Category: Company News

  • Alleged Saudi ballistic missile site suggests push for greater independence from Washington

    Satellite imagery reportedly revealing a ballistic missile facility deep in the Saudi desert spotlights Riyadh’s increased investment in its independent warfighting capabilities, U.S. defense experts say.

    This, they believe, indicates a growing desire by the longtime ally to be able to take offensive measures without the approval of its main weapons sponsors in Washington.

    “There’s an arms race underway,” Michael Rubin, a former Pentagon official and Arab affairs expert at the American Enterprise Institute, told CNBC. “Whiplash policy changes in Washington have had their impact on Riyadh: Saudi authorities are no longer going to be constrained by White House whispers. The Saudis are demonstrating that they can take matters into their own hands.”

    Images analyzed by missile defense experts at the Middlebury Institute of International Studies in Monterey, California, and first reported by The Washington Post, appear to show the testing and possible manufacturing of ballistic missiles. These can carry nuclear warheads to targets thousands of miles from their launch point. International powers have sanctioned Iran for its own frequent testing of the weapons.

    As America’s top weapons buyer and foremost security partner in the Arab world, one might question why Riyadh would need to invest in its own ballistic missile facility. It already has a fleet of top-of-the-line F-15 fighter jets, Tornados and Typhoons, giving it an airpower advantage over regional arch-rival Iran, the majority of whose air force hasn’t been updated since the 1970s.

    The catch is that Saudi Arabia’s air force still needs maintenance and logistics support from the jets’ countries of origin — the U.S. and the U.K. — and that support could be terminated if the aircraft is used in an unapproved manner. Homegrown missiles, meanwhile, have no such limit. Furthermore, missiles don’t need pilots who require training and risk being shot down and tortured by the enemy.

    Riyadh has long operated its missile program outside the realm of U.S. approval and without U.S. assistance, starting with its small purchase of Chinese D3-F Silkworm ballistic missiles in 1988. The program is overseen by the kingdom’s secretive Strategic Rocket Forces (SRF), which unlike other military branches, reportedly does not mix with American advisors.

    One former Pentagon official, who requested to remain anonymous due to the sensitivity of the situation, told CNBC that the SRF likely “operates with Chinese input,” adding that “given that Pakistan has close ties with both China and with the Kingdom and has numerous advisors working with Saudi security agencies, I wouldn’t be surprised if there were some Pakistani assistance as well.”

    If true, the links illustrate a longtime Saudi strategy of diversifying its diplomatic and security alliances and highlight a potential shift eastward. Weapons purchases from China, though a tiny fraction of those from the U.S., now feature armed drones — something the U.S. currently won’t sell to the Saudis. And American arms dealers have voiced alarm over Riyadh’s expressed interest in purchasing Russia’s flagship S-400 missile defense system, a cheaper alternative to the U.S.-made THAAD system.

    China’s Ministry of Defense, its foreign ministry and embassy in Riyadh did not immediately respond when asked for comment by CNBC. Chinese Foreign Ministry spokeswoman Hua Chunying responded to the Associated Press last week, saying: “I have never heard of such a thing as China helping Saudi Arabia to build a missile base.” Pakistan’s Ministry of Defense, its foreign ministry and its Saudi embassy also did not immediately respond when contacted by CNBC.

    And at a time when Iran, which the U.S. and Saudi Arabia designate the world’s top state sponsor of terror, has increasingly sophisticated ballistic missile capability thanks to Russia, the investment is “common sense,” some experts say.

    “If the Saudis are developing an indigenous ballistic missile capacity, part of the blame for this should be placed on the JCPOA (Joint Comprehensive Plan of Action) with Iran,” David DesRoches, an associate professor of security studies at the National Defense University in Washington D.C., told CNBC, referencing the multilateral 2015 deal that lifted sanctions on Iran in exchange for limits to its nuclear program.

    In doing this, DesRoches argues, “the West in effect gave Iran absolution for its missile program … Given the plethora of missiles in the Iranian inventory, it is not unlikely that the kingdom sought to match its rival.”

    The kingdom has long asserted its right to self defense, particularly at a time when it’s been subject to missile and other projectile fire from Houthi rebels in neighboring Yemen, where it’s led a bloody offensive since 2015. Weapons experts have confirmed that the missiles fired at Riyadh, Medina and other cities from Yemen in recent years are of Iranian origin.

    In an interview with CNBC’s Hadley Gamble in Riyadh on Monday, Saudi Energy Minister Khalid al-Falih refrained from acknowledging the missile base, but argued that his country should be able to defend itself.

    “I really don’t have any information one way or another, so I can’t confirm or deny,” Al-Falih said in response to a question about the base. “But I would say that Saudi Arabia is today a receiver, unfortunately, of a barrage of ballistic missiles that are being launched at civilian installations … the kingdom needs to look after its own defense, our own interest.”

    The Saudis are also pursuing a nuclear energy program they say will be strictly peaceful. But the plan has faced pushback by many in Congress, particularly following Crown Prince Mohammed bin Salman’s statement last March that “without a doubt if Iran developed a nuclear bomb, we will follow suit as soon as possible.”

    In a report published by the AP last week, missile expert Jeffrey Lewis noted the frequent link between missile development and the pursuit of nuclear weapons, telling the news agency, “I would be a little worried that we’re underestimating the Saudis’ ambitions here.”

    Foreign policy analysts note that this development could further complicate relations between the U.S. and the Saudis, given the already increased anger of many lawmakers over Riyadh’s activities in Yemen and the murder of Saudi journalist Jamal Khashoggi last fall, which has been blamed on Saudi government operatives. But they also warn that any sanctions would likely accelerate the kingdom’s shift eastward.

    One of the many former U.S. government officials wary of Saudi intentions is Bruce Riedel, a 30-year CIA veteran and expert on Gulf affairs.

    “The timing of the construction suggests that Mohammed bin Salman and his father (King Salman) embarked on building this facility very early after he took charge of the Defense Ministry,” he told CNBC in an email Wednesday. “It underscores a willingness to ignore Washington’s interests and policies from the beginning of his rise to power.”

    Could Washington be underestimating Saudi capabilities? The AEI’s Rubin believes so.

    “The history of America in the Middle East is a history of underestimating what regional states are willing to do,” he said. “So, yes: the U.S. underestimates Saudi Arabia.”

  • Dow rises after strong jobs report, posts 6-week winning streak

    The Dow Jones Industrial Average posted slight gains on Friday after the U.S. government released jobs growth data that easily beat expectations.

    The 30-stock Dow rose 39 points as Chevron, Exxon Mobil and Merck all traded higher. The S&P 500 traded just below the flatline, however, as the consumer discretionary sector dropped 1.9 percent. The Nasdaq Composite declined 0.37 percent as Amazon shares fell.

    The U.S. economy added 304,000 jobs in January, according to data released by the Bureau of Labor Statistics. Economists polled by Refinitiv expect the U.S. economy to have added 170,000 jobs in January. The report follows a 35-day U.S. government shutdown. It also marks the 100th straight month of jobs growth. Investors had been awaiting the report in search of clues about the state of the economy.

    However, the report also included a sharp downward revision of December’s jobs gains. January’s wages also grew at a much slower-than-expected pace.

    “There were definitely some gives and takes here with this report,” said Bill Northey, senior investment director at U.S. Bank Wealth Management. “Regardless of your perspective, there was something to find in it.”

    Friday’s moves come after the major indexes posted sharp monthly gains for the month of January. Last month’s gains were the biggest for the Dow and S&P 500 since October 2015.

    Wall Street also digested key earnings from companies like Amazon, Merck and Exxon Mobil. On Thursday, Amazon reported better-than-expected earnings and revenue for the fourth quarter. However, the company issued weaker-than-expected revenue guidance for the first quarter and warned about increasing investments. These concerns pushed Amazon shares down by 4 percent.

    Merck, meanwhile, posted a better-than-expected profit and revenue, sending its shares up by 3.5 percent. Exxon Mobil shares rose 3.88 percent after the company reported better-than-expected earnings. Chevron also gained 3.9 percent on a stronger-than-forecast profit.

    “The word I’m using to describe this earnings season is reassuring,” said Kate Warne, investment strategist at Edward Jones. The reaction to the earnings “is very good because it reflects that investors were more worried than the numbers reflected and companies are being rewarded” for posting better-than-expected results.

    So far, more than 45 percent of S&P 500 have reported earnings this season. Of those companies, 68.1 percent have topped analyst expectations, according to FactSet.

    “It’s been pleasantly surprising for us,” said JJ Kinahan, chief market strategist at TD Ameritrade. “We would have expected the tariff situation to weigh a little bit more than what it did, but I think the way that it weighed in was in what was unsaid than what was said. We did not hear any CEOs, so far at least, talk about capex spending. That goes back to the uncertainty around tariffs.”

    Wall Street also kept an eye on trade talks between China and the United States. Both negotiating teams have said they made “important progress.” President Donald Trump also said he would soon meet with Chinese President Xi Jinping to try to reach a comprehensive trade deal. Stocks had taken heart from the possibility of top-level trade talks over the coming weeks, but the upbeat mood soon cooled when the White House insisted it sees March 1 as a hard deadline for a deal.

    The moves Friday come after Wall Street posted its biggest January gain since 1987 in the previous session. Strong earnings and an indication from the Federal Reserve that it will pause rate hikes boosted investor confidence. The S&P 500 ended January up more than 7 percent.

    Gains in January usually translate into a positive year for stocks. Since 1950, the S&P 500 has ended a calendar year higher 87 percent of the time when January ends up being a positive month, according to the Stock Trader’s Almanac.

    —CNBC’s Silvia Amaro and Sam Meredith contributed to this article.

  • Worries about Chinese consumers spending less are 'overdone,' analysts say

    Chinese consumer spending is in better shape than indicated by retail sales data, analysts say, in what could be a positive sign amid a disconcerting slowdown in the world’s second-largest economy.

    Retail sales growth may have faltered in 2018, but experts say that’s only one piece of the puzzle in an increasingly complex consumer landscape.

    China’s retail sales figures are part of an eagerly-awaited set of monthly data that includes readings on industrial production and fixed asset investment.

    In 2018, retail sales growth slowed to 6.9 percent after adjustment for inflation, hit hard by weak auto sales. That compared with an increase of about 9 percent the year before.

    The problem is that investors pay too much attention to that metric, said Christopher Wood, equity strategist at financial firm CLSA, who added that that measure includes purchases of goods but hardly any services.

    “Many investors are looking at the collapsing car sales in China and extrapolating that across all sectors,” Wood told reporters on Jan. 28 in Hong Kong.

    “While that’s understandable from a sentiment standpoint, a broader measure of Chinese consumption just doesn’t look that bad,” he said, citing the consumption expenditure per capita index, which includes both goods and services.

    Growth in that index accelerated last year to 6.2 percent compared to the 5.4 percent increase in 2017.

    Services are an increasingly important part of the equation in China as consumers spend more on healthcare, leisure and travel.

    “Given that services now account for over 50 percent of total consumption, slowing retail sales masked the solid growth in consumer spending on services,” Tianjie He, senior economist at Oxford Economics, said in a January report.

    He cited an increase in spending on healthcare by urban households last year to 15.1 percent from 9 percent in 2017, as an example.

    “The fact that retail sales excluding cars (have) held up well and consumer confidence has also improved indicate that concerns about China’s consumers are largely overdone,” He wrote.

    Authorities have for years aimed to shift China’s economic model to one where expansion is slower but more sustainable. They have also geared the economy toward being driven by private consumption instead of state-led infrastructure investment and exports.

    The transition has been seen as largely working and China is expected this year to overtake the United States — the world’s largest economy — in total retail sales for the first time.

    Frank Tsui, a fund manager at Hong Kong-based investor Value Partners, said the government largely focused on reducing debt in the financial system in the last two years and will be “keen to drive domestic consumption” this year.

    “We actually think the health care sector is looking quite attractive at the moment,” Tsui told CNBC on Jan. 23.

    But not everyone is optimistic about consumer spending. Economists at Japanese financial firm Nomura cited high household debt and growing unemployment for its view that even stimulus in the form of individual income tax cuts won’t help.

    “We see no signs of a sustainable rebound in the near term and maintain our bearish outlook on consumption through 2019,” they said in a report on Jan. 21.

    Investors, however, say it’s only natural that China will go through bumps amid its economic transformation, but no one should lose sight of the bigger picture.

    “More than 60 percent of China’s GDP is now basically value-added services and consumption,” according to Gavin Parry, managing director of Hong Kong-based investment services firm Parry Global Group.

    “So it’s moving very much towards the American model,” Parry told CNBC.

  • India to breach fiscal deficit target this financial year, finance ministry says

    India’s fiscal deficit this financial year would be 3.4 percent of gross domestic product (GDP), slightly higher than the targeted 3.3 percent, the country’s acting finance minister said on Friday while presenting an interim budget.

    “Fiscal deficit has been brought down to 3.4 percent in the revised estimate of 2018/19,” Piyush Goyal told the lower house of parliament as he delivered the Hindu nationalist-led government’s last budget for an election that must be held by May.

    The deficit was widely expected to be higher than targeted due to a combination of revenue shortfalls and increased spending ahead of the election.

  • Farmers win big in India's latest budget

    India’s Hindu nationalist-led government poured extra money into support for farmers and a rural jobs program, delivering on Friday its last budget before a general election due by May with the clear aim of winning over votes.

    Prime Minister Narendra Modi’s ruling alliance is facing discontent over depressed farm incomes and doubts over whether his policies are creating enough jobs.

    The interim budget for 2019/20 allocated 600 billion rupees for a rural jobs program and 190 billion for building of roads in the countryside where two-thirds of Indians live.

    The fiscal deficit in 2018/19 would be 3.4 percent of gross domestic product (GDP), slightly higher than the targeted 3.3 percent, acting finance minister Piyush Goyal told the lower house of parliament.

    Goyal was standing in for Finance Minister Arun Jaitley, who was undergoing medical treatment in the United States.

    The deficit was widely expected to be higher than targeted due to a combination of revenue shortfalls and increased spending ahead of the election. The benchmark 10-year bond yield fell 3 basis points to 7.46 percent once the new fiscal deficit estimate was revealed as investors showed relief that it wasn’t worse.

    “India is solidly back on track and marching towards growth and prosperity,” Goyal said as Modi and lawmakers from the ruling Bharatiya Janata Party thumped their desks in appreciation.

    A report in the Business Standard daily the previous day belied the government bullishness over the economy.

    It reported that the government has been withholding an official survey that showed India’s unemployment rate at its highest in decades.

    The budget, which is interim and is likely to be followed by a full one in July, is expected to project economic growth of around 7.5 percent for the next financial year, while expanding capital spending on railways, roads, ports by 7-8 percent, and estimating an increase in revenue of about 15 percent, officials said.

  • Trump denies in NYT interview that he talked to Roger Stone about WikiLeaks

    U.S. President Donald Trump said he never spoke to his longtime advisor Roger Stone about WikiLeaks and stolen Democratic emails posted by the site, the New York Times reported on Thursday.

    Stone was arrested last week on multiple charges that included lying to Congress about his communications with Trump campaign officials regarding stolen emails published on WikiLeaks during the 2016 presidential election. Stone pleaded not guilty to those charges.

    The arrest was a major development in special counsel Robert Mueller’s ongoing investigation of Russian meddling in that election.

    When asked by the Times if he ever spoke to Stone about WikiLeaks, the president answered: “No, I didn’t. I never did.” He also denied directing anyone to talk to Stone about WikiLeaks.

    Trump also said he did not help Jared Kushner, his son-in-law and senior advisor, to obtain top-secret government clearance.

    NBC News reported last week that Kushner’s clearance application was turned down by security specialists amid concerns about foreign influence over him. However, NBC reported, other more powerful authorities overruled those considerations and eventually granted Kushner clearance.

    The president’s son-in-law has long denied access to sensitive information amid concerns over his relationship with foreign governments.

    Trump’s denials to the Times are noteworthy as there are no widespread claims of his involvement in either the Stone or Kushner cases, political watchers say.

    Read the Times’ story for the full interview.

  • Deutsche Bank swings to first full-year net profit since 2014

    Deutsche Bank posted its first full-year net profit since 2014 on Friday, despite a weak fourth quarter, amid growing merger speculation and a series of uphill struggles.

    The profit number of 341 million euros ($390 million) for 2018 failed to beat market consensus, with a Reuters poll of analysts predicting a figure of 461 million euros. For the fourth-quarter alone, the bank posted as loss of 409 million euros, which also failed to match estimates.

    “Our return to profitability shows that Deutsche Bank is on the right track. Now, our priority is to take the next step. In 2019 we aim not only to save costs but also to make focused investments in growth. We aim to grow profitability substantially through the current year and beyond,” CEO Christian Sewing said in statement.

    Net revenues came in at 25 billion euros for the year and 5.5 billion for the last quarter of 2018, which both narrowly missed estimates in a Reuters poll.

    The German lender has been under immense scrutiny by investors given its prolonged and ongoing troubles. It has been plagued by fines and several failed restructuring attempts. More recently, its headquarters were raided by prosecutors amid a money-laundering investigation.

    James von Moltke, the chief financial officer of Deutsche Bank, told CNBC’s Annette Weisbach that the last quarter was “challenging.”

    “Obviously the market backdrop was very challenging, and we also went through some idiosyncratic, if you like, headlines. In light of that backdrop we are pleased with our performance,” he said.

    “We have been working to stabilize and grow revenues after having executed on the restructuring and reshaping of the business that we did in 2018. The fourth quarter, with the environment that we faced, didn’t turn out to be quarter for that turnaround but it is something we continue to work for look for in 2019.”

    The bank’s ongoing problems and shrinking market capitalization has led to speculation about a potential merger with rival Commerzbank. On Thursday, a Bloomberg report suggested that a merger could happen as early as mid-2019 if efforts to restructure the bank fell short of targets.

    Von Moltke said there was “a lot of speculation out there but we won’t comment on mergers.”

    “We are executing on the plan that we have defined, and as Christian said I think a number of times, we are wholly focused on our own business and on executing the plans we defined,” he added.

    “We control our own fate.”

    Sewing said last year that the bank needs to focus on becoming profitable rather than on a merger or an acquisition. The German government has reiterated its support to Deutsche Bank.

    Peter Altmaier, minister for economic affairs and energy, told CNBC in Davos last week, that the bank has suffered some setbacks but it is still sound.

    “Deutsche Bank … suffered some setbacks in the past, but it is basically sound and it can recover and so the question is what are the details of such strategy. And as we discussed with the CEO and the board and all the people concerned, I trust in Deutsche Bank and I will lend my political support to Deutsche Bank,” Altmaier said.

  • Shaquille O'Neal is bringing his 'Fun House' to Super Bowl weekend

    Basketball legend Shaquille O’Neal has made a name for himself bringing fun and energy wherever he goes.

    He’s now turning that image into a new concept for a Super Bowl party — “Shaq’s Fun House.” It’s his way of re-imagining the cookie-cutter VIP Super Bowl party.

    “You have Carnival, Cirque du Soleil, Waffle House, of course, great music,” said O’Neal. “You put that together, and that’s what you call Shaq’s Fun House.”

    He said his business model has always been this: “If it’s going to change people’s lives and make them happy, that’s what I’m all about.”

    The party kicks off at 9:00 pm on Friday night. Tickets start at $400 and go into the thousands for table service. The event will also make six-figure numbers each from corporate sponsors.

    “For me it’s never been about money,” said O’Neal. “I don’t want to know how much we made.”

    O’Neal said he’s expanding the concept domestically and internationally over the two years. “The Shaq Fun House is a brand and we are going everywhere,” he said. “We’re doing a fun house in Miami and Belgium.”

    For now, he said he’ll know his party is a success if people leave Atlanta this weekend tell all their friends, the best party this week was Shaq’s.

  • Indonesian ride-hailing firm Go-Jek hits big number with latest fundraising effort

    Indonesian ride-hailing company Go-Jek said Friday it had finalized the first closing of its ongoing Series F fundraising efforts.

    Go-Jek’s release did not disclose the amount of fresh funds raised.

    An industry source familiar with the matter told CNBC that Go-Jek raised just more than $1 billion with the first close of the Series F funding round.

    Investors included tech giants Google and Tencent as well as Chinese e-commerce player JD.com and Japan’s Mitsubishi Corporation.

    The company said the proceeds would be used to expand and deepen Go-Jek’s presence in its home market, Indonesia, as well as Singapore, Vietnam and Thailand.

    “We started out with ride-hailing but in a short space of time have become Indonesia’s industry leader across all key verticals including transport, food delivery, mobile payments, logistics, and merchant services,” Nadiem Makarim, CEO of Go-Jek Group, said in a statement.

    “As we expand internationally, we are excited to extend our vision to more countries and at the same time put Indonesia on the map as a regional hub for tech innovation,” he said.

    Go-Jek has a presence in 204 cities and regencies across five countries in Southeast Asia. It has more than 2 million drivers and about 400,000 merchants on its platform.

    Last month, the company made its beta service available to all users in Singapore.

    Go-Jek’s regional expansion puts it in direct competition with Grab, which announced a partnership with video streaming service Hooq earlier this week.

    Grab has also raised funds north of $3 billion since last year as investors jump on board the potentially lucrative digital market in Southeast Asia.

    The region’s internet economy is set to exceed $240 billion by 2025, according to a report from Google and Singapore’s Temasek Holdings.

    Go-Jek said that after the close of the Series F fundraising, its founders would still maintain control over the decision-making process and direction of the company.

  • Another Chinese manufacturing number comes in lower than expected

    A private survey on China’s manufacturing sector showed on Friday that factory activity contracted in January — confirming views that the world’s second-largest economy started the new year on soft footing.

    The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) came in at 48.3 in January, compared to 49.7 in December. Analysts polled by Reuters had expected the Caixin PMI to be 49.5 last month.

    A reading above 50 indicates expansion, while a reading below that level signals contraction.

    The PMI is a survey of businesses about the operating environment. Such data offer a first glimpse into what’s happening in an economy, as they are usually among the first major economic indicators released each month. Investors have been closely watching economic indicators from the world’s second-largest economy for signs of trouble amid domestic headwinds and the ongoing U.S.-China trade dispute.

    The Caixin/Markit measure followed the Thursday release of China’s official manufacturing PMI by the National Bureau of Statistics. The official data came in at 49.5 — higher than 49.3 expected by analysts in a Reuters poll and the 49.4 reported in the previous month.

    Thursday’s soft manufacturing data showed that Beijing would have to step up support for the slowing economy, economists said. Growth in China slowed to 6.6 percent last year — the lowest expansion rate in 28 years.

    Chinese authorities have introduced measures to boost the economy over the past year, but those policies may take time to be effective, economists said. So, economic growth in China could stay weak in the first half of 2019 given both external and domestic challenges, Citi economists wrote in a Thursday note.