Every week at the Current we round up the world’s biggest business stories. This week; Barclays’ nets huge profits despite legal woes; Volkswagen profits and edges Toyota to become 3rd largest automaker; Twitter surpasses expectations, but not good enough for boss; America’s economic strength could prompt Fed to raise rates; low oil causes Shell layoffs; Kenya’s airline hit by tourism decline; Apple is up, Microsoft is down; gold prices at five year low.
British Banking Giant Barclays reported a 25% surge in pre-tax profits. The figures show that the bank earned £3.1bn for the first two quarters of 2015. The profits come despite a number of trading scandals that have damaged the bank’s reputation and resulted in large fines. Anticipating further legal battles, Barclays has already set aside an additional £850m to compensate customers.
Volkswagen also showed a rise in profits, despite a slowdown in demand in some key markets. The German automaker saw profits rise by almost 5% to 3.49 billion euros in the second quarter of this year. Competition, exchange rates and other factors could stunt the automakers profits going forward, despite recently surpassing Toyota to become the world’s 3rd largest automaker.
Twitter beats forecast
Twitter punched above its weight and surpassed expectations by reporting revenue of just over half a billion dollars, beating its own forecast of $485 million. Revenue is up 61% year-on-year but co-founder Jack Dorsey has insisted that he is not yet satisfied with the company’s growth.
America continues to go from strength to strength releasing second quarter growth figures of 2.3%. Increased spending from consumers, cheaper fuel prices and other factors have spurred the economy ahead, despite the high value of the dollar potentially hurting exports. The figures prompted speculation that the Fed could raise interest rates as soon as September.
Low oil layoffs
Low oil prices have continued to take a toll on the industry as Royal Dutch Shell axed 6,500 jobs in an attempt to cut expenditure as part of a larger $4bn cut in operating expenses. Profits have dropped 35%, relative to last year, to $3.4bn. The oil giant currently employs 94,000 people globally.
Kenya Airways, one of Africa’s largest and most advanced airlines, has announced a loss of $290m. Increased instability in East Africa has taken a huge toll on Kenya’s once highly profitable tourism industry.
Apple up, Microsoft Down
Apple’s profits are up 39% year on year to 10.7bn thanks, in part, to an increase in sales to China of over 110%. Meanwhile Microsoft has reported a net loss of $3.2bn in the three months ending in June. The disappointing quarterly results are largely as a result of its failed investment in Nokias phone business. Xbox, tablet and cloud sales, meanwhile, have continued to hold strong for Microsoft.
Gold prices low
Gold prices hit a 5 year low to $1090 an ounce. The fall comes as a result of the Federal Reserve’s likely rates hike – which would boost the strength of the USD and attract investors from gold to the greenback – and a disappointingly small purchase of gold by the Chinese government. Gold speculators had believed that the Chinese government would seek to greatly increase its gold reserves as the country attempts to increase the attractiveness of the yuan as a trading currency. A strong stock market, combined with a strong greenback (and looming rates hike) mean that investment in gold is low – if stock prices begin to fall, and the dollar weakens then gold prices will likely surge again.
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