ГОЛОВНЕ

Amazon.com Inc plans to deliver packages to members of its loyalty club Prime in just one day, instead of two days, part of a spending ramp-up that might curb future profits after a blockbuster first quarter.

Shares rose as much as 2% in after-hours trade on Thursday on the faster shipping announcement for customers around the globe and as Amazon’s first-quarter profit trounced estimates thanks to soaring demand for its cloud and ad services. Amazon will spend $800 million in the second quarter on the goal.

 The announcement adds pressure to rivals Walmart Inc and others already racing to keep pace with the speed and benefits of Amazon’s Prime program.

Amazon’s first-quarter net income more than doubled to $3.6 billion, while analysts were only expecting $2.4 billion, according to IBES data from Refinitiv.

Second-quarter operating income will be as much as $3.6 billion, but analysts had been expecting $4.2 billion, according to FactSet.

 Chief Financial Officer Brian Olsavsky said Amazon was still reaping rewards from prior years of hiring and investments in warehouses and other infrastructure.

“We’re banking the efficiencies of prior investments, continued into Q1,” he said on a call with reporters. “There’ll be times when we have to invest ahead to build out warehouse capacity, but right now we are on a nice path where we are getting the most out of the capacity we have.”

Olsavsky also said earlier that the company would spend more later this year to roll out more benefits to international Prime members.

Investments mean lower profits

The news marks a familiar refrain for the world’s largest online retailer. For years, Amazon has made expensive bets on new technology and programs, like its $13.7 billion purchase of Whole Foods Market in 2017 to become a player in the U.S. grocery business.

 Amazon’s investments had long meant lower profit. However, its steady, often successful marches into new industries have been lucrative to shareholders, including its founder Jeff Bezos, who had become the richest man in the world.

 The luster of these bets still shined brightly on Thursday. The company’s loyal customer base has drawn merchants to sell and increasingly advertise through its site in exchange for fees, helping Amazon transform from a largely low-margin retail business to a more and more lucrative marketplace.

Revenue from seller services jumped 20% to $11.1 billion in the first quarter, while ad and other sales surged 34%  to $2.7 billion, the company said.

Meanwhile, Amazon’s cloud unit kept growing as more enterprises moved data and computing operations to the technology company’s servers. Sales for Amazon Web Services (AWS) rose 41% to $7.7 billion in the first quarter.

More hiring, spending to come

Some analysts noted that these growth figures, while impressive, were lower than what Amazon had posted in prior quarters.

“Amazon delivered slower growth in all key segments,“ (AWS, advertising and e-commerce) “but margins skyrocketed, seemingly driven by less aggressive investment,” said Atlantic Equities analyst James Cordwell.

Amazon suggested that spending indeed was on the way, and with that smaller growth in profit.

‘Lord of the Rings’ prequel

The company has been building warehouses around the world to ensure its edge in delivering goods to customers the fastest. It is spending more on video, from live sports to a planned prequel series to “The Lord of the Rings,” to draw more people to log on to its website, watch, and while they are there, buy socks. Hiring will pick up from the 12 percent increase Amazon posted in the past 12 months, Olsavsky said.

And the company is delving into even less familiar terrain.

It recently announced investments in self-driving and electric car companies, teasing how it thinks these high-tech, capital-intensive businesses could pay dividends potentially in the form of autonomous deliveries in the long run. Amazon has not described in detail its thinking behind the bets.

In China, where the company had long struggled to compete with Alibaba Group Holding Ltd, Amazon said this month it would close warehouses and its domestic marketplace in July. There were silver linings for investors, however.

Amazon’s Olsavsky said the company saw no material impact in India from actions the company took to comply with new regulations there affecting foreign investment in the e-commerce sector, something Amazon had voiced concern about in the past.

Prime signups on rise in India

Prime member signups in India, one of Amazon’s most important growth markets, continue to be rising the fastest in the company’s history.

Bezos, who many regard as a management guru, also settled his closely watched divorce such that he will retain full voting control of his family’s stock, sparing Amazon a boardroom battle. However, his fortune, which has been the largest of any married couple in the world, will be divided.

The company forecast net sales of between $59.5 billion and $63.5 billion for the second quarter, the midpoint of which was below analysts’ average estimate of $62.37 billion, according to IBES data from Refinitiv.
…

The U.S. Trade Representative said on Thursday it has added Pinduoduo.com, China’s third-largest e-commerce platform, to its “notorious markets” list for a proliferation of counterfeit products, as the agency also called out China as a priority to watch for intellectual property rights concerns.

In its annual review of trading partners’ protection of intellectual properties rights and so-called “notorious markets,” the U.S. Trade Representative said 36 countries warranted additional bilateral engagement over these issues. The agency kept China on the list and lifted Saudi Arabia up as a priority.

The release of the report comes as the United States and China are embroiled in negotiations to end a tit-for-tat tariff battle that has roiled supply chains and cost both countries billions. The two countries are due to resume talks in Beijing next week.

USTR also kept Alibaba Group’s taobao.com on the “notorious” list, even though the parent company has “taken some steps” to curb the offer and sale of copyright infringing products, according to the report.

The agency bumped Saudi Arabia up to priority in part due to an illicit service for pirated content called BeoutQ, the report said.

Despite “extensive engagement” in Saudi Arabia by both U.S. government and private stakeholders, treatment of intellectual property rights “continued to deteriorate,” USTR said.

 
…

South Korea’s economy unexpectedly shrank in the first quarter, marking its worst performance since the global financial crisis, as government spending failed to keep up the previous quarter’s strong pace and as companies slashed investment. 

The shock contraction reinforced financial market views that the central bank is likely to make a U-turn on policy, shifting to an easing stance and possibly cutting interest rates to counter declining business confidence and growing external risks.

A worse-than-expected downturn in the memory chips sector hit first quarter capital investment, while slumping exports amid the Sino-U.S. trade dispute erased gains from private consumption, the Bank of Korea said Thursday.

Gross domestic product (GDP) in the first quarter declined a seasonally adjusted 0.3 percent from the previous quarter, the worst contraction since a 3.3 percent drop in late 2008 and sliding from 1 percent growth in October-December, the Bank of Korea said Thursday.

None of the economists surveyed in a Reuters poll had expected growth to contract. The median forecast was for a rise of 0.3 percent.

Government spending

“Government spending failed to keep up the bumper boost of the fourth quarter, especially for construction investment, while a drop in business investment was worse than expected due to a downturn in the chips sector,” a BOK official said, adding there was also a strong base effect after solid fourth-quarter growth.

The grim data came a day after the Moon Jae-in government unveiled a 6.7 trillion won ($5.9 billion) supplementary budget to tackle unprecedented air pollution levels and boost weak exports.

Capital investment tumbled 10.8 percent, the worst reading since 1998, while construction investment inched down 0.1 percent, the BOK said.

Exports fall

Exports fell 2.6 percent quarter-on-quarter, a sharper drop than the 1.5 percent decline in the previous three months.

Private consumption gained by 0.1 percent because of a rise in demands for durable goods.

From a year earlier, Asia’s fourth-largest economy grew 1.8 percent in the January-March quarter, compared with 2.5 percent growth in the poll and 3.1 percent in the final quarter of 2018.
…

Stephen Moore, the economic commentator that U.S. President Donald Trump has said he will nominate to the Federal Reserve Board, is drawing new fire from top Democrats for his comments denigrating, among other targets, women and the Midwest.

But Republicans, whose 53 to 47 majority in the U.S. Senate gives them the final say on whether Moore’s pending nomination is confirmed, have not weighed in since news surfaced this week documenting Moore’s long history of sexist remarks, some of which he says were made jokingly.

As a Fed governor, Moore would have a say on setting interest rates for the world’s biggest economy. Some economists and Democratic lawmakers have questioned his competence, citing his support for tying policy decisions to commodity prices and his fluctuating views on rates. This week though, it is his comments about gender and geography that are drawing criticism.

“What are the implications of a society in which women earn more than men? We don’t really know, but it could be disruptive to family stability,” Moore wrote in one column in 2014.

In 2000, he opined that “women tennis pros don’t really want equal pay for equal work. They want equal pay for inferior work.” The New York Times among others has documented many other instances where he expressed similar viewpoints.

It’s just added evidence that Moore is unfit for the Fed job, vice chair of the joint economic committee Carolyn Maloney told Reuters.

“Those include his reckless tendency to politicize the Fed as well as his bizarre and sexist comments about women in sports that came to light this week,” she said.

Republicans, she said, “should also take note that Moore has said capitalism is more important than democracy. That’s a dangerous comment that further confirms my belief that Moore shouldn’t be allowed on the Fed Board.”

Maloney earlier this month sent a letter urging Republican Senator Mike Crapo and Democratic Senator Sherrod Brown to oppose Moore’s nomination. Crapo and Brown are the chair and vice chair, respectively, of the Senate banking committee, which would be Moore’s first stop in any confirmation hearings.

Senators Elizabeth Warren and Charles Schumer, both Democrats, have also publicly criticized Moore as well as businessman Herman Cain, who withdrew his name from consideration for the Fed this week amid mounting objections.

Cain said he stopped the process because he realized the job would mean a pay cut and would prevent him from pursuing his current business and speaking gigs.

The Senate banking panel’s 13 Republican members, contacted by Reuters about their views on Moore’s suitability for the Fed role after his derisive commentary about women came to light, all either did not respond or declined to comment.

But Brown on Wednesday blasted Moore for comments he made in 2014 calling cities in the Midwest, including Cincinnati, the “armpits of America.” Brown demanded an apology.

“It would be your job to carefully consider monetary and regulatory policies that support communities throughout the country” even those you apparently consider beneath you,” Brown wrote in a letter to Moore. “Based on your bias against communities across the heartland of our country, it’s clear that you lack the judgment to make important decisions in their best interest.”

 
…

Boeing reported lower first-quarter profits Wednesday as the global grounding of its 737 MAX plane following two crashes hit results.

The US aerospace giant reported $2.1 billion in profits, down 13.2 percent from same period a year ago.

Revenues dipped 2.0 percent to $22.9 billion, due to a tumble in commercial plane revenues following the suspension of 737 MAX deliveries.

Boeing also withdrew its full-year profit forecast, citing uncertainty surrounding the 737 MAX.

The aerospace giant has been under scrutiny since the March 10 crash of an Ethiopian Airlines jet, which came on the heels of an October Lion Air crash. Together the crashes claimed 346 lives.

Boeing said it is “making steady progress” on a fix to the jet’s anti-stall system that is thought to be a factor in both accidents.

The company has conducted more than 135 test flights of the fix and is working with global regulators and airlines, it said in a news release.

“Across the company, we are focused on safety, returning the 737 MAX to service, and earning and re-earning the trust and confidence of customers, regulators and the flying public,” said Chief Executive Dennis Muilenburg in a press release.

The company announced earlier this month it was cutting monthly production of the 737 by about 20 percent.

Boeing shares were up 1.3 percent at $379.07 in pre-market trading.
…

China is getting ready to welcome representatives from 150 nations, including senior leaders of 40 countries, to discuss its international infrastructure program at the second Belt and Road Forum, beginning Thursday and running through Saturday in Beijing.

Analysts say it is not merely a conference on infrastructure building, but an attempt by China to display its popularity and power as a political rallying force. This is significant in view of severe criticism by the United States, which has described the Belt and Road Initiative, or BRI, as China’s “vanity project.”

“It is a political show of strength. BRI has assumed the characteristics of a global public good,” said Sourabh Gupta, senior fellow at the Institute for China-America Studies in Washington. “In a sense, conceptually, it is about China slipping itself into American clothing which the U.S. itself has discarded. It is about mainstreaming China as a leader of the global development system.”

China has repeatedly denied it has a political purpose in trying to construct connectivity projects across the world. “The ‘Belt and Road Initiative’ is not a geopolitical tool but a platform for cooperation. We welcome all parties to take part in it,” Chinese State Councilor and Foreign Minister Wang Yi said at a recent press conference.

The forum is expected to see an emphasis on the importance of multilateralism and its criticism of protectionism in business and world affairs. Some observers see this as a veiled attempt by Beijing to build up world opinion against the United States.

Countering US clout

Zhiqun Zhu, chair at the department of international relations at Bucknell University in Pennsylvania, said the meeting will reflect China’s growing clout. “When the U.S. focuses on “America first” under President [Donald] Trump, China is quickly emerging as a leader in the global economy and global governance.”

Political clout comes from success in international affairs, however, and not by merely hosting political theater. Although China has achieved some success in its infrastructure program, it has faced several setbacks, with Sierra Leone, Malaysia and Myanmar canceling or scaling back previously negotiated construction deals.

“A lot of the forum will be an attempt at restoring the Belt and Road brand, which has been tarnished over the past two years,” said Jonathan Hillman, director of the Reconnecting Asia project at the Center for Strategic and International Studies in Washington.

The U.S. has said it will not send a high-level delegation to the forum. It expressed disappointment at Italy’s recent decision to join the BRI. “Secretary Pompeo has very publicly gone to every corner of the world and denigrated China’s overseas development lending and projects-based model,” Gupta said, referring to U.S. Secretary of State Mike Pompeo.

Foreign Minister Wang Yi said no country has a right to stop others from attending the forum. “All countries have the freedom to participate, but they don’t have the right to prevent other countries from taking part,” he said.

Zhiqun Zhu said instead of running a smear campaign, the U.S. should work with China to ensure that investments in BRI projects are more rule-based and transparent.

World opinion

Germany, France, Japan and Australia are expected to send mid-level officials. They have raised serious objections, saying they would like to see BRI become more transparent, environmentally sustainable and offer equal business opportunities to all participating countries.

“At the end of the day, Europe genuinely wants China to grow into the role of a ‘responsible stakeholder;’ but, responsible stakeholder-ship means that China needs to up its game and conform to prevailing international standards in its practices – be it trade, investment or development,” Gupta said.

India, China’s neighbor, is expected to stay away from the forum. It has said the BRI program violates the country’s sovereignty because some of its projects are located in Pakistan-controlled areas that India regards as its own. India was the only major country to stay away from the first meeting of the forum in 2017.

“India’s stand has increased international attention on some of the troubling aspects of the BRI plan,” said Ananth Krishnan, visiting fellow at Brookings India.

“India was the only country to publicly flag issues such as opacity and debt when the first Belt and Road Forum was held in 2017.”

Gupta at the Institute of China-America Studies thinks many of the objections raised against BRI will be sorted out in negotiations between China and different countries.

“A Chinese menu is on offer but it is not pre-set and it is not being force-fed to host countries,” he said. “It is for host countries, though, to impose themselves and set the minimum standards of project integrity – although China would do well to set a reasonably high bar in this regard of its own volition.”
…