Good morning. UBS put on a good show, with earnings easily beating estimates. Facebook’s user stats and share buyback plan got the thumbs up. New York and London have let working women down.
What’s Happening Now
UBS joined Wall Street rivals by smashing estimates on surging fee income at its wealth management and investment bank businesses. Net income came to $2.28 billion and investment banking pre-tax profit was almost double the consensus. But the bank expects lower client activity levels in the fourth quarter.
Investors liked Facebook’s results and buyback plan. Shares rose postmarket after its latest earnings showed about 3.6 billion people are actively using its network of social media apps. It will buy back as much as $50 billion more in stock. Revenue however fell short.
Conflict avoidance. Recep Tayyip Erdogan dropped his demand for the expulsion of 10 Western ambassadors, de-escalating a row that had shaken the lira and threatened ties with key partners. The Turkish president said the envoys, including the U.S. ambassador, had issued a statement to undo the “slander” caused by their earlier joint demand for the release of a jailed government critic.
Frankly speaking. The U.S. and China made incremental progress in their economic and trade talks, with Liu He and Janet Yellen holding their second call in about four months. The Chinese described it as “pragmatic, candid and constructive” and the countries agreed on strengthening communication. Yellen “frankly raised issues of concern,” the U.S. said.
Ethically speaking. Riksbank Governor Stefan Ingves and his deputy directly hold stock in Swedish firms whose bonds have been bought by the central bank’s asset-purchase program. The overlap prompted some ethics experts to call for the bank to follow a move by the Fed. Stock trading revelations preceded the resignation of two Fed chiefs last month, and a move by the Fed to ban such activity.
Spotlight
Monte Paschi has become Italy’s latest ‘zombie firm,’ burning through about €18 billion of taxpayer and investor cash since 2008 with no fix in sight.
What’s the issue: Fears in Italy are growing that the bank will become an even deeper money pit for Mario Draghi’s administration after talks to sell to UniCredit collapsed over the weekend. Revamping the world’s oldest bank may require another €7 billion, people familiar said.
What’s next: The Italian government will now probably have to ask the EU for an extension to a year-end deadline for finding a buyer and then recapitalize the bank on its own.
What to Watch
Thaw in sight. The U.K. Treasury said it will end a pay-freeze for public sector workers next year. Businesses are looking to Rishi Sunak to repair their strained relationship by doing more to spur investment and ease taxes when he delivers his budget tomorrow. The government wants to unlock business investment but its tax policies “do the opposite,” said CBI.
EU energy ministers will meet today to discuss how to cushion consumers and companies from soaring power and gas prices. Several countries are calling for the EU to come up with new intervention tools, but a separate group will argue the increase is temporary and shouldn’t lead to hasty changes to the bloc’s energy laws and ambitious climate reforms.
Iran and the EU will hold talks in Brussels tomorrow designed to facilitate a wider diplomatic push to revive the 2015 nuclear deal. U.S. special envoy Robert Malley said negotiations were at a “critical phase” and warned that the Biden administration “will use other tools” if they fail. Meantime, the IAEA’s chief said efforts to monitor Iran’s uranium enrichment activities are deteriorating.
Opinion
Facebook watchers were on pins and needles going into the company’s most hotly anticipated quarterly report in years, Tae Kim writes. In the end, it fell a bit short. But with many expecting far worse, sometimes avoiding disaster is good enough. Even if it spends billions of dollars more on moderators or faces remedies from the FTC, much of the downside may be priced into its shares.
It’s increasingly difficult to find a clear, logical justification for Hong Kong’s zero Covid strategy, which at this point is defensive, backward-looking and rooted in fear, Anjani Trivedi writes. If officials are going to stick to their guns, then the quarantine system must be vastly improved. A few places to start: more suitable hotel rooms, as well as more family-friendly facilities that let in fresh air.
By the Way
The world’s top business cities are still failing working women. Daily life is often shaped by what they cannot do and how they’re excluded. In the Big Take, Businessweek analyzed how 15 global cities rank for career women. Toronto came in first and London took fifth place, with the analysis showing structural and social gender inequalities remain rife everywhere.
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