’ (‘exchange’). Under this policy, countries can receive German armament free of charge in exchange for delivering tanks and infantry fighting vehicles from own stocks to Ukraine,” Mitzer and Oliemans noted in an article in early September.

“Although a promising scheme at first, the ‘Ringtausch’ programme has largely failed to live up to expectations as most countries expect to have their Soviet-era systems replaced by larger numbers of modern weapon systems than what Berlin is currently able (or willing) to offer,” they noted.

What does Germany say?

Pressure has been mounting on German Chancellor Olaf Scholz to make a decision on sending such weapons to Ukraine, but there appears to be reluctance at the top to take that decision. On Monday, Germany’s Defense Minister Christine Lambrecht said sending more heavy weaponry to Ukraine was “not so simple.”

“It’s not so simple just to say: I’ll just risk that we won’t be able to act, the defense of the country, by giving everything away. No, I won’t do that,” she said. “But we have other possibilities, from industry, with our partners,” Deutsche Welle reported.

CNBC contacted the German defense ministry for more comment, and a response to Kuleba’s comments, and is yet to receive a response.

Chancellor Scholz defended Germany’s record over weapons deliveries on Wednesday, however, telling reporters that “it can be said that the very weapons that Germany has now provided to Ukraine are decisive to the development of the conflict in eastern Ukraine, and they have also made the difference” in battle.

Germany’s reticence over certain arms deliveries has prompted some critics to look for ulterior motives for its reluctance, with some even suggesting that Germany does not like the idea of German tanks facing Russian tanks on the battlefield, as they did in World War II.

“We have no alternative. It is about our independence, about our future, about the fate of the entire Ukrainian people,” said Ukrainian President Volodymyr Zelenskyy (pictured here on June 16).

Ludovic Marin | Reuters

Rafael Loss, a defense expert at the European Council on Foreign Relations (ECFR), told CNBC Wednesday that the German government has put forward various explanations for not sending the weapons.

“The German government itself has put forward explanations for why not to do so, essentially, since the beginning of Russia’s war against Ukraine and even before that. We’ve heard concerns about the potential for escalation, that Russia might see the transfer of such weapons as some kind of red line.”

“We see concerns, mostly from the SPD (Scholz’s Social Democratic Party) about the images that German Leopard tanks might produce going toe to toe with Russian tanks in Ukraine. And we’ve also heard in the past arguments about the tight timeline as a reason for sending the Soviet-produced materiel first. I think that that is a legitimate argument. But it only holds up so long,” he said.

“At some point, Ukraine — and the countries that will be able to support Ukraine with these types of systems — will run out of them, and you can’t replace them as easily. So at some point, you need to start thinking about Western supply chains that are based on Western western systems.”

Loss characterized Germany’s stance toward Ukraine as one of “immense” resistance to sending weapons unilaterally, and that it would prefer some kind of European coalition that jointly sends arms and assistance.

“Over the past six or four months, we’ve seen an immense reluctance both from the Chancellery and from the Defense Ministry to be proactive, to take the initiative and they’ve always referred to ‘not going it alone’,” Loss said, adding that Germany appeared to want the U.S. to take the lead and for Berlin to follow.

Ukraine left waiting

While the pressure is mounting on Berlin to act, Germany’s stance is unlikely to change any time soon, or potentially at all, according to Anna-Carina Hamker, a Europe researcher at political risk analysis firm Eurasia Group. She said in a note Wednesday that Scholz’s government — a coalition of his Social Democratic Party, Greens and pro-business Free Democrats, uncomfortable bedfellows at the best of times — would likely continue to struggle over its Ukraine policy.

“Major adjustments to the government’s Ukraine policy are unlikely and the coalition will not significantly step up arms deliveries, despite Ukraine’s territorial gains over the last few days,” she said in a note.

As such, Ukraine has been left fuming and disappointed by Germany’s stance, leaving Kyiv to question Berlin’s commitment to supporting it as the war continues into the fall and likely the winter, unless there is a dramatic change of course from the Kremlin.

Ukrainian defense ministry official Yuri Sak summed up Kyiv’s frustrations toward Germany, noting that “one of the arguments is that they are afraid of further escalation — but that’s an invalid argument because it’s like, an escalation to what? It’s bad enough as it is.”

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OPEC+ decision is a ‘political snub’ and ‘symbolic’, say analysts

OPEC+’s decision to implement a small production output cut is more of a political statement and symbolic message sent by the alliance, analysts said.

On Monday, the group announced a small oil production cut of 100,000 barrels per day to bolster prices. Just last month, OPEC+ decided to raise oil output by the same target of 100,000 barrels per day.

“Essentially, it’s like a zero sum for the market,” said Ellen Wald, president of Transversal Consulting. “The increase [in oil production] last month was also almost nothing… and now we’re talking about taking those away.”

Wald said the underlying message is more significant than the cut itself.

“The symbolic meaning of this cut is, I think, much more important for the market,” Wald said, adding that the price of Brent crude was “pushed up so much” following the decision.

Oil prices rose about 3% on Monday following OPEC’s announcement. The rally has since lost steam, paring gains in Tuesday trade. Brent Crude stands around $95 per barrel while West Texas Intermediate hovers around $88 per barrel.

“It’s more of a political snub to President [Joe] Biden as well as the European Union, signaling that OPEC is going to go its own way and they want to protect those higher prices,” said Andy Lipow of Lipow Oil Associates, who also mentioned that the cut was “quite paltry.”

“[They’re] basically saying — look, we have been talking about a cut. A cut is totally within our power and we very well may put through a cut that would be much more significant than this,” Wald said, adding that Russia’s influence is quite significant in OPEC+. 

Price cap may end ‘pushing up the price of oil’

Both analysts were skeptical about the efficacy of Russian oil price caps.

Last week, the G-7 countries agreed to cap Russian oil prices to reduce funds flowing into Moscow’s war chest and bring down the cost of oil for consumers.

“[It] doesn’t look like India is really about to sign on here. And neither is China,” Wald said. She explained that even if some countries agree on not buying oil from Russia, other countries like India and China could purchase those barrels at a discount.

“I just don’t see how this works out in any way except to end up pushing up the price of oil for everyone, except for those who are continuing to buy Russian oil,” she said.

Similarly, Lipow said the price cap is inviable because both China and India are “already benefiting from deeply discounted Russian oil” and have nothing to gain by getting on the bandwagon.

Lipow added that the price cap protects consumers from paying higher prices rather than reducing demand for oil.

“They don’t have an incentive to reduce demand… What it means is that the governments around Europe are gonna be printing money to send to the consumers, and going deeper into debt.”

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Euro zone inflation hits another record of 9.1% as food and energy prices soar

Inflation continues to hit new records just as the European Central Bank mulls another large interest rate hike for next month.

NurPhoto / Contributor / Getty Images

Euro zone inflation hit a new record high in August of 9.1%, according to flash figures from Europe’s statistics office Eurostat, with high energy prices the main driving force.

The rate was above expectations, with a Reuters poll of economists anticipating a rate of 9%. It is the ninth consecutive record for consumer price rises in the region, with the climb starting back in November 2021. Headline inflation in the euro zone hit 8.9% (year-on-year) in July.

Energy had the highest annual inflation rate at 38.3%, Eurostat said Wednesday, down slightly from 39.6% in July. Food, alcohol and tobacco were up 10.6% compared to 9.8% in July, with the knock-on effects of recent heatwaves across the continent contributing to increases.

Non-energy industrial goods, such as clothing, household appliances and cars were up 5% compared to last year, a 0.5 percentage point increase on last month, while services were up by 3.8% in price year-on-year, 0.1 percentage points more than in July.

French and Spanish inflation slows

Drilling down into national figures, the French inflation rate decreased to 6.5% in August, down from 6.8% in July. The rate was lower than expectations, with economists polled by Reuters having anticipated a drop to 6.7%.

Spain also released slowing inflation figures for August, at 10.3% year-on-year compared to 10.7% for July, according to the Eurostat flash estimate.

Meanwhile, the region’s largest economy, Germany, saw inflation reach its highest level in almost half a century at 8.8% year-on-year in August.

Estonia currently has the highest inflation rate in the euro zone at 25.2%, followed by Lithuania (21.1%) and Latvia (20.8%). Malta and Finland follow France with the lowest inflation rates, at 7.1% and 7.6% respectively.

The ECB ‘has some catching up to do’

Inflation continues to hit new records just as the European Central Bank mulls another large interest rate hike for next month.

The ECB increased interest rates by 50 basis points to zero on July 21 – its first rate hike in 11 years – and a similar, or larger, hike is now expected on Sept. 8.

“Some members are inclined to advocate a 75 basis points interest rate increase,” Peter Schaffrik, global macro strategist at RBC Capital Markets, told CNBC’s “Squawk Box Europe” on Wednesday.

“Despite the slowdown in the economy that we will almost certainly be getting, the central banks won’t let up on their hiking path,” he said.

The outlook for Europe’s economy is “pretty bleak,” Kenneth Wattret, head of economics at S&P Global Market Intelligence, told CNBC’s “Street Signs Europe” on Aug. 23.

“It looks inevitable that the euro area is headed for a recession. The question is only how deep it will be and how long it will last,” he said. The ECB “has some catching up to do,” according to the economist.

“The ECB is way behind the curve, inflation is exceptionally elevated and likely remain that way for at least the next seven months,” Wattret said.

France’s Finance Minister Bruno Le Maire told CNBC’s Charlotte Reed Tuesday that inflation is a main focus for the nations of Europe in the short term. “The key challenge that we all have to face for the next weeks and the next months, is to reduce the level of inflation everywhere in Europe,” Le Maire said.

“So it’s up to the ECB to take the right decisions, and we fully trust the ECB to take the right decisions, but the key point is to have a decrease in the level of inflation everywhere in Europe,” he said.

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Sony raises price of PlayStation 5 console due to soaring inflation

In this photo illustration a PlayStation 5 logo seen displayed on a smartphone.

Mateusz Slodkowski | SOPA Images | LightRocket via Getty Images

Sony on Thursday raised the recommended retail price of its PlayStation 5 games console in several international markets citing the global economic environment, including high inflation.

The Japanese gaming giant said that the price hikes are effective immediately except in Japan where they will begin on Sep. 15.

Sony is not raising the price of the PS5 in the U.S.

“The global economic environment is a challenge that many of you around the world are no doubt experiencing,” Sony said in a blog post. “We’re seeing high global inflation rates, as well as adverse currency trends, impacting consumers and creating pressure on many industries.”

The company said that “based on these challenging economic conditions,” it has decided to raise the price of its flagship console.

These are the hikes and new prices for the PS5:

  • Europe: 50 euro ($50) increase to 549.99 euros for the disc version and 449.99 euros for the digital version
  • UK: £30 increase to £479.99 for the disc version and £399.99 for the digital model
  • Japan: 5000 yen increase to 54,980 yen for the disc version and 44,980 yen for the digital model
  • China: 400 yuan increase to 4,299 yuan for the disc version and 3,499 yuan for the digital model
  • Australia: 50 Australian dollar increase to 799.95 Australian dollars for the disc version and 649.95 Australian dollars for the digital model
  • Mexico: 1,000 Mexican pesos increased to 14,999 Mexican pesos for the disc version and 12,499 Mexican pesos for the digital model
  • Canada: 20 Canadian dollars increase to 649.99 Canadian dollars for the disc version and 519.99 Canadian dollars for the digital model

Sony’s price hike comes amid a slump for gaming companies including Nintendo and Microsoft, which saw their sales slide in the second quarter as the pandemic-induced boom begins to wear off.

Sales at Sony’s gaming unit declined 2% year-on-year in the June quarter while operating profit plunged nearly 37%. The Japanese giant also cut its full-year profit forecast for its gaming division.

Sony is also contending with continued supply chain issues that make it difficult to make enough PS5 consoles to meet demand. There has been a notable shortage of PS5s globally.

Rival Xbox, which is made by Microsoft, has not yet announced any price hikes.

Given the fact “that the PS5 has been severely supply constrained since launch, with many consumers unable to buy Sony’s latest console, and the fact that Microsoft has shown no indication yet of increasing its Xbox Series pricing, there is no doubt that this price increase will have been a hard decision to make,” Piers Harding-Rolls, research director at Ampere Analysis, wrote in a note on Thursday.

“However, with inflation and price increases being felt through the component supply chain, much of that priced in US dollars, alongside continued high costs in distribution, Sony has now had to pass on some of those cost increases to try and maintain its hardware profitability targets.”

Ampere Analysis estimates that Sony had sold 21 million PS5s worldwide compared to Microsoft’s Xbox Series consoles at 13.8 million.

Harding-Rolls said that he does not expect this to put off gamers wanting to buy a PlayStation 5 given demand remains high.

“While we believe there will be disappointment for some consumers that have been trying to buy a PS5 without success, or that were saving to buy the console just in time for the price to increase, the high pent up demand for Sony’s device means that this price increase of around 10% across most markets will have minimal impact on sales of the console,” he said.

“We expect Sony’s sales forecast for the PS5 to remain unchanged.”

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UK real wages decline at record rate as inflation soars

Data from the U.K. Office for National Statistics released on Tuesday showed that real wages declined at a record pace in June, while unemployment stayed level.

Jason Alden/Bloomberg via Getty Images

LONDON – U.K. real wages, which reflect the power of employee’s pay after accounting for inflation, fell by an annual 3% in the last quarter, according to data released by the Office of National Statistics on Tuesday.

While average pay — excluding bonuses — increased by 4.7% in the April to June period, according to the ONS, the cost of living is increasing at an even faster rate and outpacing wage growth.

Darren Morgan, ONS director of economic statistics, said this was affecting how far wages go in the day-to-day life of workers.

“The real value of pay continues to fall. Excluding bonuses, it is still dropping faster than at any time since comparable records began in 2001,” he commented.

Higher energy and food bills have been putting pressure on households in the U.K. The cost of living crisis continues to take hold of the country, with consumers’ purchasing power decreasing.

U.K inflation rose to a fresh 40-year high of 9.4% in June, and is expected to soar above 13% by October. The Bank of England responded to rising prices earlier this month by hiking interest rates by 50 basis points to 1.75% — the largest single increase in 27 years.

Lauren Thomas, U.K. economist at career site Glassdoor, said inflation and rising prices are currently workers’ main concerns.

“The only constant in 2022 is change and skyrocketing prices. Even with high wage growth and a tight labour market, workers are feeling the pinch as inflation emerges as the biggest winner. With real wages falling a record 3.0 percent thanks to inflation, the cost of living is a priority for many job seekers,” she said.

The ONS’ data also showed that unemployment remained stable at 3.8%, while job vacancies fell during the same timeframe.

James Smith, a developed markets economist at ING, said that the Bank of England will be paying close attention to both wage growth and the unemployment rate in the U.K.

“The Bank of England’s official forecasts point to a material increase in the unemployment rate over the next couple of years, but policymakers will be looking for signs that firms are ‘hoarding’ staff even where margins are squeezed, amid concerns about their ability to rehire again in the future. Wage growth has decent momentum right now, and the committee will be concerned that this could be sustained,” he said.

Looking ahead, this could mean further sharp interest rate hikes by the Bank of England, Smith adds:

“For now, we think there’s not much in these latest figures that will stop the Bank of England from hiking rates by 50bp again in September, even if we are nearing the end of the tightening cycle.”

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Saudi Aramco profit surges 90% in second quarter amid energy price boom

An employee looks on at Saudi Aramco oil facility in Abqaiq, Saudi Arabia October 12, 2019.

Maxim Shemetov | Reuters

Saudi oil giant Aramco reported a stunning 90% surge in second quarter net income and record half year results on Sunday, as high oil prices continue to drive historic windfalls for “Big Oil.” 

Aramco said strong market conditions helped to push its second quarter net income to $48.4 billion, up from $25.5 billion a year earlier. The result easily beat analysts estimates of $46.2 billion.

“Our record second-quarter results reflect increasing demand for our products — particularly as a low-cost producer with one of the lowest upstream carbon intensities in the industry,” Aramco President and CEO Amin Nasser said. 

Aramco said half year net income soared to $87.9 billion, easily outpacing the largest listed oil majors, including Exxonmobil, Chevron and BP and other “Big Oil” companies, which are all benefiting from a commodity price boom.

Oil prices surged above $130 dollars a barrel earlier this year, as the global energy crisis, made worse by supply disruptions stemming from Russia’s invasion of Ukraine, roiled global markets and contributed to decades high inflation.

“While global market volatility and economic uncertainty remain, events during the first half of this year support our view that ongoing investment in our industry is essential — both to help ensure markets remain well supplied and to facilitate an orderly energy transition,” Nasser added.

Aramco said it expects the post-pandemic recovery in oil demand to continue for the rest of the decade, despite what it called “downward economic pressures on short-term global forecasts.”

The blowout results are also a major windfall for the Saudi Arabian government, which relies heavily on its Aramco dividend to fund government expenditure. The Kingdom reported a $21 billion budget surplus in the second quarter. 

Aramco said it would maintain its dividend payout of $18.8 billion in the third quarter, covered by a 53% increase in free cash flow to $34.6 billion. 

Major gains

Aramco is using its major gains to invest in its own production capabilities in both hydrocarbons and renewables, while also paying down debt. 

“We are progressing the largest capital program in our history, and our approach is to invest in the reliable energy and petrochemicals that the world needs, while developing lower-carbon solutions that can contribute to the broader energy transition,” the company said.

Saudi Arabia, alongside its OPEC+ counterparts, has been under increasing pressure to boost oil output to ease high prices. Company executives said limited global spare production capacity was a major concern for the global pricing outlook.

Aramco said it achieved total hydrocarbon production of 13.6 million barrels of oil equivalent per day in the second quarter, and was working to boost capacity from 12 million barrels of oil per day to 13 million barrels of oil per day by 2027.

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Focus turns to U.S. inflation, Fed outlook

LONDON — European markets were slightly lower on Tuesday as focus in global markets turns to a key U.S. inflation print due Wednesday.

The pan-European Stoxx 600 slipped 0.3% by mid-morning, with travel and leisure stocks shedding 1.2% to lead losses while insurance stocks gained 0.5%.

Investors are trying to assess the potential pace of the U.S. Federal Reserve’s monetary policy tightening efforts. A surprisingly strong U.S. jobs report last week seemed to reduce the likelihood of a recession, allowing the central bank the capacity for more aggressive rate hikes as it looks to rein in inflation.

Wednesday’s July consumer price index is expected to offer some clarity on the path of interest rate hikes.

Shares in Asia-Pacific were mixed on Tuesday as markets continued to digest last week’s stellar payrolls report and assess the trajectory of monetary policy, with Japan’s Nikkei 225 the weakest performer in the region.

U.S. stock futures rose slightly in early premarket trade on Tuesday as Wall Street reacted to some significant earnings report, in particular weaker-than-expected revenue from Nvidia and several chipmakers.

Earnings also remain a key driver of individual share price movement in Europe, with Abrdn, IHG, L&G, Continental and Munich Re among those reporting before the bell on Tuesday.

Swiss travel retailer Dufry gained 3.3% in early trade to lead the Stoxx 600, while workspace company IWG plunged 11% to the bottom of the index after their respective first-half earnings.

On the data front, U.K. retail sales rose 1.6% in July, buoyed by a heatwave and sales of hot-weather clothing, picnic items and electric fans, according to a report from the British Retail Consortium.

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Microsoft Xbox, Sony PlayStation, Nintendo: Video game earnings round-up

A gamer plays on Sony’s Playstation 5 console at his home in Seoul.

Yelim Lee | AFP via Getty Images

The giants of the video game world saw their sales slide in the second quarter, as initial tailwinds from the Covid pandemic faded.

In the three months ended June, Microsoft, Sony and Nintendo each posted disappointing results in their respective gaming businesses.

The numbers reflect a broader contraction in consumer spending on video games. Americans spent $12.4 billion on games in the second quarter, according to market research firm NPD, down 13% year-on-year.

Several factors are to blame, not least the relaxing of pandemic restrictions, with people eschewing home entertainment options in favor of outdoor activities.

Ongoing shortages of semiconductor equipment haven’t helped either.

“The growth of the overall game market has recently decelerated as opportunities have increased for users to get out of [the] home as Covid-19 infections have subsided in key markets,” Hiroki Totoki, Sony’s chief financial officer, said on the company’s earnings call last month.

Sony reported a 2% decline in sales year-on-year at its gaming unit in the June quarter, while operating profits plunged almost 37%. The company also issued a gloomy outlook, cutting its full-year profit forecast by 16%.

The main reason? People are spending less time playing games and more time going out.

Total gameplay time among the PlayStation player base was down 15%, much lower than initially forecast by the company.

‘Covid effect’ disappears

Gaming was one of the big beneficiaries of the Covid pandemic, with publishers experiencing bumper growth as consumers spent more time indoors.

But with consumers’ spending habits shifting post-lockdown, and inflation running hot, the industry is taking a hit.

At Microsoft, overall gaming revenues sank 7% year-on-year. Sales of the company’s Xbox consoles declined 11%, while gaming content and services revenues dipped 6%.

The declines were “driven by lower engagement hours and monetization in third-party and first-party content,” Amy Hood, chief financial officer of Microsoft, said on the firm’s earnings call last week.

Activision Blizzard, the embattled game publisher being acquired by Microsoft, reported a 70% plunge in net profit and a 29% drop in revenues.

The Call of Duty-maker blamed the slump on weak sales of the latest title in the popular shooter franchise.

Ubisoft, the firm behind Assassin’s Creed, posted a 10% decline in net bookings.

Michael Pachter, managing director at Wedbush Securities, said the disappointing numbers were largely driven by comparisons with “outsized performance” a year ago. In other words, companies couldn’t match the wildly high numbers they posted in 2021.

“Everyone saw record numbers during shelter-in-place, with catalog sales of older titles leading the way,” Pachter told CNBC. “That set up an impossible comparison, and the year-over-year declines were well telegraphed and were expected.”

Electronic Arts was one of the rare companies to defy the gaming contraction, posting a 50% rise in profits and revenue growth of 14%.

Console shortage lingers

A major factor hampering performance in the gaming world is the continued scramble for key console hardware.

Nintendo saw a 15% slide in operating profit in the April-June period. The company behind the Super Mario franchise blamed the weak performance on the global semiconductor shortage, which meant it was unable to produce and sell as many Switch consoles as it wanted.

Nintendo sold 3.43 million units of its portable Switch console in the quarter, down 23% year-over-year, while software sales slumped 8.6%, to 41.4 million units.

Sony sold 2.4 million PlayStation 5 consoles in the quarter, slightly higher than the 2.3 million units sold in the same period a year ago. The firm is hoping a lifting of lockdown measures in the crucial manufacturing hub of Shanghai and a holiday season sales drive will help it reach its target of shipping 18 million PS5 units in 2022.

“The slow rollout of hardware is one of the biggest contributors,” Pachter said. “New hardware purchasers tend to buy a lot of software, and PlayStation and Switch sales have been supply constrained.”

The remote-working trend has also caused delays for new game releases, limiting the pool of games people want to buy. Microsoft, for example, delayed the release of its highly-anticipated sci-fi epic Starfield until early 2023, while Ubisoft pushed back the launch of a game based on the Avatar film franchise.

More pain to come?

Spiraling prices for everything from gas to groceries and fears of an impending recession could spell further trouble for the sector.

The global games and services market is forecast to contract 1.2% year-on-year to $188 billion in 2022, the first annual decline in over a decade, according to data from Ampere Analysis.

“The cost of living squeeze means added pressure on household budgets,” Piers Harding-Rolls, research director at Ampere, told CNBC.

“The impact is likely to be felt on high ticket items which could include console hardware, although limited availability and pent up demand especially for the higher-end consoles means impact will be minimal at present.

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Harding-Rolls added: “There could also be some additional pressure on high in-game spending as gamers adjust their discretionary spending.”

Some firms are betting a push toward subscription products will help counter the effect of waning game sales.

According to Microsoft, growth in the company’s Xbox Game Pass membership plan helped cushion the blow of softer demand for consoles and games. While Microsoft didn’t give an updated subscriber number for the service, it had over 25 million subscribers in total as of January.

Sony recently revamped its PS Plus subscription service, and is hoping the move will help combat the recent tail-off in gaming activity. PS Plus subscribers totaled 47.3 million, according to Sony’s quarterly report, slightly down from the previous quarter.

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European markets open to close; Bank of England interest rate decision

LONDON — European stocks were slightly higher on Thursday, building on gains made in the previous session.

The pan-European Stoxx 600 was up 0.3% in early trade. Retail stocks were the standout performers, gaining 2.5%, while telecoms fell 0.4%.

The cautiously positive start for European stocks came after gains on Wednesday on the back of strong U.S. economic data that tamed investor fears of a looming recession. The ISM non-manufacturing purchasing managers index showed a surprise rebound in July also prompting U.S. stocks to climb.

Such a move would take borrowing costs to 1.75% as the central bank battles soaring inflation and would be the first half-point hike since it was made independent from the British government in 1997. The anticipated hike comes as U.K. inflation hit a new 40-year high of 9.4% in June.

Elsewhere overnight, Asia-Pacific shares traded higher on Thursday following the rally on Wall Street and as investors moved on from the tensions over U.S. House Speaker Nancy Pelosi’s controversial visit to Taiwan.

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Meanwhile, U.S. stock futures were roughly flat on Thursday morning after the major averages snapped a two-day slide in the previous regular trading session.

Earnings before the bell came from Credit Agricole, Adidas, Bayer, Lufthansa, Merck, Zalando, Rolls-Royce, Next, Glencore and Adecco Group on Thursday.

Lufthansa shares climbed 6% to lead the Stoxx 600 after the German posted a smaller-than-expected quarterly loss.

At the bottom of the European blue chip index, Danish medical device company Ambu plunged 14% after cutting its margin forecast and announcing that it would lay off around 200 employees.

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