Squawk Box Europe Express

U.S. stocks rebound from a tough first half in July, shrugging off inflationary concerns to notch their best monthly performance in more than two years. HSBC reports a 15% drop in first half profit as Europe's biggest bank wrestles with rising credit losses. Demand weakness and Covid curbs hit China's manufacturing sector as factory activity shrinks in July, and EU member states prepare to tighten their belts for a long cold winter, as a voluntary 15% cut in natural gas consumption comes into effect.

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U.S. markets are in the green despite the U.S. economy posting a second consecutive negative quarter. The Biden administration, however, refuses to acknowledge the economy has tipped into recession. In tech news, Apple posts record Q3 revenues with iPhone demand remaining steady despite macro headwinds. Amazon’s AWS unit helps the e-commerce giant to a quarterly revenue beat. Meanwhile, rising interest rates boost Asia-focused UK lender Standard Chartered. Profits are up 19 per cent for the first half and the bank announces a $500m share buyback scheme.

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The U.S. Federal Reserve raises rates by a further 75bps but does not elaborate on forward guidance. Chairman Jerome Powell says the path to that end may “narrow further” but that the U.S. is not in a recession. Equities Stateside rally as downturn fears recede slightly on his comments. Facebook parent Meta posts its first-ever quarterly decline with CEO Mark Zuckerberg citing softer digital ad spending. We also hear from Airbus CEO Guillaume Faury who says the plane maker is cutting its jet forecast due to labour shortages and supply chain bottlenecks.  

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In tech news, Google parent company Alphabet sees revenue growth hit a two-year low following uncertainty about its ad spending business. Microsoft posts a miss on its top and bottom line but investors are buoyed by the company’s positive forecast. The IMF says the global economy is on the cusp of recession. We hear from the fund’s Head of Monetary and Capital Markets department, Tobias Adrian. Plus we have a whole slew of European corporate earnings, including Deutsche Bank, Holcim and Mercedes-Benz.  

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UBS posts a Q2 net profit of $2.1bn but challenges persist as it records $12bn in outflows from its asset management business. Russian gas firm Gazprom has cuts European gas supplies by half, citing maintenance issues. In retail news, Walmart issues its second profit warning in 10 weeks and moves to cut its FY guidance. We’re awaiting a slew of U.S. earnings ahead of an expected rate hike by the Federal Reserve later this week.   

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Social media stocks see a sell-off following Snap’s poor Q2 earnings. U.S. Treasury Secretary Janet Yellen, however, continues to downplay recession fears. In auto news, Volkswagen CEO Herbert Diess is pushed out of the position as a supervisory board seeks to replace him with Porsche CEO Oliver Blume. Uniper shares are down by almost a third following the German government’s agreement to buy a 30 per cent stake in the beleaguered utility. The WHO declares monkeypox as a global health emergency.  

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The ECB raises rates by 50bps – the central bank’s first hike in 11 years, which finally lifts the benchmark rate from negative territory. Italy is once again plunged into political turmoil and faces a snap election, possibly in late September, after the coalition government led by Prime Minister Mario Draghi collapses. President Sergio Mattarella is forced to accept Draghi’s resignation and dissolve parliament. In Germany, beleaguered utility Uniper is closing in on a bailout deal with a decision expected today. The country’s economy minister Robert Habeck accuses Russia of blackmailing Europe over gas. And Wall Street closes in the green but the momentum is short-lived as social media firm Snap misses expectations for the second quarter. 

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The ECB is set for a historic interest rate hike – its first in 11 years – and there is speculation it could be as much as 50bps. We are live in Rome where Prime Minister Mario Draghi is expected to resign following yesterday’s failed call for parliamentary unity. The crisis could prompt early elections this autumn. The Nord Stream 1 pipeline is to resume gas delivery following scheduled summer maintenance. However, the head of Germany’s energy regulator confirms that operations are only at 30 per cent of capacity. Tesla shares are up in extended trade as the electric car maker beats Q2 earnings expectations. CEO Elon Musk says he believes inflation is likely to top out later this year.    

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Wall Street rallies, helping along markets into the green globally as earnings season begins. Netflix manages to stem subscriber losses, losing half the number initially feared. The streaming giant was saw strong numbers in Latin America and Asia. Germany awaits the scheduled re-start of the Nord Stream 1 gas pipeline following maintenance. Gas flows look to be on track following preliminary testing. Also in Germany, trouble utility firm Uniper is close to concluding bailout talks with Berlin which is reportedly seeking a 30 per cent stake in the company. And we are live in Rome ahead of Italian Prime Minister Mario Draghi’s debate with the Senate as the political crisis in the country reaches a crucial juncture which could potentially lead to early elections in September.  

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Russia’s Gazprom has declared ‘force majeure’ on certain natural gas supplies into Europe provoking criticism from German utility Uniper. Apple shares tumble on the news that the tech giant will slow hiring and investment in some units as recession fears weigh. Goldman Sachs and Bank of America beat earnings expectations but both CEOs express concerns over inflation. Japanese conglomerate Softbank will postpone the London listing of microchip producer Arm following the recent political upheaval in the UK.   

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