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Morgan Stanley profit beats on wealth management gains, lower expenses

Morgan Stanley reported a drop in quarterly profit but beat analysts' expectations on gains in its wealth-management business and lower expenses. The results capped earnings for big U.S. banks and underscored weakness in Wall Street-focused businesses in a quarter marked by lower market activity due to trade tensions and rising bets of a cut in interest rate. Morgan Stanley is distinct from its competitors in that it gets half of its revenue from wealth management, which acts as a ballast during market fluctuations. Revenue from the wealth management business rose 1.9% to $4.40 billion from a year earlier, and accounted for 43% of total revenue. The business beat its pre-tax margin target at 28.2%. Chief Executive Officer James Gorman has been focusing on the unit to help the bank tide over swings in market-related businesses. Morgan Stanley shares were 1.4% lower in pre-market trading Thursday. Overall, Morgan Stanley's sales and trading revenue fell 12%, with both bond and equity trading seeing a dip. By comparison, main rival Goldman Sachs Group Inc (N:GS) on Tuesday reported a drop in revenue from bond trading but higher equities trading. Morgan Stanley Chief Financial Officer Jonathan Pruzan described the quarter as strong overall, and said that the 14% decrease year over year in equity sales and trading net revenues was due to last year's exceedingly good first six months. "We are No. 1 in the world in (equities sales and trading) business," Pruzan said. "The first half of last year was quite strong - tax cuts, global synchronized growth, all that good stuff." Revenue from investment banking, which includes advising on deals and helping corporations raise money, fell 13%, helping push the bank's total revenue down to $10.2 billion. The bank said earnings attributable to Morgan Stanley fell to $2.20 billion, or $1.23 per share, in the second quarter ended June 30, from $2.44 billion, or $1.30 per share, a year ago. Non-interest expenses fell 2% to $7.34 billion, helped by lower compensation costs. Analysts were looking for a profit of $1.14 per share, according to IBES data from Refinitiv, with revenue of $9.99 billion.

Crude Prices Rise as Iran Says It Seized Foreign Oil Tanker

Oil prices extended gains on Thursday after Iran said it had seized a foreign tanker in the Persian Gulf, pushing geopolitical premiums higher after a brief lull. New York-traded West Texas Intermediate crude futures rose 30 cents, or 0.5%, to $57.08 a barrel by 8:13 AM ET (12:13 GMT), while Brent crude futures, the benchmark for oil prices outside the U.S., gained 48 cents, or 0.8%, to $64.14. Several media reports cited Iranian state TV as saying that Revolutionary Guards forces seized a foreign tanker with 12 crew members accused of smuggling oil. The tanker was reportedly seized in the strait of Hormuz, a key shipping route for oil. Oil prices had been under pressure earlier this week in part from reports that the U.S. and Iran might begin talks soon, ratcheting down the recent tension in the Middle East. Ellen Wald, president of Transversal Consulting and Investing.com contributor, pointed to the fact that the “mere possibility” of negotiations between Washington and Iran had driven U.S. crude down more than 3%. “Overall, this shows that without the Iran tensions, oil prices would be lower, and absent the start of a war, the prices are not likely to increase much based on the Iran situation,” she said. Thursday’s gains in oil were the first after three consecutive sessions of losses due to several bearish factors beyond the Middle East. Contributing to this week’s selloff was the fact that Hurricane Barry passed without causing as much damage as feared, and oil rigs began preparations to restart production. That means they'll be able to contribute again relatively soon to a U.S. market that is already amply supplied: data from the Energy Information Administration showed that, despite a slightly larger-than-expected draw in U.S. crude inventories last week, gasoline and distillate stockpiles surged. In other energy trading, gasoline futures advanced 0.5% to $1.8881 a gallon by 8:15 AM ET (12:15 GMT), while heating oil gained 0.8% to $1.9075 a gallon. Lastly, natural gas futures traded up 0.9% to $2.325 per million British thermal unit.

IMF says regulators must address possible risks from Facebook's Libra

Facebook Inc's planned cryptocurrency, Libra, could help boost financial inclusion, but also raises concerns about consumer protection, data privacy, and potential "backdoor dollarization," the IMF's chief economist said on Wednesday. Gita Gopinath told reporters the International Monetary Fund was flagging risks and concerns about Facebook's plans, and said it was important for regulators to pay close attention to such developments. "It is very important for regulatory agencies in the world to pay close attention to these developments and to make sure that they are not too late in undertaking the right steps," Gopinath said. On Wednesday, members of the U.S. House Financial Services Committee are questioning David Marcus, the Facebook executive overseeing the Libra project. Marcus was grilled on Tuesday by the U.S. Senate Banking Committee over the possible risks posed by Libra to data privacy, consumer protections and money laundering controls. The social media company is seeking to win over Washington after it shocked regulators and lawmakers with its June 18 announcement that it hopes to launch a new digital coin called Libra in 2020. Policymakers and financial watchdogs in the United States and elsewhere fear widespread adoption of the digital currency by Facebook's 2.38 billion users could upend the financial system. Gopinath said the Fund favored expanded financial inclusion, and digital currencies could play a role in that process. But she said there were also important questions about consumer protection, data privacy, the impact on monetary policy and other issues. "If you look particularly at countries that are not reserve currency countries, would this lead to backdoor dollarization?" she said. "All of these questions (and) whether there will be enough checks and balances in place to prevent money laundering ... are very important." Facebook is one of 28 founding members of the Libra Association which will be headquartered in Geneva and which is in talks with Swiss regulatory authorities about a framework.

Amazon’s Prime Day Surpassas Black Friday, Cyber Monday

Prime Day is the new Black Friday if you look at the results for Amazon. The e-commerce giant reported that this year’s two-day shopping extravaganza was bigger than last year’s Black Friday and Cyber Monday combined, with 175 million items sold. The July 15-16 sale was also the biggest event for Amazon devices like Echo Dot, Fire TV Stick and Alexa Voice Remote, the company said. “Members purchased millions of Alexa-enabled devices, received tens of millions of dollars in savings by shopping from Whole Foods Market and bought more than $2 billion of products from independent small and medium-sized businesses,” CEO and Founder Jeff Bezos said in a press release. Amazon shares were offset by news that the European Union has opened an antitrust investigation into its use of merchants’ data. Amazon fell 0.5% in midday trade.

Tech executives head to Capitol Hill for antitrust hearing

Executives from tech giants Apple Inc, Amazon.com Inc, Facebook Inc and Alphabet's Google go before the House Judiciary Committee's antitrust panel Tuesday to discuss competition in online markets. The committee is likely to discuss antitrust probes of the four companies under way at the Justice Department and Federal Trade Commission, as well as allegations that the companies seek to thwart nascent competitors. Democrats, in particular, are expected to press Facebook about a proposed $5 billion settlement between the company and the FTC to resolve allegations that the company violated a 2011 consent agreement by inappropriately sharing information on 87 million users with the now-defunct British political consulting firm Cambridge Analytica. Facebook is likely to note it has increased spending on security and moderating content to keep hate speech and disturbing videos off of the site. Other congressional panels Tuesday will focus on Facebook's plans to bring out a cryptocurrency, the Libra, and allegations that Google is biased against conservatives in search results. The companies are expected to argue that they face plenty of competition and that consumers have alternate choices for search, social media, online purchasing and wireless devices. Witnesses include Google's Adam Cohen, director of economic policy; Nate Sutton, an associate general counsel at Amazon; Matt Perault, head of global policy development at Facebook and Apple's Kyle Andeer, a vice president and chief compliance officer. While the tech companies appear to have few friends on Capitol Hill, there has been some pushback from Republicans against a proposal by Senator Elizabeth Warren, who is running for president, that Amazon, Facebook and Google be forced to divest companies that they purchased previously. "I don't think the goal of antitrust law is to break up a big company just because they're big," said Representative Kelly Armstrong, a Republican from North Dakota, on Fox Television. "I don't ever want to penalize any company for success."

JPMorgan profit beats estimates on strength in consumer banking

JPMorgan Chase & Co reported a better-than-expected quarterly profit on Tuesday as higher interest income and buoyant consumer lending offset lower activity at its trading desks. Even as the world's biggest bank recorded record earnings, there were warning signs that the playing field is beginning to tilt against the financial industry. JPMorgan's net interest margin declined to 2.49% from 2.57% a year ago as deposit rates rose and the rate the bank paid on other borrowings rose. Citigroup similarly reported a decline in net interest margin on Monday, which sent bank stocks lower. Trading volumes have been lower at large U.S. banks as a tit-for-tat tariff war between Beijing and Washington has kept investors on edge. A flattening of the yield curve and rising bets of an interest rate cut have also challenged banks' ability to boost revenues. Average loans at the largest U.S. bank, however, increased 2% on the back of an 8% rise in credit-card loans. The earnings beat was driven by JPMorgan's consumer bank, Chase, which reported credit card loans were up 2%, credit costs were flat and overall income was up 22%. Chief Executive Officer Jamie Dimon remained bullish about the U.S. economy. "We continue to see positive momentum with the U.S. consumer – healthy confidence levels, solid job creation and rising wages – which are reflected in our Consumer & Community Banking results," he said in a statement. Income from consumer and community banking, JPMorgan's largest business, rose 22% to $4.17 billion, offsetting declines across its other main businesses. Total net interest income, the difference between what banks pay on deposits and earn on loans, rose 7% to $14.40 billion. Investors, however, worry that if the U.S. Federal Reserve cuts interest rates in July, it could pressure margins at banks, which have benefited recently from higher rates. Net income climbed 16% to $9.65 billion. Excluding the tax gain, it earned $2.59 per share. Net revenue rose 4% to $29.57 billion. Analysts were expecting earnings of $2.50 per share and revenue of $28.90 billion, according to IBES estimate from Refinitiv. The bank’s return on tangible common equity, a key profit measure for how well it uses shareholder money, rose to 20%, up from 19% in the first quarter and higher than the bank’s 17% target. JPMorgan's results are closely watched by investors looking to gauge the health of the U.S. economy. Among other banks reporting results on Tuesday are Goldman Sachs Group Inc and Wells Fargo & Co.

Gold Prices Edges Higher Despite Boost in Risk Appetite

Gold prices headed higher on Monday as a boost in risk appetite from generally positive economic data was insufficient to derail demand in an environment marked by decreasing yields. Gold futures for August delivery on the Comex division of the New York Mercantile Exchange, gained $1.35, or 0.1%, to $1,413.55 a troy ounce by 9:06 AM ET (13:06 GMT). Even though China registered its worst growth in 27 years during the second quarter, upbeat readings on the country’s industrial production, retail sales and capital spending in June were enough to offer hopes that the world’s second largest economy was stabilizing. The NY Empire State manufacturing index also showed a much-stronger-than-expected bounce in July, although it recovered only half of the ground it lost in June. "The manufacturing sector remains vulnerable, especially if trade talks hit a brick wall," ING chief international economist James Knightley said via Twitter. Despite the positive reaction to the data in global equities on Monday - U.S. futures pointed to new record highs at the open - gold managed to hold its own, continuing to benefit from expectations that interest rates will fall. The Federal Reserve is widely expected to cut interest rates at the end of the month for the first time in a decade, lowering the opportunity cost of holding non-yielding bullion. As expectations for further policy easing across the globe increase, yields have been dropping on most fixed-income products bonds, even those traditionally seen as high-risk in economic downturns. Mohamed El-Erian, chief economist at Allianz, tweeted that “even some high yield (‘junk’) bonds now trade at negative yields -- ie, creditors PAY for the privilege of financing companies with notable default risk." More than $13 trillion of bonds worldwide currently carry negative yields, that is, they yield less than gold in absolute terms. John Reade, chief market strategist at the World Gold Council, suggested that, while gold has essentially been range-bound for the last three weeks, some of its technical factors are improving. Reade said that “the extreme overbought condition saw in June has moderated a lot”, while the “50-day moving average is climbing, making gold look less extended." In other metals trading, silver futures rose 0.4% to $15.293 a troy ounce by 9:07 AM ET (13:07 GMT). Palladium futures advanced 1.5% to $1,565.75 an ounce, while sister metal platinum gained 1.5% to $846.90. In base metals, copper traded up 0.8% to $2.715 a pound.

Citigroup profit beats estimates on gains in consumer lending

Citigroup Inc beat analysts' estimates for quarterly profit on Monday, as a tight lid on costs and strength in consumer lending helped the third-largest U.S. bank counter weakness in its trading business. New York-based Citi is the first major bank to report second-quarter earnings. Wall Street titans JPMorgan Chase & Co, Bank of America Corp and Goldman Sachs Group Inc are scheduled to report later in the week. Citi shares were up 0.8 percent in premarket trading. Bank stocks have been falling in recent weeks amid concerns that their net interest margins, or the difference between what they pay on deposits and earn on loans, have been squeezed by falling interest rates. Citi's interest margin declined slightly to 2.67% from 2.70% a year earlier and 2.72% in the first quarter of 2019. Citi continued to add loans and deposits in the most recent quarter, allaying concerns that a weaker economic outlook was hurting consumers' ability to borrow. Total loans at the third-largest U.S. bank by assets rose 3% to $689 billion, while deposits increased 5% to $1.05 trillion, excluding foreign exchange fluctuations. Trading revenue remained challenged. Fixed-income trading fell 4%, excluding a gain from Citi's investment in Tradeweb, while it declined 9% at its equities business. Executives at leading U.S. banks had warned that trading revenue would be hit by a slump in client activity due to burgeoning trade tensions and uncertainties around Britain's planned exit from the European Union. "We navigated an uncertain environment successfully by executing our strategy, and by showing disciplined expense, credit and risk management," Chief Executive Officer Michael Corbat said in a statement. A key was that the bank was able to make more money from its lending activities during the quarter. Net interest income rose 2%. Net income rose to $4.80 billion, or $1.95 per share, in the second quarter, from $4.50 billion, or $1.63 per share, a year earlier. The quarter included a one-time gain of 12 cents per share related to the investment in electronic trading company TradeWeb (O:TW). Revenue rose 2% to $18.76 billion, while expenses fell 2%. Analysts had expected a profit of $1.80 per share and revenue of $18.50 billion, according to IBES data from Refinitiv. One of the broadest measures of performance improved dramatically as Citi posted a return on tangible common equity of 11.9%. up more than a percentage point from a year earlier.

Airbus pulls anniversary book over fraud probe concerns

Airbus has halted sales of a new book that the planemaker had commissioned for its 50th anniversary to avoid hampering the manufacturer's attempts to win a settlement in a bribery probe, two people familiar with the matter said. The move is the latest sign of tension in Airbus as it nears the climax of a roughly $400 million, four-year internal probe carried out in support of an Anglo-French investigation into the use of intermediaries to win jetliner and other deals. Airbus has already fired more than 100 people over ethics and compliance issues as its probe has progressed. The book, "Airbus: The First 50 Years", written by former New York Times journalist Nicola Clark, charts the rise of Airbus against challenging odds to become a European rival to Boeing and has a chapter focusing on the probe. Sources said Airbus hoped to present its findings to the UK Serious Fraud Office and France's PNF police by the end of the year. By doing so, they said it would seek more leniency under a system of prosecution agreements that allows for heavy fines rather than charges that might bar it from public contracts. The two people said Airbus halted the book's sales because it was concerned its official links to the publication could hamper talks with the authorities or discussions over other litigation as it seeks a fresh start under new management. Airbus confirmed it had decided not to go ahead with the commissioned book, but denied any link to the bribery probe. It declined comment on the progress of the investigation itself. "We continue to co-operate in full with the ongoing investigation," an Airbus spokesman said. "The investigation and the book are two separate topics". Clark told Reuters she was "deeply disappointed with the very belated decision by Airbus to withdraw (the book)". UK-based publisher Urbane Publications declined to comment. The book stems from an unusual initiative launched in 2016 under which Airbus granted Clark unprecedented access and full independence to give an unvarnished account of 50 years of industrial co-operation just as Europe's political unity wavers. It was published on Amazon's Kindle service on May 29, half a century after Airbus was launched at a meeting of Franco-German founders including Roger Beteille, who died last month. The book was quickly withdrawn from online sale and plans to distribute already-printed copies at the Paris Airshow in June were scrapped at the last minute, casting confusion over the company's 50th anniversary celebrations. But copies have been circulating and a review was published by Leeham News, a website covering the aviation industry. Airbus said the version seen by the public was a draft. "The draft wasn't consistent with our ambition for celebrating 50 years of pioneering progress," the Airbus spokesman said. Clark said Airbus had not described the book as a draft before notifying her of the decision to withdraw it.

Ford, VW join forces on electric, autonomous cars

Ford Motor Co and Volkswagen AG joined forces to develop autonomous and electric cars on Friday and said they were also looking at other areas of cooperation, deepening a global alliance to slash development and manufacturing costs. Ford and VW have already started cooperating in the area of commercial vehicles as part of the auto industry's broader effort to redraw production and sales footprints to cope with more stringent regulation and fragmented markets. VW will invest $2.6 billion in Argo AI, Ford's self-driving cars venture, and will buy $500 million worth of Argo shares from Ford, giving the two automakers equal stakes in the startup. Ford also will build an electric car in Europe using VW's MEB electric vehicle platform, the companies said. "Our global alliance is beginning to demonstrate even greater promise, and we are continuing to look at other areas on which we might collaborate," VW's Chief Executive Herbert Diess said on Friday. Ford expects to build more than 600,000 electric vehicles in Europe over six years, sourcing components and the vehicle underpinnings from VW, helping both companies to drive down costs. VW said it had committed $7 billion to its MEB platform, which is expected to underpin 15 million vehicles worldwide from the VW group over the next decade. Analysts at Citi said Ford's licensing of Volkswagen's MEB platform was a "transformational" step for both companies. "It likely provides VW with an unassailable scale advantage," Citi analyst Angus Tweedie said in a note published on July 10. The broader alliance, which covers collaboration beyond joint investments in Argo AI, does not entail cross-ownership between the two companies. Ford created Ford Autonomous Vehicles LLC in 2018, pledging to invest $4 billion until 2023 and has sought outside investors to help share the spiraling cost of developing autonomous vehicles. Volkswagen will contribute its Autonomous Intelligent Driving (AID) company to Argo, which will boost the self-driving unit's employees to 700 from 500.