The world this week
Business
Mario Draghi released his long-awaited report regarding European growth and competitiveness. Mr Draghi, who has been president of the European Central Bank and prime minister of Italy, focused on boosting innovation, calling for the EU’s countries to combine their research spending and create a new super-agency for advanced projects. As well as easing competition rules to enable consolidation, the report calls for the integration of capital markets. Mr Draghi said his recommendations were not a case of do or die, but rather one of do this, “or it’s a slow agony.”
Underlining the problems with Europe’s competitiveness, Northvolt, which makes batteries for electric vehicles, said it would scale back its operations and suggested jobs would be lost. The Swedish company is adjusting in part to reduced demand for EVs, but it is also pausing its production of cathode active materials, essential elements for lithiumion batteries. It will now have to import the materials from cheaper Chinese and South Korean rivals.
A bout of consolidation beckoned in Europe’s financial sector, when UniCredit, Italy’s second-largest bank, declared a 9% stake in Commerzbank, Germany’s second-biggest lender, and expressed interest in increasing its holding. The German government recently decided to reduce its stake in the bank from 16.5% to 12%.
The European Court of Justice ruled that Apple must pay €13bn ($14.3bn) in back taxes, overturning a lower court’s decision in 2020 that had dismissed the order from the European Commission. The case arose from the commission’s finding in 2016 that Apple benefited from an unlawful deal on corporate tax in Ireland, where it had established its European base. The company said the commission was “trying to retroactively change the rules” on corporate tax. In another victory for the commission, the ECJ upheld a €2.4bn fine against Google from 2017 for pushing its own shopping search results over those of its competitors.
In America another antitrust trial got under way against Google, this time for improperly using monopoly power to corner the market in digital advertising. Google denies the government’s claims, arguing that it competes “millisecond by millisecond” with rivals for ad revenues. The trial will last for several weeks.
Hello Mate
Investors were unimpressed with Apple’s new iPhone 16, which can use artificial-intelligence features, though only some will be ready in 2025. In China Huawei launched the Mate XT, the world’s first tri-fold smartphone, which sells for a hefty $2,800.
Southwest Airlines announced that its executive chairman would depart next year, one of the key demands made by Elliott Management, an activist hedge fund that plans to launch a proxy battle to shake up the company’s management. After a meeting between Elliott and the board Southwest said that six directors would also retire, in November, and four independent directors would be appointed. But the board reiterated its support for Bob Jordan, the chief executive, denying Elliott another of the scalps it wanted.
America’s annual inflation rate fell sharply in August, to 2.5%, though core inflation, which excludes food and energy prices, was surprisingly high. The Federal Reserve is expected to cut interest rates for the first time in four years when it meets on September 18th.
Following intense lobbying from Wall Street, the Fed said it would cut roughly in half the extra capital that America’s largest banks will be required to hold under new rules that fall under the Basel framework.
The Bank of England also announced that it is watering down the rules.
OPEC trimmed its forecasts and now thinks global demand for oil will grow by 2m barrels a day this year, which is still above the 1.4m b/d growth seen before the pandemic. Oil prices have tumbled to their lowest point this year. Brent crude is trading around $72 a barrel.
A private crew of four astronauts flew 1,400km (870 miles) above Earth’s surface, the farthest humans have travelled in space apart from missions to the Moon, which is 384,000km away. The crew, led by Jared Isaacman, a businessman, flew in a SpaceX capsule and prepared for the first spacewalk by private citizens.
Always with us
Tributes were paid to James Earl Jones, who died aged 93. The American actor had a long career in theatre and film but is best known as the voice of Darth Vader, for which he was first paid $7,000 in 1977. His baritone voice will live on. Mr Jones struck a deal with Disney, which owns the Star Wars franchise, to reconstruct his voice using AI for future films.