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Jul 29, 2020

Analysis | The Cybersecurity 202: The Trump administration's battle over mail-in voting heads to Congress

Joseph Marks

with Tonya Riley

Attorney General William P. Barr held fast to claims that a drastic expansion of mail voting in November could undermine the election amid an often combative hearing with House lawmakers.
But he provided no concrete evidence for his assertions there's a “high risk” mail-in voting will lead to massive fraud, which have been roundly dismissed by election security experts. He said “common sense” guides his concern that U.S. adversaries might flood the election with phony ballots submitted by mail, even though election officials say safeguards such as bar codes and signature verification prevent this. 
It was the first time a congressional committee scrutinized Barr's claims in person – and Democrats savaged him, contending that he and the president were spreading conspiracy theories and aiding U.S. enemies.
The FBI and our intelligence services have repeatedly warned that [U.S.] adversaries are actively trying to sow mistrust of our election system and by repeating disinformation about mail-in voting, you and the president are helping them,” said Rep. Mary Gay Scanlon (D-Pa.), vice chair of the committee.
Barr did break from the president, however, when asked if he believed the election will be rigged. “I have no reason to believe it will be,” Barr said.

The mail-voting fight is playing out amid a broader partisan battle over how to run the general election. 

Democrats have routinely pushed for a surge in funding to protect the elections from hacking by Russia and other adversaries and more recently to fund voting by mail, expanded early voting and safety measures to reduce the spread of the coronavirus at polling places. But they’ve faced stiff opposition from Republicans including Senate Majority Leader Mitch McConnell (R-Ky.). Some $400 million was allocated in the first coronavirus relief bill passed in March, which many states insist is not nearly enough to make the changes needed to help voters cast their ballots safely in a pandemic.
A $3 trillion coronavirus relief bill passed by the Democratic-controlled House committed another $3.6 billion for elections – while a $1 trillion bill released by Senate Republicans this week contained no money at all. Republicans have also balked at Democratic efforts to impose new mandates on states including that all voters who want to cast mail ballots in future elections can do so.

Complicating the argument: Barr acknowledged during the hearing that he has voted by mail himself. 

But he insisted mail voting concerns don’t apply when a smaller number of people who aren’t able to make it to the polls in person vote that way.
“I’ve made very clear I’m not talking about accommodations to people who have to be out of state or have some particular inability to go and vote,” he said. “What I’m talking about is the wholesale conversion of an election to by mail voting.”
That explanation echoes President Trump, who has repeatedly attacked mail voting even though he also voted by mail this year.
But the explanation bears little resemblance to the way states actually run their mail-voting programs. Both Virginia, where Barr voted by mail, and Florida, where Trump voted by mail, have long allowed any resident to vote that way without providing any excuse. The only difference this year will be that many more residents will choose to vote by mail because they fear contracting the coronavirus if they vote in person.
There are no states that have announced plans to convert entirely to mail voting during the general election. Even the five states that ran elections almost entirely by mail before the pandemic — Washington, Oregon, Colorado, Utah and Hawaii — offer in-person voting options to people who can’t vote by mail because of disabilities that make it impractical or people who are homeless or don’t have a steady address.
Lawmakers were quick to seize on the contradiction. Sen. Amy Klobuchar (D-Minn.), who is a sponsor of the Senate’s main effort to expand mail voting:
More than a dozen other Trump allies have also voted by mail, including Vice President Pence, Education Secretary Betsy DeVos, White House press secretary Kayleigh McEnany, adviser and daughter Ivanka Trump and first lady Melania Trump.

Trump has been pushing his party further in the fight over mail voting than many want to go. 

Many Republican state election officials, for example, are eager to expand voting by mail during the pandemic despite Trump’s criticisms and urging constituents to vote that way.
Trump has also bucked convention by refusing to pledge that he won’t accept dirt from other nations on his political opponents. All the Democratic presidential candidates including presumptive nominee Joe Biden made that pledge last year.
When Rep. David N. Cicilline (D-R.I.) asked Barr during the hearing if it would be appropriate for a president to “solicit or accept foreign interference in an election,” Barr first replied, “It depends on what kind of assistance.”
When Cicilline repeated the question, Barr backed down. “No, it’s not appropriate,” he said.

The keys

Russian operatives are using three English-language websites to spread coronavirus misinformation.

The trio of websites published about 150 articles between late May and early July exploiting the pandemic in the West, U.S. government officials told Eric Tucker at the Associated Press. Some coronavirus-related headlines sought to falsely suggest that Russia was helping the United States fight the pandemic while others stoked tensions with China.
The sites also capitalized on civil unrest in U.S. cities and perpetuated a conspiracy theory about Joe Biden's dealings with Ukraine.
Officials did not say whether the effort was related to the November election. Officials identified two Russians as leading InfoRos, the agency behind the disinformation sites. They formerly served in Russia’s military intelligence agency, the GRU, which conducted operations to sow chaos during the 2016 U.S. elections.

Senate Republicans included funding to fight foreign hackers going after coronavirus vaccine research in their relief bill.

The package includes more than $50 million for the Department of Homeland Security's cybersecurity agency to combat foreign attacks against vaccine development, the Hill reports
The United States recently put out a warning that Russian hackers were targeting companies developing a vaccine and previously warned about Chinese hackers targeting such research. DHS received $9.1 million in the last package to address a rise in coronavirus-related cyberattacks.
Meanwhile, a group of 12 Senate Democrats and one independent wrote to Senate leadership yesterday urging them to include legislation that would put guardrails protecting data collected for covid-19 from being used for nonpublic health reasons. They argue that a failure to build public trust in data collection efforts will undermine the government's coronavirus response.
Congress is rushing to get a new relief bill out the door before many provisions expire on Aug. 1.

Rite Aid quietly rolled out a facial recognition system with Chinese ties to hundreds of U.S. stores. 

Records suggest that the company DeepCam relied on help from a Chinese company to build out its technology and for funding, Jeffrey Dastin at Reuters reports.
The technology was deployed in largely lower-income and nonwhite neighborhoods. Rite Aid discontinued the program after questions from Reuters.
Reuters found no evidence that DeepCam shared the facial images of U.S. customers with the Chinese government or companies in Beijing. But the connection poses a troubling possibility that China could have exploited the company for access to U.S. data, some security experts say.
The Chinese Communist Party’s buildup of its Orwellian surveillance state is alarming, and China’s efforts to export its surveillance state to collect data in America would be an unacceptable, serious threat,” Sen. Marco Rubio (R-Fla.) said in a statement.
Both the Chinese government and DeepCam's co-founder called the suspicions about their technology unfounded.

Global Cyberspace

Beijing hackers allegedly penetrated Vatican computers before Chinese talks with the Catholic church.

The attacks began in May as the Vatican and Beijing were preparing for talks to renew a 2018 deal that eased relations, Reuters reports.
The attacks targeted both the Vatican itself and the Catholic diocese of Hong Kong, according to the cybersecurity firm Recorded Future.
More global news:

Cyber insecurity

Security flaws left OKCupid users' personal information vulnerable to hackers.

Hackers could have accessed personal addresses and private messages of millions of the dating site's users, researchers at Check Point found.
There's no evidence any users were affected by the flaw and OKCupid fixed the vulnerability within 48 hours after Check Point researchers alerted the company.

Personal customer information is the most commonly breached data – and the most costly.

Breaches caused by nation-state actors were the costliest for companies to recover from, said a new report on industry financial losses from breaches IBM found. While just 13 percent of malicious breaches were believed to be carried out by nation-state hackers, the presumed average costs of the attacks was $200,000 higher than financially motivated hacks.
More news in hacks and breaches:

Chat room

Former DHS cybersecurity official Phil Reitinger and former intelligence community lawyer Susan Hennessey bat around the possibility of making DHS's cybersecurity division an independent agency:


  • The House Judiciary will hold a hearing on online platforms and market power with testimony from the CEOs of Amazon, Apple, Facebook and Google today at noon.
  • The Brookings Institute will host an event on "Reorienting national security for the AI era" on Wednesday at 2:30 p.m.
  • The Senate Commerce Subcommittee on Security will hold a hearing to examine the China challenge and how to build resiliency and competitiveness on Thursday at 10 a.m.
  • The Senate Armed Services Committee will hold a hearing on the findings and recommendations of the Cyberspace Solarium Commission on August 4 at 2:30 p.m.

Secure log off

Don't forget to take a break today. For coffee. Definitely just for coffee and not crying.

Market Insider | Biggest Moves Premarket: Stocks making the biggest moves in the premarket: Boeing, GE, GM, Spotify, Eastman Kodak & more

Peter Schacknow

Take a look at some of the biggest movers in the premarket:

Boeing (BA) – The jet maker reported a quarterly loss of $4.79 per share, wider than the loss of $2.54 anticipated by analysts. Revenue was well below estimates as well – amid the overall slowdown in the aviation industry. Boeing also announced a slowdown in production rates for the 737 Max, 777X, and 787 aircraft.
General Electric (GE) – GE reported a quarterly loss of 15 cents per share, wider than the 10 cents a share loss Wall Street was anticipating. Revenue was above forecasts. GE reported pandemic-related weakness in its power and aviation businesses, but free cash flow metrics were better than expected.
General Motors (GM) – The automaker reported a quarterly loss of 50 cents per share, smaller than the $1.77 per share loss that Wall Street was predicting. Revenue came in below forecasts, however, with plants closed due to Covid-19 during part of the quarter.
Anthem (ANTM) – The health insurer earned $9.20 per share for the second quarter, beating the $8.87 a share consensus estimate. The health insurer’s revenue was essentially in line with expectations. Profits were helped by pandemic-related deferrals of elective health-care procedures.
Spotify (SPOT) – The music streaming service reported a wider-than-expected loss and lower-than-expected revenue, but did report a bigger-than-expected increase in total users and premium subscribers.
Scotts Miracle-Gro (SMG) – The maker of lawn and garden products reported better-than-expected earnings and revenue, declared a $5 per share special dividend, and raised its regular dividend by 7%. Scotts is seeing a jump in consumer demand as more people stay at home due to Covid-19.
Eastman Kodak (KODK) – The stock is surging once again, after tripling yesterday on news that it was awarded a $765 million government loan to produce ingredients for generic drugs.
Six Flags (SIX) – The theme park operator reported a quarterly loss of $1.62 per share, wider than the loss of $1.01 a share that analysts had predicted. Revenue was well below estimates, as park attendance tumbled amid the pandemic.
Starbucks (SBUX) – Starbucks reported a quarterly loss of 46 cents per share, smaller than the 59 cents a share loss anticipated by Wall Street. The coffee chain’s revenue was also better than expected, and it said business was “steadily recovering” as coronavirus restrictions have eased.
Visa (V) – Visa came in 4 cents a share above estimates, with quarterly earnings of $1.07 per share. Revenue came in above estimates as well. The payments processor said that payment volume was down 10% during the quarter with profit dropping 23%, as consumer spending was hit by rising unemployment.
Mondelez (MDLZ) – Mondelez reported a quarterly profit of 63 cents per share, 7 cents a share above estimates. The snack maker’s revenue was slightly above Wall Street forecasts. Strong demand for its snacks in North America helped offset other declines, and Mondelez also announced an 11% dividend increase.
FireEye (FEYE) – FireEye surprised analysts – who had expected a loss – by reporting an adjusted profit of 9 cents per share. Revenue was above estimates as well, helped by the shift to cloud-based work amid the pandemic.
Seagate Technology (STX) – Seagate fell 9 cents a share shy of forecasts, with quarterly earnings of $1.20 per share. The hard disk drive maker’s revenue also came in below estimates and it issued a weaker-than-expected forecast amid what it called Covid-19 related disruptions and economic uncertainty.
Avis Budget (CAR) – Avis Budget reported a quarterly loss of $5.60 per share, slightly smaller than the loss of $5.68 that analysts were expecting. The car rental’s revenue beat estimates, with a recovering used car market and increased leisure rentals helping results.
L Brands (LB) – L Brands is cutting 15% of its corporate staff, amounting to 850 jobs. The parent of Victoria’s Secret and Bath & Body Works also projected a smaller-than-expected current quarter sales decline.
Spirit Airlines (SAVE) – Spirit will tell its unions to be prepared for possible October furloughs of 20% to 30% of workers, according to a memo sent to employees and first reported by Reuters.
Moderna (MRNA) – Moderna is aiming to price its Covid-19 vaccine at $50 to $60 per dose, according to sources cited by the Financial Times. That would be at least $11 more than the vaccine being developed by Pfizer (PFE) and partner BioNTech (BNTX).
Advanced Micro Devices (AMD) – AMD beat estimates by 2 cents a share, with quarterly profit of 18 cents per share. The chip maker’s revenue came in above estimates as well. AMD also raised its full-year forecast, as the surge in the number of employees working from home raises demands for its chips.
EBay (EBAY) – EBay reported quarterly earnings of $1.08 per share, 2 cents a share above estimates. The e-commerce company’s revenue also topped forecasts and the company raised its full-year outlook amid more online shopping during the coronavirus pandemic.
Amgen (AMGN) – Amgen earned $4.25 per share for its latest quarter, compared to a $3.82 a share estimate. Revenue came in above forecasts as well, helped by stronger sales of its newer drugs.
AMC Theaters (AMC) – AMC struck a deal with Comcast’s (CMCSA) Universal Pictures unit that will allow movies to be made available to home viewers after only three weekends in theaters. Financial terms weren’t disclosed. Comcast is the parent of NBCUniversal and CNBC.

DealBook: A Handbook to Today’s Tech Hearing

By Jack Nicas, Daisuke Wakabayashi, Karen Weise and Mike Isaac

The C.E.O.s are likely to argue before Congress that their companies aren’t anticompetitive. Here are the facts.
Credit...From left: Kyle Johnson for The New York Times, Erica Yoon for The New York Times, Jessica Chou for The New York Times, Erik Tanner for The New York Times; Photo Illustrations by The New York Times
Jeff Bezos of Amazon, Tim Cook of Apple, Mark Zuckerberg of Facebook and Sundar Pichai of Google are set to testify before Congress on Wednesday to make their case about why their companies actually are not that powerful.
The four will answer questions from House lawmakers who have been investigating their companies’ business practices for more than a year to examine if they stifle competition and harm consumers. Because of the coronavirus pandemic, the chief executives will be testifying remotely via videoconference, starting at noon Eastern time.
Each C.E.O. is expected to offer a full-throated defense of his business, with some like Mr. Bezos already laying out their arguments in prepared testimony. To make following along easier — the companies face scrutiny for complex and varied issues — The New York Times prepared this guide to what you are likely to hear and what you should know.
Credit...Erica Yoon for The New York Times
Companies and app developers have accused Apple of abusing its control over its iPhone App Store to set burdensome rules on their apps and charge some of them up to 30 percent of their revenues.
Mr. Cook is likely to argue that competition is alive and well in the App Store.
Competition may be fierce, but the playing field is not level. Apple’s own apps have long enjoyed different rules in the App Store. Developers do not have to pay Apple’s 30 percent commission. They are not subject to user reviews or ratings like other apps. They do not deal with what other companies call Apple’s capricious enforcement of opaque rules. And they have regularly ranked ahead of the competition in the App Store’s search results.
Mr. Cook is likely to argue that Apple is not a monopoly because it controls just 15 percent of the global smartphone market.
While that number is accurate, it downplays the iPhone’s importance. Overall, Google’s Android software dominates when measured by global users, in part because cheap Android devices have blanketed the developing world. But the iPhone has a much higher market share in industrialized nations, including about 42 percent in the United States, according to International Data Corporation, a research firm.
Most app developers also care more about dollars than the number of users — and by that measure, iPhones regularly beat Android devices. So far this year, iPhone users have spent about $36.8 billion on digital goods and services like in-app features and subscriptions, or 65 percent of the global total, according to Sensor Tower, an app data firm. App developers said that made Apple’s App Store necessary for their business, leaving them with little choice but to comply with its rules and fees.
There is also one fact that no one disputes: By any measure, the smartphone industry is a duopoly. Apple and Google create the software that underpin just about every smartphone in the world. And both companies enforce effectively the same fees on developers.
Mr. Cook is likely to argue that Apple does not take a fee from a vast majority of apps.
This is true. Apple does not charge up to 30 percent commission on the sale of physical goods or advertising, which make up a vast majority of commerce on iPhone apps. (This includes all of the physical goods Amazon sells over its iPhone app, and all of the ads Facebook and Google show in their apps.) In 2019, Apple said it received about 15 percent of the $519 billion in overall commerce in the App Store.
But it is also true that Apple takes a fee from many of the apps it competes with. The company charges commission on the sale of “digital goods and services,” such as subscriptions to a music app like Spotify or a video-streaming service like Hulu, which are categories in which Apple offers its own services.
Credit...Erik Tanner for The New York Times
Companies accuse Google of using the dominance of its search engine to direct people to its own products and to force companies to advertise to remain visible in search results.
Mr. Pichai is likely to argue that Google has plenty of internet-search competition and that its high market share is because people like its products.
Yes, there are segments in which Google has more search competition, like shopping. But the notion that 90 percent of people use Google solely because they prefer its search engine is misleading because there are other factors that play into its large market share.
Google actively preserves its search dominance, for example. One of its biggest expenses is the fee it pays Apple to be the default search engine on Apple devices. It does not make much sense to pay Apple billions of dollars each year if you believe that consumers will ultimately end up on Google anyway because it is better.
Mr. Pichai is likely to argue that Google has helped drive down prices in advertising and increased choices for advertisers.
In the past, Google has argued that digital advertising prices have come down more than 40 percent since 2010.
In response, Britain’s Competition and Markets Authority said in a report this month that it found that Google’s market power had a significant impact on prices. Its analysis showed that Google’s prices were 30 percent to 40 percent higher than those for Microsoft’s Bing search ads, when comparing like-for-like terms on both desktop and mobile.
Mr. Pichai is likely to argue that it’s not in Google’s long-term interest to load its pages with ads.
In reality, Google has steadily increased the real estate it devotes to ads, especially for commercially lucrative search terms. On smaller smartphone screens, there are times when a user must scroll to avoid seeing only ads. Google has also made its ads harder to spot by making its advertising labels more discreet.
Google also lets companies advertise on the search results of their competitors’ names. Companies have argued that the policy feels like a shakedown, requiring them to pay Google to appear at the top of search results for their own name and prevent a rival from stealing potential customers. Google says it does not allow people to advertise against trademarked names if the owner of the trademark complains.
Credit...Kyle Johnson for The New York Times
Lawmakers are investigating whether Amazon abuses its role as both a large retailer and a platform for third-party sellers who offer products on its marketplace. Because of these dual hats, Amazon might be able to use data it gathers from sellers to develop its own competing brands of products, like generic batteries and diapers.
Mr. Bezos is likely to say that Amazon is actually quite small, arguing that e-commerce makes up about only 12 percent of all retail sales in the United States and that Walmart sells more than his company.
Amazon has long said that all retailers — both online and physical ones — should be considered its competitors. Yet that 12 percent statistic, from the U.S. Census Bureau, includes large consumer categories where Amazon does not currently sell products, such as auto dealers and gas stations.
In Amazon’s oldest lines of business, such as books, toys and electronics, the market is more concentrated. The research firm eMarketer estimates that 63 percent of books and other media are bought online, and Amazon has cornered about 90 percent of the online market for books, according to Rakuten Intelligence, another research firm.
Mr. Bezos is likely to say Amazon’s third-party sellers are thriving, outpacing the growth of Amazon’s own sales directly to customers.
While many third-party merchants have seen their sales on Amazon grow, some also say their profit has shrunk. These third-party sellers are giving more money to Amazon over time to pay for services like fulfillment and advertising, which have become essential to thrive on its platform.
Mr. Bezos is likely to say that Amazon’s own branded products are a small share of its business, that they are common practice in retail and that it doesn’t use proprietary data to develop the products.
Amazon has said the percentage of sales in North America from its own branded products is in the “low single digits.” Other retailers like Target and Costco depend more on private label sales than Amazon.
But some sellers say Amazon can develop products with more data and less risk. Walmart might have 200,000 unique products in its store, but Amazon can comb through the millions of items listed by sellers to choose which to emulate.
Amazon says information on promising products are available to anyone through its public best-seller rankings, but The Wall Street Journal reported in April that the company had at times used private data, like advertising and other costs, that would give it an advantage. Amazon said that would violate its policies and that it was investigating the matter.
Credit...Jessica Chou for The New York Times
Facebook faces scrutiny for its dominance in social media and its history of acquiring smaller companies like WhatsApp and Instagram that have helped it gain power while neutralizing the competition.
Mr. Zuckerberg is likely to point to TikTok, a Chinese-backed video app, as a sign that competition in social networking is thriving.
TikTok, which only became popular in the past few years, remains Facebook’s best evidence that it does not have a stranglehold on innovation and new products. Citing TikTok also gives Facebook political points amid a geopolitical battle between the Trump administration and China.
Even so, Facebook is the undisputed king of social networking. About 2.99 billion people around the world use one or more of its family of apps, including Messenger, WhatsApp and Instagram, each month. That dwarfs TikTok’s 800 million monthly worldwide users.
Tencent’s WeChat, which is huge in China, has 1.2 billion monthly active users. Other social networks are much smaller. Twitter has 186 million daily users, while Snap, the maker of Snapchat — which Facebook previously tried to buy — has 238 million.
Mr. Zuckerberg will most likely point to the vast digital ads marketplace to argue that Facebook has no advertising monopoly.
Google, with about 29.4 percent market share of digital advertising in the United States, is Facebook’s best argument to defend against accusations of cornering the market. The social network also has noted that Twitter, Pinterest, Snap, YouTube, Amazon and Apple are vying for the same ad dollars.
Facebook has also said there should be no distinguishing between digital and traditional outlets competing for ad dollars. If Facebook is tussling with television, radio and print outlets to court advertiser spending, then its piece of the overall pie looks smaller.
Yet there is no question Facebook is a large presence in digital advertising. The company is expected to haul in more than $73.8 billion in ad revenue this year, even with the pandemic, according to estimates from eMarketer. For 2020, its share of U.S. digital advertising is set to be about 23.4 percent, eMarketer said.

News | Business | Carmakers: GM swings to a loss as coronavirus shuttered factories and devastated sales

Michael Wayland

General Motors Chairman and CEO Mary Barra on April 1, 2020 tours one of the company's facilities in Warren, Michigan that will produce Level 1 face masks.
General Motors Chairman and CEO Mary Barra on April 1, 2020 tours one of the company’s facilities in Warren, Michigan that will produce Level 1 face masks.

General Motors lost $758 million and burned through billions of dollars in the second quarter in what is expected to be the worst three months of the year for the auto industry as the coronavirus pandemic shuttered factories and devastated sales.
Here’s what GM reported versus what Wall Street is expecting, based on average analysts estimates compiled by Refinitive.
  • EPS: A loss of 50 cents a share versus a loss of $1.77 per share expected.
  • Revenue: $16.8 billion versus $17.3 billion expected. 
The second quarter is expected to be “likely to be the toughest in modern history” for the automotive industry, according to Bank of America Merrill Lynch analyst John Murphy, noting that companies “grappled with close to a zero revenue environment for a few months.”
Other investors and industry executives have called the second quarter “unprecedented,” and likely the worst three months of the year.
GM said it expected to spend between $7 billion and $9 billion in the second quarter, however that was partially contingent on how much U.S. sales fell. That estimate is based on 8 million to 10 million sales a month, which only occurred in April.
Of the Detroit automakers, GM was expected to be best positioned to weather a crisis as big as the coronavirus pandemic. For years, the automaker has aggressively cut costs and exited unprofitable markets, including Europe, to fortify its balance sheet.
GM’s second-quarter U.S. vehicle sales fell 34% from a year ago, the company said earlier this month. That was in-line with the industry.
GM reported second-quarter net income last year of $2.4 billion on new revenue of $36.1 billion. 

News | Business | Banking: Barclays’ loan-loss reserves rise to £3.7bn as Covid-19 hits economy

Stephen Morris

Barclays added a further £1.6bn to its reserves for bad loans in the second quarter as the scale of the damage coronavirus could wreak on Britain’s banks becomes clearer.
Credit impairment charges more than tripled from £408m in the same period last year, as strict lockdowns to slow the spread of Covid-19 devastated the global economy.
“We have faced extraordinary economic challenges, principally in the UK and US,” said chief executive Jes Staley.
The provision for bad loans was worse than the £1.4bn analysts had forecast. In the first quarter Barclays put aside £2.1bn, among the most conservative provisioning of any European lender, taking its total so far in 2020 to £3.7bn.
The charge drove a 91 per cent drop in Barclays’ net profit, to £90m, in the period, the London-based bank said on Wednesday. This was half of the £180m expected by analysts.
Despite being partially offset by a surge in trading revenue at the investment bank, investors remain pessimistic and Barclays shares fell 4.5 per cent on Wednesday, extending their decline to almost 40 per cent this year.
Mr Staley said that Barclays had “never had a stronger capital base [and] our hope is to be a firewall in the economic recovery and for the Covid pandemic”. This was very different to what happened with the banks during the financial crisis 12 years ago, he added.
The Barclays CEO warned that it “may experience stronger capital headwinds in the second half” and dividends and share buybacks would remain on hold until at least the end of the year.
The stress was most visible at the UK consumer bank. It accounted for £583m of the loan-loss provisions, overwhelmingly from the credit card business. The international Barclaycard unit added a further £414m of charges, pushing it to a loss for the quarter.
Finance director Tushar Morzaria said the level of coverage for unsecured consumer lending was at an “all-time high”. He added: “It feels like a good level of provisions at the moment . . . [but] we don’t have a crystal ball about future lockdowns.”
The bank is basing its loan-loss projections on a 6.6 per cent UK unemployment rate this year and a 8.7 per cent contraction in the country’s economy. The comparable figures in the US are 9.3 per cent and 4.2 per cent, respectively.
Spain’s Santander, which also reported on Wednesday, put aside an additional €3.1bn to deal with loan losses, raising its total this year to €7bn.
Barclays’ Covid-19 blow was tempered by a 49 per cent jump in trading income, as the investment bank benefited from high volumes in turbulent markets as companies scrambled to raise emergency funds and hedge exposures. However, this was not enough to prevent overall group revenue falling 4 per cent to £5.3bn as income in both the UK and credit card divisions fell.
Fixed-income revenue surged 60 per cent, but still lagged behind its larger Wall Street rivals such as JPMorgan, Goldman Sachs and Morgan Stanley, where revenues more than doubled. European peer Deutsche Bank posted a 39 per cent gain in the same business.
Mr Staley echoed his US peers by warning there would be an abrupt slowdown in the second half of the year as market volatility moderated.
Elsewhere in the investment bank, equity trading rose by about a third and fees from debt capital markets climbed by a quarter, but M&A advisory plunged 61 per cent as deals dried up during lockdown. As a result, overall pre-tax profits at the investment bank rose 17 per cent to £1bn.
“The second-quarter numbers at Barclays are strong . . . almost driven entirely by investment banking revenues,” said Jonathan Pierce, an analyst at Numis.
The performance, off the back of a similarly good first quarter, will reinforce Mr Staley’s case for preserving Barclays’ trading arm, which he has long argued is a valuable counterbalance to its traditional British retail business.
“The reason that we have been able to support the economy as extensively as we have and remain financially resilient is because of our diversified universal banking model,” Mr Staley said. “Even after impairment, we remain profitable.”
The investment bank has been subject to a multiyear attack from activist investor Edward Bramson, who has led several unsuccessful campaigns to shrink the division and unseat the chief executive.
Barclays’ capital ratio reached 14.2 per cent, up from 13.1 per cent at the end of March, as it was forced to conserve capital when the Bank of England banned dividends in the spring in response to the pandemic.

News | Central Banks | Deutsche Bank: Deutsche Bank quarterly loss tempered by surge in bond trading

Olaf Storbeck 

Deutsche Bank has increased its forecast for revenue this year after it posted the strongest surge in fixed-income trading revenue in almost eight years, more than offsetting €761m of coronavirus-related loan loss provisions.
Germany’s largest lender on Wednesday said it was expecting that revenue this year would be “essentially flat”, compared with the previous guidance of a slight decrease. The loan loss provisions were almost five times higher than a year ago but better than the €818m expected by analysts.
Despite the better than expected results, executives cautioned the surge in trading revenue would likely subside in the second half of the year, and Deutsche’s net loss attributable to shareholders for the quarter nearly doubled to €77m.
Christian Sewing, chief executive, is in the second year of a radical restructuring plan that will cut about 18,000 jobs and reduce the size of its balance sheet by a fifth.
“Deutsche’s restructuring measures have made it more resilient to weather the disruptive effects of the coronavirus pandemic,” said Michael Rohr, an analyst at Moody’s rating agency.
James von Moltke, chief financial officer, told journalists on a call that the bank was planning to resume dividend payments for the coming fiscal year, a year earlier than currently expected by analysts. The German lender suspended payouts to shareholders last year when it announced its restructuring plan, which will cost €7.4bn by 2022.
Shares in Deutsche rose 0.6 per cent to €8.05 in morning trading on Wednesday and are up 9.5 per cent year-to-date. It has been one of Europe’s best-performing bank stocks in 2020.
Investment banking revenue shot up 46 per cent year on year to €2.7bn in the quarter, led by fixed-income trading. Group revenue rose 1 per cent to €6.3bn, €200m above expectations.
Despite Deutsche’s surge in trading revenue, analysts noted that it was lagging behind the performance of US rivals, which more than doubled their revenue in the second quarter.
Kian Abouhossein, an analyst with JPMorgan, said Deutsche’s results “could be viewed as just good enough”.
Andrew Coombs, an analyst at Citi, warned that the surge in trading activities was “unlikely to be sustainable”.
Deutsche said it was expecting a slowdown in trading activities during the rest of the year. “In the fixed-income business, we do see a return to more of a normal world [in the second half],” Ram Nayak, head of fixed income sales and trading, told the Financial Times.
Mark Fedorcik, head of Deutsche’s investment bank, said in an interview that the lender’s origination and advisory operations “gained or maintained market share across every product and region in the first half of 2020 versus the second half of last year” while cutting costs at the same time. “I don’t think any of our peers can say this,” he said.
Deutsche recorded a return on equity for the quarter of minus 0.6 per cent, a long way off its 2022 target of at least 8 per cent.
The lender also said the risk of its common equity tier one ratio — a key measure of balance sheet strength — temporarily falling below its internal target of 12.5 per cent in 2020 was “now significantly lower than was anticipated earlier in the second quarter 2020”.
As disclosed last week, Deutsche’s balance sheet in the second quarter was in a better position than analysts had expected as its CET1 ratio rose to 13.3 per cent, up from 12.8 per cent in the first quarter. One driver of the positive surprise was that corporate clients were repaying loans taken out to cope with the coronavirus crisis quicker than expected.

US Market | Futures Indicator: Stock futures are flat as investors await earnings, Big Tech testimony, and a Fed decision

Yun Li

3minutes - Source: CNBC

Stock futures were little changed early Wednesday as investors await a congressional hearing on antitrust in Big Tech as well as the latest corporate earnings results and the Federal Reserve’s policy decision.
The Dow Jones Industrial Average futures suggested a gain of less than 50 points, while the S&P 500 futures and Nasdaq 100 futures also traded slightly higher.
The busiest week of corporate earnings rolled on after the bell on Tuesday. Starbucks swung to a loss during its fiscal third quarter, but the world’s largest coffee chain raised its forecast for the current quarter, sending shares up more than 5% in extended trading.
Shares of Advanced Micro Devices popped more than 9% after the chipmaker posted better-than-expected quarterly earnings and issued an upbeat guidance for the year.
Investors will assess more results from Boeing, General Motors and General Electric before the bell Wednesday, while Qualcomm and PayPal are among the companies reporting after the close Wednesday.
Chief executives of Amazon, Apple, Facebook and Google-parent Alphabet will testify before the House Antitrust Subcommittee later Wednesday following a yearlong probe into their anti-competitive practices. Investors will look for insights on how the Big Tech is handling antitrust challenges from regulators with the authority to break them up.
Meanwhile, the Federal Reserve will conclude its two-day policy meeting Wednesday and is set to release a statement at 2 p.m. ET. Chairman Jerome Powell will have a press conference at 2:30 p.m. ET.
The central bank is expected to keep short-term interest rates unchanged at near zero to support the economy still struggling with the coronavirus pandemic. On Tuesday, the Fed announced it would extend its emergency lending programs through the remainder of 2020.
“Markets continue to expect ultra-accommodative policy from the Fed, and the Fed is unlikely to disappoint at this meeting,” Bill Callahan, investment strategist at Schroders, said in an email. “Given that we are still squarely in the center of the pandemic, the only question for investors is just how dovish the Fed will be.”
In other news, Eastman Kodak soared more than 60% in extended trading Tuesday after President Donald Trump announced a deal to work with the photography pioneer to produce ingredients in generic drugs.

News | Business | Tech Companies: Apple's China iPhone sales jump 225% in the second quarter as recovery continues, research shows

Arjun Kharpal

Apple was the fastest-growing smartphone maker in China in the second quarter, according to research data, which showed that the iPhone maker bucked the overall decline in the world’s second-largest economy.
The cheaper iPhone SE and the popularity of the iPhone 11 series, along with deep discounts, helped Apple get a boost in one of its most critical markets.
The sell-through volume for iPhones in China was 7.4 million units in the April to June quarter, a 32% growth year-on-year, according to Counterpoint Research. Sell-through refers to iPhones that go to Apple’s retail partners and is a close gauge to actual sales to consumers.
In comparison, Chinese phone maker Huawei saw sell-through volumes of 36.6 million units, or up 14% compared to a year ago. Apple sells significantly fewer phones than Huawei in China.
Oppo, Vivo and Xiaomi, the brands that make up the rest of the top five biggest players in China, all saw significant declines, while the overall market fell 17% year-on-year.
Separately, figures from Shanghai-based CINNO Research showed iPhone sales jumped 62% year-on-year to 13 million in the second quarter. CINNO Research tracks sales rather than sell-through. On a quarter-on-quarter basis, iPhone sales jumped 225%, coming off a low base but also highlighting a recovery for the Cupertino giant after the coronavirus outbreak forced closures of its stores in China and dented sales in the three months that ended in March. 
Since a low in February, when Apple sold fewer than 500,000 phones, the company has seen a steady rebound, thanks in part to the iPhone 11 series released last year.
“iPhone 11 remains the best-selling model in China. iPhone 11 has consecutively led as the best-selling model in China since last September, which indicates the strong brand power of Apple amongst Chinese consumers,” Flora Tang, research analyst at Counterpoint Research, told CNBC by email.
The latest third-party figures come ahead of the release of Apple’s official fiscal third quarter earnings on Thursday.
Apple also offered big discounts on iPhones during a major online Chinese shopping festival in June which helped keep the momentum going. The cheaper second-generation iPhone SE was also among the top 3 best-selling iPhones in China in the second quarter, Counterpoint Research said in a note.
On the services front, Apple also appeared fairly resilient. The App Store generated $4.4 billion in gross revenue in the second quarter, down 4% from $4.6 billion in the first quarter, according to data from Sensor Tower. However, that was a 13% year-on-year rise.
“Spending on China’s App Store typically increases between Q1 and Q2 each year, but the Q/Q decline this year could be attributed to the ecosystem there normalizing following the height of COVID-19 in the country,” Stephanie Chan, mobile insights strategist, told CNBC by email. 

All eyes on iPhone 12

China turned on its 5G networks last November and its domestic smartphone makers have launched 5G-capable devices. 5G refers to next-generation mobile networks that promise super-fast data speeds.
A third of smartphones sold in China in the second quarter were 5G handsets, the highest adoption in the world, according to Counterpoint Research.
However, Apple does not yet have a 5G iPhone. But several analysts expect the next iPhone model, potentially named the iPhone 12, to support 5G
Chinese customers look at iphones at the official opening of the new Apple Store in the Sanlitun shopping area on July 17, 2020 in Beijing, China.
Kevin Frayer | Getty Images
“We expect 5G iPhones to gain immediate traction in China, if Apple goes for a juicy pricing strategy. Chinese consumers have been well educated about the benefits of 5G, and Chinese telecom operators are promoting competitively priced 5G plans,” Counterpoint Research’s Tang said.
Daniel Ives, analyst at Wedbush Securities, said in a note published Monday that Apple has seen “a continued demand snapback in China during the month of June and first half of July despite some speed bumps and the stage is setting up for a massive pent up iPhone 12 cycle heading into the Fall in this key region as well as globally.”
He anticipates that 60 million to 70 million iPhones in China are in the “window of an upgrade opportunity over the next year with Apple going aggressively at all price points (SE, iPhone 12) to cement its installed base despite competitive pressures from domestic players.”

News | Business | Tech Giants: A day of reckoning for US tech giants' CEOs

8-10 minutes - Source: BBC

Media playback is unsupported on your device
Media captionWATCH: Who are the 'big four' and just how much power do they have?
Unprecedented is a dangerous word in journalism, but this really hasn't happened before.
On Wednesday, four of the biggest names in tech will give evidence to members of the US Congress.
Mark Zuckerberg (Facebook), Sundar Pichai (Google), Tim Cook (Apple) and Jeff Bezos (Amazon) will all be grilled.
Jeff Bezos - the world's richest man - has never testified before either house. They have never all been quizzed together.
How these tech bosses do, how they stand up to scrutiny, could be a defining moment in their future relationship with government.
Central to the interrogation will be whether these tech giants are simply too big.
The Covid pandemic has put this into sharp focus. Where other companies have struggled, Big Tech companies have thrived. Together they are now worth $5tn dollars. It's led to accusations that - just like the banks - they are simply too big to fail.
The number of complaints levelled at these companies are so numerous they are too many to name individually here.

What are they likely to say?

In pre-released comments, Mark Zuckerberg argued that Facebook had become successful "the American way" - providing products that people find valuable after starting with nothing.
"Our story would not have been possible without US laws that encourage competition and innovation," he said.
But he acknowledged that there were concerns about the size and perceived power of technology companies and that there should be a more active role for governments and regulators - and updated rules for the internet.
Jeff Bezos posted his opening statement to Congress.

"At Amazon, customer obsession has made us what we are, and allowed us to do ever greater things," he said.
"I know what Amazon could do when we were 10 people. I know what we could do when we were 1,000 people, and when we were 10,000 people. And I know what we can do today when we're nearly a million."
"I believe Amazon should be scrutinized," he added. "We should scrutinize all large institutions, whether they're companies, government agencies, or non-profits. Our responsibility is to make sure we pass such scrutiny with flying colours."

Commanding position

The general theme is that these companies don't just run services - they own the internet's utilities. The charge is that they use that commanding position unfairly at the expense of others.
Take one of the criticisms against Amazon, for example, that it promotes its own products over others on its Amazon marketplace.
Or Apple charging a 30% cut on the money generated from apps that use the App Store.
The complaint from app makers: where else do we go to sell our apps? Apple and Google (which respectively own iOS and Android, the operating systems of almost all the world's smartphones) control the market, and so control who gets to play and who doesn't. And they of course get to set the charges.
Google too, with its dominant search engine, has been accused (and fined) before, for burying competitor searches. Once again, the accusation is that no one company should have such a commanding position in an essential part of our internet.
And there are general criticisms that can be levelled at all the tech giants too. For example the alleged Copy/Acquire/Kill strategies that all four are accused of using.
Copy others' ideas, buy a company that threatens you - and even potentially kill it off. Is this just shrewd, albeit ruthless business? Or is this Big Tech flexing its muscle unfairly?

Here's why this has been such a difficult area to police. Traditionally, anti-competition law - in this case "anti-trust" law - has been focused on consumer pricing.
In a typical monopoly or cartel, there's a simple test. Are consumers paying more because of a lack of competition?
The US "trusts" of the early 20th Century - from which the anti-trust legislation derives its name - were found to be driving up prices. Companies like Standard Oil and railway companies used their dominant position to hurt consumers.
That's much harder to prove with these tech companies.
For example Facebook, Instagram and WhatsApp are free. Amazon often drives down prices to beat competition. Google's search engine is free. YouTube - owned by Google - is free. And apps on iPhones can often be downloaded for free.

So what's the problem?

That is the heart of the argument. Critics say that these companies hurt consumers in a more subtle way, killing off smaller companies and strangling other businesses. The charge is that they are in fact damaging the economy.
That's what legislators are looking to examine.
Anti-trust campaigners have already lost one battle before the hearing even begins. They wanted to have the tech bosses grilled one by one.
"We want to leave as little room as possible for them to hide behind each other," Sarah Miller, from the American Economics Liberties Project, told me last week.
But that's not going to happen. They'll be questioned together and the hearing will - perhaps aptly - be virtual.
There are also worries that members of Congress will use the occasion to grandstand - to strut and preen - rather than asking the more difficult technical questions that might catch them out.

Off-topic questions are also likely - particularly for Mark Zuckerberg. For example, Facebook is currently the focus of an advertising boycott. It's accused of being too slow in removing racist and hateful content, and that could well be a line of questioning.
And of course, ahead of the US elections, Facebook should expect incoming from both Republican and Democratic members of Congress. Democrats are generally concerned about far-right content on the platform, Republicans that the company is structurally left-wing. And of course there are still concerns of foreign interference.
Expect China to come up too - and for it to be brought up by the tech bosses. With companies like TikTok and Huawei attracting the ire of the Trump administration, one defence will go something like: "Break us up, overregulate us, and you give Chinese tech companies more power."
Trying to prize the four away from their scripts is going to be the toughest job. That worked most effectively during Mr Zuckerberg's interrogation on Capitol Hill in 2018. But that's harder said than done.

Congress has a big opportunity here. The chance to really cross-examine these powerful men doesn't come often, and the evidence they give could shape their future relationship with government and their customers.
But whatever happens on Wednesday, this won't be end of the story. Earlier this week, the Senate Judiciary Committee's anti-trust panel said it would hold a hearing in September to discuss Google's dominance in online advertising.

News | Business | New Investment Segment: Camera firm Kodak turns to drugs to fight virus

3minutes - 

Kodak began making drug ingredients four years ago but will not dramatically expand production. Image copyright Getty Images
Better known for making cameras, Kodak has moved into drug making and has just secured a $765m (£592m) loan from the US government.
The fallen giant of the photography industry will make ingredients used in generic drugs to help fight the coronavirus.
Announcing the loan, the US government said it wanted to reduce dependency on foreign countries for medical supplies.
Shares in Kodak shot up more than 60% on Tuesday after the announcement.
Pharmaceutical firms are in a race to find a vaccine for the coronavirus with a handful of human trials underway.
"Kodak is proud to be a part of strengthening America's self-sufficiency in producing the key pharmaceutical ingredients we need to keep our citizens safe," said its executive chairman Jim Continenza.
At the launch of Kodak Pharmaceuticals, Mr Continenza said it would take three or four years to reach large-scale production.
"If we have learned anything from the global pandemic, it is that Americans are dangerously dependent on foreign supply chains for their essential medicines," Peter Navarro, a White House spokesman, said.
US President Donald Trump called it "one of the most important deals in the history of US pharmaceutical industries" referring to Kodak as "a great American company — you remember this company".
Kodak is not the only photography firm to shift direction into drug making. Japan's Fujifilm is working on a potential Covid-19 vaccine and hopes to start human trials soon.

Fallen giant

The Eastman Kodak Company was founded by George Eastman in 1888. The Brownie box was one of its most popular cameras and helped Kodak become a dominant player in the photographic industry.
The company became famous for its "Kodak moment" tagline but began to struggle financially in the late 1990s as consumers moved away from photographic film and towards digital photography.
At its peak Kodak employed more than 145,000 people but now has a global workforce of around 5,000.
In 2012, Kodak filed for Chapter 11 bankruptcy protection in the US and and shifted its focus onto printing and professional services for companies. But it does still make digital and instant cameras for consumers.
Kodak began making drug ingredients four years ago and will now dramatically expand production at its New York and Minnesota facilities.

News | Business | Industry | Carsmakers: Nissan shares fall 10% after record loss warning

2-3 minutos - Source: BBC

Nissan has seen its shares plunge by 10% in Tokyo trading after warning that it would see a record annual loss. Image copyright Getty Images
Nissan's shares have plunged by 10% in Tokyo trading after warning that it would see a record annual loss.
Japan's second largest carmaker said it expects a $4.5bn (£3.5bn) operating loss this year as the coronavirus hinders its turnaround efforts.
The worse-than-expected forecast came as the company predicted its sales will be the lowest in a decade.
It's the latest indication of the extent of the damage caused by the pandemic to the global car industry.
“The market outlook remains uncertain and we may see a further deterioration in demand due to a possible second wave of the pandemic,” Nissan's chief executive Makoto Uchida told investors.
Mr Uchida also said the company would not make a dividend payout to shareholders this year.
Nissan's global sales slumped 48% in the April-June period as they halved in North America and fell by 40% in China.
Even before the coronavirus pandemic, the company was wrestling with a number of issues.
In May, Nissan announced a major turnaround plan after reporting its biggest loss in two decades for the previous financial year.
Under the four-year plan production will be cut by 20%, and Nissan's plant in Barcelona, Spain will be closed.
The company's UK factory in Sunderland was spared but Nissan's global chief operating head told the BBC that the operation would be "unsustainable" if the UK leaves the European Union without a trade deal.
In May, Nissan's alliance partner Renault announced that it would shed 15,000 jobs worldwide as part of a €2bn (£1.8bn) cost-cutting plan after seeing sales plunge because of the pandemic.
"This plan is essential," said interim boss Clotilde Delbos, who announced a bigger focus on electric cars and vans.
Some 4,600 jobs will go in France, and Renault has said six plants are under review for possible cuts and closure.