If the Economy Is Shaky, Why Are Company Profits Still Strong?

Sat, July 30, 2022 

Builders have been able to sell homes at ever higher prices, even though demand is falling. (Philip Cheung/The New York Times)

Consumers are gloomy, the economy is shrinking, the Federal Reserve wants it to keep slowing and economists now say the whole world could be sliding toward recession.

At the same time, a lot of strong numbers are still coming out of many large American companies, which have been releasing their quarterly earnings reports and discussing their outlooks with Wall Street.

“We had an outstanding quarter,” American Express CEO Stephen Squeri said after the company reported record revenue. “As our second-quarter results demonstrate, we have a lot to be proud of,” Hilton Worldwide CEO Christopher Nassetta said, noting that revenue per room in most major regions of the world was now above 2019 levels.

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The blustery corporate optimism may seem at odds with the Fed’s grim determination to hold back the economy to get inflation down. But the economy is both what the Fed does and how companies and consumers are behaving. And the full picture of this strange economic moment is perhaps better captured by considering both sides together, central bankers and CEOs, no matter how divergent they seem.

Some big companies — Meta, for example — have reported disappointing numbers, and their CEOs are downbeat about the future. Other tech giants, Alphabet, Amazon, Apple and Microsoft included, all released results that, though hardly stellar, were enough to persuade investors that their businesses were not falling off a cliff.

Indeed, so far, with roughly half of all large companies having reported their numbers, this earnings season has not provided much evidence that the economy is entering a big crackup, and almost no CEOs talked about doing mass layoffs on earnings calls.

The lack of really bad news in earnings in part explains why the S&P 500 stock index has bounced about 12% from its low point in June and why Wall Street analysts still predict that earnings for the companies in the S&P 500 will grow 10% this year, according to data from FactSet. Although much of that growth is expected to come from energy companies, which have benefited from higher oil and gas prices, analysts expect profits to rise in eight of the 11 industries represented in the index.

It’s an awfully rosy picture when “recession” is on people’s minds. That’s why for some on Wall Street, that optimism is absurd. Michael Burry, an investor who foresaw the 2008 mortgage meltdown, wrote on Twitter on Tuesday that the earnings reports coming in felt like a “last hurrah.”

Not done with fighting inflation, central banks are expected to continue pushing up the cost of borrowing, which would make corporate investments more expensive and dampen demand for companies’ products and services. Europe, a big market for U.S. corporations, could have a nightmare winter if natural gas prices continue rising. And supply chains are still dysfunctional for many companies, meaning they can’t even make and sell products for which there is demand.

“All those headwinds that created the downturn, they’re still intact and arguably getting worse,” said Mike O’Rourke, chief market strategist at JonesTrading.

Things could go into reverse quickly, the pessimists say. Many companies have for some time lived in a sort of nirvana in which they could keep hoisting their prices and customers would keep paying them, creating blowout profits.

Now there are signs that consumers are balking at what companies charge, and if they pull back hard, their sales and earnings could take a big hit and lead CEOs to lay off workers and slash investments to protect profit margins and balance sheets. Early signs of this dynamic are emerging, according to some analysts.

Homebuilding companies, for instance, have been able to sell homes at ever-higher prices over the past two years, but as the Fed has raised interest rates, their senior executives say demand has fallen.

PulteGroup, a large homebuilder that reported earnings this past week, said the average price of its homes in the second quarter was $531,000, a 19% increase from a year earlier. The company forecast that the average would keep rising this year. At the same time, Pulte said, net new orders plunged 23% from a year earlier, which the company blamed on the increase in mortgage rates.

“We’ll have to see how well the sector is able to hold on to those price increases that they’ve accumulated over the last couple of years,” said Brian Barnhurst, co-head of credit research for PGIM Fixed Income, a division of Prudential, referring to homebuilders.

Pulte did not respond to requests for comment.

Although well-off consumers show few signs of cutting back, the second-quarter earnings contain plenty of evidence that some households are getting squeezed as inflation pushes up their bills.

AT&T said its customers were taking two days longer on average to pay their bills, which caused a hit to the phone company’s second-quarter cash flow of almost $1 billion. AT&T CEO John Stankey said on the earnings call that bad-debt levels were slightly higher than before the pandemic. But, he added, “We view this cycle no differently and still expect customers will pay their bills, albeit a little less timely.”

On the earnings call for McDonald’s, the company’s chief financial officer said some of its customers were choosing “value” offerings over others. On Chipotle’s earnings call, CEO Brian Niccol said: “The low-income consumer definitely has pulled back their purchase frequency. Fortunately, for Chipotle, that is not the majority of our customers.”

Big retailers such as Walmart have said their customers are spending so much on must-have items such as food and fuel that they’re eschewing higher-cost merchandise, including clothes and home goods. Since shoppers are still spending at Walmart for the staples, the company — and to a certain extent, the economy — still benefits from their purchases, although the shift has hit its profit margins and helped pummel its stock.

Banks earnings are a good place to get an early read on how consumers are faring. Overall, there are few signs at lenders that borrowers are having trouble repaying their loans, analysts say.

“You would have come away from the quarterly earnings thinking that the consumer was generally in good shape,” said Moshe Orenbuch, an analyst who covers finance companies at Credit Suisse.

Because of pandemic stimulus payments, low unemployment and rising wages, the levels of past-due loans and bad debt fell to historical lows, but lenders have expected them to rise as borrowers reduce cash holdings and their balance sheets look more like they did before the pandemic. The finance industry has started calling that process “normalization.”

It appears to have begun among lower-income borrowers.

Richard Fairbank, CEO of Capital One, a big credit-card lender, said on the company’s earnings call that this normalization was more evident in the bank’s subprime loans than in those made to borrowers with stronger credit. But Capital One declined to provide past-due loan numbers for its subprime loans, making it impossible to chart the extent of any deterioration.

In its earnings report, Ally Bank, a big auto-loan maker, provided data on past-due auto loans in the second quarter for borrowers at a range of income levels. Past-due loans were either at or close to pre-pandemic levels for borrowers with lower incomes.

Ally declined to provide the same data for earlier quarters, making it impossible to know how quickly past-due loans might have risen. On its earnings call, Jenn LaClair, Ally’s chief financial officer, said, “We have continued to invest in talent and technology to enhance our servicing and collection capabilities and remain confident in our ability to effectively manage credit in a variety of environments.”

Some analysts think the pullback in spending could spread to wealthier households.

“You’re going to see it go up the income scale as the year unfolds with people sitting there, saying, ‘I’ll go without rather than spend this much on that’ or ‘I’ll trade down to something more affordable,’” said O’Rourke, the JonesTrading strategist. He added that he was waiting for earnings from Macy’s and Nordstrom, which are scheduled to report in August, to see if that was happening.

The concern is that the heavy summer spending that has recently bolstered the earnings of the hospitality industries and the airlines is not sustainable. “There’s a faction of the market that’s quite convinced that when we get to the fall and the bills from the summer spending come home to roost, the consumer will be in a much trickier spot,” said PGIM’s Barnhurst.

An exchange this earnings season reveals how CEOs and companies can keep the economy going, even when they fear that a downturn may be at hand.

JPMorgan Chase CEO Jamie Dimon warned in May that storm clouds were gathering over the economy. On JPMorgan’s second-quarter earnings call, Mike Mayo, an analyst at Wells Fargo, asked Dimon why the bank had committed to investing such large sums this year if things could turn dire.

“It’s like you’re acting like there’s sunny skies ahead,” Mayo said, “You’re out buying kayaks, surfboards, wave runners just before the storm. So is it tough times or not?”

Dimon’s response: “We’ve always run the company consistently, investing, doing this stuff through storms.”

© 2022 The New York Times Company

European energy companies are raking in

record profits - as sky-high bills squeeze 

their customers' wallets

Sun, July 31, 2022 

UK energy company Shell reported record quarterly profits earlier this week.Google Streetview

• Energy providers Centrica and Shell both just booked record profits as fuel costs rise.

• Europe is experiencing a gas crisis, with one key benchmark doubling in two months.

• British households' energy bills could have tripled by the end of the year, according to the consultancy firm BFY.

Soaring gas prices are bad news for consumers - but they're helping major energy companies to rake in record-breaking profits.

UK-listed oil and gas major Shell and Centrica, a utility, reported record-breaking quarterly profits this week.

Shell posted quarterly profits of 11.5 billion pounds ($13.6 billion) - up 92% from a year ago - while British Gas owner Centrica hauled in 1.3 billion pounds ($1.6 billion).

Soaring oil and gas prices have helped the two firms to achieve those historic results. Brent crude and WTI crude have both spiked over 30% year-to-date, while benchmark Dutch TTF natural gas futures have risen by 112% since the start of June.

"It comes as no surprise that Centrica and Shell have performed very strongly again this quarter, with earnings resulting in an $11.5 billion profit, a new record for Shell," Infosys Consulting strategist Simon Tucker said. "It's clear we are currently in a commodities super cycle with supply limited and demand high – and this is likely to be the case for the next three to five years."

European prices for natural gas, coal and power have surged this year, largely because of disruption to fuel supply from Russia, which provides around 40% of the region's gas needs alone. EU sanctions on Moscow over the war in Ukraine have resulted in tit-for-tat closures of key sources of energy supply, which has driven inflation to multi-year highs, squeezing consumers, but bringing a windfall to fuel providers.

And it isn't just UK energy companies that have seen their profits soar.

Norwegian firm Equinor paid out an additional $3 billion dividend to shareholders earlier this week after a strong second quarter, while France's Total SE saw its adjusted income treble to $9.8 billion.

Goldman Sachs strategists warned Europe's energy crisis is likely to last until at least 2025 earlier this week.

"We expect European gas prices will ultimately be driven higher once again during summer 2023, as price-driven demand destruction becomes top of mind once more," a team led by the bank's head of natural gas research Samantha Dart said in a recent research note. "A more sustained lower-price environment is not likely in Europe in our view until 2025."

But the record-breaking profits come as consumers grapple with soaring fuel costs.

The energy consultancy firm warned this week that UK households could see their fuel bills rise to just under 3,500 pounds ($4,280) by the end of 2022 - meaning the figure would have tripled in the space of a year.

Analysts called for the oil and gas firms to reinvest their sky-high profits to help boost supply, which could be one route to easing Europe's energy crisis.

"Every effort possible must be made to reduce energy use and improve supply," Infosys's Tucker said. "Investment can also be directed towards the clean-up of bad industry practices like flaring and spillage of oil, which will open up significant waste reduction potential."

BP expected to report soaring profit days after Shell and Centrica slammed

Pa City Staff - Friday

Bosses at BP will likely be nervously eyeing the headlines that fellow energy giants Shell and Centrica generated this week as they prepare to present their own set of bumper profits.


© PA WireFuel prices

The oil giant is expected to have made far more than twice of what it pocketed in profit a year ago.

It comes as bosses at Centrica and Shell were branded “money-grabbing” on one front page on Friday. “Profits in misery,” another said.

The businesses both combed in big profit increases as they benefited from higher prices for oil and gas around the world.

BP will continue to reap the reward of elevated oil prices in the second quarter with healthy profits expected this time round

Analyst Laura Hoy

The amount that Shell was able to sell its gas for more than tripled in the last year from 4.31 dollars to 13.85 dollars per thousand standard cubic feet.

Undoubtedly some of this will rub off on BP, one of Shell’s big rivals, though just how much, and how much anger it stokes, remains to be seen.

The answers will come on Tuesday.

Analysts expect underlying replacement cost profit – a measure that BP likes to use – to reach 6.8 billion dollars (£5.6 billion) for the second quarter. It would be an increase from 2.8 billion in the same period a year ago.

“BP will continue to reap the reward of elevated oil prices in the second quarter with healthy profits expected this time round,” said Hargreaves Lansdown equity analyst Laura Hoy.

“Capital expenditure in oil and gas is on the decline as BP marches forward with its transition to renewables.

“The recent Windfall Tax imposed by the UK government is still looming over the industry.

“But given that projects within the industry take years – or even decades – to set up, it should have little impact on the group’s investment plans. Still, any update from management on potential implications will be welcomed.

“Aggressive spending on lower carbon assets means this will also be an area of focus for investors.

“These yet unproven projects could become a cash furnace to oil profits, so any update on BP’s aims to generate returns of 8-10% in this part of the business could move the needle.”

She said investors will also be looking for extra information on BP’s exit from Russia. It has decided to sell off its 20% stake in Rosneft, which the company jointly owned with the Kremlin.

But it could be easier said than done. “Eager buyers are not expected to emerge any time soon,” Ms Hoy said.

“That means continuous write-downs are anticipated as the value of this asset declines.”

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Taiwan says 'key position' in semiconductors won't be shaken as US passes chip act

Fri, July 29, 2022 

FILE PHOTO: Two chips are on display at the Taiwan Semiconductor Research Institute (TSRI) in Hsinchu

TAIPEI (Reuters) - Taiwan's "key position" in making semiconductors will not be shaken and production on the island is the most efficient way of doing things, the Economy Ministry said on Friday in response to the U.S. Congress passing a major new chips act.

The U.S. House of Representatives passed the sweeping legislation on Thursday to subsidise the domestic semiconductor industry as it competes with Chinese and other foreign manufacturers.

Taiwan is a major chip producer, home to Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world's largest contract chipmaker, which is also investing $12 billion in a new plant in Arizona.

The Economy Ministry noted that it is "happy to see" Taiwanese firms being able to access "resources on the ground" when they operate around the world, and to establish good relations in the U.S. supply chain.

At the same time, Taiwan is an advanced global semiconductor manufacturing centre with the most resilient and competitive production model, it added.

"After 50 years of continuous innovation, investment and generations of talent, our country's semiconductor manufacturing efficiency, supply chain integrity and innovation energy have always been at the world's top, and Taiwan's key position in semiconductors will not be shaken."

Taiwan has always been a partner of the world, as shown by its efforts to alleviate auto chip supply chain problems, and the "made in Taiwan" model of manufacturing semiconductors is the most efficient and reliable way of doing things, it said.

"Whether in the past, present or future, Taiwan will continue to play the role of an indispensable partner in the global supply chain."

Taiwan has been keen to show the United States, its most important international backer at a time of rising military tensions between Taipei and Beijing, that it is a reliable friend as a global chip crunch impacts auto production and consumer electronics.

But Taiwan's government is also determined to keep the majority of advanced chip manufacturing at home.

China had lobbied against the U.S. semiconductor bill, calling it reminiscent of a "Cold War mentality" and "counter to the common aspiration of people" in both countries.

(Reporting by Taipei newsroom; Writing by Ben Blanchard; Editing by Kirsten Donovan)

 U.S. says it will limit size of semiconductor chips grants

Fri, July 29, 2022 

By David Shepardson

WASHINGTON (Reuters) - The U.S. Commerce Department said late on Friday it will limit the size of government subsidizes for semiconductor manufacturing and will not let firms use funding to "pad their bottom line."

On Thursday, the U.S. House of Representatives gave final approval to legislation that provides $52 billion in government funding to boost semiconductor manufacturing and research. President Joe Biden is expected to sign the legislation early next week.

The Commerce Department Friday told chips companies awards will be "no larger than is necessary to ensure the project happens here in the United States" and added it will discourage "race-to-the-bottom subsidy competitions between states and localities."

Congressional Progressive Caucus chair Pramila Jayapal said the group backed the legislation after lengthy negotiations with Commerce Secretary Gina Raimondo after the group expressed concerns chips companies would use funding for stock buybacks or pay dividends.

A caucus spokeswoman said Friday "progressives were able to vote for the bill yesterday, confident that the department would be ensuring the funding could not be used for corporate self-enrichment."

Commerce said applicants must supply detailed financial information and projections for proposed projects and capital investment plans: "The department will go over these with a fine-tooth comb and make sure that companies are not padding their models to ask for outsized incentives."

A Commerce Department spokesperson declined to comment beyond the web posting.

The department vowed to "give preference in awards to companies who commit to make future investments that grow the domestic semiconductor industry ... and not engage in stock buybacks."

The legislation does not prohibit stock buybacks by companies receiving government funding but does prohibit the use of grant funds for the buybacks.

Companies winning funding will be prohibited for 10 years "from engaging in significant transactions in China or other countries of concern involving any leading-edge semiconductor manufacturing capacity or material expansions of legacy semiconductor manufacturing capacity designed to export to the U.S. and other countries."

(Reporting by David Shepardson; Editing by Chris Reese)

COUNTING ON CHIPS FOR BAIL OUT

What Intel’s Disastrous Earnings Tell Us About the Chip Sector and Competitors

07/29/2022

What a disaster.

We’re talking about Intel (INTC) June-quarter results. The company not only delivered a disappointing quarter but reset its 2022 guidance meaningfully lower, putting its shares under pressure Friday.

For the current quarter, the chip company now sees earnings of $0.35 per share vs. the $0.84 consensus. It is now guiding for third-quarter revenue of $15 billion-$16 billion vs. the $18.67 billion consensus. As for full-year 2022, its EPS expectation is now $2.30, down from its prior forecast of $3.60 and the $3.39 consensus. In terms of revenue for the year, Intel now expects $65 billion-$68 billion, down from $76 billion and well below the $74.4 billion consensus.

What do we make of this?

Some of it can be accounted for by the weakening PC market, which Intel said it is seeing for the consumer market even though the enterprise and high-end PC market remains strong. That matches comments we’ve collected from Microsoft (MSFT) , Logitech (LOGI) , and Samsung in recent days. Indeed, during the June quarter, there were enough data points on the PC market that a good deal of that news was already priced into chip companies, including our own Advanced Micro Devices (AMD)  .

In terms of Intel’s data center business, the company now expects to grow slower than the overall data center market, which in plainer English means it will continue to experience market-share loss as AMD and Nvidia (NVDA) continue to eat its lunch. Comments on cloud and data center spending continue to be vibrant, and that suggests both AMD and Nvidia will deliver June quarters that were better than feared. AMD will report its quarterly results this coming Monday (August 1) after the market close.

Turning to Intel’s capital spending, the company is cutting its 2022 forecast to $23 billion from its $27 billion target earlier this year. Despite the reduction, Intel is still spending roughly $5 billion more than it did last year. At the same time, the CHIPS bill has passed, which should result in Intel’s capital spending remaining at elevated levels in 2023 as it adds additional foundry capacity.

During the earnings call, Intel discussed its recent win with MediaTek and commented it is talking with several other fabless chip companies. We are not surprised by this considering the supply-chain issues during the pandemic and those with China during the June quarter. How quickly companies like Qualcomm (QCOM) , Nvidia, AMD, and others will be willing to use Intel’s foundry services remains to be seen, however. We suspect they will be more inclined to use newfound domestic capacity from Taiwan Semiconductor (TSM) . That said, all this forthcoming domestic capacity is a positive for semi-cap equipment companies, including our own Applied Materials (AMAT) .

Samsung seeks to reassure markets about the competitiveness of semiconductors

Markets / July 30, 2022 / Admin / 0

Samsung Electronics reassured markets about the competitiveness of its semiconductor business, after a series of warnings from investors, analysts and employees that the Korean company is losing its technological edge.

The South Korean conglomerate is the global market leader in memory chips, harboring ambitions of bridging the gap in its main competitor, Taiwan Semiconductor Manufacturing Company, in the plumbing sector, where companies are contracted to produce chips designed by others.

To illustrate the company’s importance to the global economy, US President Joe Biden visited its semiconductor plant in Pyeongtaek during a visit to South Korea in May.

But earlier this year, the company lost its two largest plumbing customers, Qualcomm and Nvidia, to TSMC, according to analysts, who noted that the companies were disappointed by Samsung’s inability to offer fixed sizes of 4nm chips and 5 nanometers that make up the central processing units of computers.

TSMC captured 54 percent of the foundry market in the first quarter of 2022, more than triple Samsung’s market share, according to market researcher TrendForce.

Last year, Samsung announced a 171 trillion won ($151 billion) investment plan for foundry chips by 2030. But its Taiwanese rival plans to invest up to $44 billion this year compared to Samsung’s estimated $12 billion, according to SK Securities and Exchange headquartered in Seoul.

And in the D-Ram business, traditional strengths Samsung, competitors Micron Technology and SK Hynix have been quicker to unveil some of its more advanced chips. D-Ram technology enables short-term storage for graphics, mobile and server memory chips.

Problems with its flagship Galaxy S22 smartphone, which was launched in February, indicates that the South Korean conglomerate is also lagging behind Apple in hardware competitiveness, while the performance and sales of Samsung’s Exynos 2200 mobile processor chips, launched this year, It was disappointing.

Investors, including hedge funds Petra Capital Management and Dalton Investments, have raised concerns about what they describe as Samsung’s tough corporate culture under Lee Jae-yong, Samsung’s vice president and de facto leader.

They argue that the company has prioritized rapid development and cost savings over quality and innovation.

“Designing their chips required creative and engineering ingenuity, but Samsung’s risk aversion culture deepened under Lee Jae-yong’s leadership, with engineers shunning new attempts at innovation,” said Chan Lee, managing partner at Seoul-based Petra Capital Management.

Investors have expressed concerns about what they say is a rigid corporate culture under Lee Jae-young, Samsung’s vice president and de facto leader © Jeon Heon-Kyun / Pool via AP

In April, a junior engineer who worked on Samsung’s semiconductor technology development team wrote a letter to the company’s leadership complaining that Samsung researchers were under enormous time pressure to achieve “impossible” goals to develop new technology and products, and that this “feeling of failure” permeated the organization.

“It seems that the top decision maker is unable to understand the root cause of the problems,” the engineer added. “I’ve heard quite a few stories about the ‘crisis’ but I think this moment is more dangerous than ever.”

“Cultures in the design house and luxury division are critical to success. SemiAnalysis senior analyst Dylan Patel wrote in a recent report: He attributed Samsung’s problems to a “toxic” culture where different business units blame each other “in the face of bugs” for their weakness in the sector. Not related to memory.

Samsung’s share in the smartphone application processor market has almost halved since 2019, and it ranked fourth last year at 6.6 percent, compared to 37.7 percent by Qualcomm, MediaTek 26.3 percent, and Apple 26 percent, according to a research firm. Market Strategy Analytics.

“[Samsung’s] “Technological advantages are crumbling,” Patel wrote. “Samsung is falling behind in all aspects of technology development including the one area where they have historically crushed all competitors, D-Ram.”

Samsung Electronics reported lower-than-expected operating profit for the second quarter of 2022 as inflation dented consumer demand for electronic devices.

It is also preparing for a fall in demand in response to higher global prices following the pandemic-driven boom in the technology sector over the past two years.

But company executives argue that its memory business still has a technological advantage over its competitors, citing its faster adoption of UV lithography to produce memory chips and its dominant D-Ram market share of about 40 percent.

Kang Moon-soo, Samsung’s foundry vice president, called market concerns about losing key customers “exaggerated,” telling analysts in April that it has backlogged orders for the next five years, or eight times last year’s revenue from the business.

Analysts said TSMC’s faster transition to mass production of 4nm and 5nm chips has affected the Korean company’s ability to produce high-end chips in sufficient sizes for its high-profile customers.

But Samsung told the Financial Times that it is now able to produce fixed quantities of chips and will “maximize” supply. The company is “reorganizing” its chip design business to boost its long-term competitiveness, an executive told analysts Thursday.

Earlier this week, the company held a gala to celebrate its first shipment of 3nm chips, after beating TSMC to bring the next generation of memoryless chips to market.

“Samsung still has a chance to attract customers back if it can increase the rate of return on advanced chips,” said James Lim, an analyst at hedge fund Dalton Investments in California. “No one wants to take the risk of being completely dependent on TSMC.”

Samsung also said it was making efforts to create a “comprehensive challenge culture” through “open communication” with employees. She said she continued to talk to employees about the company’s vision and business direction.

There is optimism within the company that Lee, a scion of the company’s founding family, will receive a pardon from President Yoon Seok Yeol next month.

Lee was released from prison on parole last year, having served 60 percent of his sentence for bribing former president Park Geun-hye to secure his family’s control of Samsung Electronics.

But he is still subject to restrictions related to his job and business activities, which effectively complicate his ability to oversee the management of the sprawling Samsung conglomerate. Presidential pardons are traditionally granted before South Korean Independence Day in mid-August.

Egyptian prosecutors deny imprisoned activist faced harm

THEY LIE


Alaa Abdel Fattah, left, a leading Egyptian pro-democracy activist walks with his mother Laila Soueif, a university professor who is an also an activist, outside a court, in Cairo, Egypt, Oct. 26, 2014. A leading human rights watchdog on Thursday, July 28, 2022, urged Egyptian authorities to allow the family of a jailed activist access to him and reiterated calls for his immediate release. For nearly 10 days, Abdel-Fattah's family members had not received any word from him and were told by prison officials that he is refusing to meet with them, Amnesty International reported.

(AP Photo/Hussein Tallal, File) 

Fri, July 29, 2022 

CAIRO (AP) — Egyptian prosecutors are denying allegations of torture and ill-treatment leveled by a prominent imprisoned activist and claim he is in good condition, years after the allegations were made.

For nearly 10 days, Alaa Abdel-Fattah's family members say they have not heard from him and have been told by prison officials he's refusing to meet with them. Amnesty International has urged Egyptian authorities to allow the family access to the 40-year-old programmer and father serving a five-year sentence.

He was sentenced in December on charges of spreading false news, a charge often used to sentence opposition and pro-democracy activists in Egypt. His family says he has been on hunger strike since April to protest his detention and has voiced serious concerns for his health.

His imprisonment has come to symbolize the broad crackdown on dissent that has targeted not only Islamists from the outlawed Muslim Brotherhood but also secular activists, economists, writers and others under the government of President Abdel-Fattah el-Sissi.

A statement released late Thursday by the Public Prosecution Office said a senior prosecutor was dispatched on Wednesday to Wadi el-Natrun Prison to investigate nearly three-year-old claims that Abdel-Fattah was beaten and denied basic rights. Abdel-Fattah's complaints stem from when he was previously held at the Tora prison complex in southern Cairo.

After examining Abdel-Fattah, the prosecutor concluded that he showed no marks of torture, the statement said.

“The inmate is in good health and a doctor examines him regularly, along with other inmates. He never had any health complaint,” read the statement.

Abdel-Fattah's sister, Mona Seif, wrote on Twitter that the prosecutor's statement provides the family with proof that her brother is alive.

“That is the most important update now,” she said.

His aunt, award winning novelist Ahdaf Soueif, cast doubt on the seriousness of the prosecutors’ investigation.

“They are examining Alaa and concluding that they cannot see any signs of beatings that actually took place two years and nine months ago,” she wrote on Twitter.

Abdel-Fattah, an outspoken dissident, rose to prominence during the 2011 pro-democracy uprisings that toppled longtime autocrat Hosni Mubarak and has spent most of the past decade behind bars.

His family has filed multiple complaints since 2019 about him being denied access to books, exercise time outside his cell, regular visits and proper medical care. In May, authorities transferred him from Tora Prison to the newly-inaugurated Wadi el-Natrun prison, located about 100 kilometers (62 miles) north of Cairo.

Earlier this year, Abdel-Fattah gained British citizenship through his mother, Laila Soueif, a math professor at Cairo University who was born in London. The family said at the time they sought a British passport for Abdel-Fattah as a way out of his “impossible ordeal.” The family has been asking authorities to grant him access to a consular visit.

On Friday, the U.K. Foreign Office said Foreign Secretary Liz Truss raised Abdel-Fattah’s case during a meeting with her Egyptian counterpart earlier this month in London. It said Britain is working to secure his release and called on Egyptian authorities to ensure his welfare needs are met while in prison.

ZIONIST ETHNIC CLEANSING 

Palestinians say Israeli fire kills teen in West Bank rally

Close this content

Palestinians say Israeli fire kills teen in West Bank rally

Palestinian protesters block an Israeli army vehicle as they block the street that bypasses the West Bank village of Mughayer, north of Ramallah, Friday, July 29, 2022. Palestinians protesting against Israeli settlements activities blocked a main street and scuffled with Israeli settlers and army soldiers who used teargas to disperse them. (AP Photo/Nasser Nasser

IMAD ISSEID
Fri, July 29, 2022 

RAMALLAH, West Bank (AP) — Israeli forces opened fire at Palestinian protesters in the occupied West Bank on Friday, killing a 16-year old and wounding five people, the Palestinian Health Ministry said.

According to the ministry, Amjad Abu Alia was shot in the chest by a live bullet and pronounced dead after he was brought to the hospital. He was shot as some 250 Palestinians gathered to protest against Israeli settlement expansion in the village of Mughayer, north of the city of Ramallah.

There was no immediate statement from the Israeli military.

The protesters closed a road used by settlers with burning tires, after which scuffles erupted with the settlers, according to an Associated Press reporter at the scene. The Israeli military stepped in, firing stun grenades and tear gas to disperse the protesters.


Shortly after, both settlers and soldiers fired live shots, according to Wafa, the official Palestinian news agency.

Abu Alia was shot as he was running away with a group of protesters. The ministry said five protesters were wounded; three by live fire and two by rubber-coated bullets.

Demonstrations against Israeli settlement expansions are a weekly occurrence in several parts of the West Bank, which Israel occupied in the 1967 Mideast war.

The Palestinians want the West Bank and the Gaza Strip for a future state, along with a capital in east Jerusalem. They say the building of settlements, which house half a million settlers, hinders an independent, contiguous Palestinian state in the future.

Most of the international community does not recognize settlements and considers them illegal.

Cree singer reflects on 'speaking the law' to Pope Francis


Pope Francis visits Alberta

Fri, July 29, 2022 
By Anna Mehler Paperny

TORONTO (Reuters) - A Cree woman who captured global attention with her anguished song before Pope Francis on Monday said she was moved to do so when he donned a gifted feathered headdress without first removing his skullcap - something she saw as disrespectful.

Si Pih Ko, a Cree woman from Manitoba, stood in her beaded regalia and belted out an ancient Cree song - "Our village" - with a rhythm similar to the Canadian national anthem as tears streamed down her face.

"He didn’t remove his law before allowing our law to be placed on his head," she told Reuters by phone from Winnipeg, adding the pope could have given the headdress back instead.

Shaking with emotion, Si Pih Ko, 45, ended her song with a statement on indigenous law, fist raised, before turning her back and walking away.

As she sang, Francis stood and watched. The pontiff is in Canada to apologize to indigenous people for abuse in government schools run by the Roman Catholic church.

The poignancy of singing before the pope in a language priests and nuns beat indigenous children for speaking was not lost on her, Si Pih Ko said.

"It felt good, being able to just sing it and speak it. And he could not destroy it in me."

She said she had wanted to be at the event in Maskwacis, Alberta, not to hear the pope's apology but "to have that opportunity to speak the law to him. No apology will ever make things right."

She said she knew she would be "speaking the law" to the pope somehow, but added: "I didn't think it would be right in the centre, hand up like that."

She said that in her mind as she sang were the indigenous women, men and children who would never come home.

"Everyone who lost their lives fighting against the system, with all odds against them, that’s who I was there for."

(Reporting by Anna Mehler Paperny; Editing by Daniel Wallis)

Pope: Canadian residential schools were cultural 'genocide'





Pope Francis speaks to journalists aboard the papal flight back from Canada Saturday, July 30, 2022, where he paid a six-day pastoral visit. Pope Francis wrapped up his Canadian pilgrimage by meeting with Indigenous delegations and visiting Inuit territory in northern Nunavut. In one of his addresses, he assailed the Catholic missionaries who "supported oppressive and unjust policies" against Native peoples in the country's notorious residential schools and vowed to pursue truth and healing. (Guglielmo Mangiapane/ Pool via AP)


NICOLE WINFIELD
Sat, July 30, 2022 

ABOARD THE PAPAL PLANE (AP) — Pope Francis agreed Saturday that the attempt to eliminate Indigenous culture in Canada through a church-run residential school system amounted to a cultural “genocide.”

Speaking to reporters while en route home from Canada, Francis said he didn’t use the term during his trip to atone for the Catholic Church’s role in the schools because it never came to mind.

Canada’s Truth and Reconciliation Commission determined in 2015 that the forced removal of Indigenous children from their homes and placement in the residential schools to assimilate them constituted a “cultural genocide.”

Some 150,000 children from the late 1800s to the 1970s were subject to the forced assimilation policy, aimed at making them fully Christian and Canadian. Physical and sexual abuse were rampant at the schools, and children were beaten for speaking their Native languages.

“It’s true I didn’t use the word because it didn’t come to mind, but I described genocide, no?” Francis said. “I apologized, I asked forgiveness for this work, which was genocide.”

Francis said he repeatedly condemned the system that severed family ties and attempted to impose new cultural beliefs as “catastrophic” to generations of Indigenous peoples.

In the main apology of his Canada trip, delivered Monday, Francis spoke of “cultural destruction,” but he didn’t use the term “cultural genocide” as some school survivors had hoped and expected.

“It’s a technical word, ‘genocide.’ I didn’t use because it didn’t come to mind, but I described that, and it’s true it’s a genocide,” he said Saturday.

___

Associated Press religion coverage receives support through the AP’s collaboration with The Conversation US, with funding from Lilly Endowment Inc. The AP is solely responsible for this content.

Mexican manufacturing tumbles as price hikes bite


Fri, July 29, 2022 

A worker walks past storage silos at the ALIPEC animal feed factory on the outskirts of Guadalajara

MEXICO CITY (Reuters) - Mexico's manufacturing sector declined in July, with demand for the country's goods hit by inflation after a long pandemic-driven downturn, a survey showed on Friday, despite hopes for a recovery.

The seasonally adjusted S&P Global Mexico Manufacturing Purchasing Managers' Index (PMI) fell to 48.5 in July from 52.2 in June.

Aside from a brief hiatus in May and June, Mexico's PMI has lingered below the 50-point threshold that separates growth from contraction since March 2020. It hit a record low of 35.0 in April 2020 during the initial enactment of the country's COVID-19 containment measures.

The data showed a July drop in factory orders and lower sales, with pressure from drought, input shortages and inflation.

The drop in manufacturing output also prompted a marginal drop in employment for the first time in four months.

"Companies are now reporting trepidation over their financials, a factor which restricted input buying and led to the non-renewal of temporary contracts," said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

Business confidence also dropped, with almost one-quarter of those polled predicting output levels would continue to fall in the coming 12 months, De Lima added.

"Solvency concerns, alongside supply-chain constraints, the war in Ukraine and acute price pressures stifled business confidence in July."

Mexico's central bank announced a record interest rate increase last month if an effort to control inflation, with more hikes expected.

(Reporting by Isabel Woodford; Editing by David Alire Garcia and William Mallard)

Mali and Burkina Faso: Did the coups halt jihadist attacks?


Natasha Booty - BBC News
Sat, July 30, 2022 

Many Malians welcomed the coups following months of anti-government protests

Widespread anger at chronic insecurity in the West African countries of Mali and Burkina Faso paved the way for military men to kick out failing governments over the past two years.

"There's no more room for mistakes," said Mali's coup leader as he seized power in August 2020.

"We have more than what it takes to win this war," echoed Burkina Faso's new man in charge earlier this year.

So are citizens now more safe?

The short answer is, no.

In both countries, attacks by Islamist militants on civilians have only increased. The same is true of civilian deaths - more ordinary people are being killed by Islamists, militants and the military.

Burkina Faso graph showing the rise of civilian deaths and Islamist attacks on civilians

"The tallies for each year are increasing year by year," says Héni Nsaibia, a senior researcher covering West Africa's Sahel region for the Armed Conflict Location and Event Data project (Acled).


Data supplied to the BBC by Acled in June compares the 661 days before and after Mali's coup in August 2020, and the 138 days before and after Burkina Faso's coup in January 2022.

To gather this data Acled relies on a network of "informants and professionals" as well as media reports, but Mr Nsaibia says tracking violence is particularly hard in the Sahel because of "Russian-driven disinformation, and the states themselves often feed the media with fake reports to make them appear more successful than they really are".

Russia, which backs Mali's junta, has consistently denied such allegations in the past. The Mali and Burkina Faso governments have not responded to BBC requests for comment.

One of the deadliest months on record was March 2022. Acled says 790 civilians were killed in Mali.

Mali graph showing the rise of civilian deaths and Islamist attacks on civilians

Some of these civilians were killed by militants from the local branch of the Islamic State group in Ménaka, according to Acled, and there were other smaller attacks. But the vast majority were civilians massacred in the town of Moura by the Malian army, rights groups agree.

"According to multiple reports, the Malian army and Russian mercenaries entered Moura looking for what they claimed was a meeting of jihadist leaders. They attacked civilians and the UN claims that they killed towards 500 civilians in a three-day period," says International Crisis Group (ICG) Sahel project director, Richard Moncrieff.

Malian authorities have denied that any civilians were killed in Moura, saying only Islamist militants died. It has since refused access to the UN for an investigation into the deaths, and launched its own instead.

"This is a classic problem, sometimes referred to as the issue of the 'missing dead'," says Mr Nsaibia of Acled. "State-sanctioned violence goes unreported, but sometimes even framed as being perpetrated by someone else."

He says unreliable media coverage presents a key obstacle, as do the often remote, rural locations of such attacks in countries in the Sahel - plus "there is a prevailing fear among communities about speaking out".

In some instances the lines between state actor and civilian militia can seem blurred too - Burkina Faso in particular has a tradition of armed community militias, Mr Moncrieff says, for whom the government created an official role in 2020.

Such militias in the Sahel are increasingly being called upon to face down the jihadist threat, but are often outgunned and outnumbered. Some have also been accused of committing violent abuses against civilians.
'Clandestine armies'

Malian authorities are fully in control of as little as 15% of the country's territory, according to a recent UN report. Meanwhile in Burkina Faso only about 60% of the country is under state control, says the West African regional bloc Ecowas.

Islamist militants in Mali and Burkina Faso have a huge amount of firepower, analysts say.

"It's warfare between an army and a clandestine army" and in large swathes of these countries "the staying power of the state is not there", argues political scientist Abdourahmane Idrissa, based at the University of Leiden.

In Burkina Faso as well as Mali, Islamists engage in "classic asymmetric warfare," says ICG's Mr Moncrieff, "where they don't take control of any cities. They do increasingly encircle cities and cut them off in order to flex their muscles, and otherwise have become very rural."

One of the catalysts for January's coup in Burkina Faso was a brazen raid in which jihadists killed 57 gendarmes at camp in Inata, in the north of the country. The gendarmes had resorted to scavenging for food before the attack, after their requests for rations and more ammunition went unheeded.

"It was a shock - almost a whole unit was wiped out - and they died in conditions everybody thought were deplorable," former Burkinabè soldier-turned-analyst Mahamoudou Sawadogo tells the BBC.

Since then under the new junta, Mr Sawadogo says, the armed forces have been promised better conditions, more resources plus an anti-terrorism strategy review - "but that hasn't fixed the problem".

"Attacks are on the up, there's more violence against civilians and more territorial control has been lost to armed groups - so the putschists' strategy isn't adequate against the threat," he adds.

Structural changes to unify Burkina Faso's armed forces under a single command have also failed, says Mr Sawadogo.
'Exploiting the void'

Neighbouring Mali, with its longer history of insurgency, is not faring any better.

It has been the epicentre of Islamist violence in the Sahel for the past decade, with jihadists enabling ethnic Tuareg rebels to seize control of much of the north in 2012.

French troops were called in to tackle the insurgency the following year, with Malians initially welcoming the intervention by its former coloniser. But after nine years they are leaving Mali after falling out with junta, and Mali has also decided to quit the multi-national G5 Sahel force that was jointly created to fight the jihadists.

As the French-led Barkhane force has shifted the central hub of its anti-jihadist operation to Niger, militants from Islamic State in the Greater Sahara have "exploited the void left behind" to wage "unprecedented levels of violence" in the regions of Menaka and Gao, according to Mr Nsaibia.

Some analysts say that the Mali junta's activities since taking power - including hiring troops from Russian security contractor Wagner and buying a large number of arms from Russia - have failed for lack of coherent strategy.

"The army is now more active - the massive corruption that prevented them from being more active has been gotten rid of - but that doesn't mean that they are now more in control," argues Mr Idrissa.

Mr Moncrieff agrees that since the start of the year Mali's army has been taking "a much more front-foot approach and taken the fight to the jihadist groups", probably because they feel "emboldened by the support of Russian mercenaries and an influx of weapons - much of them from Moscow".

"The reports indicate that they've managed to secure some areas at least for some sustained periods and pushed jihadist groups out," he adds.

Mali denies the presence of Russian military contractors in the country, yet both parties are accused by rights groups of committing abuses and massacres of civilians, and Acled tells the BBC that violence against civilians has "skyrocketed" since Russian involvement began in December.

In many cases the civilians killed by Malian forces belong to the Fulani ethnic group, who they regard as the main social base from which the Islamists recruit, and sometimes civilians are targeted on simple suspicion of having collaborated with militants, analysts tell the BBC.

Mali, however, has consistently denied this.

IS and al-Qaeda's JNIM are both active in the Sahel region where they compete for power

In recent years as their influence has waned in the Middle East, the Islamic State group and al-Qaeda have increasingly focused their efforts on the Sahel.

They have exploited existing tensions in communities, says Mr Moncrieff, with "climate change and declining agricultural resource adding to that very violent mix".

"It's a vicious circle," he adds, with "people being excluded from their fields by insecurity, when that makes them more likely to join groups that are either jihadist in nature or simply criminal gangs who aim to steal cattle and so forth."

The spread of jihadist violence from northern to central Mali over the past seven years, and its emergence in Burkina Faso in the last two years, has implications elsewhere in West Africa.

"We also see it in the coastal states, especially Benin, and more recently Togo," says Mr Nsaibia.

"So far it's only really Ghana that has been untouched, so to speak, even though there are strong indications that militant groups are using Ghanaian territory as a place of rest and recuperation."
'A last resort'

Many people in Sahelian countries who are desperate for solutions do believe that military governments can handle insecurity better than democratically elected ones, but analysts warn that this popular support could soon sour.

"We're living through this now in Burkina Faso and in Mali," says Mr Sawadogo. "Any involvement of the army in political affairs worsens the nation's social and security situation... It's a last resort. Every coup in Burkina Faso has set back the country's progress."

"Acclaim fades when people become aware that the army in power have no greater leverage in peripheral areas than civilian governments," agrees Mr Moncrieff.

It is a view shared by Niger's President Mohamed Bazoum - who withstood a coup attempt days before his official swearing-in - as well as by Ghana's President and Ecowas leader Nana Akufo-Addo, who told the BBC in April that "the initial evidence doesn't point to the fact that Mali is doing anything better about the insecurity and the fight against the jihadists than the civilian government."

So how can Burkina Faso and Mali bring about lasting change?

"Better management and organisation of their security forces, and better management of the electoral processes in their countries," suggests ICG's Mr Moncrieff.

"The main lesson is that you need to have a plan - whether you are a military or a civilian power - because the civilian government also didn't have this," says political scientist Mr Idrissa.

Shows of military might, such as raids and crackdowns on armed groups, are ultimately not enough to establish the staying power of the state, he adds. For that you need a reformed state, able to keep control of its territory.

For now, the basic safety that military leaders had promised the people of Burkina Faso and Mali seems a long way off.