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Alibaba Group reported weaker-than-expected earnings for the latest quarter, despite efforts to revive growth in a challenging environment. Net profit for the three months ending in June fell 29% year-over-year to 24.27 billion yuan ($3.40 billion), missing the 28.175 billion yuan expected by analysts. The decline was attributed to increased marketing, product development, administrative costs, and higher taxes.
Revenue grew by 3.9% to 243.24 billion yuan, also falling short of analysts’ expectations of 246.36 billion yuan. This growth slowed from the previous quarter’s 6.6% increase, reflecting the impact of fierce domestic competition, a cooling Chinese economy, and shifting consumer behaviors.
Alibaba’s core domestic e-commerce segment, Taobao and Tmall Group, saw a 0.9% decline in sales to 113.37 billion yuan. Despite this, the company achieved high-single-digit growth in online gross merchandise value, driven by increased customer numbers and purchase frequency.
The cloud-computing division reported a 5.9% increase in revenue to 26.55 billion yuan, while the overseas e-commerce unit posted a 32% rise to 29.29 billion yuan, though this was slower than the 45% growth in the previous quarter.
CEO Eddie Wu emphasized the company’s focus on enhancing user experience and returning its domestic e-commerce business to a growth trajectory. However, the challenges posed by a slowing economy and rising competition from platforms like Pinduoduo and Douyin continue to weigh on Alibaba’s performance. Adjusted net profit, which excludes certain expenses, fell 9.4% to 40.69 billion yuan, slightly exceeding analyst expectations.
The Japanese yen appreciated past 146.5 per dollar, marking a rebound from over one-week lows as the US dollar weakened following cooler-than-expected US producer inflation data. This latest inflation report reinforced market bets on more aggressive interest rate cuts from the Federal Reserve, fueling optimism that the upcoming US consumer inflation figures will further confirm easing price pressures in the world’s largest economy.
Domestically, the yen’s strength also reflects mixed economic signals in Japan. The latest Reuters Tankan survey revealed a slight weakening in business sentiment among Japanese manufacturers in August, attributed largely to tepid demand from China. This decline in confidence adds to the ongoing economic challenges facing Japan, particularly as its key trading partner, China, struggles with its own economic slowdown.
Investors continue to scrutinize the outlook for the Bank of Japan’s (BOJ) monetary policy amid recent market volatility and the unwinding of yen carry trades. Speculation is growing on whether the BOJ will adjust its ultra-loose monetary policy stance. However, a former BOJ official recently suggested that the central bank may hold off on further rate hikes this year due to financial market instability, adding another layer of uncertainty to the economic outlook.
Adding to the political landscape, reports indicate that Prime Minister Fumio Kishida will not seek reelection as the party leader in September, which could usher in new leadership and potentially shift Japan’s economic policies.
Overall, the yen’s recent appreciation is driven by a combination of weakening US economic data, domestic economic challenges, and the evolving political landscape in Japan, which are all contributing to heightened market volatility.
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