US Business

Walmart reported a drop in profits Tuesday as higher operating costs dented its bottom line, while April data showed another increase in US consumer spending in spite of rising prices.

Walmart shares tumbled following the report, which comes amid rising recession worries in the wake of a 40-year peak in inflation that has prompted monetary tightening from the Federal Reserve.

Tuesday’s batch of earnings and economic data offered a mixed reading on the US consumer overall, with April retail sales still coming in at a healthy level and Home Depot shares rising following better-than-expected results.

Walmart US President John Furner said the company is seeing a “wide range” of responses from shoppers to the rise in prices.

Furner pointed to continued strong demand for pricey items such as game consoles and outdoor grills. At the same time, other consumers are moving away from brands for lunch meats, dairy and other goods in favor of Walmart’s own branded goods, which are lower-priced. 

“We need to do more to control costs, to make sure we can provide good value for our customers,” Furner said on an earnings conference call.

The healthy US consumer has underpinned the strong recovery in the world’s largest economy following the slowdown during the Covid-19 pandemic, but the surge in demand also has strained supply chains and helped push inflation to its fastest rate since the early 1980s.

US retail sales rose 0.9 percent in April, boosted by a rebound in auto sales and increases in other categories, including electronics, home furnishings and restaurants, according to Commerce Department data. 

“Looking ahead, consumers’ tolerance to high inflation will continue to be tested and the renewed spike in gasoline prices, along with tighter financial conditions, will weigh on households’ willingness to spend on big-ticket items,” said Kathy Bostjancic, a chief US economist at Oxford Economics.

– Labor, fuel costs rise –

Walmart reported a 25 percent drop in profits to $2.1 billion for the quarter ending April 30. That translated into $1.30 per share, below the $1.48 expected by analysts.

Revenues rose 2.4 percent to $141.6 billion.

Walmart raised its full-year sales forecast slightly but lowered its profit forecast. It now expects earnings per share to fall one percent after previously projecting an increase in the mid-single digits.

Executives pointed to a series of cost hits that converged during the period. 

The company was overstaffed for part of the quarter due to the unexpectedly speedy return of workers who were afflicted by the Omicron variant of Covid-19, resulting in higher labor costs.

Walmart was also affected by a spike in energy costs when the Russian invasion of Ukraine sent oil prices soaring.

Another obstacle was a March fire that destroyed a warehouse in Indianapolis, Indiana that employed more than 1,000 people. Nobody was injured in the episode, but Walmart had to replace goods and route items through neighboring infrastructure, adding cost.

Walmart Chief Executive Doug McMillon said the company’s vast array of goods can help in an inflationary environment because it is able to offset higher prices for food and other staples with lower prices elsewhere in the store.

“Customers are even more price sensitive now,” he said. “So when you bring something down in sporting goods or hardware, one of these other category, they notice even more than they would have noticed before and that makes the elasticity impact a bit different than it would be otherwise.”

– Investing in homes –

Walmart’s results stood in contrast to Home Depot, which raised its outlook after reporting that first-quarter profits rose 2 percent to $4.2 billion on a four percent increase in revenues to $38.9 billion.

Executives with the home-improvement chain saw higher sales resulting largely from cost inflation that consumers appeared to take in stride.

Propelling the spending is a strong historic trend that shows increased investment as homes increase in value, according to Chief Financial Officer Richard McPhail, who also said most of the company’s customers already have mortgages and aren’t affected by rising interest rates.

“The homeowner has never had a balance sheet that looks like this,” McPhail said. “They’ve seen the price appreciation and they have the means to spend.”

Walmart shares plunged 11.4 percent to $131.37 in afternoon trading, while fellow Dow member Home Depot rose 1.4 percent to $300.12.

Billionaire Elon Musk said Tuesday his bid to buy Twitter won’t proceed unless he gets proof of the number of spam accounts plaguing the platform, adding more uncertainty to his roller-coaster pursuit of the social media giant.

This latest twist to his $44 billion move to acquire the key platform sparked speculation over whether the world’s richest person was trying to shrink the price tag or even back away from the deal.

Hours after Musk’s early morning tweet over bots, Twitter insisted the deal push through and without delay.

“Twitter is committed to completing the transaction on the agreed price and terms as promptly as practicable,” the company wrote in a statement accompanying a filing to US regulators.

Musk last week tweeted his bid for the company was “temporarily on hold,” pending questions over its estimates of the number of fake accounts, or bots.

Then early Tuesday he pushed for more information, writing to his almost 94 million followers on the social network: “Yesterday, Twitter’s CEO publicly refused to show proof of <5%.” 

“This deal cannot move forward until he does,” he added.

Twitter chief executive Parag Agrawal has said the platform suspends more than a half-million seemingly bogus accounts daily, usually before they are even seen, and locks millions more weekly that fail checks to make sure they are controlled by humans and not by software.

Internal measures show that fewer than five percent of accounts active on any given day at Twitter are spam, but that analysis cannot be replicated externally due to the need to keep user data private, Agrawal contended.

Musk posted that the real number of bots may be four times what Twitter claims and “could be *much* higher,” and has said he would make getting rid of them a priority if he owned the platform.

“So how do advertisers know what they’re getting for their money?” Musk tweeted in a subsequent response about the need to prove Twitter users are real people.

“This is fundamental to the financial health of Twitter.”

– ‘Under pressure’ –

The process used to estimate how many accounts are bots has been shared with Musk, Agrawal insisted.

According to an estimate published Friday by software firm SparkToro, 19.42 percent of Twitter accounts are fake or spam, but the company acknowledges its methodology for determining bots is likely different from that used by Twitter. 

SparkToro has a tool on its website that shows more than 70 percent of Musk’s followers are fake accounts. 

“It appears the spam/bot issue is cascading and clearly making the Twitter deal a confusing one,” Wedbush analyst Dan Ives said in a note to investors.

“The bot issue at the end of the day… feels more to us like the ‘dog ate the homework’ excuse to bail on the Twitter deal or talk down a lower price.”

Twitter shares “will be under pressure this morning again as the chances of a deal ultimately getting done is not looking good now,” Ives said, adding it is “likely a 60%+ chance from our view Musk ultimately walks from the deal and pays the breakup fee.”

Another tech watcher, Grady Booch, tweeted to Musk that it “Seems like you have buyers remorse”.  

After sliding ahead of the market bell, shares of Twitter were up slightly in Tuesday trading.

Meanwhile in a filing to the Securities and Exchange Commission, Twitter urged its shareholders to vote in favor of Musk’s buyout for $54.20 per share in cash, at an upcoming special meeting.

Musk has described his motivation as stemming from a desire to ensure freedom of speech on the platform and to boost monetization of a website that is massively influential but has struggled to attain profitable growth.

He has also said he favored lifting the ban on Donald Trump, who was kicked off the platform in January 2021 over concerns the ex-president could incite violence.

burs-oho/jm/mlm

The UK government on Tuesday unveiled a plan to drastically overhaul post-Brexit trade rules in Northern Ireland, arguing the changes are needed to end political paralysis in the divided territory.

But the European Union, defending the so-called Northern Ireland Protocol and the integrity of its vast single market, vowed reprisals if Britain pushes ahead with its unilateral plans.

London said it would introduce legislation reforming the protocol “in the coming weeks” — unless Brussels caves on its refusal to renegotiate the pact.

The protocol was agreed as part of Britain’s Brexit divorce deal with the European Union, recognising Northern Ireland’s status as a fragile, post-conflict territory that shares the UK’s new land border with the European Union.

Its requirement for checks on goods arriving from England, Scotland and Wales has infuriated pro-UK unionists in Northern Ireland. 

They claim the protocol is undermining their place within the UK, and are refusing to join a new power-sharing government in Belfast following elections this month.

The UK plan would scrap most of the checks, but the government denied it was trashing international law by abrogating a key element of the Brexit deal agreed by Prime Minister Boris Johnson in 2019.

“I think the higher duty of the UK government in international law is to the (1998) Good Friday Agreement and the peace process,” Johnson told reporters.

“We don’t want to nix it (the protocol), we want to fix it, and we will work with our EU partners to do it,” he said.

– ‘Rogue state’ –

But the EU issued no hint of compromise, after warning that any UK violation of the Brexit pact could see it hit back with swingeing tariffs.

“Unilateral actions contradicting an international agreement are not acceptable,” European Commission Vice-President Maros Sefcovic said.

The UK plan “raises significant concerns”, he added, warning that the EU “will need to respond with all measures at its disposal” if London goes ahead.

Irish Foreign Minister Simon Coveney called the UK step “damaging to trust”.

Johnson, however, said a trade war was unlikely — and the UK can ill-afford one, at a time when its people are grappling with the worst inflationary crisis in a generation.

“But what we have to fix is the problems with the Northern Ireland political situation, where you can’t get the executive up and running,” he said, a day after visiting Belfast for talks with Northern Ireland’s main parties.

The largest pro-British party, the Democratic Unionist Party (DUP), says it will not share power with pro-Irish rivals Sinn Fein until the protocol is reworked.

Its line has hardened since Sinn Fein won a historic victory in elections to the Northern Ireland Assembly two weeks ago, which entitled the party to the role of first minister in a joint regional government with the DUP. 

In the London parliament, DUP leader Jeffrey Donaldson said the UK government’s announcement was a “good start” that could help restore the Belfast executive. But he insisted progress on an actual bill was needed in “days, not weeks”.

For her part, Sinn Fein leader Mary Lou McDonald accused Britain of acting like a “rogue state”.

– US ire – 

Keeping the border open with neighbouring Ireland, an EU member, was mandated in the Good Friday Agreement, given the frontier was a frequent flashpoint during three decades of violence in Northern Ireland until 1998.

But it means checks have to be done elsewhere, to prevent goods getting into the EU single market and customs union by the back door via Northern Ireland.

Under the new plan, the UK intends unilaterally to create a “green channel” for British traders to send goods to Northern Ireland without making any customs declaration to the EU.

The EU would have access to more real-time UK data on the flow of goods, and only businesses intending to trade into the single market via Ireland would be required to make declarations.

The EU would need to trust the UK to monitor the flow, and UK Foreign Secretary Liz Truss vowed “robust penalties” for any companies seeking to abuse the new system. 

The plan would also seek to end oversight of the protocol by the European Court of Justice — another red line for Brussels.

Britain also risks antagonising the United States, which helped broker the Good Friday Agreement.

Democratic Congressman Bill Keating, speaking on Britain’s Times Radio from Washington, said any UK action on the protocol should not resort to “breaking international law”. 

If the bill goes ahead, British hopes for a post-Brexit trade deal with the US “will be scuttled in the process”, he added.

US air safety regulators have cleared United Airlines to resume service on more than 50 Boeing 777 planes that were grounded over engine issues, a United executive said Tuesday.

The news — confirmed by the Federal Aviation Administration — comes as United and other airlines prepare for a heavy summer travel season.

The jets have been grounded since February 2021, when a United Airlines plane scattered debris over suburban Denver after an engine failure. The jet landed safely, but the FAA issued an emergency order requiring inspection of the engines made by Pratt & Whitney.  

On Monday night, the FAA “issued final paperwork” on United’s fleet of 52 Boeing 777 aircraft, accounting for about 10 percent of the carrier’s capacity, said Andrew Nocella, chief commercial officer at United.

“It’s a pretty significant step up change in our capacity,” Nocella said at a Bank of America investor conference.

He said he expects the first 777s to be restored to the flight schedule starting May 26 with most of the planes back in service by July.

In an email to AFP, the FAA said it “approved the service bulletins” to make “necessary changes” to the planes.  

United shares jumped 6.8 percent to $46.50 shortly after midday.

Global stock markets rallied Tuesday on hopes that China will ease its weeks-long Covid lockdown and gradually reopen businesses.

European exchanges closed higher and Wall Street’s main indices also rose in mid-day trading, spurred by a nearly one-percent rise in April retail sales.

“We’ve seen a much more positive vibe around European equity markets today, with reports out of Asia suggesting that China might be close to looking to ease some of its Covid restrictions, as case rates come down,” Michael Hewson, chief market analyst at CMC Markets UK, said.

“This hope appears to be helping to power some buying interest, and is also pushing up metals, as well as oil prices, with Brent crude at six-week highs,” he added.

Much of Shanghai, China’s economic hub and a city of 25 million, has been under lockdown since April as Beijing attempts to stamp out an Omicron-fuelled virus surge under its strict zero-Covid policy.

The impact of Beijing’s zero-Covid strategy on the world’s second-largest economy was revealed Monday when official data showed that retail sales and industrial production in April on-year had slumped to their lowest levels in more than two years.

World markets have also been roiled by surging inflation, spiralling oil and wheat prices and Russia’s war in Ukraine — leaving investors jittery.

Wheat prices hit a record high in the European market Tuesday at 434.25 euros after the world’s second producer India announced an export ban due to falling output caused by climate change. 

Oil was another area of concern. 

“Oil prices have hit their highest levels since early March as Europe continues to work towards a Russian embargo and China looks to ease Covid restrictions,” said Craig Erlam, another market analyst at OANDA. 

“The question becomes just how much further they’ll go and how uncomfortable it’s going to get,” he said.

Analyst Fawad Razaqzada at City Index was bullish on the demand for oil despite rising prices.

“Demand did fall briefly when China went into a lockdown but now with Shanghai emerging from lockdowns and other cities are likely to follow suit, demand should remain elevated,” he said.

“Unless the OPEC and its allies ramp up production and fast, it is difficult to see how prices can go down meaningfully,” he added.

The British pound was the best performing G10 currency on Tuesday as traders bet that soaring UK inflation, lifted in part by wage rises, will see more monetary policy tightening by the Bank of England.

There are rising concerns that ongoing rapid interest rate rises by the BoE and other central banks including the Federal Reserve to curb decades-high inflation will push the economy into a downturn.

On the corporate front Tuesday, India’s insurance giant LIC slumped on its market debut following the country’s biggest-ever initial public offering, closing nearly eight percent below the IPO price.

Prime Minister Narendra Modi’s government raised $2.7 billion by selling 3.5 percent of Life Insurance Corporation of India. But it was forced to cut back the offer from a planned five percent after markets turned volatile.

Elsewhere, Elon Musk said his planned purchase of Twitter would not go ahead unless he was assured that fewer than five percent of accounts on the platform were fake.

The Tesla owner has bid $44 billion for the social media platform.

– Key figures at around 1530 GMT –

New York – Dow: UP 0.8 percent at 32,482.75 points 

EURO STOXX 50: UP 1.3 percent at 3,734.36 

London – FTSE 100: UP 0.7 percent at 7,518.35 (close)

Frankfurt – DAX: UP 1.6 percent at 14,185.94 (close)

Paris – CAC 40: UP 1.3 percent at 6,430.19 (close)

Hong Kong – Hang Seng Index: UP 3.3 percent at 20,602.52 (close) 

Shanghai – Composite: UP 0.7 percent at 3,093.70 (close)

Tokyo – Nikkei 225: UP 0.4 percent at 26,659.75 (close)

Brent North Sea crude: UP 0.6 percent at $114.91 per barrel

West Texas Intermediate: UP 0.5 percent at $114.75 per barrel

Euro/dollar: UP 0.9 percent at $1.0532 from $1.0436 at 2030 GMT Monday

Pound/dollar: UP 1.2 percent at $1.2478 from $1.2323

Euro/pound: DOWN at 84.44 pence from 84.67 pence 

Dollar/yen: UP at 129.29 yen from 129.08 yen

The UK government on Tuesday unveiled a plan to drastically overhaul post-Brexit trade rules in Northern Ireland, arguing the changes are needed to end political paralysis in the divided territory.

But the European Union, defending the so-called Northern Ireland Protocol and the integrity of its vast single market, vowed reprisals if Britain pushes ahead with its unilateral plans.

London said it would introduce legislation reforming the protocol “in the coming weeks” — unless Brussels caves on its refusal to renegotiate the pact.

The protocol was agreed as part of Britain’s Brexit divorce deal with the European Union, recognising Northern Ireland’s status as a fragile, post-conflict territory that shares the UK’s new land border with the European Union.

Its requirement for checks on goods arriving from England, Scotland and Wales has infuriated pro-UK unionists in Northern Ireland. 

They claim the protocol is undermining their place within the UK, and are refusing to join a new power-sharing government in Belfast following elections this month.

The UK plan would scrap most of the checks, but the government denied it was trashing international law by abrogating a key element of the Brexit deal agreed by Prime Minister Boris Johnson in 2019.

“I think the higher duty of the UK government in international law is to the (1998) Good Friday Agreement and the peace process,” Johnson told reporters.

“We don’t want to nix it (the protocol), we want to fix it, and we will work with our EU partners to do it,” he said.

– ‘Rogue state’ –

But the EU issued no hint of compromise, after warning that any UK violation of the Brexit pact could see it hit back with swingeing tariffs.

“Unilateral actions contradicting an international agreement are not acceptable,” European Commission Vice-President Maros Sefcovic said.

The UK plan “raises significant concerns”, he added, warning that the EU “will need to respond with all measures at its disposal” if London goes ahead.

Irish Foreign Minister Simon Coveney called the UK step “damaging to trust”.

Johnson, however, said a trade war was unlikely — and the UK can ill-afford one, at a time when its people are grappling with the worst inflationary crisis in a generation.

“But what we have to fix is the problems with the Northern Ireland political situation, where you can’t get the executive up and running,” he said, a day after visiting Belfast for talks with Northern Ireland’s main parties.

The largest pro-British party, the Democratic Unionist Party (DUP), says it will not share power with pro-Irish rivals Sinn Fein until the protocol is reworked.

Its line has hardened since Sinn Fein won a historic victory in elections to the Northern Ireland Assembly two weeks ago, which entitled the party to the role of first minister in a joint regional government with the DUP. 

In the London parliament, DUP leader Jeffrey Donaldson said the UK government’s announcement was a “good start” that could help restore the Belfast executive. But he insisted progress on an actual bill was needed in “days, not weeks”.

For her part, Sinn Fein leader Mary Lou McDonald accused Britain of acting like a “rogue state”.

– US ire – 

Keeping the border open with neighbouring Ireland, an EU member, was mandated in the Good Friday Agreement, given the frontier was a frequent flashpoint during three decades of violence in Northern Ireland until 1998.

But it means checks have to be done elsewhere, to prevent goods getting into the EU single market and customs union by the back door via Northern Ireland.

Under the new plan, the UK intends unilaterally to create a “green channel” for British traders to send goods to Northern Ireland without making any customs declaration to the EU.

The EU would have access to more real-time UK data on the flow of goods, and only businesses intending to trade into the single market via Ireland would be required to make declarations.

The EU would need to trust the UK to monitor the flow, and UK Foreign Secretary Liz Truss vowed “robust penalties” for any companies seeking to abuse the new system. 

The plan would also seek to end oversight of the protocol by the European Court of Justice — another red line for Brussels.

Britain also risks antagonising the United States, which helped broker the Good Friday Agreement.

Democratic Congressman Bill Keating, speaking on Britain’s Times Radio from Washington, said any UK action on the protocol should not resort to “breaking international law”. 

If the bill goes ahead, British hopes for a post-Brexit trade deal with the US “will be scuttled in the process”, he added.

Insurance giant Allianz will pay $6 billion in restitution and fines over a multi-billion fraudulent scheme that hit American teachers, clergy and other investors, US regulators announced Tuesday.

Allianz Global Investors US, a US unit of the German financial firm, admitted to violating US securities laws with its “Structured Alpha” scheme which dates to at least January 2016 and was exposed with the stock market downturn in March 2020, said the US Securities and Exchange Commission.

Allianz Global, as well as two of three portfolio managers named in the complaint, also agreed to plead guilty in a parallel criminal case, the SEC said.

The agency said Allianz and the three portfolio managers doctored key financial figures to make losses look smaller than they were. 

But when Covid-19 struck the United States in March 2020, the pandemic-induced market crash showed Allianz had misled investors about risk, and “the fund suffered catastrophic losses and investors lost billions,” the SEC said.

Allianz Global agreed to pay about $1 billion in penalties and disgorgement, while the company and its German parent will pay over $5 billion in restitution to victims, the statement said.

“The victims of this misconduct include teachers, clergy, bus drivers, and engineers, whose pensions are invested in institutional funds to support their retirement,” said SEC Chair Gary Gensler, who lamented “a recent string of cases in which derivatives and complex products have harmed investors across market sectors.”

Two of the three Allianz Global officials named in the case, co-lead portfolio manager Trevor Taylor and portfolio manager Stephen Bond-Nelson, have agreed to plead guilty in the case. The government is also charging lead portfolio manager Gregoire Tournant. 

Hong Kong led a rally across stock markets Tuesday on hopes that China’s economic hub Shanghai will ease its weeks-long lockdown and gradually reopen businesses.

European exchanges were all strongly higher in afternoon trading and Wall Street’s main indices also snapped higher at the open.

“Hopes that the Shanghai lockdowns will ease, along with the ensuing supply chain disruptions, have been enough to lift” equities, said OANDA analyst Jeffrey Halley.

Much of the city of 25 million has been under lockdown since April as Beijing attempts to stamp out an Omicron-fuelled virus surge under its strict zero-Covid policy.

Tuesday’s rally coincides with the third day in a row that Shanghai has recorded no Covid-19 cases outside of its quarantine facilities.

The impact of Beijing’s zero-Covid strategy on the world’s second-largest economy was revealed Monday when official data showed that retail sales and industrial production in April on-year had slumped to their lowest levels in more than two years.

World markets have also been roiled by surging inflation, surging oil and wheat prices and Russia’s war in Ukraine — leaving investors jittery.

Wheat prices hit a record high in the European market Tuesday at 434.25 euros after the world’s second producer India announced an export ban due to falling output caused by climate change. 

Oil was another area of concern. 

“Oil prices have hit their highest levels since early March as Europe continues to work towards a Russian embargo and China looks to ease Covid restrictions,” said Craig Erlam, another market analyst at Oanda. 

“The question becomes just how much further they’ll go and how uncomfortable it’s going to get,” he said, adding that this was “both from an economic and monetary policy standpoint”.

Analyst Fawad Razaqzada was bullish on the demand for oil despite rising prices.

“Demand did fall briefly when China went into a lockdown but now with Shanghai emerging from lockdowns and other cities are likely to follow suit, demand should remain elevated,” he said.

“Unless the OPEC and its allies ramp up production and fast, it is difficult to see how prices can go down meaningfully,” he added.

The British pound on Tuesday rallied more than one percent versus the dollar as traders bet that soaring UK inflation, lifted in part by wage rises, will see more monetary policy tightening by the Bank of England.

There are rising concerns that ongoing rapid interest rate rises by the BoE and other central banks including the Federal Reserve to curb decades-high inflation will push the economy into a downturn.

On the corporate front Tuesday, India’s insurance giant LIC slumped on its market debut following the country’s biggest-ever initial public offering, closing nearly eight percent below the IPO price.

Prime Minister Narendra Modi’s government raised $2.7 billion by selling 3.5 percent of Life Insurance Corporation of India as his administration seeks to sell off state assets to bolster tattered public finances.

But it was forced to cut back the offer from a planned five percent after markets turned volatile following Russia’s invasion of Ukraine and China’s Covid lockdowns.

Elsewhere, Elon Musk said his planned purchase of Twitter would not go ahead unless he was assured that fewer than five percent of accounts on the platform were fake.

The Tesla owner has bid $44 billion for the social media platform.

– Key figures at around 1330 GMT –

London – FTSE 100: UP 0.9 percent at 7,532.96 points

Frankfurt – DAX: UP 1.5 percent at 14,179.21

Paris – CAC 40: UP 1.3 percent at 6,427.49 

EURO STOXX 50: UP 1.5 percent at 3,741.44

New York – Dow: UP 1.1 percent at 32,569.43 

Hong Kong – Hang Seng Index: UP 3.3 percent at 20,602.52 (close) 

Shanghai – Composite: UP 0.7 percent at 3,093.70 (close)

Tokyo – Nikkei 225: UP 0.4 percent at 26,659.75 (close)

Brent North Sea crude: UP 0.2 percent at $114.50 per barrel

West Texas Intermediate: UP 0.2 percent at $ 114.47 per barrel

Euro/dollar: UP at $1.0532 from $1.0436 at 2030 GMT Monday

Pound/dollar: DOWN at $1.262 from $1.2323

Euro/pound: DOWN at 84.52 pence from 84.67 pence

Dollar/yen: UP at 129.66 from 129.08 yen

The UK government on Tuesday announced its intention to drastically overhaul post-Brexit trade rules in Northern Ireland, arguing the plan was needed to end political paralysis in the territory but risking a trade war with the EU.

The government said it would introduce legislation reforming the so-called Northern Ireland Protocol “in the coming weeks” — unless Brussels caves on its insistence that the pact cannot be rewritten.

The protocol was agreed as part of Britain’s Brexit divorce deal with the European Union, recognising Northern Ireland’s status as a fragile, post-conflict territory that shared the UK’s new land border with an EU member.

Its requirement for checks on goods arriving from England, Scotland and Wales has infuriated pro-UK unionists in Northern Ireland. 

They claim the protocol is undermining their place within the UK and are refusing to join a new post-election power-sharing government in Belfast.

The UK plan would scrap most of the checks, but the government denied it was trashing international law by effectively abrogating a key element of the Brexit deal agreed by Prime Minister Boris Johnson in 2019.

“I think the higher duty of the UK government in international law is to the (1998) Good Friday Agreement and the peace process,” Johnson told reporters.

“We don’t want to nix it (the protocol), we want to fix it, and we will work with our EU partners to do it,” he said.

– ‘Rogue state’ –

But the EU issued no hint that renegotiating the protocol was in the offing, after warning that any UK violation of the Brexit pact could see it hit back with swingeing tariffs.

“The protocol is an international agreement signed by the EU and the UK. Unilateral actions contradicting an international agreement are not acceptable,” European Commission Vice-President Maros Sefcovic said.

The UK plan “raises significant concerns”, he added, warning that the EU “will need to respond with all measures at its disposal” if London goes ahead.

Irish Foreign Minister Simon Coveney said he “deeply” regretted the UK step, which he called “damaging to trust”.

Johnson, however, said a trade war was unlikely at a time when the UK public was grappling with the worst inflationary crisis in a generation.

“But what we have to fix is the problems with the Northern Ireland political situation, where you can’t get the executive up and running,” he said, a day after visiting Belfast for talks with Northern Ireland’s main parties.

The largest pro-British party, the Democratic Unionist Party (DUP), says it will not share power with pro-Irish rivals Sinn Fein until the protocol is reworked.

Its hard line came nearly two weeks after Sinn Fein won a historic victory in elections to the Northern Ireland Assembly, which entitled the party to the role of first minister in a joint regional government with the DUP. 

In the London parliament, DUP leader Jeffrey Donaldson said the UK government’s announcement was a “good start” that could help restore the Belfast executive. But he insisted progress on an actual bill was needed in “days, not weeks”.

For her part, Sinn Fein leader Mary Lou McDonald accused Britain of acting like a “rogue state”. 

– Green or red – 

Keeping the border open with neighbouring Ireland, an EU member, was mandated in the Good Friday Agreement, given the frontier was a frequent flashpoint during three decades of violence in Northern Ireland until 1998.

But it means checks on have to be done elsewhere, to prevent goods getting into the EU single market and customs union by the back door via Northern Ireland.

Under the new plan, the UK intends unilaterally to create a “green channel” for British traders to send goods to Northern Ireland without making any customs declaration to the EU.

The EU would have access to more real-time UK data on the flow of goods, and only businesses intending to trade into the single market via Ireland would be required to make declarations.

The EU would need to trust the UK to monitor the flow, and UK Foreign Secretary Liz Truss vowed “robust penalties” for any companies seeking to abuse the new system. 

The UK plan would also harmonise tax policy between Great Britain and Northern Ireland, which has been unable to benefit from recent tax breaks announced in London given its position in the EU single market.

And it would seek to end oversight of the protocol by the European Court of Justice — another red line for Brussels.

The bill would remove regulatory barriers to goods made to UK standards being sold in Northern Ireland, with businesses able to choose between meeting UK or EU standards in a new “dual regulatory regime”.

Walmart reported a drop in profits Tuesday due to higher costs for labor, food and fuel as it pointed to some consumers shifting away from discretionary items amid high inflation.

Shares tumbled following the report, with profits lagging expectations as Walmart executives described a series of cost hits that converged during the period.

The company was overstaffed for part of the quarter due to the unexpectedly speedy return of workers who were afflicted by the Omicron variant of Covid-19, resulting in higher labor costs.

Walmart was also affected by a spike in energy costs when the Russian invasion of Ukraine sent oil prices soaring.

Another obstacle was a March fire that destroyed a warehouse in Indianapolis, Indiana that employed more than 1,000 people. Nobody was injured in the episode, but Walmart had to replace goods and route items through neighboring infrastructure, adding cost.

Walmart reported a 25 percent drop in profits to $2.1 billion for the quarter ending April 30. That translated into $1.30 per share, below the $1.48 expected by analysts.

Revenues rose 2.4 percent to $141.6 billion.

Walmart raised its full-year sales forecast slightly but lowered its profit forecast. It now expects earnings per share to fall one percent after previously projecting an increase in the mid-single digits.

Chief Executive Doug McMillon acknowledged on a conference call with analysts that the results were “a disappointment to us,” but said, “We’re looking forward to putting it behind us and having a strong year.”

Walmart’s revenue at its massive US namesake stores rose on average just three percent, versus a 5.6 percent jump in the quarter that ended in January, a benchmark known as comparable sales. E-commerce sales growth has also leveled off compared with earlier in the pandemic.

Executives said strong demand for pricey items such as game consoles suggest that some consumers are not cutting back due to inflation.

But other shoppers have shifted behavior as rising prices for gasoline and other necessities pressure consumers, resulting in some people steering more money to staples such as groceries and away from discretionary items such as apparel. 

As a result, Walmart has been adding more promotions in general merchandise, where inventories have risen significantly from a year ago.

Another shift is in the move away from brands for lunch meats, dairy and other goods in favor of Walmart’s own branded goods, which are lower-priced. 

Walmart US President John Furner said the company planned to redouble efforts with food suppliers to limit future price increases.

“We need to do more to control costs, to make sure we can provide good value for our customers,” Furner said on the call.

Walmart shares fell 8.0 percent to $136.32 in early trading.