Shinzo Abe, Japan’s prime minister, speaks during a meeting with council members of the Keidanren business lobby in Tokyo, Japan, on Wednesday, Dec. 26, 2018.
Tomohiro Ohsumi | Bloomberg | Getty Images
Japanese Prime Minister Shinzo Abe is in Iran for a two-day mission with clear goals: to secure his country’s energy supply, and to bring adversaries Iran and the U.S. to the negotiating table.
Both are challenging feats, and they require Abe — an ally of President Donald Trump and the first Japanese prime minister to visit Iran since its 1979 Islamic Revolution — to walk a thin tightrope between Japan’s economic needs and its maintenance of geopolitical relationships.
Japan imports nearly all of its oil, and most of it from the Middle East, so sanctions on Iranian crude and potential instability in the region threaten its economy. But it also doesn’t want to anger the U.S., its most powerful ally and security partner.
Abe is slated to meet with Iranian Supreme Leader Ayatollah Ali Khamenei and President Hassan Rouhani, and may well attempt to persuade them not to abandon the Iranian nuclear deal, from which the U.S. withdrew in May of last year. Trump gave Abe the green light for his visit, saying last month, “I know for a fact that the prime minister is very close with the leadership of Iran, and we’ll see what happens. That would be fine.”
Henry Rome, an Iran analyst and political risk consultancy Eurasia Group is skeptical of progress.
“While the meetings may help ease tensions in the short term, Abe will likely fail to convince Iranian leaders to negotiate directly or indirectly with Washington,” he said in a research note Monday.
Economically cornered, Iranians still largely remain “firmly opposed” to talks with the Trump administration, Rome added. Trump has openly suggested talks with Iranian leaders, who criticize the U.S. for being insincere and engaging in what they describe as provocative escalation.
“As we have argued over the past year, the main barrier to talks between the US and Iran is Tehran,” Rome said. “Abe has little shot at convincing Iranian leaders to abandon this policy.” Khamenei has vocally urged against negotiating with Washington, stressing in recent speeches that to negotiate would mean “losing absolutely.”
A clean slate: Japan’s track record of diplomacy
Tensions have escalated rapidly between Tehran and Washington after the White House blamed a number of regional attacks in recent weeks on Iran. The U.S. is deploying additional military hardware and troops to the Gulf region while economic sanctions have crippled parts of Iran’s economy, including oil exports.
Trump withdrew from the 2015 Iranian nuclear deal in May of last year and has been tightening sanctions on the country ever since. Now that Iran sees dwindling benefit to the deal that was supposed to give it economic relief in exchange for limits to its nuclear program, it has threatened to return to higher levels of uranium enrichment, sparking acute concern across the international community.
The Nimitz-class aircraft carrier USS Abraham Lincoln transits the Indian Ocean in this U.S. Navy handout photo dated January 18, 2012. The carrier sailed through the Strait of Hormuz and into the Gulf without incident on Sunday, a day after Iran backed away from an earlier threat to take action if an American carrier returned to the strategic waterway.
U.S. Navy | Chief Mass Communication Specialist Eric S. Powell/Handout | Reuters
In addition to pursuing some sort of path to de-escalation, Abe seeks to showcase Japan’s diplomatic influence on the world stage.
In 1983, Abe’s father, then Japan’s Foreign Minister Shintaro Abe, visited Tehran in an attempt to mediate between Iran and Iraq during the two countries’ brutal war, and the younger Abe accompanied him as a secretary. Iran and Japan have a long history of cooperation, even during that war against the U.S.’s wishes — meaning it has something of a clean slate diplomatically.
The ball for negotiations in Iran’s court?
There are obvious economic interests too. Oil makes up 97% of Japan’s imports from Iran, according to the Japanese finance ministry. But Iranian crude made up only 4% of Japan’s total oil imports last year, dwarfed by imports from Saudi Arabia, the United Arab Emirates and Qatar. Market forecasters expect Japan to fully cease its Iran imports as required by U.S. sanctions.
Still, the energy dynamic remains a part of Abe’s outreach. Tokyo’s considerations include “its own energy policy, stability in the region, a diversified source of oil imports,” Waqas Adenwala, an analyst at the Economist Intelligence Unit, told CNBC’s Capital Connection on Wednesday.
“But it also has the short-term goal of having a very successful foreign policy page front.”
By that measure, Adenwala said, Abe hopes to boost support at home ahead of his hosting of the G20 Summit in Osaka at the end of June and parliamentary elections scheduled for late July.
And despite Tehran’s apparent unwillingness to engage with the White House, “Iran does want to lower tensions with the US,” Rome said. “It has little to lose by engaging with Abe.”
Q2 net profit falls 18% amid Popular costs
Santander said on Tuesday second-quarter net profit fell 18% from a year earlier, due to one-off restructuring costs from its acquisition of troubled lender Banco Popular and a weak performance in Britain.
The euro zone’s largest bank in terms of market cap — which took over Banco Popular in June 2017 — reported a net profit of 1.39 billion euros ($1.56 billion) for the April to June period, topping analysts’ expectation of 1.29 billion euros in a Reuters poll.
Steady growth in Latin America business volumes, where it makes 46% of its earnings, was not enough to offset charges of 706 million euros, mainly in Spain.
Like its European rivals, Santander is struggling to lift earnings from loans in its home market with interest rates hovering at historic lows.
“We have delivered the strongest underlying quarterly performance in over 8 years, reflecting the progress that we have made in our commercial and digital transformation,” Jose Garcia Cantera, chief financial officer of Santander, told CNBC’s “Squawk Box Europe.”
“Our businesses in both North and South America continue to perform extremely well and while the charges relating to ongoing infrastructure in Europe have impacted attributable profit — something that we anticipated — we are already starting to see the value that this will create going forward,” Cantera said.
Net interest income, a measure of earnings on loans minus deposit costs, was 8.95 billion euros, up 5.6% from the second quarter of last year and 3.1% higher against the previous quarter due to a solid lending growth in Latin America.
Analysts had forecast a NII of 8.76 billion euros.
In Britain, its third-largest region, profit fell 41%, partly due to restructuring costs of 26 million euros and provisions of 80 million euros.
Santander ended the quarter with a core Tier-1 capital ratio, a closely watched measure of a bank’s strength, of 11.3%, compared with 11.23% in the previous quarter.
Shares of the bank were up over 2% shortly after the opening bell.
Coca-Cola raises revenue forecast after earnings beat
Coca-Cola on Tuesday reported quarterly earnings and revenue that beat analysts’ expectations, driven by sales of its namesake soda brand.
Shares of the company jumped 5.6% in early trading. The beverage giant’s stock, which has a market value of $230.6 billion, is up 14% in 2019. Shares of rival PepsiCo, which are valued at $182.8 billion, have been closing the gap with Coke, rising 18% over the same period.
“Our strategy to transform as a total beverage company has allowed us to continue to win in a growing and vibrant industry,” CEO James Quincey said in a statement.
Here’s what the company reported for its fiscal second quarter compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Adjusted earnings per share: 63 cents, adjusted, vs. 61 cents expected
- Revenue: $10 billion vs. $9.99 billion expected
The beverage giant reported net income of $2.61 billion, or 61 cents per share, up from $2.32 billion, or 54 cents per share, a year earlier.
Excluding items, Coke earned 63 cents per share, topping the 61 cents per share expected by analysts surveyed by Refinitiv.
Net sales rose 6% to $10 billion, narrowly beating expectations of $9.99 billion. Coke raised its full-year outlook for revenue and now expects organic revenue growth of 5% rather than 4%.
“We think the dollar is towards the end of a strong cycle,” CFO John Murphy said.
The company attributed its strong performance during the quarter to 4% volume and transaction growth in Coke’s namesake brand. Its Zero Sugar line once again saw double-digit volume growth across the globe.
Quincey told analysts that nearly 25% of the company’s revenue now comes from new or reformulated beverages, up from 15% just two years ago.
During its second quarter, Coke partnered with Netflix to bring back New Coke and help promote the third season of “Stranger Things.” It also rolled out Coca-Cola Plus Coffee in more markets, as the company expands into different kinds of caffeinated drinks.
That includes Coke’s first energy drink under the Coca-Cola brand. Coca-Cola Energy uses caffeine from naturally derived sources and is available in 14 countries, including Japan and South Africa. By the end of 2019, the beverage giant plans to bring it to Mexico, Brazil and four more countries.
Quincey declined to share any plans to sell Coca-Cola Energy in the U.S. but said it would benefit the company to wait to learn more from early markets before entering its home market. In July, an arbitrator ruled that Coke can peddle the energy drink under the terms of its contract with Monster Beverage.
The company has also launched its first product line with Costa Coffee since it acquired the U.K. coffee brand in January for $4.9 billion. The canned coffee drinks contain double shots of espresso and will launch in Poland and China this year. There are no plans to introduce the ready-to-drink coffee beverages in the U.S.
Coke reiterated its fiscal 2019 earnings forecast, saying that earnings per share could fall or rise by 1%. The company had pointed to currency fluctuations, Fed rate hikes and changing tax rates as reasons for its gloomy earnings projection. Murphy told analysts on the conference call Tuesday that “currencies have gotten worse,” but he expects a more “benign” currency environment in 2020.
Net sales in the Asia Pacific and Europe, Middle East and Africa segments were flat for the quarter, largely due to the impact of currency. Revenue in Latin America fell 6% because of a 13% currency headwind, although Coke said it had strong performance in Mexico and Brazil. Quincey told analysts that Mexico’s economic growth is slowing, so the company is tweaking its strategy for the country.
North America was the only region to reported net revenue growth. Price hikes and packaging initiatives helped propel revenue growth of 2%. The company said that it saw strong performance from soda, water, sports drinks, juices and dairy and plant-based beverages.
Correction: An earlier version misstated the amount of the Costa deal. It was $4.9 billion when it closed, according to a Coca-Cola spokesperson.
Daimler, Bosch get green light for automated valet parking system
Daimler and Bosch have been granted approval to roll out an automated parking system in Stuttgart, Germany.
In an announcement Tuesday, German auto giant Daimler said that the automated valet service would be introduced at the parking garage of the Mercedes-Benz Museum. It will be accessed using a smartphone app and will not need a safety driver.
Daimler said that the system was the “world’s first fully automated driverless SAE Level 4 parking function to be officially approved for everyday use.”
Five “levels” of driving automation have been defined by SAE International, a global association of over 128,000 engineers and technical experts. At Level 4, a vehicle can drive itself under limited conditions and “will not operate unless all required conditions are met.” At Level 5, a vehicle’s automated driving features can drive it under all conditions.
Michael Hafner, who is head of drive technologies and automated driving at Daimler, said in a statement Tuesday that gaining approval from authorities in Baden-Wurttemberg set “a precedent for obtaining approval in the future for the parking service in parking garages around the world.”
Hafner went on to add that the project paved the way “for automated valet parking to go into mass production in the future.”
The infrastructure for the system in Stuttgart has been supplied by Bosch, with Daimler providing the technology in the vehicles, which display turquoise lighting to indicate they are in driverless mode.
When the driver of a vehicle with the appropriate technology reaches the car park, they get out and use their smartphone to send their car to a space. The vehicle then drives to that space and parks up.
Sensors from Bosch assess the “driving corridor” of the garage and its surroundings, sending the vehicle all the information it needs. The vehicle processes this data to plot its maneuvers and route, driving up and down ramps to move through the garage if required. If an obstacle is detected, the vehicle will stop.
Around the world, major businesses are working to develop autonomous driving systems. It was only last week that another car giant, Groupe PSA, announced it was conducting tests in the Spanish city of Vigo to “advance the development of autonomous driving”.
The collaboration with the Automotive Technology Centre of Galicia will focus on a number of areas, including the protection of vulnerable users; automated valet parking; autonomous driving in urban areas; and “optimal speed regulation” when vehicles approach traffic lights.
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