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Oil major Shell to write down up to $22 billion of assets in Q2

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A detailed view of a Shell gas station sign showing the low price of $1.69 per gallon, the result of the coronavirus (COVID-19) outbreak on March 31, 2020 in Jacksonville, Fl.

David Rosenblum | Icon Sportswire | Getty Images

Oil giant Royal Dutch Shell said on Tuesday it will write down the value of its assets by up to $22 billion in the second quarter, after revising down its long-term outlook for oil and gas prices.

It comes after the energy company announced in mid-April an ambition to reduce greenhouse gas emissions to net zero by 2050.

Shell said in a statement to investors that it had reviewed a significant portion of its business given the impact of the coronavirus pandemic and the “ongoing challenging commodity price environment.”

It said it would take aggregate post-tax impairment charges in the range of $15 billion to $22 billion in the second quarter. 

This included a write-down of between $8 billion-$9 billion in its integrated gas unit, a $4 billion-$6 billion write-down in upstream assets, and a $3 billion-$7 billion write-down in oil products across its refining portfolio.

Shares of the Anglo-Dutch company were over 1% lower during early morning deals.

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Wall Street is under pressure over its lack of diversity

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Protestors and police officers clash for the second morning in a row on July 1, 2020 in New York City following a budget vote. (Photo by David Dee Delgado/Getty Images)

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A global corporate reckoning that began in the United States after the killing of George Floyd has prompted industries long dominated by White males, such as the financial sector, to rethink diversity.

George Floyd was killed by a Minneapolis police officer on May 25, who knelt on Floyd’s neck for 8 minutes and 46 seconds. Floyd was arrested on suspicion of using a counterfeit $20 bill. His death ignited worldwide protests aimed at addressing racial injustice and inequality.  

Wall Street has long been an industry dominated by White males. At Goldman Sachs, just 2.7 percent of executives, senior officials and managers are Black. At Citi, 2 percent of executives and senior managers are Black.

Closing the racial wealth gap

While companies and banks cannot single-handedly solve the systemic and historic racism that has existed in the United States since its founding, an effort is being made to try and give Black Americans a better chance at economic equality.

In addition to the obvious benefit closing the racial wealth gap would mean for affected communities, a 2019 McKinsey report projected doing so could net the U.S. economy between $1.1 trillion and $1.5 trillion by 2028.

“Public companies and private companies have to focus on ‘how can you show your corporate purpose,’ not just to your employees and your clients, but in every society you work,” BlackRock CEO Larry Fink told CNBC’s Hadley Gamble in a World Government Summit panel last week. He added that “purposeful” companies are going to have better long term profitability.

BlackRock has promised 30 percent more Black employees at the firm by 2024. As CEO of the world’s largest asset manager, Fink oversees more than $6 trillion and hires 16,000 people across the globe, only 5 percent of which are Black. Global Infrastructure Partners Chairman Adebayo Ogunlesi told CNBC’s Hadley Gamble that thanks to “prodding” from CEOs like Fink, business is recognizing that it has a leadership role to play in society in areas like economic and racial injustice.

Wall Street wakes up

Under pressure, banks have taken steps to do more to fight racism. Many CEOs released statements and spoke out about the killing of George Floyd, recognizing the deep divisions America faces when it comes to race.

JPMorgan CEO Jamie Dimon released a statement recognizing the “reality” of police brutality, and “coupled with the COVID crisis, highlights the inequities black and other diverse communities have and continue to face every day,” vowing to do more as a firm.

Wells Fargo pledged to double Black leadership over the next 5 years at the bank. According to a memo, only 6 percent of the San Francisco-based bank’s senior leaders are Black.

Bank of America announced a $1 billion, four-year commitment of additional support to help local communities address economic and racial inequality accelerated by Covid-19.

The gender gap

Wall Street doesn’t struggle only with racial diversity. Women are significantly underrepresented in the financial services industry.

Francesca McDonagh, the CEO of the Bank of Ireland, told CNBC the banking sector is “notoriously non-representative” of women.

“There are very few female CEOs of systemically important banks,” she said. “When I look around at opportunities to promote women, I always look hard and fast, but there is a shortage at the senior level.”

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What it means for Hong Kong as a global financial center

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Hong Kong’s status as one of the world’s most prominent financial hubs appears to be under threat. 

Beijing has unanimously passed a new national security law for the territory, which some experts warn has the potential to erode the very structures that grant the region major privileges on the international stage. 

The legislation bans sedition, secession and treason against China, crimes that can mean life in prison.

“China constantly uses national security as a reason for saying, ‘I don’t have to abide by any rules. I can arrest you without any need for explanation,'” said Robert Koepp, founder and principal at  Geoeconomix. 

China’s premier says the law is designed to protect the long-term prosperity of the city, which has been gripped by protests since 2019, but critics worry that China’s move to tighten its hold jeopardizes the freedoms that China guaranteed to Hong Kong for 50 years when the U.K. handed it over in 1997.

“We didn’t expect this full-scale frontal attack,” said Hong Kong legislator Claudia Mo. “Beijing obviously thinks this is going to be a knockout blow for the Hong Kong democracy movement. … This is the end of Hong Kong as we know it.”

Why now?

With the West largely distracted by the global coronavirus pandemic — and superpowers like the U.S. already retrenching under increasingly isolationist policies — experts say the timing of the national security law actually makes a lot of sense for China.

Also at play? A need to shore up support at home. China’s handling of the outbreak in Wuhan drew the wrath not just of the international community but also of some mainland Chinese citizens.

In addition, China’s economy is in bad shape. It took a big hit from Covid-19, but even before that, growth was slowing. 2020 marked the first time in decades the Communist Party opted not to set a growth target for the economy.

Some analysts say Beijing needed a quick fix to repair its image at home. Getting Hong Kong to fall in line is a hugely popular mission among the general population — one that could help distract from other problems. 

Perhaps the biggest factor at play is that China just doesn’t need Hong Kong nearly as much as it used to.

In the 1990s, Hong Kong accounted for 27% of the Chinese economy. Now, it represents less than 3%.

China’s megacities like Shenzhen, Beijing, Shanghai, Chongqing and Guangzhou have seen explosive growth since the ’90s. Instead of having one hub city attracting foreign investment and workers, China now has several, and without the red tape that comes with Hong Kong’s special status.

That means the Chinese government has fewer and fewer incentives to keep Hong Kong happy and economically independent. 

Why Hong Kong still matters

China has been relying less and less on Hong Kong for years now. Shanghai has become a major business hub, attracting multinationals from around the globe. And Shenzhen, a metropolis to the north of Hong Kong, has grown into a massively productive, manufacturing powerhouse that helped turn China into the world’s biggest exporter.

But Hong Kong’s status as one of Asia’s most prominent financial hubs will be hard to shake. The city’s seamless interface with the West, not to mention its massive port, make it a very easy place to do business with global investors. 

For much of its history, Hong Kong has functioned as a key East-West conduit for global finance and trade, thanks in large part to its independent judiciary and regulators that guarantee an ironclad rule of law. 

Although multinational companies now run out of mainland China and Hong Kong, international businesses and investors trust Hong Kong’s legal system. Operating out of mainland China is a trickier proposition with its authoritarian legal system and strict capital controls. 

So, even though Hong Kong doesn’t contribute nearly as much to China’s annual GDP as it once did, it remains China’s lifeline to cash from the West.

Most of the foreign direct investment flowing into and out of China goes through Hong Kong.

Chinese companies also prefer Hong Kong when it comes to raising and borrowing money. Take a look at this chart comparing the amount of cash raised by mainland businesses going public across the major stock exchanges. The Hong Kong exchange dominates. 

The city is just as popular when it comes to helping mainland businesses borrow cash through bonds or loans.

Hong Kong is also home to private banking, fintech and derivatives trading. But perhaps the biggest difference between Beijing and Hong Kong is access to the global currency market. 

China has used Hong Kong’s financial institutions to help prop up its national currency. In June, Chief Executive Carrie Lam unveiled a new proposal to transform the city into a more prominent offshore center for the Chinese yuan, one part of a larger initiative to further integrate the city with the financial markets of mainland China.

Some experts say the city’s greatest advantage is its position as a major offshore funding center for U.S. dollars. 

The Hong Kong dollar has been pegged to the greenback since 1983, which has been key to ensuring financial stability. Investors typically feel safe leaving their cash in Hong Kong and dealing in Hong Kong’s local currency, because it’s easily convertible to U.S. dollars

This is a big part of what propelled Hong Kong to become the premiere financial hub that it is today. And it is, according to analysts, one of its most important contributions to China. 

“What’s changed for Hong Kong over the years is that it is a much smaller part of China’s GDP today than it was 20 years ago,” said Ravi Agrawal, managing editor of Foreign Policy. “But even so, it is still a vital component, in that it provides dollar financing for much of China’s big companies that use Hong Kong for that very fact. So any pressure from the United States could hurt.”

Some China watchers say that American threats to upend Hong Kong’s special privileges might include limiting the city’s access to U.S. dollars — a move that could set off a domino effect, beginning with capital flight and culminating in a currency collapse and huge losses to investors. 

But this outcome is part of the “nuclear scenario” — one that analysts think is highly unlikely.

A financial hub in jeopardy 

Hong Kong’s economic stability was in question even before the announcement of the new national security law.

Hong Kong had already dropped from third to sixth place from September 2019 to March 2020 in a twice-yearly ranking of the world’s global financial centers, overtaken by Tokyo, Shanghai and Singapore — and with Beijing trailing just behind at number seven. 

2019’s pro-democracy protests effectively shut down commerce. No one was going out, shops and restaurants closed early, and tourism took a massive hit. That, paired with an atmosphere of eroding freedom, sent the territory’s economy into a recession in 2019. 

The new legislation, which bars subversion of state power, terrorism activities and foreign interference, has only served to further foment unrest across the territory.

More than 1,300 American businesses operate in Hong Kong, and more than 80% of the U.S. companies in the territory surveyed by the American Chamber of Commerce said they’re concerned about China’s move to enact the new national security law, citing fears over the potential impact on “basic civil liberties.” 

Also at stake are major privileges long afforded to Hong Kong under the 1992 U.S.-Hong Kong Policy Act. Trade between the United States and Hong Kong was about $66 billion in 2019.

The National Australia Bank said in a note on May 28 that the U.S. has opened “the door for possible tariffs on imports from Hong Kong, visa restrictions or asset freezes for top officials.”

The Trump administration has already begun to take action. Secretary of State Mike Pompeo announced Friday new visa restrictions on Chinese officials responsible for restricting freedoms in Hong Kong.

However, the U.S. has the greatest potential to inflict pain if it decides to restrict imports of sensitive technology to Hong Kong-based firms. 

“Hong Kong will become just like another Chinese city,” said Koepp. “For those companies that have interests where data is very important, say finance, say anything related to medicine or business information, business intelligence. Well, a lot of those operations might end up going to a place like Singapore, which is seen as untainted by the threat of Chinese national security laws.”

 

 

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Twitter removes Trump image in tweet for violating copyright policy

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Jaap Arriens | NurPhoto | Getty Images

Twitter has removed an image tweeted by President Donald Trump for violating the company’s copyright policy.

Trump’s tweet showed a picture taken by Damon Winter for the New York Times in 2015. But the president had turned it into a meme with the words: “In reality they’re not after me they’re after you.”

It ends off with: “I’m just in the way” at the bottom. 

The tweet now just shows a “media not displayed” notice after Twitter removed the picture.

“Per our copyright policy, we respond to valid copyright complaints sent to us by a copyright owner or their authorized representatives,” a Twitter spokesperson told CNBC. 

“Twitter responds to copyright complaints submitted under the Digital Millennium Copyright Act (“DMCA”),” the company’s copyright policy says.

The New York Times filed the takedown notice, a company’s spokesperson said. 

Twitter has been cracking down on Trump’s tweets that violates its policies. 

Last month, the president posted a viral doctored video of two kids. Twitter slapped it with a “manipulated media” tag and the video was eventually removed after a copyright claim from one of the child’s parents. 

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