Markets Defused aims to give an easy-to-understand and straightforward recap of the day’s most engaging business and stock market news.
- Rivian soars as Volkswagen pledges $5bn of investment
- Carnival Corp stock soared on record cruise bookings
- Microsoft is the next tech giant to face EU sanction
- Chipotle shares will now be more affordable
- Vauxhall-owner Stellantis threatens British exit in EV row
- Businesses face new wave of “The Great Resignation”
- UK banks cut mortgage rates ahead of election
- Eli Lilly and OpenAI team up to fight drug-resistant bacteria
- Pool Corp profit warning pours cold water on consumer outlook
Rivian soars as Volkswagen pledges $5bn of investment
Amazon-backed elective vehicle firm Rivian Automotive Inc (NASDAQ:RIVN) saw its shares soar on news of a new $5 billion partnership with German car maker Volkswagen.
VW will invest up to $5 billion, starting with an initial $1 billion injection into a new joint venture.
This new partnership aims to develop shared electric vehicle (EV) architecture and software.
It is seen as a boost for Rivian’s development of its R2 SUVs, which are slated to roll out by 2026.
The deal will see Rivian license its existing intellectual property to the VW venture, and it is expected to accelerate the German group’s development of ‘software-defined vehicles’ (SDVs).
Carnival stock soared on record cruise bookings
Carnival Corp (NYSE:CCL) beat market expectations for its second-quarter, as the cruise operator reported a “surprise” profit.
At $5.78 billion, revenue for the quarter exceeded Wall Street forecasts.
The company also reported adjusted earnings per share of $0.11, versus a projected narrow loss of $0.01 per share.
Net income rose by nearly $500 million, and operating income was up nearly fivefold to $560 million.
Carnival highlighted higher ticket prices, higher onboard spending, and what it described as strategic improvements in commercial operations.
Pointing to strong demand, it now expects adjusted earnings per share of $1.15 for the third quarter, and $1.18 for the full year 2024.
Customer deposits hit an all-time high of $8.3 billion, comfortably above it prior record by $1.1 billion, and, said its cumulative booked position for the rest of 2024 and 2025 was ‘the best on record’ in terms of price and occupancy rate.
"We have made incredible strides in improving our commercial operations, strategically reallocating our portfolio composition and formulating growth plans,” chief executive Josh Weinstein said in a statement.
“We closed yet another quarter delivering records, this time across revenues, operating income, customer deposits and booking levels, exceeding our guidance on every measure."
Weinstein added: "Based on continued strong demand trends, we are taking up our expectations for the year with net yields now forecasted to top ten percent and propelling us towards double-digit returns on invested capital.”
In New York, Carnival stock was up nearly 9%, closing Tuesday’s session at $17.82.
Microsoft is the next tech giant to face EU sanction
Microsoft Corp (NASDAQ:MSFT) is the next American tech giant under the scrutiny of European competition laws, after Apple was targeted yesterday.
The European Union alleged a breach of its antitrust rules, due to the “bundling” of its Teams messaging and videoconferencing app along with its established Office 365 and Microsoft 365 software packages.
The European Commission, the EU's executive arm, claims that bundling restricted competition by giving Teams an unfair advantage over rival messaging services like Slack and Alfaview.
It followed an investigation, that began last July, after complaints from Salesforce-owned Slack Technologies and Germany-headquartered Alfaview.
Microsoft opted to ‘unbundle’ Teams from its Office software in 2023, but, the European Commission found the move to be insufficient.
The Commission said its preliminary findings indicated that Microsoft might have given Teams a distribution advantage by not offering customers a choice on whether to include Teams with their software subscriptions.
Additionally, it cited limitations on interoperability between Microsoft’s services as exacerbating the issue.
Microsoft’s Vice-Chair and President, Brad Smith, has acknowledged the Commission’s concerns and stated that the company would work to address the additional issues raised.
If found guilty, Microsoft could face a large fine.
Yesterday, separately, the EU charged Apple with a breach of new European competition rules.
Chipotle shares will now be more affordable
Chipotle Mexican Grill Inc (NYSE:CMG) tonight completes changes to make its shares more accessible to retail investors.
After Tuesday’s close, Chipotle’s equity undergoes a 50-for-1 stock split.
It means that tomorrow the share price will be in the mid-$60s, rather than trading at the $3,283 mark.
The underlying value of shareholdings will not be impacted.
Shareholders will receive 50 newly priced shares for each share they currently hold.
Not only will it make the shares more accessible for investors, it also makes it easier for the company to reward with share-base incentives.
"With this historic decision, we'll be better able to reward our team members and empower them to have ownership in our company,” chief financial officer Jack Hartung said in a statement.
Vauxhall-owner Stellantis threatens British exit in EV row
Vauxhall, Peugeot, and Citroën owner Stellantis NV (NYSE:STLA, EPA:STLA) has warned that it may halt car manufacturing in the UK amid electrification pressures.
Maria Grazia Davino, UK managing director for Stellantis, told an industry conference on Tuesday that the carmaker will decide on the viability of its Luton and Ellesmere Port plants within a year.
The problem, according to Stellantis, is that there’s insufficient demand for EVs for it to meet stringent Government-mandated sales quotas – which will require a specified percentage of all new car sales to be EVs.
Davino called on the British government to do more to support and incentivize EV adoption in the UK, proposing reduced VAT on EV and new government support for improving the country’s charging infrastructure.
Stellantis has invested substantially in UK facilities to produce electric vehicles, with the Ellesmere Port plant going ‘electric-only’ in 2023, whilst the plant in Luton is supposed to begin producing electric vans in 2025.
But, the company would face government fines if it fails to meet mandated EV sales targets, regardless of the market demand.
Stellantis chief executive Carlos Tavares has previously described the UK policy as being too aggressive compared to the European Union, where a mix of hybrids and EVs can be used to meet targets.
Just over a week before a general election, in which the Labour party is expected to win, the carmaker has called for government action to prevent potential job losses and ensure the continued operation of its UK plants.
Businesses face new wave of the “Great Resignation”
Businesses face a third-wave of the so-called “Great Resignation”, that’s according consultant and accountancy firm PwC.
PwC’s data indicated that nearly a third (28%) of employees expect to change jobs over the next twelve months.
The survey found that 45% of workers have experienced increased workloads over the past twelve months.
Moreover, it claimed that 62% of workers ‘noticed more workplace changes’ this year, compared to the prior year.
"The findings suggest that job satisfaction is no longer enough." PwC UK’s Carol Stubbings said.
Stubbing added that employers would need to invest in both staff and technological platforms to alleviate pressures and retain talent.
"Employees are placing an increased premium on organisations that invest in their skills growth, and so, businesses must prioritise upskilling and employee experience,” PwC’s Pete Brown added.
UK banks have lowered ahead of election and Bank of England decision
HSBC Holdings PLC (LSE:HSBA) has become the latest UK bank to cut mortgage rates, after Barclays and NatWest lead the way last week.
Today, HSBC said its rate cuts would come into effect from Wednesday.
Barclays is offering a five-year fixed-rate mortgage at 4.23% for customers with a deposit of at least 40% – marking a notable reduction versus the current average five-year deal interest rate of 5.53%.
The Bank of England's Monetary Policy Committee, which sets interest rates, is set to meet on 1 August.
Although the last meeting resulted in rates being held, economists noted a significant shift in tone, indicating a possible rate cut in the near future.
Eli Lilly and OpenAI team up to fight drug-resistant bacteria
American drug maker Eli Lilly and Co (NYSE:LLY) is entering a collaboration with OpenAI, using AI to develop new antimicrobials targeting drug-resistant bacteria.
The company announced it will use OpenAI's generative AI capabilities to discover these novel medicines.
Eli Lilly highlighted that antimicrobial resistance (AMR) is a major global health threat, which it said is worsened by misuse and overuse of antimicrobials.
It aims to bring 2 to 4 new antibiotics to patients by 2030 through the AI initiative.
"Our collaboration with OpenAI represents a groundbreaking step forward in the fight against the growing but overlooked threat of antimicrobial resistance," said Diogo Rau, Eli Lilly’s chief information and digital officer.
Brad Lightcap, OpenAI chief operating officer, meanwhile, added: "Advanced AI has the potential to deliver innovative breakthroughs in pharma, and we're committed to working together with industry leaders to deliver tangible benefits for patients."
Pool Corp (NASDAQ:POOL) profit warning pours cold water on consumer outlook
Anyone looking for a novel market indicator may look no further than Pool Corp as they take the temperature of consumers.
Pool Corp (Pool Corp (NASDAQ:POOL)), “the world’s largest distributor of pools and backyard products”, saw its shares plummet on Tuesday as it issued a profit warning, citing “persistently weak demand for new pool construction”, at a time that is typically deemed peak pool selling season.
The company told investors that it now believes new pool construction could be down between 15% and 20% this year, and that pool ‘remodels’ will be down as much as 15%.
Pool Corp’s ‘seasonally significant’ second-quarter revenues would be below market expectations, the company said.
It downgraded its full-year earnings guidance for 2024, by around $2 per share, to $11.04 to $11.44, with group sales ‘trending down around 6.5%’ and are expected to be impacted by a similar amount for the full year.
The company now intends to tighten its belt, whilst focussing on ‘recurring revenue’ items such as the supply of chemical treatments and maintenance equipment.
“With more than 60% of our business derived from recurring revenues and generally not impacted by macroeconomic conditions, we are heavily focused on managing controllable expenses and generating free cash flow while providing best-in-class service to all of our customers,” chief executive Peter D. Arvan said in statement.
In New York, Pool Corp stock was down $27.17 or 8.04% changing hands at $310.74 each.