Canada Markets closed

A growing list of companies from FedEx to BMW are warning about the world economy

Kate Rooney
Sergio Ermotti, chief executive officer of UBS Group AG, speaks during a news conference, as the worlds largest wealth manager announces full year earnings in Zurich, Switzerland, on Monday, Jan. 22, 2018.

Corporate giants doing business abroad are painting a dreary picture of the world's economy.

With an ongoing trade war between the U.S. and China, Brexit uncertainty weighing on Europe and the U.K., and new weakness out of Japan, some business leaders say it's harder than ever to rake in profits.

This week, top executives at FedEx, BMW, UBS and others described bleak global business conditions while discussing quarterly results. Fitch Ratings also "aggressively" cut its forecast for the year.

The head of UBS was among the latest to blame the world's backdrop for weaker-than-expected results. CEO Ermotti told a conference in London on Wednesday that it "one of the worst first-quarter environments in recent history," Reuters reported. The Swiss bank slashed another $300 million from 2019 costs after revenue at its investment bank plunged. Investment banking conditions are among the toughest seen in years, especially outside the U.S., he said.

Ermotti's remarks echo the sentiment from FedEx a day earlier. The multinational package delivery service reported sluggish international revenue on Tuesday as a result of tough exchange rates and ongoing trade battles.

"Slowing international macroeconomic conditions and weaker global trade growth trends continue, as seen in the year-over-year decline in our FedEx Express international revenue," Chief Financial Officer Alan B. Graf Jr. said in FedEx's quarterly earnings report.

BMW is another with a less-than-rosy outlook. The German automaker said it expected pretax profit to fall by more than 10 percent in 2019, and its CFO said global conditions make it hard to provide a clear forecast.

"Depending on how conditions develop, our guidance may be subject to additional risks; in particular, the risk of a no-deal Brexit and ongoing developments in international trade policy," Chief Financial Officer Nicolas Peter said in BMW's quarterly earnings report Wednesday.

Bayerische Motoren Werke AG (BMW) vehicles, assembled in the U.S., sit parked before being driven onto vehicle carrier ships at the Port of Charleston in Charleston, South Carolina.

Samsung also joined in on Wednesday. The electronics company is forecasting a tough 2019 due to slowing economic growth, global trade tensions and softer demand for memory chips from data center companies, the firm's co-chief executive said on Wednesday.

"We are expecting many difficulties this year such as slowing growth in major economies and risks over global trade conflicts," Samsung Co-Chief Executive Kinam Kim said.

It's not just these big names — all companies in the S&P that generate more than half of their sales overseas are expected to see an earnings decline of 11.2 percent in the first quarter of 2019, according to FactSet.

Global jitters

Fitch Ratings also "quite aggressively cut" its 2019 global forecast this week. But the firm's economics team stopped short of calling a global recession.

"Global growth prospects have deteriorated significantly since Fitch Ratings' last Global Economic Outlook (GEO) in December 2018," the agency said in a report published Wednesday. "We do not see the onset of a global recession."

Fitch dropped its global growth forecasts for 2019 to 2.8 percent from 3.1 percent. For 2020, it dropped from 2.8 percent from 2.9 percent. The eurozone growth outlook weakened "particularly sharply," Fitch said. It also highlighted a slowdown in China, and decelerating in emerging markets led by Turkey and Argentina in the aftermath of last summer's currency crises.

"This has occurred against the backdrop of world trade growth weakening steadily through 2018," Fitch said. "The US-China trade war may have suppressed and distorted trade flows, but more fundamentally, weaker EM domestic demand has been a key contributor to the trade slowdown."

Washington and Beijing are locked in a stalemate on tariffs. In the past year, the world's two biggest economies have slapped billions of dollars' worth of tariffs on each other's goods. The tensions have taken a toll on global financial markets and kept investor sentiment in check.

There were multiple reports this week about progress on negotiations. According to Bloomberg, some U.S. officials fear that China is reneging on certain trade concessions. The Wall Street Journal meanwhile reported that U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin plan to travel to Beijing next week for another round of negotiations with their Chinese trade counterparts.

(L-R) US Treasury Secretary Steven Mnuchin, US Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He pose for a group photo at the Diaoyutai State Guesthouse in Beijing on February 15, 2019.

Then there's Brexit. The ongoing confusion and uncertainty around the U.K.'s departure from the European bloc is hanging over global markets. Some fear the U.K. would default to World Trade Organization rules which would mean heavy import and export tariffs and possible delays to goods at the border.

In January, the CEO of Adidas called Brexit the "biggest concern" for the company for its potential ripple effect on the European economy. Europe is about 30 percent of the German sportswear maker's business.

Japan added to the heap of worries this week. For the first time in three years, the Japanese government downgraded its assessment of the economy, blaming the U.S.-China trade war for slumping exports and industrial output.

Despite uncertainty, some luxury retailers seem to be holding up. Hermes, known for its $10,000 Birkin handbags, said Wednesday it sees no change in its positive sales trend and was helped by strong demand from clients in Asia. Hermes posted a 15 percent rise in net profit last year to $1.6 billion.

If a string of weak sentiment numbers and data continues, Bryn Mawr Trust Chief Investment Officer Ernie Cecilia told CNBC companies could trim spending and scale back hiring.

"It certainly is an issue. I think in many ways the first quarter is a possible air pocket or a slowdown," Cecilia said. "If it's deeper and more pervasive, then it would be a concern for employment, it would be a concern for wages, it would be a concern for earnings and it would be a concern for the market."

— CNBC'S Fred Imbert contributed reporting.

  • Finance
    Bloomberg

    Johnson to Raise Brexit Stakes in Visits to Germany and France

    (Bloomberg) -- Boris Johnson will travel to Germany and France this week to make clear that Britain is leaving the European Union on Oct. 31 with or without a deal.The prime minister will tell German Chancellor Angela Merkel and French President Emmanuel Macron that the EU must offer a new deal or face

  • Leaked UK memos warn of food, drug shortages in Brexit chaos
    Finance
    The Canadian Press

    Leaked UK memos warn of food, drug shortages in Brexit chaos

    LONDON — Leaked British government documents have warned of disruptions across the country in the event that the U.K. leaves the European Union without a trade deal on Oct. 31.British Prime Minister Boris Johnson has said he is prepared to charge out of the EU regardless of whether he is able to renegotiate

  • Israel's Economy Slows More Than Forecast on Exports, Investment
    Finance
    Bloomberg

    Israel's Economy Slows More Than Forecast on Exports, Investment

    (Bloomberg) -- The Israeli economy stumbled more than forecast in the second quarter, hampered by slowing trade, investment and private consumption.Gross domestic product rose 1% from the previous three months on an annualized basis, after a downwardly revised 4.7% gain in the first quarter, according

  • Finance
    Bloomberg

    U.S.-Mexico Tomato Trade War Faces Crucial Deadline on Monday

    (Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. A key deadline is set to lapse Monday that could lead to permanent U.S. tariffs on Mexican tomato imports, with costs potentially hitting American consumers when the weather turns cold later

  • Qatari Stocks Break Losing Streak, Lead Mideast Gains: Inside EM
    Finance
    Bloomberg

    Qatari Stocks Break Losing Streak, Lead Mideast Gains: Inside EM

    (Bloomberg) -- Qatar’s QE Index of stocks interrupted a three-day losing streak to rise as much as 2%, its biggest intraday gain in more than two months.Still, the benchmark remains among the world’s worst equity performers this month, according to major gauges tracked by Bloomberg. It’s headed toward

  • Democrats Count on Re-Energizing Youth Vote for 2020 Elections
    Finance
    Bloomberg

    Democrats Count on Re-Energizing Youth Vote for 2020 Elections

    (Bloomberg) -- The election prospects for Democrats in 2020 will turn on whether the party can keep fanning the fires that drove young voters to the ballot box last year.A record jump in the turnout rate for young voters -- those ages 18 to 29 -- helped Democrats retake control of the House in the midterm

  • Saudi Oil Field Hit by Drone Attack But Production Unaffected
    Finance
    Bloomberg

    Saudi Oil Field Hit by Drone Attack But Production Unaffected

    (Bloomberg) -- Yemeni rebels attacked oil and gas facilities at the Shaybah field in southeast Saudi Arabia, but failed to disrupt production.Saudi Arabian Oil Co., or Aramco as the company is known, extinguished a small fire at a natural gas liquids plant at Shaybah on Saturday morning, it said in a

  • Saudi Arabia's Oil Price Promise Just Doesn't Add Up
    Finance
    Bloomberg

    Saudi Arabia's Oil Price Promise Just Doesn't Add Up

    (Bloomberg Opinion) -- Saudi Arabia isn’t as willing to do whatever it takes to support oil prices as it would have us believe. That’s the only conclusion one can draw from what we’ve learnt since a government official said the kingdom wouldn’t tolerate a continued price slide.After crude fell to a seven-month

  • Saudi Arabia's Oil Price Promise Just Doesn't Add Up
    Finance
    Bloomberg

    Saudi Arabia's Oil Price Promise Just Doesn't Add Up

    (Bloomberg Opinion) -- Saudi Arabia isn’t as willing to do whatever it takes to support oil prices as it would have us believe. That’s the only conclusion one can draw from what we’ve learnt since a government official said the kingdom wouldn’t tolerate a continued price slide.After crude fell to a seven-month

  • Here’s How Germany Could Boost Its Economy, If It Wants to Act
    Finance
    Bloomberg

    Here’s How Germany Could Boost Its Economy, If It Wants to Act

    (Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Germany’s economy is in trouble and the government is dithering over whether to provide support in the form of fiscal stimulus.The administration is under increasing pressure now that it’

  • Negative Mortgages Set Another Milestone in a No-Rate World
    Finance
    Bloomberg

    Negative Mortgages Set Another Milestone in a No-Rate World

    (Bloomberg) -- The world’s headlong dash to zero or negative interest rates just passed another milestone: A bank in Denmark is paying homebuyers to take out mortgages.Jyske Bank A/S, Denmark’s third-largest lender, announced in early August a mortgage rate of -0.5%, before fees. Nordea Bank Abp, meanwhile

  • Finance
    Bloomberg

    Bond Traders Are Hostage to a Global Gloom

    (Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Treasuries investors are casting a wary eye abroad after a barrage of sloppy overseas data roiled the world’s biggest bond market.Fears of a worldwide slowdown erupted last week following

  • 3 Stocks for Baby Boomers
    Finance
    The Motley Fool

    3 Stocks for Baby Boomers

    Retirement can be stressful, but investing in stocks like Royal Bank of Canada (TSX:RY)(NYSE:RY) and two others will help you enjoy your well-deserved time off.

  • ASIC Seeks New Hires to Speed Up Enforcement Through the Courts
    Finance
    Bloomberg

    ASIC Seeks New Hires to Speed Up Enforcement Through the Courts

    (Bloomberg) -- Australia’s securities regulator plans to hire more investigators and lawyers over the next year as it steps up enforcement through the courts, Deputy Chairman Daniel Crennan said.The Australian Securities & Investments Commission has established an Office of Enforcement and wants to strengthen

  • Argentine Economy Minister Dujovne Resigns After Market Rout
    Finance
    Bloomberg

    Argentine Economy Minister Dujovne Resigns After Market Rout

    (Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Argentine Economy Minister Nicolas Dujovne resigned Saturday, capping a week of market chaos that followed President Mauricio Macri’s stunning loss in a primary vote.Dujovne, who led bailout

  • The World Is Waiting for Powell’s Signals: Global Economy Week
    Finance
    Bloomberg

    The World Is Waiting for Powell’s Signals: Global Economy Week

    (Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. All eyes will be on a small resort in Wyoming this week, where Federal Reserve Chairman Jerome Powell will speak for the first time since bond markets hit the recession alarm bells.His words

  • Finance
    The Canadian Press

    Illinois sues company after lead found in village's water

    UNIVERSITY PARK, Ill. — Illinois alleges that a company that provides water to a Chicago suburb made changes without permission from state regulators that caused lead to contaminate the village's drinking water.Attorney General Kwame Raoul filed a lawsuit Friday against Aqua Illinois, the company

  • A Capital City in the Jungle? It’s Not a Crazy Idea
    Finance
    Bloomberg

    A Capital City in the Jungle? It’s Not a Crazy Idea

    (Bloomberg Opinion) -- Indonesia’s president wants to spend at least $30 billion to move the capital to a forest on the island of Borneo. The proximate trigger is climate change – Jakarta is sinking into the sea. President Joko Widodo is planning a giant wall to keep big waves out, but global warming

  • Finance
    Bloomberg

    U.K. Faces Fuel, Food Shortages, Port Delays Post-Brexit

    (Bloomberg) -- The U.K. will grapple with a shortage of fuel, food and medicine as well as job losses and a disruption at its ports of as long as three months with a no-deal Brexit, the Sunday Times reported, citing leaked government documents.The dossier called “Operation Yellowhammer,” prepared by

  • Argentina's treasury minister resigns, senior official says
    Finance
    The Canadian Press

    Argentina's treasury minister resigns, senior official says

    BUENOS AIRES, Argentina — A senior official in Argentina's presidential office says the country's treasury minister resigned Saturday.The resignation comes three days after President Nicolas Macri announced his conservative administration is temporarily increasing the minimum wage, reducing payroll

  • Liberals unveil $3B sole-source deal for armoured vehicles ahead of election
    Finance
    The Canadian Press

    Liberals unveil $3B sole-source deal for armoured vehicles ahead of election

    OTTAWA — The federal Liberal government has unveiled plans to award a sole-source contract for hundreds of light armoured vehicles to General Dynamics Land Systems-Canada, while also promising the London, Ont., company a $650-million loan.The surprise deal and loan were announced by Defence Minister

  • Amazon, Swatch, Daimler and the Risks of a Global Recession
    Finance
    Bloomberg

    Amazon, Swatch, Daimler and the Risks of a Global Recession

    (Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Investors are bracing for a significant downturn in the world economy, cutting earnings estimates amid a market sell-off. While all cyclical industries face some form of risks, some companies

  • San Francisco doesn't care about the stock market
    Finance
    Yahoo Finance

    San Francisco doesn't care about the stock market

    San Francisco is home to hot IPOs like Uber, Lyft, Slack and Pinterest. Big swings in the stock market get less attention than sizeable moves with any of the cities biggest publicly traded names.

  • Yemen rebel drone attack targets remote Saudi oil field
    Finance
    The Canadian Press

    Yemen rebel drone attack targets remote Saudi oil field

    DUBAI, United Arab Emirates — Drones launched by Yemen's Houthi rebels attacked a massive oil and gas field deep inside Saudi Arabia's sprawling desert on Saturday, causing what the kingdom described as a "limited fire" in the second such recent attack on its crucial energy industry.The

  • Susan Lucci on how to get over being fired
    Finance
    Yahoo Finance

    Susan Lucci on how to get over being fired

    Soap Opera legend Susan Lucci reveals how she got over the "All My Children" cancellation and how she's finding success in her 70s.