Every week at the Current we round up the week’s biggest business stories. This week: China cuts rates, low oil cuts airline expenses, Amazon turns a profit despite expectations, VW may have more emission cheating engines, Airbnb offers renters increased liability protections, TD and Scotiabank cut jobs despite profits and Trudeau’s majority boosts markets.
China Cuts Rates
China cut its benchmark interest rate by 0.25 percentage points to 4.35%. The Chinese Central Bank has also indicated that it will hold a smaller proportion of Chinese currency. Both moves are part of a looser monetary policy designed to make money cheaper to borrow in order to boost the lagging Chinese economy. European shares, particularly in the mining sector, immediately went up following the news.
Low Oil, Cheap Flight
Low oil prices and a tax benefit have helped boost United Airlines to a record quarterly profit – $4.82 billion up from $924 million in the third quarter of last year. Low oil prices saved the company $1.19 billion while a tax break saved the company a huge $3.22 billion. Despite the huge increase in profits third quarter revenue was down 2.4% to $10.3 billion.
Amazon reported profits of $79 million in the second quarter of this year. Compared to a loss of $437 million last year. The world’s largest online retailer saw net sales rise 23.2% to $25.36 billion. Investors had expected another loss for the online retailer and Amazon shares jumped 10% at the news.
Tiger Airlines Losses
Singapore based Tiger Airways Holdings reported a S$12.8 million net loss last quarter – compared to a loss of S$182.4 million last year. Tiger offloaded its 40% share in Tigerair Australia to Virgin Australia for $1. The Australian subsidiary had been posting significant losses. Revenue was also up 12.8% to S$167 million. Low fuel prices also helped reduce costs.
More VW Emissions
Volkswagen has said that it will check further diesel engines for emissions test manipulating software. If further vehicles have the software then it could increase the number of over 11 million diesel vehicles that are currently affected. Criminal investigations in Europe have already been launched against the company.
Airbnb – which allows people to rent their homes to other online users – is increasing the level of insurance offered to Canadian users. The Host Protection Insurance program will provide compensation for personal injury liability as well as the existing damage coverage currently offered. The overage will come at no additional cost and covers liability up to $1 million. Meanwhile Quebec has tabled a bill designed to crack down on illegal accommodations. The law will exclude Airbnb users that occasional rent out their room and will focus on long term unlicensed tourist accommodations.
ScotiaBank is aiming to cut 1 500 jobs in a restructuring move. The bank says that it will invest in new technologies while cutting back office and support staff jobs. Scotiabank reported a profit of $1.85 billion last quarter. TD has also been conducting layoffs despite a $2.3 billion profit last quarter.
Liberals boost Loonie
The TSX and Loonie rose following Justin Trudeau’s Liberal Party victory. An initial dip of 0.20 of a percent following the announcement was quickly reversed by almost half a cent. Despite uncertain polls prior to the election, the Liberals emphatic victory has ensured that they will wield a majority government – an added level of stability that could further boost markets. If Trudeau upholds his promise to boost infrastructure spending there could be a knock on benefit to the construction industry. Some commentators are still concerned that Trudeau’s promise to run a deficit and raise certain taxes could have a detrimental effect on the economy – but so far so good.
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