China's hottest startup is flatlining

• Rob Price
 

• 8h
• 2,982

Etienne Oliveau/Getty ImagesLei Jun, the chairman and CEO of Xiaomi Technology and the chairman of Kingsoft Corp.

Xiaomi was once the most valuable tech startup in the world. Now it's flatlining.

The Chinese smartphone and electronics company's revenues barely grew in 2015, according to a new report from Fortune, as it struggles to grow its business globally amid a slowdown in the Chinese smartphone market.

Xiaomi launched in 2010, and it has enjoyed meteoric growth: By the end of 2014, it was the officially the world's most valuable technology startup, with a private valuation of more than $46 billion. (It has now No. 2 behind Uber.)

Specialising in cheap, high-quality smartphones, it grew off the back of an unusually passionate fan base, which it was careful to cultivate; liberal borrowing from Apple's playbook, including charismatic CEO keynote speeches; and a booming market in China for smartphones.

The company set an ambitious target for 2015: Sell 100 million smartphones. But by July, as sales began to slow, it started to become clear that it just wouldn't happen.

It ultimately sold "over 70 million," according to a company representative.

Scott Cendrowski of Fortune, citing an investor and a company representative, now has the scoop on revenue figures, and they don't make pleasant reading for the company.

• Overall revenue for 2015 was 78 billion yuan ($11.9 billion), up 5% on 74.3 billion yuan ($11.3 billion) in 2014, well short of a 100 billion yuan target for the year.
• Internet services revenue reached $560 million versus $1 billion predicted.

A Xiaomi representative told Business Insider: "We are not able to comment on the revenue figure mentioned. What we have shared is that we sold over 70 million smartphones in 2015 despite the shrinking of the overall China smartphone market."

After years of double-digit growth, China's smartphone market has now significantly cooled. In 2015, 434 million devices shipped, according to IDC — just 2.5% year-on-year growth. Xiaomi has launched in other territories, including in Latin America, but it has been unable to replicate the runaway success of its home market.

Xiaomi's days as a rising star of the tech world may now be behind it: With its global ambitions muted by lack of growth, it's now just another phone company.

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Deutsche Bank's credit rating was downgraded to 2 notches above junk

• Ben Moshinsky
 

• 9h
• 592

Thomson ReutersDeutsche Bank Chief Executive Cryan addresses a news conference in Frankfurt

Deutsche Bank's credit rating was lowered by Moody's on Monday,citing difficulties with the lender's plan to stabilise itself in a world of low growth and low interest rates.

The bank's credit rating for senior unsecured debt, which is not backed by collateral but is ahead of junior debt in the queue for assets in the event of bankruptcy, was lowered to two notches above junk.

Moody's gave it a Baa2 rating, down from Baa1, and also downgraded the lender's long-term deposit rating from A3 to A2.

Moody's said: "Deutsche Bank's performance over the last several quarters has been weak, and substantial operating headwinds, including continuing low interest rates and macroeconomic uncertainty, will challenge the firm."

"These forces will likely result in periods of subdued customer volumes and revenues within Deutsche Bank's retail, asset management and institutional franchises, in Moody's view."

Deutsche Bank has tried to simplify its business, cut costs and reduce litigation and fines from poor conduct, as part of a plan started in October last year.

The firm has scaled back on businesses that use a lot of regulatory capital, such as trading and markets, to free up resources. But CEO John Cryan has had poor luck with timing, according to Moody's, because sluggish economic growth and low interest rates have made it harder for the bank to generate profit during its restructuring.

"Deutsche Bank's new management team is executing in a disciplined way, but the headwinds have stiffened, reducing the firm's operating flexibility," said Peter Nerby, a Moody's senior vice president.

Net income at Deutsche Bank fell 58% in the first quarter of 2016 to €236 million (£183 million) from €559 million (£432.2 million) in the same period (January to March) last year.Group revenue was down 22% and key investment banking areas of debt and equity sales and trading suffered 29% drops.

John Cryan said: “Financial markets were challenging during the first quarter, largely reflecting concerns about the outlook for the global economy."

"This uncertainty led to a decline in client activity in the capital markets, and our revenues fell from the prior year, most notably in our trading and corporate finance businesses,” Cryan said last month.

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The pound is charging after the latest Brexit poll showed remain building a huge lead

• Will Martin
 

• 4h
• 638

Reuters/Phil Noble

The British pound is on a charge on Tuesday after a new Brexit poll showed that the Remain campaign is moving further into the lead ahead of the UK's EU referendum, which is now less than a month away.

On Tuesday morning, a poll conducted by the ORB for the Daily Telegraph showed that 55% of people now back staying in the EU, compared to just 42% wanting to leave.

The poll calmed nervy currency traders, and caused the pound to rocket higher, gaining nearly 0.5% against the dollar at around 9:00 a.m. BST (4:00 a.m. ET).

Since then, it has continued to soar, and as of around 12:40 p.m. BST (7:40 a.m. ET) is up just shy of 0.9%. Here's how it looks:

Investing.com

ORB's poll was good news for currency traders, who are generally worried about the potential impacts of Brexit on Britain's currency. Various warnings, from everyone from currency traders all the way to the IMF, have suggested that Sterling could crash as much as 15%-20% after a Brexit vote.

One of the key findings of the poll was not just that remain has a big lead, but also that many of the key demographics expected to back Brexit — like men, pensioners, and Conservative voters— are now increasingly likely to vote to remain in the EU.

The pound slumped early in 2016, hitting a near ten-year low in February after former Mayor of London Boris Johnson made his much-anticipated decision to back Brexit. Since then however, it has climbed by more than 5%, as worries about Brexit have waned somewhat. Earlier in May for example, it was reported that traders no longer fear that Britain will leave the EU.

NOW WATCH: How one simple mistake cost 'Real Housewives' superstar Bethenny Frankel millions

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The 'black swan event' that could send oil to $25 a barrel

• Elena Holodny
 
•  

• 15h
• 28,213
 
• 17

Noel Reynolds / Flickr

Oil's had a pretty good year.

The commodity's seen a nice rally in light of a weaker US dollar, stronger economic data from China, decreasing non-OPEC production, and a continued rise in demand.

WTI crude and Brent crude were around $48 per barrel on Monday, well above their lows below $30 per barrel earlier this year.

But all of that may come crashing down if one "black swan event" transpires, argued a Bank of America Merrill Lynch global-commodities research team.

From their recent note to clients (emphasis added):

Global GDP in US dollar terms at market exchange rates is stagnant. Continued US dollar strength could force Saudi Arabia either to cut oil production modestly and push Brent back to $50 or de-peg the Saudi riyal, our black swan event, which could lead Brent to collapse to $25/bbl.

While this certainly sounds ominous for the oil market, it's worth noting that analysts and financiers are split on whether the Saudis will actually de-peg their currency and undo the current fixed exchange rate with the US dollar.

Capital Economics' Middle East economist, Jason Tuvey, previously argued that his team's long-term view continues to be that the riyal's peg against the dollar will remain intact.

On the flip side, Zach Schreiber, CEO of PointState Capital who made $1 billion betting against oil two years ago, noted that he's short the currency against the US dollar, arguing that the lower-for-longer oil-price environment and growing costs will ultimately lead the kingdom to abandon its three-decade-old currency peg.

But as for the dollar, several analysts think that its recovery is just getting started, and that it has more room to advance this year.

As an end note, we should add that it's a bit of a faux pas to call this forecast a black swan, given that black-swan risks are, by definition, nearly impossible to see coming.

But when they materialize, it's bad — and that's the point BAML's commodities research team seems to be making.

Investing.com

SEE ALSO: Nigeria is headed for a 'full-blown economic crisis'

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HOUSING IN FOCUS: Your complete preview of the week's big economic events

• Myles Udland
 
•  

• 8h
• 1,999

Dan Zen/Flickr

That was a lot of work to go nowhere. 

Stocks finished slightly higher last week, breaking a three-week trend of down weeks, but it wasn't without some big swings as Federal Reserve commentary and a final trickle of US corporate earnings gave markets plenty to react to. 

The big story last week was the return of "Fedspeak" as a market-moving catalyst. 

Meanwhile the retail sector continued to reveal poor results in the first quarter, though Walmart investors rewarded the company handsomely for a better-than-expected first quarter result that sent shares up by about 10% on Thursday.

This week's earnings calendar slows down a bit and the economic calendar remains modest, with readings on the housing and manufacturing sectors dominating before the second estimate of first quarter US GDP growth comes in on Friday.

Top Stories

• The Fed came roaring back to life this week. After what seemed like months of markets knowing what the Federal Reserve was going to do next — short answer: nothing — a number of Fed officials this week signaled that more aggressive moves to raise interest rates could be coming. And soon. The action started on Tuesday with commentary from Atlanta Fed president Dennis Lockhart and San Francisco Fed chief John Williams, who suggested two or three rates hikes might be appropriate in a conversation with Politico. Then came Wednesday's Fed minutes, which suggested a progressing-as-expected economy might be enough to push the Fed towards raising interest rates in June. On Thursday we heard from Richmond Fed president Jeffrey Lacker and New York Fed president Bill Dudley, both of whom suggested markets are under-appreciating the likelihood that the Federal Reserve moves more aggressively on raising interest rates this year.
  
  In an interview on Bloomberg Radio Thursday morning, Lacker said he supported an interest rate hike at the Fed's April meeting and thinks the case for raising interest rates in June would be "very strong." Lacker is not a voter on the Federal Open Market Committee (FOMC), the committee that votes and determines actual policy decisions. Lacker added that he thinks markets took "the wrong signal from us pausing in March and April" as a sign additional rate hikes in 2016 were off the table. He added that he's "comfortable" with four rate hikes this year. Markets are expecting one.
  
  Dudley also emphasized that June is a "live meeting," something Fed chair Janet Yellen has stressed in recent communications though markets by and large discount this idea. Dudley added that if the economy follows his forecast then an additional rate hike in June or July — the Fed meets in both months — "is a reasonable expectation." Dudley is an FOMC voter. Many in markets had become are quick to dismiss jawboning from Fed officials as merely that, but the recent ramp-up in hawkish communication from the Fed is clearly in reaction to a market that had, in the Fed's mind, become too complacentwith respect to the Fed's stated intentions.  And as Akin Oyedele wrote on Saturday, the Fed risks getting stuck in a perpetual cycle of reacting to the market's reaction to the Fed. Perhaps a June rate hike would snap us out of the "doom loop" so elegantly outline by Bank of America. Bank of America Merrill Lynch

Economic Calendar

• Markit flash manufacturing PMI (Mon.): The preliminary reading on US manufacturing activity in May is set to cross the tape at 9:45 a.m. ET on Monday with Markit's flash PMI expected to hit 51.0. This would be an improvement from the final reading of 50.8 for this measure in April, indicating a continued, but still modest, expansion of activity in the US manufacturing sector.
• Richmond Fed Manufacturing (Tues.): The May reading on manufacturing activity in the Richmond area is expected at 10:00 a.m. ET on Tuesday. The Richmond Fed's manufacturing index should hit 8 this month, down from 14 in April but indicating an increase in activity during the month.
• New Home Sales (Tues.): New home sales likely rose 2% in April to an annualized pace of 521,000 after March's number saw a 1.5% decline in the pace of sales to 511,000. This number from the Census Bureau is due out at 10:00 a.m. ET on Tuesday.
• Trade Balance (Weds.): The US trade deficit is expected to have widened slightly in April to $60 billion, up from the $56.9 billion deficit seen in March.
• FHFA Home Prince Index (Weds.): The Federal Housing Finance Agency's reading on home price increases in March is expected to show a 0.5% appreciation in prices, better than the 0.4% increase seen in February. This report, due out at 9:00 a.m. ET on Wednesday, will also give us data on how much home prices rose in the first quarter of the year.
• Markit flash services PMI (Weds.): The preliminary reading on US service sector activity in May is expected to cross at 9:45 a.m. ET on Wednesday, and economists expected this reading will rise to 53.0 from 52.8 at the end of April.
• Initial Jobless Claims (Thurs.): The weekly report on initial jobless claims should show new filing for unemployment insurance totaled 275,000 last week, down slightly from the 278,000 seen the week prior and still a slight uptick from recent readings.
• Durable Goods Orders (Thurs.): Durable goods orders are expected to rise 0.4% in April, down from the 1.3% increase seen in March. Excluding airline and defense orders, durable goods orders should rise 0.3% in April.
• Pending Home Sales (Thurs.): Economists expect the number of homes under contract in April will rise 0.7% from the prior month when the National Association of Realtors' latest pending home sales report comes out at 10:00 a.m. ET on Thursday.
• First Quarter GDP, Second Estimate (Fri.): The second estimate of first quarter GDP growth is expected to show the US economy grew 0.9% to start the year, up from the 0.5% indicated in the first estimate of this number. Personal consumption is also expected to be revised up, to growth of 2.1% from 1.9% at first blush, while both GDP prices on a headline and "core" basis — excluding food and energy — are expected to be unchanged. 
• University of Michigan Consumer Confidence (Fri.): The final reading on consumer confidence in May from the University of Michigan is expected to come in at 95.5 when the report is released Friday morning. This follows May's preliminary reading of 95.8, which was a huge beat relative to expectations after this measure pulled back some in April.

Market Commentary

Markets are about trust.

And the one thing markets are missing right now is exactly that.

On Sunday, Linette Lopez summarized all the ways markets right now are sort of almost maybe functioning as well as some would like, but that there's still some little piece missing. And that piece is trust, true belief that markets are working and yielding the sorts of economic outcomes (read: growth) you'd hope to achieve. 

Citing commentary from luminaries such as Goldman Sachs CEO Lloyd Blankfein and Bank of England economist Andy Haldane — who is probably the most creative thinker among major central bank officials in the world — Linette outlines a world of confidence, and perhaps even conviction in markets, but one that lacks trust, an ultimate faith that the system works and that the system will hold. 

"Evidence has emerged, both micro and macro, to suggest trust may play a crucial role in value creation. At the micro level, there is now ample evidence the degree of trust or social capital within a company contributes positively to its value creation capacity," Haldane said in a speech on Wednesday titled "The Great Divide."

"At the macro level, there is now a strong body of evidence, looking across a large range of countries and over long periods of time, that high levels of trust and co-operation are associated with higher economic growth.

"Put differently, a lack of trust jeopardizes one of finance’s key societal functions — higher growth." 

Economists at the IMF expect the world economy will grow 3.2%. Not great, but not terrible.

And while many economists and observers will cite things like political instability or demographic trends as reasons for a lack of robust economic growth, it seems that a missing baseline belief that our current systems are something we can believe is the single-biggest missing ingredient right now. 

SEE ALSO: American companies are 'masking' a $6.6 trillion pile of debt

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Bayer is making a $62 billion move for Monsanto

• Ludwig Burger and Georgina Prodhan, Reuters

• 13h
• 5,313
 
• 2

REUTERS/Wolfgang RattayMarijn Dekkers, left, the outgoing CEO, and Werner Baumann, the new CEO of the German pharmaceutical and chemical maker Bayer AG at the annual general meeting in Cologne, Germany, on April 29.

FRANKFURT, Germany — The German drugs and crop chemicals group Bayer has offered to buy the US seeds company Monsanto for $62 billion in cash, including debt, which would be the biggest foreign takeover by a German firm if the unsolicited proposal is accepted.

The move, which would create the world's largest farm supplier, eclipsing a planned combination of Dow Chemical and DuPont's agriculture units, comes just three weeks after Werner Baumann took over as Bayer CEO and has been condemned by a major shareholder as "arrogant empire-building."

The offer of $122 a share represents a 37% premium to Monsanto's share price before rumors of a bid emerged.

"We fully expect a positive answer of the Monsanto board of directors," Baumann told reporters on a conference call on Monday, describing criticism from investors as "an uneducated reaction in the media," driven by an element of surprise.

Monsanto, which said last week it had a received an approach from Bayer but gave no details, has yet to comment on the offer.

Baumann is staking his claim as the global agrochemicals industry races to consolidate, partly in response to a drop in commodity prices that has hit farm incomes and also because of the growing convergence between seeds and pesticides markets.

ChemChina is buying Switzerland's Syngenta for $43 billion after Syngenta rejected a bid from Monsanto, while Dow and DuPont are forging a $130 billion business.

The German chemicals group BASF has also been exploring a tie-up with Monsanto but is seen as unlikely to counter bid, sources close to the matter have said. BASF declined to comment on Monday.

Shares in Bayer, which had already fallen 14% since rumors of a bid emerged last week, dropped as much as 3.6% on Monday to a new 2-1/- year low of 86.3 euros.

The offer values Monsanto at 15.8 times its earnings before interest, tax, depreciation, and amortization for the year that ended February 29.

Brent Stirton/Getty ImagesResearch biologist Heidi Windler taking tissue samples from genetically modified corn plants inside a climate chamber housed in Monsanto agribusiness headquarters in St Louis in 2009.

'Upper limit'

Markus Manns, a fund manager at Union Investment, Bayer's 14th-biggest investor, said a deal made sense but not at any price.

"The price that has now been disclosed is at the upper limit and it is just about economical," he said. "Should it rise further, which is to be assumed, the takeover will become increasingly unattractive."

Equinet analyst Marietta Miemietz, who has a "buy" rating on Bayer stock, said: "While the leverage appears to be manageable from a (credit) ratings perspective, we believe that it would curtail Bayer's strategic flexibility in the Healthcare space."

Baumann said Bayer would continue to develop its healthcare business, which includes the stroke-prevention pill Xarelto and aspirin, the painkiller it invented more than a century ago.

"We are not feeding Peter by starving Paul here," he said, adding that no asset sales were planned to help pay for the deal.

Bayer said it would finance the bid with a combination of debt and equity, primarily a share sale to existing investors. Equity would account for about a quarter of the deal value.

The German company expects synergies to boost annual earnings by about $1.5 billion after three years, plus additional future benefits from integrated product offerings, a reference to Bayer's push to combine the development and sale of seeds and crop protection chemicals.

(Reporting by Maria Sheahan, Ludwig Burger and Patricia Weiss; Writing by Ludwig Burger and Georgina Prodhan; Editing by Edwina Gibbs and Mark Potter)

Read the original article on Reuters. Copyright 2016. Follow Reuters on Twitter.

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• Bayer is making a move for Monsanto

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The Breakthrough in Renewable Energy (Video)

The Breakthrough in Renewable Energy

2016

Clean energy is becoming less exotic and more practical than ever before thanks to the efforts of a few key countries. Collectively, they're greasing the wheels for a worldwide revolution. The Breakthrough in Renewable Energy, a new documentary produced by the acclaimed VPRO Backlight series, takes us inside the corporate offices and production lines where this groundbreaking work is being done, and examines what it could mean for the future of energy consumption on Earth.

What main factor will ultimately determine the widespread acceptance and use of solar and wind energy? In a word: cost. Once upon a time, investments in these alternative energy sources were considered an extremely risky proposition. After all, the cost to the consumers was many times that of energy powered by natural gas and other traditional fossil fuels. However, as argued by the film's impressive panel of expert industrialists and other energy entrepreneurs, new and untested technologies are always priced high on the outset. Once the research, innovation and production of these technologies begin to progress and mature, the costs go down. This is where the industry stands today.

The filmmakers travel the globe to discover where these seismic advancements are taking place. In China, where air pollution has reached catastrophic levels, the government has made unprecedented investments in the development of solar and wind powered technologies. Their efforts are beginning to pay off in a big way, and reverberate throughout the rest of the world. Thanks to increased production savvy and volume, the cost of solar energy has now dipped by more than 80%, and wind energy has decreased by 50%. As the cost of these resources begin to fall well below that of natural gas, how long will it take for other regions of the world to opt in?

The industry's fight to acquire the hearts and minds of consumers can only be won through simple economics; consumers will begin to embrace green technologies when the dollars make sense. With great insight and access, The Breakthrough in Renewable Energy shows us how this battle is being waged and won everywhere from Abu Dhabi to the Netherlands to California.