© Reuters. FILE PHOTO: Shipping containers are transported on a Maersk Line vessel through the Suez Canal in Ismailia, Egypt July 7, 2021. Picture taken July 7, 2021. REUTERS/Amr Abdallah Dalsh
By Stine Jacobsen
COPENHAGEN (Reuters) – The chaos that has bedevilled global supply chains in recent months will extend into next year, with a lack of truck drivers preventing hundreds of container vessels from offloading goods around the world, shipping group Maersk said.
“The whole system has become one gigantic bottleneck,” Chief Executive Soren Skou told reporters on Tuesday.
Skou said the biggest problem preventing containers from leaving ports is a lack of labour, particularly drivers of heavy goods vehicles in the United States and Britain despite salaries having been raised “significantly”.
There are 300 container vessels laying idle outside ports, Skou said after Maersk reported robust third-quarter earnings on the back of record freight prices driven by the supply chain problems as the global economy recovers from the coronavirus crisis.
To meet the rising demand, Maersk said it has added more capacity but this could not offset the port congestion that sent third-quarter container volumes down 4% from the same period in pre-pandemic 2019 and slightly below the level in last year’s third quarter.
“A too large proportion of our capacity is tied up lying waiting outside the ports,” Skou said.
Maersk, which handles one in five containers shipped worldwide, said its main ocean business is now expected to grow more slowly than global container demand. The company now expects demand to grow by 7-9% this year, up from previous guidance of 6-8%.
Container demand growth is then expected to slow to 2-4% next year, it said, reflecting normalisation of the burgeoning consumer demand for material goods during the pandemic.
Maersk shares, which have gained 40% this year, were up almost 3% at 1148 GMT.
Maersk also announced that it is buying freight-forwarder Senator International along with two Boeing (NYSE:) aircraft to further the group’s diversification.
The group, which relies on ocean shipping for two thirds of its revenue, aims to expand its services to include more air and land-based freight, hoping to deliver door-to-door logistical solutions to clients such as Walmart (NYSE:) and Puma.
Strong financial results during the pandemic have accelerated the company’s ongoing transformation from a container shipping company to an integrated logistics company.
It said that final third-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) tripled to $6.9 billion compared with a preliminary figure of close to $7 billion issued on Sept. 16 when the company also raised its 2021 forecasts.
Maersk also said it would extend its share buyback programme by an additional $5 billion over 2024 and 2025.
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Morgan Stanley: bear market rally to continue
One of Wall Street’s best-known bears, Michael Wilson, thinks the S&P 500 will rise another 7% before turning down, so the bear market rally will continue for now, writes Market Watch.
After the Dow Jones, S&P 500 and Nasdaq Composite joined their strongest weekly gains since at least May last Friday, Wilson, who is chief strategist and head of U.S. equity markets at Morgan Stanley (NYSE:MS), told clients that there could be another 5% to 7% before the downward trajectory of U.S. stocks resumes during the latest bear market recovery.
Wilson has held a bearish view of the stock market for about 2 years and correctly predicted a sell-off this year.
Wilson explained in a research note sent out to clients on Monday that a pullback in the 38-50% drop in the stock market this year “would not seem like something unnatural, not consistent with the previous bear market rally.”
While growth concerns have triggered a sell-off in commodities and lowered inflation expectations, the fact that the U.S. economy is already slowing and heading toward recession means that any market rally is likely to be short-lived, and U.S. stocks are likely to eventually fall.
Wilson mentioned in the note that the bear market is not over yet, although it may appear otherwise in the next few weeks as the market takes the rate cut as a sign that the Fed can still manage a “soft landing” and prevent a meaningful revision to earnings forecasts.
U.S. stocks rose last week as investors now hope the slowing economy and falling commodity prices may inspire the Fed to raise interest rates less sharply. Federal funds futures, a derivative used by investors to bet on the pace of the Fed’s monetary policy changes, estimate with a high probability that the Fed will be forced to start cutting interest rates again as soon as next summer.
They also consider the lower peak in the federal funds rate: it will peak around 3.5% at the end of 2022 instead of 3.75% just a couple of weeks ago. Wilson also pointed out the drop in Treasury yields: the 10-year Treasury bond yield went from 3.230% to a low of 3.07% on Friday before rebonding again on Monday.
Wilson expects the S&P 500 index to fall to around 3,400 points if the U.S. Federal Reserve manages to get a “soft landing” for the economy — which Fed Chairman Jerome Powell said last week would be “a very difficult thing to do.”
Wilson expects that if the U.S. economy plunges into recession, the S&P 500 index will fall to around 3,000 points. In any case, Wilson believes that U.S. stocks are still highly valued because the risk premium — that is, the measure of compensation that investors receive for the extra risk of owning stocks instead of bonds — remains about 300 basis points higher than the 10-year Treasury bond yield, which is considered a “risk-free rate.”
Easing chip shortages to help Volkswagen in H2 – CEO
© Reuters. FILE PHOTO: Volkswagen logo is pictured at the 2022 New York International Auto Show, in Manhattan, New York City, U.S., April 13, 2022. REUTERS/Brendan McDermid/File Photo
BERLIN (Reuters) – Volkswagen (ETR:VOWG_p) sees a strong second half of 2022 and expects progress in catching up with rival Tesla (NASDAQ:TSLA) as easing chip shortages start to offset supply chain bottlenecks and rising costs, the carmaker’s CEO said on Tuesday.
“We are earning more than ever,” Chief Executive Herbert Diess said at a works meeting, adding Volkswagen is ramping up electric vehicle volumes in its biggest markets in Germany and China thanks to easing semiconductor shortages.
This should allow the carmaker to narrow the Volkswagen-Tesla gap this year and meet its goal of becoming market leader by 2025 if it seizes the moment while the U.S. electric car maker burns cash on large investments, the CEO said.
“Elon (Musk) has to ramp up two highly complex factories in Austin and Gruenheide at the same time – as well as expand production in Shanghai. That’s going to take strength out of him,” Diess said.
Reliance Chairman Mukesh Ambani steps down as director of telecom arm
© Reuters. FILE PHOTO: Mukesh Ambani, Chairman and Managing Director of Reliance Industries, arrives to address the company’s annual general meeting in Mumbai, India July 5, 2018. REUTERS/Francis Mascarenhas
BENGALURU (Reuters) – Reliance Industries Chairman Mukesh Ambani has stepped down as director of Reliance Jio Infocomm Ltd, the conglomerate’s telecom arm said on Tuesday.
Reliance Jio said https://refini.tv/3Nrs773 it has appointed Mukesh’s son and non-executive director Akash Ambani as the chairman of its board. Akash has been involved with the telecom unit since its launch in late 2016, where he started as a director.
India’s telecoms sector had been upended after the entry of Jio, which triggered a price war that forced some rivals out of the market and turned profits into losses.
Jio, which started out offering mobile teleservices, has been aggressively investing in services like internet broadband and forging ties with handset makers to launch low-cost smartphones and providing 5G services.
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