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Volvo Cars feels margin pressure from US-China tariff war

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Volvo Cars, owned by China’s Geely, reported higher full-year revenue on Thursday, but said its profit margins had slipped and were expected to remain under pressure this year.

Carmakers have faced rising costs and pricing pressure in some markets due to a trade war between Washington and Beijing in 2018 as well as slower demand from Europe and from China, the biggest autos market.

“For 2019, we see another year of volume growth as we continue to benefit from our strong product program and increased capacity. But we have to be realistic and acknowledge that margins will remain under continued pressure,” Volvo Chief Executive Hakan Samuelsson said in a statement.

Suppliers and automakers have issued new warnings and results misses this year, with Daimler this week reporting a fall in fourth-quarter operating profit.

Volvo said its operating profit increased by 0.9 percent to 14.2 billion Swedish crowns ($1.5 billion) although its margin fell to 5.6 percent from 6.7 percent. This was despite its 2018 revenue rising by 21 percent to 252.7 billion Swedish crowns.

Volvo has been on a growth path under Geely’s umbrella, with five straight years of record sales, aided by its steady push into premium automobiles, pitted it against Daimler’s Mercedes-Benz and its fellow German rival BMW.

The Swedish-based firm postponed plans for a listing last year, citing the adverse impact of the tariff war and an industry downturn, while also taking on the costs of retooling its factories in an effort to limit the negative tariff impact.

Speaking to CNBC’s “Squawk Box Europe” on Thursday, Samuelsson said the slowdown in the Chinese market had not blindsighted the company.

“After many years of constant growth in China (there is) finally some reduction – I think that shouldn’t really be a surprise to anybody,” he said.

“In the European market and the U.S. market we don’t see any clear signs of a downturn so far. We really see that this year will be another year of growth because we have the best profit program ever and of course we have the capacity with new factories. Strategically for us it’s very important to use that and then improve our market share.”

However, Samuelsson added that an IPO was not a part of this year’s growth strategy for Volvo Cars.

“We said it’s an option, and it’s up to our owner, but we decided right now the climate in the market (is) not suitable for an IPO, so we put that on ice – it’s not going to happen this year and we have no plans for that,” he told CNBC.

CNBC’s Chloe Taylor contributed to this report.

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J.P. Morgan earnings Q1 2019

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J.P. Morgan Chase reported record first-quarter profit and revenue that exceeded analysts’ expectations as the bank benefited from the Federal Reserve’s December rate hike.

The company said profit rose 5 percent to $9.18 billion, or $2.65 a share, compared with analysts’ average estimate of $2.35 a share. Revenue also rose 5 percent to $29.9 billion, exceeding estimates by $1.5 billion as net interest income grew 8 percent, thanks to the “impact of higher rates,” J.P. Morgan said Friday.

“We had record revenue and net income, strong performance across each of our major businesses and a more constructive environment,” CEO Jamie Dimon said in a statement. “Even amid some global geopolitical uncertainty, the U.S. economy continues to grow, employment and wages are going up, inflation is moderate, financial markets are healthy and consumer and business confidence remains strong.”

J.P. Morgan, the biggest U.S. bank by assets, is the first major lender to report earnings. The company is closely watched by investors looking for signs of how the industry’s Main Street and Wall Street businesses did in the period.

Bank stocks under-performed the broader market in the first quarter after the Federal Reserve said in March that it was pausing rate hikes for the remainder of the year. The abrupt shift – three months after the Fed signaled two increases for 2019 – roiled bond markets, leading to lower yields on long-term Treasuries than some shorter-term debt. That punished bank stocks, as a so-called inverted yield curve hurts the industry’s profit margins and signals a possible recession on the horizon, which would cause more loan losses.

At J.P. Morgan, led by CEO Jamie Dimon, analysts are watching to see if it can resume its pattern of exceeding analysts’ profit expectations. In the fourth quarter, the bank under delivered for the first time in more than 15 straight quarters.

J.P. Morgan’s trading division is unlikely to help in that department. The bank said in February that quarterly trading revenue was headed for a “high-teens” percentage drop from a year earlier as both equities and fixed income desks struggled amid slower client activity.

Nonetheless, the bank continued making long-term investments in its business. J.P. Morgan said it’s expanding its branch network to cover nearly all of the U.S. population by 2022. It also announced the first cryptocurrency from a major U.S. bank, and pledged $350 million to boost the job prospects of people in under-served communities.

Here’s what Wall Street expected:

Earnings: $2.35 per share, a 0.7% decline from a year earlier, according to Refinitiv.

Revenue: $28.4 billion, a 0.3% decline from a year earlier.

Net Interest Margin: 2.57%, according to FactSet

Trading Revenue: Fixed income $3.64 billion, Equities $1.76 billion

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Disney has a ‘major advantage’ in the streaming war: RBC Capital

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On the subject of competition, the tech expert said there was likely room for both Netflix and Disney in the streaming market.

“I think there’s actually also room in the market for Disney to succeed,” Mahaney said.

Even as Disney laid out its goal of reaching 60 to 90 million subscribers within five years, Netflix is “on track” to having more than 300 million members globally by that point, he said, adding that there’s room for both services to reach those scales.

“We did our survey work here, we think the vast majority of consumers are perfectly willing to sign up for more than one service,” he said. More than 70 percent of respondents in the RBC survey indicated they were willing to sign up for two or more platforms, he added.

“If you’ve got (a) good product out there, especially if people shave back the overall (pay TV) bundle, we think they’ll buy both Netflix and possibly Disney,” Mahaney said.

Beyond Disney’s impending entry into the streaming space, other companies such as NBCUniversal and AT&T have also announced their intentions to launch similar services in the coming months.

— CNBC’s Lora Kolodny contributed to this report.

Disclosure: NBCUniversal is the parent company of CNBC.

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India’s Jet Airways cancels all international flights

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The debt-swamped Indian airline Jet Airways has reportedly canceled all of its international flights on Friday.

According to its own website, flights scheduled to depart today from Delhi to Singapore, London, Amsterdam and Kathmandu have all been axed. Heathrow to Delhi and Mumbai services have also been canceled, according to the London airport’s website.

The airline has run out of cash, forcing pilots to go without salaries for months and causing failed payments to companies that lease aircraft, as well as defaults on other loans.

With lessors going unpaid, the number of planes operating under the Jet Airways name has collapsed. On Thursday local media reported that the airline had grounded ten more planes due to unpaid leasing fees and was now only operating 14 planes for international flights.

Illustrating the point, flight tracking website Flightradar24 has published a tweet showing the steady reduction in international services being offered by Jet Airways over the last 12 months.

Estimates puts the carrier’s debt pile at more than $1 billion and in January it was revealed that it had defaulted on loans, including those to the government-owned State Bank of India (SBI).

In March the airline’s founder, Naresh Goyal, stepped down as chairman, handing majority control to a consortium of Indian lenders led by the SBI.

On Wednesday, the lenders extended a deadline for outside bidders to take a stake of up to 75% in the airline. Initial interest bidders have until the end of today with binding bids wanted in place by the end of April, according to a notice on the SBI Capital Markets website.

Middle East airline Etihad, which holds a 12% share in Jet Airways, has reportedly expressed an interest in upping its stake. Rules dictate that foreign entities can own no more than 49% of an Indian airline.

India’s Aviation Minister, Suresh Prabhu, took to Twitter to say he would “review issues related to Jet Airways” and take “necessary steps to minimise passenger inconvenience and ensure their safety”.

Jet Airways had its first flight in May 1993, operating primarily out of Mumbai. Its latest official figures put the number of employees at more than 17,000.

Domestically, it is now India’s third-largest private airline after IndiGo and Spice Jet, holding a 10% passenger market share during February 2019.

CNBC contacted Jet Airways for comment but had received no reply by the time of publication.



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