Bloomberg

(Bloomberg) — US stocks extended gains in a broad-based rally as investors assessed the outlook for earnings amid speculation disappointments may be already priced into markets.

The S&P 500 is poised for its best day in more than three weeks, climbing more than 2%, with all 11 industry groups rising. The tech-heavy Nasdaq 100 outperformed major benchmarks, up 3%, with megacaps Apple Inc. and Alphabet Inc. bouncing back from Monday’s losses ahead of Netflix Inc.’s earnings due later today. Johnson & Johnson gained even as it lowered its earnings and revenue forecast for the year. 

With the potential for earnings disappointments baked into markets, any upside surprises may lead to outsized gains. Investors remain on high alert for signs that high inflation and monetary tightening are squeezing consumers and employment, with allocation to stocks plunging to levels last seen in October 2008 and exposure to cash surged to the highest since 2001, according to the latest Bank of America Corp.’s monthly fund manager survey.

“Earnings, so far, there’s been some caution and there’s been a little bit of dialing down of expectations, but I don’t think the worst-case scenarios are really in play anymore,” Shawn Cruz, head trading strategist at TD Ameritrade, said in an interview. “We’ve heard from the big banks, we’ve heard from IBM, we’ve heard from Johnson & Johnson, we’ve heard from enough companies that have had a big enough footprint that if there is something at the macro level severely impacting these businesses, it would have shown up in a lot of these earnings.”

Also on the earnings front, Hasbro Inc., the largest US toy company, gained after earnings beat analyst estimates, while International Business Machines Corp. fell as the tech company lowered its forecasts for free cash flow. 

In other company news, Twitter Inc. shares gained as a Delaware judge allowed the social media company to fast-track its lawsuit against Elon Musk, with the trial set to take place in October.

The dollar fell against all Group-of-10 peers except the yen. Treasuries traded lower, with the 10-year yield rising back to 3%.

Rapid Dollar Retreat Stirs Debate About Whether Peak Has Passed

Meanwhile, the euro rose to its highest level in about two weeks after Bloomberg News reported the European Central Bank may consider raising interest rates on Thursday by double the quarter-point outlined previously to counter worsening inflation. 

Markets are pricing in about 38 basis points of tightening on Thursday, when the ECB is expected to raise rates for the first time in more than a decade. That reflects about a 50/50 chance of a 50-basis point increase. 

The ECB is under pressure to subdue inflation, but the potential for a Russian gas shutdown could plunge Europe into recession. The European Union is preparing to tell members to cut gas consumption “immediately” to preserve supplies for winter, according to a report. Gazprom PJSC was said to be poised to restart gas exports through the Nord Stream pipeline on Thursday at reduced capacity.

Elsewhere, oil rebounded, with West Texas Intermediate crude rising to $104 a barrel, while a rally in cryptocurrencies took Bitcoin out of a one-month-old trading range, up above $23,000. 

More market commentary:

• “Stocks have been beaten down,” Kristina Hooper, chief global market strategist at Invesco, wrote in a note. “That doesn’t mean we won’t see more downside for some stock markets around the world, especially given that earnings expectations are likely to be adjusted downward. But I believe we are far closer to the bottom than the top.”
• “There is a growing feeling in the market that the gradual and cautious normalization process the ECB started at the end of 2021 has been the wrong decision and that to make up for that slow and late,” wrote Fawad Razaqzada, market analyst at City Index. “Indeed, even until its June meeting, the ECB was pre-committing to a 25-basis point hike in July. But with the broad weakening of the euro helping to import more inflation in the eurozone, the ECB could surprise with a 50 bp hike.”

How far will the Fed go in this hiking cycle? It takes one minute to participate in the confidential MLIV Pulse survey, so please click here to get involved. 

Key events to watch this week:

• Earnings this week include Netflix, Tesla
• US Treasury Secretary Janet Yellen visits South Korea. Tuesday
• Reserve Bank of Australia releases July minutes. Tuesday
• UK Chancellor Nadhim Zahawi and Bank of England Governor Andrew Bailey speak at event. Tuesday
• Bloomberg Crypto Summit in New York. Tuesday
• Bank of Japan, European Central Bank rate decisions. Thursday
• Nord Stream 1 pipeline scheduled to reopen following maintenance. Thursday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 2.6% as of 3:23 p.m. New York time
• The Nasdaq 100 rose 3%
• The Dow Jones Industrial Average rose 2.2%
• The MSCI World index rose 1.9%

Currencies

• The Bloomberg Dollar Spot Index fell 0.5%
• The euro rose 0.8% to $1.0229
• The British pound rose 0.3% to $1.1993
• The Japanese yen was little changed at 138.22 per dollar

Bonds

• The yield on 10-year Treasuries advanced two basis points to 3.01%
• Germany’s 10-year yield advanced six basis points to 1.28%
• Britain’s 10-year yield advanced two basis points to 2.18%

Commodities

• West Texas Intermediate crude rose 1.5% to $104.15 a barrel
• Gold futures were little changed

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(Bloomberg) — Amazon.com Inc. warehouses near New York City, Chicago and Orlando were inspected by federal investigators Monday of as part of a probe into potential worker safety hazards.

Investigators from the Department of Labor’s Occupational Safety and Health Administration visited the sites on referrals from federal prosecutors in Manhattan, said Nicholas Biase, a spokesman for US Attorney Damian Williams.

Amazon for years has been accused of pushing workers to their physical limits, using quotas and firing those that don’t meet them. Amazon founder Jeff Bezos last year pledged to make the company the world’s safest place to work when he handed the role of chief executive officer to Andy Jassy.

Prosecutors had asked members of the public as well as current and former Amazon workers to report workplace safety and injury-related issues at warehouses. Prosecutors also sought information on the company’s failure to report injuries or failing to provide adequate care to workers who hurt themselves, Biase said.

“We’ll of course cooperate with OSHA in their investigation, and we believe it will ultimately show that these concerns are unfounded,” Kelly Nantel, an Amazon spokeswoman, said in a statement.

The inspections were previously reported by ABC News.

(Updates with Amazon response)

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(Bloomberg) — Netflix Inc.’s stock has looked cheap for months and yet buyers discovered to their dismay that it just kept getting cheaper. Now bulls say the video-streaming giant is on the verge of proving that it’s an actual value stock and not a value trap.

The launch of a much-anticipated advertising supported service this year, plus a crackdown on password sharing, could help reverse the company’s shocking subscriber losses and provide a new revenue stream, the thinking goes. 

“All of these factors could help put Netflix back on a lasting multiyear growth trajectory –- and there is a strong likelihood investors will reward that with a higher multiple,” said Pedro Palandrani, director of research at Global X ETFs. 

Investors will have to look past some more bumpy days: The company, which has more than 200 million subscribers, reports second-quarter results after the close Tuesday, and it’s already said it expects to have lost 2 million customers in the period, even with the huge success of the fourth season of sci-fi thriller “Stranger Things.”

The Los Gatos, California-based company’s global market share for streaming originals plummeted to an all-time low in the second quarter, according to Parrot Analytics, as rival services from HBO Max, Apple TV+ and Disney+ steadily gain traction.  

The stock price already reflects plenty of bad news, though, so a better-than-expected quarter might spark a rally: Netflix trades at 2.5 times estimated sales, its lowest level since early 2013 and well below its 10-year average of 5.4 times. In comparison, the Nasdaq 100 Index is priced at 3.6 times forward sales.

Netflix plans to introduce the ad-supported tier by the end of the year after shunning the idea for years. Last week, the company surprised the industry by picking Microsoft Corp. as its technology and sales partner for the ad-supported service. The stock has gained 9.4% since the announcement.

Conservatively, the business may be able to boost quarterly revenue in the US and Canada by $750 million, according to Bloomberg Intelligence analyst Geetha Ranganathan. “Overseas is the bigger opportunity and Netflix’s scale may make it a major global ad player,” she said. 

Meanwhile, Palandrani estimates the ads can bring in $500 million to $625 million in quarterly revenue and Piper Sandler’s Tom Champion is more bullish, seeing a quarterly revenue opportunity of about $1.4 billion.

Netflix has plunged 68% this year, the biggest drop in both the S&P 500 and Nasdaq 100 indexes by wide margins, repeatedly disappointing optimists who thought a turnaround was near. The company faces mounting competition, customers whose finances are getting pinched by rising inflation, the looming probability of a global recession and the end of the pandemic-fueled streaming boom. 

Rivals Walt Disney Co., Paramount Global and Warner Bros. Discovery Inc. also have been hit, losing a quarter of their market value or more over the past three months. However, newer entrants have priced their subscriptions at marked discounts from Netflix to attract users, a sign that Netflix might win some clients with a lower-priced, ad-supported service.

“Disney+ is clear evidence of how effective subsidized plans can be in spurring growth –- Netflix could end up doubling its total subscriber base in 2-3 years,” Palandrani said. 

Tech Chart of the Day 

Meta Platforms Inc. now features in the list of the 15 cheapest stocks in the tech-heavy Nasdaq 100 index. Shares of the Facebook owner have fallen more than 50% this year, erasing $483 billion in market capitalization. The world’s biggest social media company, which is battling to keep growing its user base, trades at 12 times forward earnings, its lowest level as a public company. Meta shares climbed as much as 5.5% Tuesday as the Nasdaq 100 Index rallied 2.9%.

Top Tech Stories

• Apple Inc. is the latest major technology company to rein in hiring and spending plans, adding to the evidence that even Silicon Valley stalwarts are worried about a recession in the coming months.
• A drive in the Senate to quickly pass $52 billion in grants and incentives for US semiconductor manufacturing picked up steam in Congress despite last-minute lobbying for changes.
• International Business Machines Corp. lowered its forecasts for free cash flow this year due to the impact of a strong dollar and the loss of business in Russia, sending the shares down.
• Twitter Inc. dismissed Elon Musk’s complaints that he doesn’t have enough information about spam and robot accounts as an “irrelevant sideshow” and urged a judge to hold a trial as soon as possible over his cancellation of a $44 billion buyout of the company.
  • The judge overseeing Twitter’s lawsuit against Musk has tested positive for Covid-19.
• Lithium powerhouse Australia, which produces about half of all unprocessed supplies of the raw material, needs to add capacity in refining and manufacturing to help the world meet surging demand for batteries, according to Tesla Inc. Chair Robyn Denholm.
• Taiwan Semiconductor Manufacturing Co. is selling its second dollar bond since April, a deal that may offer clues about investor appetite at a time of growing uncertainties about the chip industry’s outlook.
• SoftBank Group Corp. has temporarily paused talks about listing shares of its chip division, Arm Ltd., in London because of turmoil in the UK government, while it continues to pursue an initial public offering for the business in New York, according to people familiar with the matter.

(Updates stock move in last paragraph.)

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(Bloomberg) — Securities and Exchange Commission Chair Gary Gensler says it’s unclear if American and Chinese authorities will reach a deal to avoid the delisting of some 200 companies from US stock exchanges. 

Gensler said on Tuesday during an interview on Bloomberg Television’s “Balance of Power With David Westin” that it’s ultimately Beijing’s decision whether to grant access to American audit inspectors as required by US law. He added that talks between the two sides had been “constructive.”

“I just really don’t know right now,” he said over the prospects of reaching a deal. “It’s going to be choices made by the authorities there.”

The clock is ticking to avoid congressionally imposed deadline of a 2024 for kicking businesses off the New York Stock Exchange and Nasdaq Stock Market unless American regulators get full access to inspect their audit work papers. 

The US and China have been at odds for two decades over the legal requirement, which is meant to protect investors from accounting frauds and other financial malfeasance. The 2024 deadline stems from a 2020 law called the Holding Foreign Companies Accountable Act that was popular with both Democrats and Republicans.

Dozens of other countries permit the US audit inspections, giving American officials the go ahead to interview local accountants and scrutinize the documentation underlying their work. China and Hong Kong have refused, citing confidentiality laws and national security concerns. 

Provisional list

Earlier this year, the SEC started publishing a “provisional list” of companies that could face removal. While the move had long been telegraphed, it fueled a sharp decline in US shares of companies based in China and Hong Kong. 

Pressure for Beijing and Washington to reach a deal to avoid delistings is being amplified by measures under consideration in the US Congress that call for the process be sped up. If those become law, Chinese audit firms would have even less time to comply.

In Tuesday’s wide-ranging interview, Gensler also discussed crypto regulation. While he declined to say whether the SEC might release new rules for digital assets, Gensler said his agency had longstanding authorities to regulate the sector. 

He also touched on his plans to overhaul how stock trades are routed, noting the SEC had received “helpful” feedback from market participants since first unveiling the ideas at a conference in June. 

(Updates with Gensler equities market remarks in final paragraph.)

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(Bloomberg) — The leaders of Iran, Russia and Turkey held talks in Tehran on Tuesday, but the summit on enforcing a peace deal in Syria was likely to be overshadowed by President Vladimir Putin’s war in Ukraine.

Putin arrived in the Islamic Republic on Tuesday to join Iranian President Ebrahim Raisi and their Turkish counterpart Recep Tayyip Erdogan in what was the Russian leader’s first trip outside the former Soviet Union since he ordered the February invasion. 

Russia is poised to restart gas exports via the Nord Stream 1 pipeline to Germany at a reduced capacity on Thursday. Earlier, an IMF working paper warned a cutoff of Russian natural gas supplies in retaliation for economic sanctions over the war could result in a hit of as much as 2.65% to the European Union’s economy. 

(See RSAN on the Bloomberg Terminal for the Russian Sanctions Dashboard.)

Key Developments

• Putin Arrives in Iran for Raisi, Erdogan Talks Dominated by War
• Seaport Trades Billions of Russian Bonds as Wall Street Retreats
• Germany to Wait Until Early Next Week to Count Russia Gas Damage
• Russian Gas Halt May Spark 2.65% Hit for EU Economy, Study Shows
• Gazprom Poised to Restart Gas Flows Through Nord Stream Pipeline
• EU, China to Cooperate on Tackling Food Crisis, Fertilizers

On the Ground

Russia struck Odesa region with seven missiles overnight, one of which was shot down by air defense, while six hit a village, according to the Ukrainian military’s southern command. Six people, including a child, were injured. Kremlin forces are trying to create conditions for resuming the offensive in the Donetsk region, Ukraine’s General Staff said in a statement. The Russian military continued shelling, hitting areas from Chernihiv region in the north to Dnipropetrovsk region in the south, according to Ukrainian officials.

(All times CET)

Putin Says Not All Ukraine Grain Issues Are Resolved (7:04 p.m.)

Not all issues related to the export of grain from Ukraine’s Black Sea ports are resolved, but there’s progress, Putin told Turkey’s Erdogan at a meeting in Iran. 

“With your mediation, we’ve moved forward,” Putin said in televised comments. “Not all issues have been resolved yet, but there is movement and that is already good.”

Russia Poised to Restart Gas Flows Through Nord Stream (5:49 p.m.)

Gazprom PJSC is poised to resume gas flows via the Nord Stream 1 pipeline on time at a reduced capacity Thursday after the completion of scheduled maintenance, according to people familiar with the matter.

Shipments will resume on Thursday, but remain below normal after the Russian gas giant declared force majeure on some European clients, said the people, who asked not to be named because the information is private. Flows via Russia’s biggest link to Europe were capped at 40% of capacity before the work. 

EU Budget Commissioner Johannes Hahn said earlier that he doesn’t expect Russia to restart the link on July 21 as planned.

Ukraine Plans Eurobond Payment Freeze, Ekonomichna Pravda Says (5:18 p.m.)

Ukraine’s cabinet approved a two-year freeze on Eurobond payments to conserve its hard-currency reserves, Ekonomichna Pravda reported, citing an unidentified official who attended the meeting. 

The decision still must be approved by the parliament’s budget committee, according to the report. Finance Minister Serhiy Marchenko didn’t reply to a text message or phone call seeking comment. 

Ukraine, which has $24.5 billion in foreign debt, has been in an increasingly precarious position financially as the war saps its ability to pay its bills. Last week, its state-owned energy company NJSC Naftogaz Ukrainy moved to delay payments on its bonds. 

Read more: Ukraine’s Debt Future in Flux as State Gas Giant Asks for Delay

Seaport Trades Billions Of Dollars of Russian Bonds (4:35 p.m.)

Investment bank and brokerage firm Seaport Group LLC has traded several billion dollars of Russian government bonds in recent weeks, becoming one of the main venues for clients to buy and sell securities that many of Wall Street’s biggest firms will no longer handle.

Seaport’s brokerage business, best known for trading debt and distressed situations, continues to settle and trade billions of Russian sovereign bonds daily and remains a buyer of such assets, it told clients last week in a note seen by Bloomberg News.

While the Biden administration hasn’t explicitly outlawed the brokering of such debt, the US Treasury in June forbid US investors from acquiring the securities. 

Ukraine-Linked Cyber Attacks Could Lead to Escalation, EU Says (3:51 p.m.)

Russia’s war in Ukraine has been accompanied by a significant increase in malicious cyber attacks around the world that risk possible escalation of tensions, Josep Borrell, the EU’s foreign policy chief, said in a statement.

Borrell said recent denial-of-service attacks against several EU member states claimed by pro-Russian hacker groups were “another example of the heightened and tense cyber threat landscape.” He said a “striking and concerning” number of hackers have been indiscriminately targeting essential entities globally.

IMF Warns of Economic Fallout From Potential Gas Cutoff (3:05 p.m.)

A natural gas halt would probably reduce gross national expenditures in the EU by at least 0.4% over one year, researchers Silvia Albrizio, John Bluedorn, Christoffer Koch, Andrea Pescatori and Martin Stuermer said in an IMF working paper. 

Earlier, a European Commission estimate forecast a gas embargo could reduce the bloc’s gross domestic product by as much as 1.5% if next winter is cold, according a draft EU document seen by Bloomberg News. 

Russia Expects Grain Talks to Restart Soon, Tass Says (2:42 p.m.)

Russia expects talks over Ukrainian grain exports will continue in the near future, Kremlin spokesman Dmitry Peskov said, state-run Tass reported.

Putin and Erdogan will “100%” discuss efforts to reach a deal on unblocking exports of millions of tons of Ukrainian grain from Black Sea ports, Kremlin foreign policy aide Yuri Ushakov said, Tass reported Monday. Grain talks between Russia, Turkey, Ukraine and UN representatives could resume on July 20-21, the news service said last week. 

Russians Drive Record Turkish Home Sales to Foreigners (1:39 p.m.)

Sales of Turkish homes to foreigners jumped more than 80% in June from a year ago to a record 8,630, thanks primarily to accelerating demand from Russian citizens since the start of the war in Ukraine. 

Russians purchased 1,887 properties last month, and have now bought 5,849 homes in Turkey this year, making them the biggest buyers by nationality. 

Russia to Start Buying Grain in August, Interfax Says (1:17 p.m.)

Russia’s Agriculture Ministry plans to purchase as much as 1 million tons of grain from Siberia, Urals and central Russia this year, starting in August, Interfax reported, citing the ministry. 

The purchases will be for the State Intervention Fund, according to Interfax. The announcement comes as global wheat prices are much higher than usual for this time of year, after Russia’s invasion of Ukraine cut Kyiv’s grain shipments and other major producers are hit by drought.

Read more: Russia’s Wheat Exports Are Off to Flying Start Amid Bumper Crop

Ukrainian Parliament Dismisses Prosecutor General (12:50 p.m.)

Ukraine’s parliament voted to dismiss Chief Prosecutor Iryna Venediktova after she was suspended by President Volodymyr Zelenskiy this week in a shakeup of the nation’s security services.

Her ouster follows accusations from Zelenskiy’s office that the state prosecutor’s office and the state security service — whose head the president also dismissed — employed more than 60 people who worked for Russia and leaked information to undermines Ukraine’s efforts to beat back Moscow’s invasion.

Zelenskiy’s deputy chief of staff, Andriy Smyrnov, said Tuesday the president expected officials to step up work to remove traitors from state security bodies and investigations would be launched into Venediktova and Ivan Bakanov, who led the security service.

EU Proposes New Sanctions on Sberbank (12:16 p.m.)

The European Union has proposed additional sanctions on Sberbank, Russia’s largest bank, according to people familiar with the matter.

The measures against Sberbank, which has already been cut off from the international payments system SWIFT, would include a total asset freeze, the people said. Under the current proposal the measure would kick in after six months. EU sanctions need the backing of all member states and details could change before that happens.

The EU’s latest package of proposals includes a derogation to allow listed banks to continue transactions related to essentials such as food and agricultural goods. The suite of measures also includes a proposal that would oblige sanctioned individuals to register their assets and a ban on imports of Russian gold. At a meeting of EU ambassadors on Monday, a number of member states asked that the gold ban also cover jewelery, the people said.

Russians Split Over Peace Talks, The Bell Says (12:00 p.m.)

Russians were evenly divided over the need to hold peace talks or continue what the authorities call a “special military operation” in Ukraine, The Bell reported, citing a non-public June survey by state pollster VTsIOM.

The VTsIOM poll found 44% in favor of each option, with 12% declining to answer the question, The Bell said, citing an unidentified person close to the Kremlin who was familiar with the survey of 1,600 Russians conducted in late June. In another question, 57% said they favored continuing the war compared to 30% supporting ending it as soon as possible, The Bell said.

VTsIOM did not immediately respond to a request for comment.

EU Aims to Replenish Weapons Stock (11:15 a.m.)

The European Union is proposing a 500 million-euro ($508 million) investment tool to incentivize a minimum of three member states to buy weapons jointly, including artillery, air defense systems and anti-tank missiles. 

“This initiative will make it possible to replenish part of the stocks following Europe’s united and supportive response by way of transfer of arms to Ukraine,” EU Internal Market Commissioner Thierry Breton said, adding the project would “boost our European industrial base.”

The measure would draw from the bloc’s budget for the next two years, and only European companies based in Europe will be able to benefit. 

Ukraine Picks Chief Anti-Graft Prosecutor (11:00 a.m.)

Ukraine appointed a new head of the anti-corruption prosecutors’ office after months of delay, fulfilling a requirement from the European Union and other international financial donors.

The former Soviet state, which is seeking closer integration with the West as it fights off Russia’s military invasion, has agreed to a demand by the bloc and the International Monetary Fund to demonstrate progress in fighting endemic corruption as a condition to receiving financial aid.

Ukraine Military Commander Says Situation Has Stabilized (9:12 p.m.)

Ukraine’s military chief, Valeriy Zaluzhnyi, said Ukraine “has managed to stabilize the situation” in the country. 

“It is complex, intense, but completely controlled,” Zaluzhnyi said on Facebook after speaking with General Mark Milley, chairman of the US Joint Chiefs of Staff. “An important factor contributing to our retention of defensive lines and positions is the timely arrival of M142 HIMARS, which deliver surgical strikes on enemy control posts, ammunition and fuel storage depots.”

Zaluzhnyi and Milley also discussed a meeting of the Ukraine Defense Contact Group, scheduled for Wednesday, where military needs will be discussed.

First Lady to Address US Congress Wednesday (8:01 p.m.)

Olena Zelenska, the first lady of Ukraine and wife of President Zelenskiy, will accept a human rights award at the Victims of Communism Museum on Tuesday, according to a statement from the organization.

Zelenska, who met with US first lady Jill Biden during an unannounced visit to Ukraine in May, was invited to address the US Congress on Wednesday by Speaker Nancy Pelosi.

(A previous version corrected Smyrnov’s title.)

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(Bloomberg) — Sam Bankman-Fried, the crypto billionaire who tried to bail out ailing firms during the industry’s implosion, said the turmoil has prompted investors to link valuations to profitability rather than just revenue. 

“Profitability was sort of a dirty word for a number of years, and it has returned to investor parlance,” Bankman-Fried, who co-founded crypto exchange FTX, said at the Bloomberg Crypto Summit Tuesday. “There’s been a substantial re-rating toward looking for at least likely or plausible pathway toward profitability being a core component of an investment thesis.” 

The crypto winter — as it became known — helped single out firms that could outlast the volatility, he said. He noted exchanges and some blockchain networks with superior properties survived, while many other crypto projects that people would forget ever existed “have generally sort of gone away.”  

Bankman-Fried has positioned himself as a lender of last resort in the industry amid a collapse in prices that prompted a number of firms to seek rescue. His crypto exchange FTX US injected capital into BlockFi Inc. with an option to purchase the crypto lender, while his trading firm, Alameda Research, provided credit lines to Voyager Digital, which later filed for bankruptcy protection.  

“It’s ok to do a deal that’s moderately bad” in bailing out a company, with the goal to keep the ecosystem healthy, he said. Some companies he had talks with on bailouts didn’t know or couldn’t be transparent about numbers on their own balance sheets, he said.

FTX keeps its treasury in dollars but could in theory buy Bitcoin if it drops enough, he said, but “we didn’t hit that price.”

On Three Arrows Capital, the crypto hedge fund that was ordered to liquidate, Bankman-Fried said “their trading was probably more like punting than arbitrage making.” It’s not that their positions were illiquid, they just lost their money, he said.

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(Bloomberg) — Nigerian lenders are impeding the use of the nation’s digital currency because they are concerned about losing revenue from traditional banking services, according to central bank Governor Godwin Emefiele.

Only about 700,000 customers have created an e-naira wallets since its introduction in October last year, the central bank said early this year. There are about 55 million bank accounts in Africa’s most populous nation. E-naira-based transactions have also failed to pick up. 

Read: As Currency Gets Weaponized, Central Banks Design Money’s Future

“There is apathy,” at the banks, Emefiele told reporters in Abuja, the nation’s capital, on Tuesday. 

E-naira transactions do not attract any charge unlike transfers or payments done using a bank’s platform or website. Deposits in e-naira wallets also do not count as cash in the lender’s books. The e-naira undermines the investments banks have made in mobile banking services in a bid to boost fee and commission-based income. 

The Central Bank of Nigeria is “almost concluding tests” with MTN Group Ltd.’s Nigeria unit to provide a channel to enable Nigerians without bank accounts to open e-naira wallets, Emefiele said.  Currently, the e-naira wallet is available to only bank customers.

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(Bloomberg) — Airbus SE is growing more confident it can secure a landmark purchase of about 50 A350 wide-body jets from Air India Ltd. this week, while Boeing Co. works on a deal for as many as 150 737 Max jetliners for the carrier, people familiar with the matter said. 

Boom Technology Inc., the US startup attempting to bring back a more environmentally friendly Concorde-style jet, is adding defense capabilities to the aircraft, one futuristic development Tuesday on day two of the Farnborough International Airshow.

Boeing was first out of the gate Tuesday with a firm order from 777 Partners LLC, which signed up for as many as 60 aircraft. The US planemaker also announced an order for 12 737-8 jets with lessor Aviation Capital Group LLC.

More purchase announcements may come, including a possible deal between Airbus and Air Lease Corp. that could see the biggest aircraft financier in the US take dozens of A320neo craft.

2022’s show, held as summer temperatures in the UK soar to records, is the first significant commercial air show since Covid-19 decimated international air travel.

Key Stories and Developments:

• Supply chain troubles the No. 1 talking point at air show
• As Farnborough sizzles, Airbus makes expo a slow burner
• A scorched air field south of London puts focus on green flying

Eve to Look at Flying Taxis for Defense Use (5:28 p.m.)

Eve Holding Inc. signed a non-binding letter of intent with Embraer SA and BAE Systems Plc to explore an order of as many as 150 electric vertical take-off and landing vehicles with the aim of examining the flying taxis for the defense and security markets. In a separate announcement, BAE Systems and Embraer signed a memorandum of understanding to potentially form a joint venture to develop a defense eVTOL variant using Eve’s platform.

Analysts at Latin America Equity Research said this brings Eve’s backlog to 2,060 units worth $6.2 billion, a positive as the company diversifies its clients at a faster pace than competitors.

Embraer and BAE Systems in December disclosed plans to collaborate on developing Eve’s eVTOL as a potential defense variant.

ATR Pulls in Order From Leasing Firm (4:08 p.m.)

Turboprop manufacturer ATR won an order from leasing company Abelo for 10 ATR 72-600 aircraft, as well as 10 ATR 42-600S, the short-take-off-and-landing variant. Deliveries of the ATR 72-600 will start in 2023, while the first STOL version will be delivered at the end of 2024, the company said.

ATR, a joint venture between Airbus and Italian aerospace group Leonardo SpA, ranks as No. 1 in the market for planes with fewer than 90 seats.

Leonardo to Design Mars Robotic Arm (3:34 p.m.)

Leonardo SpA has signed a contract with the European Space Agency to design, manufacture and test a robotic arm that will help collect samples from Mars, according to an announcement at the air show Tuesday.

Able to ‘see’ and make decisions autonomously, the arm will retrieve sample tubes filled with Martian soil, supporting their journey back to Earth. The arm, scheduled for delivery in 2025, will be installed on the NASA Sample Retrieval Lander and will recover tubes full of soil previously collected by the Mars 2020 rover.

Embraer Sees E-Commerce Driving Smaller Plane Sales (2:32 p.m.)

Embraer SA published its 20-year market outlook for the sub-150 seat commercial aircraft segment, saying the explosive growth in e-commerce is opening new markets for smaller-capacity, all-cargo jet aircraft and driving demand for passenger-to-freighter conversions.

The Brazil-headquartered planemaker forecasts global demand for smaller aircraft up to 150 seats through 2041 will be around 10,950 units while the demand for new turboprops will be about 2,280 planes.

Embraer also Tuesday secured an order from Canada’s Porter Airlines Inc. for 20 E195-E2 passenger jets, adding to the carrier’s existing 30 firm orders, and inked a deal with Alaska Air Group Inc. for E175 aircraft, eight firm and 13 options.

Lilium Plots Scandinavia Launch in New Partnership (1:30 p.m.)

German flying taxi firm Lilium has partnered with professional services firm AAP Aviation to develop a network of landing sites in Scandinavia. As the nascent industry for electric vertical takeoff and landing, or eVTOL, aircraft continues to grow, firms are locked in a race to secure country partnerships and big orders. Lilium’s British rival Vertical Aerospace is exploring the potential for the technology in Brazil. AAP will also purchase 40 Lilium jets, the German startup announced Tuesday.

Boeing Secures Dreamliner Order from Aercap (1:17 p.m.)

Boeing kept up its steady drumbeat of orders at the show, announcing a commitment from Aercap Holdings NV for 5 787-9 Dreamliner models. Boeing said before the start of the show that it’s preparing to start speeding 787 Dreamliner production once the Federal Aviation Administration approves it to resume deliveries of the widebody aircraft.

Airbus, Boeing Court Air India (12:38 p.m.)

The Indian carrier is considering Boeing’s narrow-body planes alongside the Airbus A350 jets, as part of a fleet renewal under new owner Tata Group, according to people familiar with the negotiations. Airbus’s long wait time for A320neo delivery slots may constrain its effort to come up with a rival offer for narrow-bodies, said the people, asking not to be identified discussing private deliberations.

Airbus is trying to get the widebody deal firmed up at the show, but the carrier may wait with an official announcement until India’s Independence Day on Aug. 15, one person said.

UK Wants 2019 to Be Aviation Emissions Peak (12:25 p.m.)

Improvements to the existing aviation system, including a targeted 2% annual gain in fuel efficiency and steps to modernize airspace to shorten routes, should mean 2019 is remembered as the peak year for emissions, according to the Jet Zero blueprint unveiled Tuesday.

UK discount airline EasyJet Plc and engine maker Rolls-Royce Holdings Plc separately announced a partnership for the development of hydrogen-combustion technology capable of powering narrow-body planes.

Boom Unites With Stealth Bomber Maker on Military Jet (12:02 p.m.)

Boom is adding defense capabilities to its dreams of restoring supersonic passenger travel, announcing plans for a faster-than-sound jet fit for non-combat military missions. The jet could deliver medical supplies to surveillance personnel and handle medical evaluations. 

The US startup unveiled an agreement with defense giant Northrop Grumman Corp., the founder of the B-21 stealth bomber, at the Farnborough International Airshow on Tuesday to add military use for supersonic jets. Blake Scholl, Boom’s founder and chief executive officer, insisted its supersonic creation won’t be weaponized.

Vertical Aero Enlists Ex-McLaren CEO Flewitt (11:00 a.m.)

Flying-taxi pioneer Vertical Aerospace has recruited former McLaren supercars head Mike Flewitt to its board as the UK firm moves closer to starting production of the futuristic craft.

Flewitt, who made a surprise exit as chief executive officer of McLaren Automotive Ltd. in October after eight years in the post, will bring “deep industrial and manufacturing expertise” to Vertical at a key point in its development, the Bristol, England-based company said.

 

Boeing Inks 777 Partners Order (10:06 a.m.)

Boeing is first out of the gate again on day two with another commercial announcement, this time from private-equity firm 777 Partners, which placed orders and commitments for as many as 60 737-8 narrowbodies and the higher-capacity 737-8-200 model, which can seat as many as 200 passengers.

777 Partners Managing Partner Josh Wander said the order, of which 30 aircraft are firm and the remainder commitments, will be divided among the company’s low-cost assets, which include Flair, Australia’s Bonza, as well as a third carrier that will be revealed soon.

Read more: New Australian Airline Bonza Sees Launch Delayed by Pandemic

GE Completes Battery-Powered Test Flight (10:02 a.m.)

GE has completed the world’s first test of a battery-powered hybrid electric propulsion system at an altitude that simulates a commercial flight, it said in a statement Tuesday.

The test of the high power, high voltage system is significant considering getting battery-powered engines to work at cruising altitude has proven challenging. This is an “important, necessary step in GE’s technology programs with NASA to develop a hybrid electric propulsion system for flight tests later this decade and for entry into service in the mid-2030s,” GE said.

Delta Expands With Airbus A220 Fleet (9:46 a.m.)

Delta Air Lines Inc.’s purchase of 12 new A220-300 aircraft is the latest step in upgrading and streamlining its fleet and introducing more sustainable aircraft.

“The A220-300 is economical, efficient and delivers superior performance,” Mahendra Nair, the airline’s senior vice president of Fleet & Tech Ops Supply Chain, said. “These additional aircraft in the A220 family are an excellent investment for our customers and employees and will be fundamental as we work toward a more sustainable future for air travel.”

Featuring 12 first class, 30 comfort+ and 88 main cabin seats, the A220-300 aircraft will serve customers traveling domestically and to Delta’s coastal hubs. Powered by Pratt & Whitney Engine Services Inc.’s latest-generation geared turbofan GTF engines, the A220 offers 25% better fuel efficiency than the aircraft it replaces, Delta said.

GE Sees Bottlenecks in Engine Manufacturing (2:55 p.m.)

GE CEO Larry Culp discussed the strategy for GE Aerospace, the engine business he will lead, having spun off its energy and health-care divisions. In his first appearance in the role at the air show, Culp said the company chose GE Aerospace as the name for the aviation unit to reflect its “wider strategic aperture” beyond the traditional engine business. While it’s premature to discuss details the expansion, the unit will have the financial strength to grow organically and through acquisitions, he said.

Culp declined to discuss specifics of engine delays that have roiled Airbus and Boeing, but acknowledged that it’s “as challenging an operating environment” as he’s yet seen. GE is grappling with many bottlenecks and capacity issues within the company and its supply chain, he said. Part shortages, high inflation and a surge in airlines sending in their power plants for service is also putting pressure on the maintenance operation, traditionally a mainstay of profitability for GE. 

Qatar Says Heathrow Should Have Seen it Coming (1:40 p.m.)

Al Baker, who represents Qatar’s sovereign wealth fund on the Heathrow board, told Bloomberg Television he understood staffing issues facing the hub but was “disappointed” by its lack of foresight. They should have seen this coming and they should have taken mitigating actions,” the aviation executive said.

Heathrow took the decision last week to impose a two-month cap on daily passenger traffic to contain travel chaos caused by staffing shortages in key areas like ground handling. The move angered airlines forced to scrap flights at short notice in the peak summer season.

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(Bloomberg) — Silvergate Capital Corp. said deposits from digital-currency customers held steady in the second quarter, a sign that the bank and its clients are weathering the cryptocurrency rout. Shares of the company soared.

Total deposits from those customers totaled $13.3 billion at the end of the second quarter, up from the $13.2 billion three months earlier. Diluted earnings per common share rose to $1.13, surpassing analysts’ average estimate of 84 cents.

Deposit resilience could help undo some of the damage suffered by some of the best-known crypto bank stocks in the first half of this year, when shares tumbled as interest-rate hikes and the collapse of high-profile crypto projects sent investors scurrying. Silvergate was among the hardest hit, dropping 64% through June.

The bank expects to keep adding clients to its platform, just as it did during the last downturn in crypto, Chief Executive Officer Alan Lane said in an interview. 

“Despite this volatility, we reported that our pipeline is as strong as ever,” Lane said. “The general growth should be up and to the right because we’ll be adding customers along the way.”

Silvergate, which has slumped 48% this year, jumped 19% to $77.72 at 12:18 p.m. in New York. 

(Adds shares in first and last paragraphs.)

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(Bloomberg) — Here are the key takeaways from FTX founder and CEO Sam Bankman-Fried’s remarks at the Bloomberg Crypto Summit in New York Tuesday. Terminal users can click here for the TOPLive blog.

• In bailing out crypto companies, Bankman-Fried said he wanted to make sure customers got their deposits back. “We need to be a good, constructive actor in this space,” he said about his efforts to avert a crypto contagion.
• Some companies Bankman-Fried talked about bailouts with didn’t know or couldn’t provide numbers on their own balance sheets, he said.
• On Three Arrows Capital, the crypto hedge fund that filed for bankruptcy, Bankman-Fried said “their trading was probably more like punting than arbitrage making.” It’s not that their positions were illiquid, they just lost their money, he said.
• While volatility can be good for exchanges in the short term, stability and a healthy ecosystem is what benefits the players in the long term, he said.
• FTX keeps its treasury in dollars, he said. It also doesn’t let its users’ accounts to go negative, exercising prudent risk management.

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