Finance

The German lender exceeded consensus expectations among analysts aggregated by Refinitiv of a 960.2 million euro profit.
And vastly improved on the 692 million euro profit for the same period last year.
“With the best half-year profits since 2011, we have proven – once again – that we can deliver growth and rising profits in a challenging environment,” Deutsche Bank CEO Christian Sewing said in a statement.

Deutsche Bank beat market expectations to post an eighth straight quarter of profit on Wednesday, recording a second-quarter net income of 1.046 billion euros ($1.06 billion).
The German lender exceeded consensus expectations among analysts aggregated by Refinitiv of a 960.2 million euro profit, and vastly improved on the 692 million euro profit for the same period last year.

Here are some other highlights for the quarter:

Total revenues stood at 6.6 billion euros, up 7% from 6.2 billion for the same period last year.
Total expenses were 4.87 billion euros, down 3% from 4.998 billion for the second quarter of 2021.
Return on tangible equity was 7.9%, up from 5.5% a year ago.
CET1 capital ratio, a measure of bank solvency, was 13%, up from 12.8% in the first quarter.

“With the best half-year profits since 2011, we have proven – once again – that we can deliver growth and rising profits in a challenging environment,” Deutsche Bank CEO Christian Sewing said in a statement.
“We are particularly pleased with the progress of our Corporate Bank and Private Bank. Thanks to our successful transformation, we’re well on track to deliver sustainable and well-balanced returns through our four strong core businesses.”
Chief Financial Officer James von Moltke also told CNBC on Wednesday that the drivers of profit growth had been strong across the bank’s core businesses.
“That momentum that we talked about last quarter carried through to the second quarter, for sure. Our corporate bank was up 26% year-on-year, driven by not just the interest rate changes but also volume growth, fee income growth,” he said.

“The investment bank performed very well at 11% (growth) and 32% in our FIC (fixed income and currencies) business, so we have been able to navigate these markets, take advantage of the trends.”
Sewing last month dubbed inflation the “biggest poison” for the global economy, and told CNBC that the risk of recession was rising in Germany and further afield.

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China’s property sales will likely drop by about 30% this year — nearly two times worse than their prior forecast, S&P Global Ratings said, citing a growing number of Chinese homebuyers suspending their mortgage payments.
Such a drop would be worse than in 2008 when sales fell by roughly 20%, Esther Liu, director at S&P Global Ratings, said in a phone interview Wednesday.
The latest developments have delayed a recovery in China’s real estate sector to next year from this year, she said.

Most apartments in China are sold before developers finish building them. Pictured here on June 18, 2022, are people selecting apartments at a development in Huai’an, Jiangsu province, near Shanghai.
Future Publishing | Future Publishing | Getty Images

BEIJING — China’s property sales are set to plunge this year by more than they did during the 2008 financial crisis, according to new estimates from S&P Global Ratings.
National property sales will likely drop by about 30% this year — nearly two times worse than their prior forecast, the ratings agency said, citing a growing number of Chinese homebuyers suspending their mortgage payments.

Such a drop would be worse than in 2008 when sales fell by roughly 20%, Esther Liu, director at S&P Global Ratings, said in a phone interview Wednesday.
Since late June, unofficial tallies show a rapid increase in Chinese homebuyers refusing to pay their mortgages across a few hundred uncompleted projects — until developers finish construction on the apartments.
Most homes in China are sold before completion, generating an important source of cash flow for developers. The businesses have struggled to obtain financing in the last two years as Beijing cracked down on their high reliance on debt for growth.
Now, the mortgage strike is damaging market confidence, delaying a recovery of China’s real estate sector to next year rather than this year, Liu said.

If there is a sharp decline in home prices, this could threaten financial stability.

S&P Global

As property sales drop, more developers will likely fall into financial distress, she said, warning the drag could even spread to healthier developers “if the situation is not contained.”

There’s also the potential for social unrest if homebuyers don’t get the apartments they paid for, Liu said.

Limited spillover outside of real estate

Although the number of mortgage strikes increased rapidly within a few weeks, analysts generally don’t expect a systemic financial crisis.
In a separate note Tuesday, S&P estimated the suspended mortgage payments could affect 974 billion yuan ($144.04 billion) of such loans — 2.5% of Chinese mortgage loans, or 0.5% of total loans.
“If there is a sharp decline in home prices, this could threaten financial stability,” the report said. “The government views this as important enough to quickly roll out relief funds to address eroding confidence.”
Chinese policymakers have encouraged banks to support developers and emphasized the need to finish apartment construction. Authorities have generally expressed more support for real estate since mid-March, while maintaining a mantra of “houses are for living in, not speculation.”

“What worries us is the scale of those support is not big enough to save the situation, [which] now turns to [a] worse direction,” Liu said.
However, critically, Liu said her team doesn’t expect a sharp decline in house prices due to local government policy to support prices. Their projection is for a 6% to 7% decline in home prices this year, followed by stabilization.
And while S&P economists estimate about a quarter of China’s GDP is affected directly and indirectly by real estate, only part of that 25% is at a risk level, Liu said, noting the firm doesn’t have specific numbers on the impact of the mortgage strikes on GDP.

A bigger problem to unravel

China’s real estate sector has been intertwined with local governments and land use policy, making the industry’s problems difficult to resolve quickly.
In analysis published Tuesday, Xu Gao, director of the China Chief Economist Forum, pointed out the amount of residential floorspace completed annually has actually not grown on average since 2005, while the amount of land area sold has declined on average during that time.
The contraction stands in contrast with rapid growth in both land area sold and completed residences before 2005, when a new bidding process for land fully took effect, he said. The new bidding process tightened the supply of land and real estate, pushing up housing prices more than speculation did, Xu said.

Read more about China from CNBC Pro

Investors should only consider the best developers among high-yield China property debt, Goldman Sachs said in a report Tuesday. “We see relative value in their lower dollar priced longer duration bonds.”
But overall it’s a story of uncertainty in one of China’s largest sectors.
“To us, the continued stresses in the property sector coupled with the uncertainties related to COVID measures suggest a murkier outlook for China,” wrote credit strategist Kenneth Ho.
A possible scenario he laid out is one in which credit worries remain elevated but without real systemic concerns, creating a negative overhang for investor sentiment on high-yield credit markets.

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Stock futures ticked up in overnight trading as traders await the Federal Reserve’s latest interest rate decision, scheduled to be announced Wednesday afternoon.
Futures on the Dow Jones Industrial Average rose by 66 points, or 0.21%. S&P 500 futures gained 0.55% and Nasdaq 100 futures increased 1.06%. Shares of Enphase Energy gained about 6% after the bell on solid quarterly earnings. Chipotle also added 8% in after-hours trading following its mixed second-quarter earnings release.

Stocks slumped Tuesday as earnings season continued. Walmart cut its earnings forecast, sending other retailers such as Kohl’s, Target, Macy’s, Nordstrom and Ross Stores lower on fears that high inflation has prompted consumers to pull back on discretionary spending.
E-commerce stocks were also down in Tuesday’s session, pulled lower by inflation sentiment and news that Shopify would slash 10% of its workforce. Amazon, Square parent Block and PayPal all fell.
Companies reported mixed earnings, showing how they’re grappling with headwinds such as economic uncertainty, foreign exchange pressures, supply chain disruptions and high inflation. General Motors shares dipped after the auto giant missed Wall Street’s earnings estimates. Coca-Cola, McDonald’s, 3M and General Electric jumped on solid results.
“The stubbornness of inflation could turn out to be a problem,” Dennis Lockhart, an economist and former president of the Federal Reserve Bank of Atlanta, said on CNBC’s “Fast Money” on Tuesday.
There are more major earnings reports to come. On Wednesday, Boeing and Shopify are expected to release their quarterly results before the bell. Qualcomm, Ford and Meta Platforms will report at the end of the day.
Investors are also awaiting a key announcement from the Federal Reserve. The central bank will announce its latest interest rate decision on Wednesday afternooon. Markets widely expect a three-quarter percentage point increase in the benchmark rate.

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A Chipotle Mexican Grill sign is seen in the Park Slope neighborhood in the Brooklyn borough of New York City.
Michael M. Santiago | Getty Images

Check out the companies making headlines in after hours trading.
Alphabet – Shares of Alphabet jumped nearly 3% even after the company reported quarterly earnings that fell short of analysts’ expectations for revenue and earnings.  

Enphase Energy – Enphase gained more than 6% following the company’s quarterly earnings release after the bell. Both earnings per share and revenue for the quarter bested analysts’ estimates for the energy company. In addition, Enphase said it expects third-quarter revenue in a range of $590 million to $630 million, ahead of expectations of $548.8 million.  
Microsoft – Shares of Microsoft gained 5% after the company reported earnings that missed Wall Street’s estimates for both income and revenue, but gave a rosy guidance. Revenue from Azure, and other cloud services at the company, came in lower than the previous quarter.
Texas Instruments – Shares of Texas Instruments jumped about 2% after the company beat earnings expectations. The company’s revenue grew 14% to $5.21 billion in the second quarter compared to a year ago, more than analysts’ estimates of $4.62 billion, according to Refinitiv data.
Chipotle – Shares of Chipotle jumped more than 8% after the company reported mixed earnings. While sales fell, profits improved mostly due to price hikes to offset inflation in food, packaging and labor costs. The chain said another price hike is coming in August.
— CNBC’s Sarah Min contributed reporting

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U.S. stocks fell Tuesday after Walmart cut its earnings forecast, sending other retail shares lower and adding to concern that consumer spending might not be strong enough to keep the U.S. out of a recession.
The Dow Jones Industrial Average fell 228.50 points, or 0.71%, to 31,761.54. The S&P 500 retreated by 1.15% to 3,921.05. The Nasdaq Composite declined about 1.87% to 11,562.57. All of the major averages were still on pace for their best month of 2022.

Walmart cut its quarterly and full-year profit estimates because of rising food inflation. This alarmed investors who deliberated the implications for other retail stocks. The big-box retailer said higher prices are spurring consumers to pull back on general merchandise spending, particularly in apparel.
Walmart plunged 7.6% Tuesday and dragged other retailers with it. Kohl’s and Target dropped 9.1% and 3.6%, respectively. Among apparel companies, Macy’s was among the hardest hit, down 7.2%. Nordstrom and Ross each lost more than 5%, and TJX Companies shed about 4.2%. The SPDR S&P Retail ETF fell nearly 4.2%.
“The most important thing from the Walmart announcement is how inflation is changing what people buy,” said Robert Cantwell, portfolio manager at Upholdings. “Food now makes up a bigger share of individuals’ budgets, but overall spending still generally remains intact.”
The retail turmoil bled into e-commerce stocks. Shopify tumbled about 14.1% after the payments provider announced it’s laying off about 10% of its global workforce, citing a pullback in online spending and saying it misjudged how long the pandemic-fueled e-commerce boom would last. The company will report its earnings Wednesday.
Amazon fell 5.2%. Square parent Block and PayPal, both of which operate major merchant services businesses, dropped roughly 7.1% and 5.7%, respectively.

Inflation has also changed the cost of production for companies like General Motors. Its shares fell 3.4% after the company missed earnings estimates, blaming supply chain disruptions that forced factory shutdowns and led it to ship fewer vehicles than expected.
UPS shares also slid 3.4% after the shipping giant reported declines in its international and supply chain businesses.
On the flip side, Coca-Cola shares rose 1.6% after the beverage giant topped earnings and revenue expectations, citing a sales volume recovery from the pandemic and higher pricing.
Shares of McDonald’s added nearly 2.7% following mixed second-quarter results, in which net sales were hurt in part by the closure of locations in Russia and Ukraine, but international growth elsewhere fueled a rise same-store sales.
Industrial stocks were earnings winners, too. Shares of 3M rose 4.9% after the company beat earnings and revenue estimates and announced plans to spin its health care business into a separate publicly traded company. General Electric posted better-than-expected results, citing recovery in the aviation industry that boosted its jet engine business. Its shares gained 4.6%.
Traders are also bracing for an onslaught of megacap tech earnings and economic data this week, as well as the outcome of the Federal Reserve meeting, that will help Wall Street direct its expectations for the rest of the year.
“There is this moderating of earnings expectations,” said Stephanie Lang, chief investment officer of Homrich Berg. “The overall corporate sentiment seems to be declining, there is a lot of cautionary commentary around inflation, the dollar”
“As the Fed continues on its trajectory with its main goal to weaken demand for goods and services, that will translate into a weaker top line – if they are able to get inflation under control and temper that demand,” she added. “That’s something we would be concerned about for the second half of this year.”
Fed meeting and the market’s expectations
On Tuesday, the Federal Reserve commenced its two-day policy meeting. Traders are widely expecting a three-quarter percentage point hike and will be looking for clues on the future interest rate path and what it could mean for equity market pricing.
“The bottom line is the Fed, no matter how you cut it, is going to quickly move to that restrictive stance that will have a toll on the economy,” Lang said. “It’s going to get there quickly enough, whether it’s an extra 25 basis points next time versus a month later. Within the next six months we’re going to be in a financially restrictive environment.”
Lea la cobertura del mercado de hoy en español aquí.

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Vehicles pass a Walmart store in Torrance, California, on Sunday, May 15, 2022.
Bing Guan | Bloomberg | Getty Images

Check out the companies making headlines in midday trading Tuesday.
Walmart – Shares of Walmart slid 7.6% after the company cut its quarterly and full-year outlook, saying that inflation is shifting consumer spending towards essentials and away from things such as clothing and electronics. The news also dragged other retail stocks such as Target, Kohl’s, Amazon and Costco lower.

Shopify – Shares dropped 14.06% after the e-commerce company said it is laying off about 1,000 employees, or roughly 10% of its workforce. Shopify cited a pullback in online spending after a pandemic boom.
3M–3M jumped 5% after the company posted quarterly earnings that beat Wall Street’s expectations. The company also announced Tuesday that it will spin off its health-care business into its own publicly traded entity.
General Electric – General Electric climbed 4.6 % after the industrial giant posted a beat in quarterly earnings. The company’s quarterly profit and cash flow were higher after a recovery in aviation fueled its jet engine business.
General Motors –The automaker’s stock dropped 3.4% after the company reported second-quarter earnings that missed Wall Street’s estimates. GM was unable to ship nearly 100,000 vehicles by quarter-end due to parts shortages. GM also confirmed that it has secured the battery materials needed to build 1 million EVs a year by 2025.
Coinbase — Coinbase shares dropped 21.08% after Bloomberg News reported that the company is facing a probe from the Securities and Exchange Commission regarding its listings of digital coins. A decline in crypto may also have weighed on the stock, with the price of bitcoin falling more than 4%.

Paramount – The media company dipped 4.74% after Goldman Sachs double downgraded Paramount to sell, citing growing macro headwind. The bank slashed its price target on the stock to $20 a share.
Coca-Cola – Coca-Cola gained 1.64% after the beverage company posted quarterly results that beat Wall Street’s expectations. The company also updated its full-year organic revenue growth numbers, saying it expects growth to be 12% or 13%, up from a previous guidance of 7% or 8%. 
McDonald’s – McDonald’s advanced 2.68% after the fast-food chain posted quarterly earnings that topped analysts estimates, even though revenue can in less than expected. Price hikes and value items drove growth in the U.S., according to the company, as inflation weighed on the quarter.
Roku – Shares of the streaming video stock sank 7.89% after Wolfe Research downgraded Roku to underperform from peer perform. The firm said in a note to clients that inflation and new advertising-supported subscription tiers from Netflix and Disney could hurt Roku.
Whirlpool – Shares of the appliance maker traded 2.19% higher after the company reported earnings per share that beat analyst expectations. Whirlpool posted a profit of $5.97 per share, while analysts polled by Refinitiv expected earnings of $5.24 per share.
— CNBC’s Yun Li, Samantha Subin, Sarah Min, Jesse Pound and Tanaya Macheel contributed reporting

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Property is usually regarded as a good hedge against inflation. Landlords’ ability to increase rents can cushion the blow from rising costs. If inflation is driven by strong economic growth, rents go up, buildings stay full and landlords are assured of rising income. Worries about the economy, however, have turned this strategy on its head. Strained household budgets and stretched corporate balance-sheets could limit tenants’ ability to pay more rent, jeopardising investors’ returns. Moreover, with the cost of debt rising, owners of office towers, hotels, shopping malls and other types of property More

Check out the companies making headlines before the bell:
Walmart (WMT) – Walmart slumped 9.5% in the premarket after cutting its outlook for the current quarter and full year. The retail giant said higher prices for food and fuel are prompting consumers to cut back, and it’s had to cut prices at its stores to reduce excess inventory. Other retail stocks fell during premarket trading in the wake of the Walmart warning, including a 3.6% drop for Amazon (AMZN), 5.2% for Target (TGT) and 2.5% for Home Depot (HD).

General Motors (GM) – The automaker’s stock fell 3.7% in premarket trading after quarterly earnings fell short of estimates, though revenue was better than expected. GM also said it was preparing for an economic slowdown and hiring fewer people.
Polaris (PII) – The recreational vehicle maker’s shares rallied 3.5% in premarket action after its quarterly profit beat Street forecasts, although revenue fell short. Polaris said supply chain issues and inflationary pressures eased during the quarter.
3M (MMM) – 3M jumped 4% in the premarket following a flurry of news, including better-than-expected profit and revenue for the second quarter and the announcement that it would spin off its health care business.
General Electric (GE) – GE added 3.9% in the premarket after reporting much better than expected second-quarter profit and revenue. GE’s results were boosted by a strong recovery in its jet engine business.
Raytheon Technologies (RTX) – The defense contractor reported second-quarter earnings that were better than expected, but revenue was slightly short of Wall Street forecasts. Raytheon said it is dealing with macroeconomic and supply chain challenges, but reaffirmed its full-year outlook. Raytheon fell 3.3% in the premarket.

Unilever (UL) – Unilever gained 2.3% in premarket action after raising its full-year sales forecast. Unilever – the seller of popular consumer brands like Dove Soap and Hellman’s mayonnaise – has been able to successfully raise prices to offset higher costs.
Coinbase (COIN) – Coinbase shares slid 5.2% in premarket trading, following a Bloomberg report saying the cryptocurrency exchange operator is the target of a government probe over the trading of digital assets. The probe is said to focus on whether those digital assets should have been registered as securities.
UBS (UBS) – UBS tumbled 7.5% in the premarket after the Swiss bank reported a lower-than-expected quarterly profit. The bank’s bottom line was hurt by market turmoil which impacted its investment banking and wealth management businesses.
Whirlpool (WHR) – Whirlpool reported a quarterly loss, but its revenue and adjusted profit beat Wall Street forecasts. The overall loss was caused by the appliance maker’s exit from the Russian market. Whirlpool gained 1% in the premarket.

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