Economy

(Reuters) -Mercedes-Benz will step up cost cuts after earnings halved in the third quarter hit by tepid demand and fierce competition in China, it said on Friday.The luxury carmaker cut its full-year profit margin target twice during the third quarter, joining a growing number of European rivals blaming a weakening Chinese car market for falling profits and margins.Union Investment, which according to LSEG is among the 30 top investors in Mercedes, called on the management to amend its strategy as it sees no market for 2 million luxury cars any longer. “We are clearly in favour of adjusting the strategy and adapting it to the new market conditions and the new competition from China,” said portfolio manager Moritz Kronenberger. Mercedes refuses to participate in the price war in China and prefers to stick to its “value over volume” strategy, hoping that a massive new model rollout will help to revive sales next year. The “value over volume” approach can be successful if demand and capacity are roughly equal, Kronenberger said, adding that currently this is not the case for the automaker. “Chinese demand is currently focused on affordable electric cars. And Mercedes has nothing to offer here,” he said. Mercedes shares were down 1.6% at 1246 GMT, dragging down peers BMW (ETR:BMWG) and Volkswagen (ETR:VOWG_p). The stock has lost around 8% year to date, underperforming Germany’s benchmark DAX index but still faring better than Volkswagen, BMW, and Porsche AG.The pan-European autos index is down 10% year-to-date, the worst-performing sector in Europe this year. PROFITABILITY DROPS Mercedes’ car division’s adjusted return on sales fell to 4.7% in the third quarter from 12.4% last year, its worst profitability since the pandemic, while earnings in the unit more than halved, worse than expected by analysts. “The Q3 results do not meet our ambitions,” CFO Harald Wilhelm said in a statement, adding that the group will step up cost cuts.Wilhelm declined to provide more details about the cost cuts, but warned that “it will be tighter and tougher for sure”.Europe’s biggest automaker, Volkswagen is considering plant closures in Germany for the first time.Stifel analyst Daniel Schwarz noted substantial progress already made by Mercedes in reducing fixed costs since 2019 but there were “fewer low-hanging fruits”, especially when compared to Volkswagen. In 2020, Mercedes launched a plan to reduce costs by 20% between 2019 and 2025, 15-16% of which was already achieved, according to the finance chief. The July-September earnings were hit as Chinese consumers continued to cut back on luxury goods in a weakening economy, which has in particular weighed on Mercedes’s lucrative high-end S-Class model sales in the country. Model revamp costs added to the pressure, especially for new versions of the G-Class SUV, which will hit the market in the next quarter, Mercedes added.In 2024, the company sees car sales slightly below the previous year, and fourth-quarter sales in line with the third quarter. When asked about a potential sale of Mercedes’s 35% stake in Daimler Truck, Wilhelm said he prefers not to rush with it as he sees “great potential” in the truckmaker that should materialise later.The comments boosted Daimler Truck shares by 4%, to the top of Germany’s DAX stock index. CHINA WOES Mercedes-Benz (OTC:MBGAF) CEO Ola Kaellenius has warned that Chinese consumers are extremely cautious about making big purchases, as long-standing economic weakness and a real estate crisis have created considerable uncertainty for consumers.Stifel’s Schwarz said a substantial part of the problem is also waning Chinese preference for German luxury cars in general. Talks between Brussels and Beijing continue over looming tariffs on imports of Chinese EVs into Europe, a major headache for Europe’s China-dependent car heavyweights due to the fears of potential retaliation.Mercedes-Benz, which counts China’s Beijing Automotive Group Co Ltd and Geely Chair Li Shufu as its two top shareholders, has called the tariffs a “mistake”, urging the European Commission to delay their implementation to allow further talks on a deal. ($1 = 0.9240 euros) More

(Reuters) – Centene (NYSE:CNC) beat Wall Street estimates for third-quarter earnings on strength in its commercial health insurance plans and maintained its annual profit forecast, easing investor fears after dour targets from rivals last week. Shares of the health insurer jumped more than 12% to $69.32 in premarket trading on Friday. They fell 16% since last week after rivals Elevance and UnitedHealth (NYSE:UNH) warned of high costs in government-backed insurance plans. Costs for insurers providing Medicaid plans have been elevated after a federal policy that required insurers to keep low-income Americans enrolled in health plans during the COVID-19 pandemic ended last year, and left the insurers with more sick patients. The quarter was “much better than expected”, said Baird analyst Michael Ha, adding that it was a “surprise” after peers reported “unprecedented levels” of Medicaid pressure last week.Costs related to Medicare plans for those aged 65 and older have also been higher, due to an increase in demand for healthcare services as older people catch up on procedures delayed during the pandemic. Centene reported a medical loss ratio — the percentage of premiums spent on medical care — of 89.2% for the quarter ended Sept. 30, compared with analysts’ estimate of 88.03%, according to data compiled by LSEG.For the full year, it expects the ratio, a key metric to track medical costs, between 88.3% and 88.5%. Analysts expect a ratio of 87.93%.Despite estimated higher costs, the company maintained its annual profit forecast of greater than $6.80 per share, compared with analysts’ expectation of $6.73.Investors had been preparing for a potential cut to Centene forecast, said Stephens analyst Scott Fidel. On an adjusted basis, the health insurer earned $1.62 per share in the third quarter, compared with analysts’ average estimate of $1.33. More

A judge ruled that investors who only relied on Barclays share value or listed status could not continue with their claims, and said he hoped this would improve the chances of an early settlement ahead of a planned trial in October 2025.Barclays declined to comment on the ruling.Hundreds of institutional investors are suing after more than 2 billion pounds was wiped off Barclays’ value in 2014, when New York’s attorney general filed a complaint against the lender over a trading system known as “Barclays LX”.The investors say Barclays misled its clients about Barclays LX – a “dark pool” trading venue where orders are not visible to other traders until they are executed – and that the bank did not publish relevant information to shareholders.Barclays settled the New York case in 2016, agreeing to pay a $70 million fine, admit violating securities laws, and to install an independent monitor.Barclays applied in July for more than half of the case – representing some 330 million pounds of its total value – to be thrown out, which Judge Thomas Leech allowed on Friday.The bank’s lawyer Helen Davies argued that it was essential in a shareholder lawsuit that claimants had relied on information published by a listed company.This meant, she argued, that claims by investors who said they relied only on Barclays’ share value or listed status could not continue.Signature Litigation, the law firm representing the claimants, said in a statement: “In our view it is not appropriate for Barclays to seek to shut out such investors from the statutory remedy and it is likely we will be seeking to appeal it (the ruling).” More

Russia’s central bank on Friday raised its key interest rate by 200 basis points to 21%, citing consumer price increases considerably above its forecast and warning of ongoing high inflation risks in the medium term.
The move exceeds the 100 basis-point hike expected by analysts and brings the institution’s benchmark rate to its highest since February 2003, according to Reuters.
The key rate was previously taken up by 100 basis points to 19% in September.

09 June 2024, Russia, Moskau: A guardhouse of the Kremlin (l) and the Foreign Ministry (M, background) stand in the center of the capital. Photo: Ulf Mauder/dpa (Photo by Ulf Mauder/picture alliance via Getty Images)
Picture Alliance | Picture Alliance | Getty Images

Russia’s central bank on Friday raised its key interest rate by 200 basis points to 21%, citing consumer price increases considerably above its forecast and warning of ongoing high inflation risks in the medium term.
The key rate was taken up by 100 basis points to 19% in September.

The Friday move exceeds the 100 basis-point hike expected by analysts and brings the institution’s benchmark rate to its highest since February 2003, according to Reuters. It was last near similar levels in February 2022, when Russia’s policymakers lifted it to 20% to soothe local markets within days of Moscow’s invasion of neighboring Ukraine.
The bank struck a hawkish tone regarding further policy steps on Friday. In a briefing following the decision, Russian Central Bank Governor Elvira Nabiullina said that the institution’s board of directors had considered boosting the benchmark rate above 21% and leave open the possibility of further hikes at the next meeting in December, according to Google-translated comments carried by Russian state news agency Tass.
It noted annual seasonally adjusted inflation hit an average of 9.8% in September, up from 7.5% in August. It now anticipates the print will sit in a 8.0–8.5% range by the end of 2024 — and is running “considerable above” a July forecast of near 6.5-7.0%.
“Over the medium-term horizon, the balance of inflation risks is still significantly tilted to the upside,” the bank said in a statement. “The key risks are associated with persistently high inflation expectations and the upward deviation of the Russian economy from a balanced growth path, as well as with a deterioration in foreign trade conditions.”
The bank anticipates annual inflation will decline to 4.5–5.0% in 2025 and to 4.0% in 2026.

Russia’s economy has been constrained by depressed global prices for its key oil exports and by Western sanctions, which have restricted trade to deplete Moscow’s coffers for the war in Ukraine and contributed to declines in the ruble. The U.S. dollar was up 0.36% against the ruble at 12:52 p.m. London time.
The Russian interest rate hikes — which take place at a time when the European Central Bank and the U.S. Federal Reserve are embarking on steps to ease monetary policy — have raised concerns over a potential stifling of the nation’s economic growth.
The International Monetary Fund forecasts Russia’s inflation will average 7.9% this year, noting in its World Economic Outlook of October that the country’s GDP will decline from 3.6% this year to 1.3% in 2025, “as private consumption and investment slow amid reduced tightness in the labor market and slower wage growth.” More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to receive the newsletter every weekday. Explore all of our newsletters hereGood morning. In your final FirstFT of the week, we’re covering:Large investment funds offload shares to avoid tax troubleThe extreme ads targeting swing votersAnd why peak population maybe coming sooner than you thinkBut we start with partner pay at some of the US’s biggest law firms, which has hit record highs, according to a leading survey.Researchers at recruitment specialists Major, Lindsey & Africa, who surveyed top lawyers at the country’s leading 200 firms, found that partner pay had risen 26 per cent over the past two years to an average of $1.4mn.The boom in pay comes amid the early signs of a revival in mergers and acquisitions activity — including several so-called megadeals — and a sharp increase in litigation.But the MLA survey found that the high rewards were not distributed fairly between male and female partners. Top male lawyers earned almost 30 per cent more than their female counterparts on average, at nearly $1.7mn.While still a significant divide, the gender pay gap has narrowed from 47 per cent reported in MLA’s survey four years ago. The study said the discrepancy was driven in part by the fact that men “significantly outpace women in originations”, meaning they bring more business to their respective firms, and a difference in billing rates. Read more of the survey’s results, including geographical differences in pay.Here’s what else I’m keeping tabs on today and over the weekend:Companies: Consumer brands including Colgate-Palmolive and Sharpie pen maker Newell Brands report earnings. Economic data: Durable goods orders and the University of Michigan’s consumer sentiment index are published. Campaign events: Vice-president Kamala Harris will hold a rally in Houston, Texas, where global pop star Beyoncé is expected to appear. Meanwhile, former president Donald Trump will stage a rally in the swing state of Michigan. Israel-Hamas war: CIA chief Bill Burns and his Mossad counterpart David Barnea renew talks over a potential Gaza peace deal in Doha this weekend. Elections: Georgia holds parliamentary polls tomorrow that could decide whether it tilts towards Russia or the west. Bulgaria, Japan, Lithuania, Uruguay and Uzbekistan also have elections on Sunday.Five more top stories1. Large investment funds run by groups such as Fidelity and T Rowe Price are being forced to offload shares to avoid getting into trouble with US tax authorities. This year’s lopsided stock market rally has pushed them up against strict limits requiring them to maintain diversified portfolios. The stock market rally has driven the S&P 500 and other indices to near-record levels of concentration.2. The European economy is set to fall further behind the US’s by the end of the decade, the IMF warned yesterday. The fund estimated Europe’s annual GDP growth rate for the 10 years until 2029 would fall to just 1.45 per cent, while the US’s is estimated at 2.29 per cent for the same period. Here’s why. 3. The US has approved a huge new lithium mine as part of its strategy to break China’s dominance over the supply chains of critical minerals. The project in Nevada is the first such mine approved by the Biden administration, which has also offered a $700mn loan to help build the project. Read the full story.4. Vladimir Putin appeared to confirm yesterday that North Korean soldiers had been sent to fight in Russia as Ukrainian intelligence officials said troops had arrived in the Kursk region. Their presence has been an open secret since South Korea’s intelligence service released footage of North Korean troops training in Russia’s far east. More details on the Russian president’s remarks.China’s reaction: The troop deployment threatens to destabilise the delicate balance of power on the Korean peninsula, upsetting China.5. Justin Trudeau has announced big cuts to Canada’s immigration programme in response to a growing public backlash over the impact of migration on the cost of living and housing affordability. Trudeau, who trails opposition Conservative party leader Pierre Poilievre by 13 points in the polls, blamed companies for abusing a temporary work scheme for rising housing unaffordability and youth unemployment. How well did you keep up with the news this week? Take our quiz.Today’s big read© FT montage/Erik S Lesser/EPA/ShutterstockThe US election will come down to seven key battleground states, and voters who live in them are being inundated with some of the most sophisticated and targeted advertising in political history. As Kamala Harris and Donald Trump try to win over undecided voters in a tight race, political ads in the swing states — from billboards to text messages — are everywhere, all the time.We’re also reading . . . Climate change: The world is on course for a “catastrophic” temperature rise of more than 3C above pre-industrial levels, according to a new UN report. ‘Bespoke’ banking: Ultra-wealthy clients who can pay for customised care in investments, tax and family governance may not get everything they need. Italian tomatoes: A tomato sauce magnate tells the FT that cheap imports from China’s Xinjiang region have damaged the “dignity” of Italy’s staple red fruit.Israel’s dead fathers: Since last October, families of fallen Israeli soldiers have been offered post-mortem sperm retrieval. FT Magazine explores the process — and its implications.Chart of the dayMethods for predicting the world’s population growth vary and as a result so do the outputs. But, one after another, the projections keep missing — repeatedly underestimating the pace and duration of falls in birth rates. And new research challenges the conventional wisdom of a U-shaped recovery trend, writes chief data reporter John Burn-Murdoch. Take a break from the newsAspen is mostly known as a glamorous ski resort. The exceptional and reliable snow conditions and the challenging and varied terrain guarantee its continued winter-destination appeal; but this is only part of Aspen’s identity, writes Josh Hickey, in this weekend’s HTSI autumn travel special.Prayer flags at the edge of the winter ski area on Aspen Mountain in Colorado More

China’s parliament will hold a highly anticipated meeting Nov. 4 to 8, state media said Friday, according to a CNBC translation.
Last year, the committee’s meeting in late October oversaw a rare increase in China’s fiscal deficit to 3.8%, from 3%.
This parliamentary meeting is a key part of the process, if China once more wants to press ahead with adjusting the national budget or deficit, said Bruce Pang, chief economist and head of research for Greater China at JLL.

A general view shows the skyline over the central business district in Beijing on Feb. 28, 2023.
Jade Gao | Afp | Getty Images

BEIJING — China’s parliament will hold a highly anticipated meeting Nov. 4 to 8, state media said Friday, according to a CNBC translation.
Investors have been awaiting news of the gathering of the standing committee of the National People’s Congress, which is expected to announce details on any fiscal stimulus.

Last year, the committee’s meeting in late October oversaw a rare increase in China’s fiscal deficit to 3.8%, from 3%, which was subsequently reported by state media.
This parliamentary meeting is a key part of the process, if China once more wants to press ahead with adjusting the national budget or deficit, said Bruce Pang, chief economist and head of research for Greater China at JLL.
He pointed out that the last month of Chinese stimulus measures have all underscored the need for more fiscal support.
Earlier this month, China’s Minister of Finance Lan Fo’an told reporters that there was room to increase the deficit and issue more bonds. He indicated at the time that significant changes had to be processed before being announced.
His remarks followed a meeting of top leaders in late September led by Chinese President Xi Jinping, which called for strengthening fiscal and monetary policy.

The People’s Bank of China has cut various rates and extended real estate support policies. Chinese stocks have surged in the weeks since the late-September meetings, with trading turning volatile in the absence of more concrete measures.
Pang said the upcoming parliamentary meeting should confirm how the budget will be adjusted and communicate any potentially planned bond issuance.
Analysts have tempered expectations that large-scale fiscal stimulus would directly pillar consumption, instead noting how struggling local governments would likely get support first. 
China’s economy grew by an annual 4.8% in the first three quarters of the year, slightly slower than the 5% pace observed in the combined first half of the year. Beijing has a target of around 5% economic growth for the whole of 2024. More

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