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No end in sight for labor shortages as U.S. companies fight high costs

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October 26, 2021

By Caroline Valetkevitch

NEW YORK (Reuters) – Labor shortages may be the most intractable of the cost risks that U.S. companies faced in the latest quarter, and as the earnings season moves into its peak there are signs the problem will persist, some strategists say.

Finding and paying for workers is a challenge investors are paying close attention to as third-quarter results come in, with supply bottlenecks and high energy and other commodity prices among other key risks for companies.

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Warnings have come already from companies in several industries, including healthcare, with hospital operator HCA Healthcare Inc saying higher labor costs seen in the third quarter could stick around longer because of a shortage of workers.

Domino’s Pizza cited a shortage of drivers as it reported recently a rare fall in U.S. sales, and FedEx Corp also cited higher labor costs in September when it cut its full-year forecast.

The coming weeks, which bring results from the bulk of S&P 500 companies, should give investors more clues on how long labor pressures could persist.

“We’re going to see it come up in the next couple of quarters as we try to continue to reopen,” said Mace McCain, chief investment officer at Frost Investment Advisors. “The reopening was delayed by the Delta variant, so we haven’t seen the full impact of the labor shortage yet.”

Goldman Sachs strategists wrote in a research note ahead of this week that there have been some “tentative signs of improvement from supply chain data and commodity prices,” while labor market tightness could be a challenge “for many companies for years.”

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“Our economists expect COVID-related pressure on labor market supply will ease in coming months but forecast a U.S. unemployment rate of 3.5% by the end of 2022, meaning companies will continue to face many of the labor market challenges they face today,” they wrote.

Among stocks within the leisure and hospitality industry, low-labor-cost names have outperformed high-labor-cost peers for months, the Goldman strategists said, noting that in the broader market, “the most asset- and labor-efficient firms have outperformed peers in recent years and in recent weeks.”

Recent economic data has underscored the tightening labor market trend. The latest data showed the number of Americans filing new claims for unemployment benefits dropped to a 19-month low in the week ended Oct. 16, marking a second straight week that claims remained below 300,000 as employers hold on to workers amid an acute labor shortage.

U.S. companies managed to keep profit margins at record levels in the second quarter, but rising costs have sparked some concern among investors.

So far this reporting period, stronger-than-expected earnings have raised the year-over-year profit growth forecast for S&P 500 companies to 34.8%, up from about 30% at the start of the month, according to IBES data from Refinitiv.

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To be sure, a labor shortage is good news for people out of work and looking for a job. And there are several signs that suggest the labor shortage may be temporary, Thomas Lee, managing partner and head of research at Fundstrat Global Advisors, wrote in recent note.

“Labor usage is actually 4.9 million lower now than pre-COVID-19,” he wrote. “Has the economy permanently changed during COVID-19 that somehow less people working means a tighter labor market? Nope.”

Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago, said labor shortages seem to be more of a problem for some industries than others.

“Customer-facing businesses” that were forced to close during the pandemic lockdowns are having a hard time filling jobs and getting back up to speed, he said, while “manufacturers never quite completely shut down.”

(Reporting by Caroline Valetkevitch; Editing by Alden Bentley and Leslie Adler)

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Tesla sold 52,859 China-made vehicles in November – CPCA

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December 8, 2021

BEIJING (Reuters) – U.S. electric vehicle maker Tesla Inc sold 52,859 China-made vehicles in November, including 21,127 for export, the China Passenger Car Association (CPCA) said on Wednesday.

Tesla, which is making Model 3 sedans and Model Y sport-utility vehicles in Shanghai, sold 54,391 China-made vehicles in October, including 40,666 that were exported.

Chinese EV makers Nio Inc 10,878 cars last month, a monthly record high, and Xpeng Inc delivered 15,613 vehicles. Volkswagen AG said it sold over 14,000 ID. series EVs in China in November.

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CPCA said passenger car sales in November in China totalled 1.85 million, down 12.5% from a year earlier.

(Reporting by Sophie Yu, Brenda Goh; editing by Jason Neely)

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Renault Zoe goes from hero to zero in European safety agency rating

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December 8, 2021

By Nick Carey

LONDON (Reuters) – French carmaker Renault on Wednesday received a blow for its popular Zoe electric model, as the European New Car Assessment Programme (NCAP) gave it a zero-star safety rating in tests that are standards for Europe.

The carmaker, which is cutting costs and working to turn around its performance after overstretching itself over years of ambitious global expansion, also received a one-star rating for its electric Dacia Spring model.

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Euro NCAP said the latest Zoe had a worse seat-mounted side airbag than earlier versions. Euro NCAP noted the Renault Laguna had been the first car ever to receive a five-star rating in 2001.

“Renault was once synonymous with safety,” Euro NCAP secretary general Michiel van Ratingen said in a statement. “But these disappointing results for the ZOE and the Dacia Spring show that safety has now become collateral damage in the group’s transition to electric cars.”

In the year through October, the Zoe was the third top-selling fully-electric car in Europe, behind Tesla’s Model 3 in top place and Volkswagen’s ID.3.

In a press release titled “Hero to Zero,” UK insurance group Thatcham Research noted the Zoe had initially received a five-star rating back in 2013.

“It’s a shame to see Renault threaten a safety pedigree built from the inception of the rating,” said Matthew Avery, Thatcham’s chief research strategy officer and a Euro NCAP board member.

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Eleven cars received ratings in Euro NCAP’s final round of tests for 2021, which did not include Tesla models.

A number of other vehicles received five-star ratings, including BMW’s electric iX, Daimler’s electric Mercedes-Benz EQS, Nissan’s Qashqai and Volkswagen’s VW Caddy.

(Reporting By Nick Carey; Editing by Bernadette Baum)

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Weibo shares close down 7.2% in Hong Kong debut

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December 8, 2021

By Scott Murdoch

HONG KONG (Reuters) -Chinese social media giant Weibo Corp’s shares closed 7.2% below their issue price in Hong Kong on Wednesday, as it became the latest U.S.-listed China stock to seek out a secondary listing closer to home.

The Hong Kong debut was in line with a fall in Weibo’s primary listing in New York after a torrid week for U.S.-listed China shares, which are facing greater U.S. regulatory scrutiny and also under pressure from Chinese authorities.

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Weibo, which raised $385 million for its Hong Kong listing, opened at $256.20 and closed at HK$253.2 after a volatile debut session.

The stock had been priced at HK$272.80 each in its secondary listing in which 11 million shares were sold.

“For Weibo, it’s a matter of timing. The Hong Kong market had started to rebound this week and now we are seeing some softness emerging in the market,” said Louis Tse, Wealthy Securities director in Hong Kong.

Weibo’s fall came as Hong Kong’s Hang Seng Index closed Wednesday up 0.06% while the Tech Index was 0.03% higher.

Some major stocks such as Alibaba Group Holdings, down 4.35%, were off sharply as sentiment towards tech majors remains fragile.

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“The listing market in Hong Kong is very lukewarm right now,” said Dickie Wong, Kingston Securities executive director.

“Plus, there is regulatory pressure from the (U.S. Securities and Exchange Commission) on Chinese companies to disclose basically everything within three years.

“So there is a major trend that most of the U.S.-listed Chinese companies will seek secondary or dual primary in Hong Kong so they can exit the U.S. market if they need to.”

Ride-hailing giant Didi Global decided last week to delist from New York https://www.reuters.com/technology/didi-global-start-work-delisting-new-york-pursue-ipo-hong-kong-2021-12-03, succumbing to pressure from Chinese regulators concerned about data security and denting sentiment toward Chinese stocks.

Hong Kong and China’s mainland STAR Market have attracted $15.2 billion worth of secondary listings from U.S. listed Chinese companies so far this year, according to Refinitiv data.

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“The moves are probably based on the increasing recognition that the U.S.-China decoupling will not stop and will proceed steadily,” said LightStream Research analyst Mio Kato, who publishes on Smartkarma.

“I would expect a continuous flow of listings from New York to Hong Kong over the next year or two.”

The U.S administration is progressing plans to delist Chinese companies if they do not meet the country’s auditing rules, which could affect more than 200 companies.

Chinese companies https://www.reuters.com/business/us-sec-mandates-foreign-companies-spell-out-ownership-structure-disclose-2021-12-02 that list on U.S. stock exchanges must disclose whether they are owned or controlled by a government entity, and provide evidence of their auditing inspections, the Securities and Exchange Commission (SEC) said last week.

(Reporting by Scott Murdoch and Donny Kwok; editing by Richard Pullin and Louise Heavens)

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