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The following is a summary of top news stories Wednesday.
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COMPANIES
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Coca-Cola, PepsiCo and coffee chain Starbucks were among the latest to suspend operations in Russia. Soft drink and snacks maker Pepsi said in light of the ‘horrific events’ occurring in Ukraine it was suspending of the sale of Pepsi-Cola, and other global beverage brands in Russia, including 7Up and Mirinda. Coca-Cola said: ‘Our hearts are with the people who are enduring unconscionable effects from these tragic events in Ukraine. We will continue to monitor and assess the situation as circumstances evolve.’ Starbucks has suspended all business activity in Russia, including the shipment of products. IBM has suspended its entire business in Russia Chief Executive Arvind Krishna said late on Monday.
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Bottling firm Coca-Cola HBC noted the announcement by Coca-Cola that it is suspending its business in Russia and explained it will move in ‘close alignment’ with the soft drinks maker. ‘Our relationship with the Coca-Cola Co remains strong, and we continue to work in close partnership across the rest of our markets.’ Coca-Cola HBC last week had noted that Ukraine and Russia contributed 20% of its 2021 volumes and earning before interest and tax.
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Prudential reported ‘high-quality, resilient growth’, though the Asia-focused insurer cautioned that Covid-19-related uncertainty in Hong Kong could continue. For 2021, pretax profit slipped by 5.0% to $3.02 billion from $3.18 billion in 2020. New business profit, however, rose by 13%, however, to $2.53 billion from $2.20 billion. It was a revival of fortunes for the insurer, as its new business profit in Asia had fallen 38% in 2020. European Embedded Value operating profit increased 4.1% to $3.54 billion from $3.40 billion. Total revenue, net of reinsurance, dropped 27% to $26.50 billion from $36.25 billion. Gross premiums earned rose 3.1% to $24.22 billion from $23.50 billion, but Prudential saw a marked drop in investment return of $3.49 billion from $13.76 billion. The company raised its annual payout by 7.0% to 17.23 cents per share from 16.10 cents. Its second interim payout alone was up 11% to 11.86 cents.
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Legal & General reported a double-digit rise in operating profit, matching its own guidance, with the financial firm attributing its ‘resilient’ performance to its ‘diversified’ business. For 2021, pretax profit attributable to shareholders increased to £2.49 billion from £1.43 billion, attributed primarily to L&G's investment return of £233 million versus a £394 million loss the year prior. Gross written premiums dropped to £10.38 billion from £12.55 billion, with led to net premiums earned falling to £6.97 billion from £9.37 billion. Total income fell to £45.45 billion from £50.23 billion. L&G declared a full-year dividend of 18.45 pence, rising from 17.57p in 2020.
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Adidas said sales and profit grew in 2021, despite challenging market conditions, as it raised its annual dividend. The Nuremberg, Germany-based shoes, clothing and accessories maker and retailer said profit before tax more than tripled in 2021 to €1.85 billion from €578 million in the prior year. This was as operating margin increased to 9.4% from 4.0% in the previous year. Whilst operating expenses increased overall by 4%, they decreased as a percentage of sales by 3.8%. Net sales were up 15% to €21.23 billion from €18.44 billion in 2020. Sales in the fourth quarter slowed, slipping 0.1% to €5.137 billion from €5.142 billion in 2020. Profit before tax in the fourth quarter was down 72% to €44 million from €160 million. Adidas said this was due to supply shortages, market challenges in China, and lockdowns in Asia-Pacific. Adidas proposed raising its dividend for the year by 10% to €3.30 per share from €3.00 in 2020.
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Germany's largest delivery and logistics firm, Deutsche Post, posted a surge in earnings for 2021. The Bonn-headquartered firm reported a net profit of €5.05 billion or €4.01 per share, compared with €2.97 billion or €2.36 per share in 2020. The company declared an increased dividend of €1.80 per share this year. For financial 2021, the German firm generated revenue of €81.74 billion, compared with €66.71 billion the previous year.
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National Express noted the announcement by Stagecoach that it has accepted a new cash takeover offer and no longer recommends the all-share merger previously agreed with National Express. The company asked Stagecoach shareholders to take no action, saying a further announcement will be made ‘in due course’. Stagecoach, a Perth, Scotland-based bus and train operator, earlier Wednesday said its directors unanimously recommend a new £594.9 million cash offer from Pan-European Infrastructure III, an infrastructure fund managed and advised by DWS Infrastructure. They no longer support the previously agreed all-share merger with Birmingham-based peer National Express. That deal, struck back in December, would have created a £1.9 billion market-cap public transport provider, though it was being reviewed by the UK Competition & Markets Authority. DWS will offer Stagecoach shareholders 105 pence in cash, which is a 37% premium to its closing price on Tuesday.
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Apple unveiled a new entry-level iPhone which retains some features from its flagship iPhone 13 range but at a much lower price. The new iPhone SE comes with 5G connectivity and the same A15 Bionic chip the tech company put in the iPhone 13 when it announced it last year. But in contrast to Apple's flagship phone, which started at £679 when announced last September, the new iPhone SE starts at £419. The iPhone SE is the only iPhone to still come with a home button and Apple's Touch ID fingerprint sensor.
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MARKETS
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Stock prices were staging a remarkable recovery on Wednesday, led by Paris and Frankfurt, while in New York, the Nasdaq Composite was called up more than 2%. This was amid some hope, however faint, of a negotiated solution to the conflict in Ukraine. Meanwhile, the euro and pound regained some poise against the dollar, ahead of a European Central Bank interest rate decision on Thursday. This may not last. ‘The bottom line is that if the ECB is not willing to hike rates this year to defend the euro, we will likely revise our forecasts [for the EUR/USD exchange rate] lower,’ commented Deutsche Bank.
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CAC 40: up 4.6% at 6,238.93
DAX 40: up 4.9% at 13,463.85
FTSE 100: up 2.1% at 7,112.74
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Hang Seng: closed down 0.7% at 20,627.71
Nikkei 225: closed down 0.3% at 24,717.53
S&P/ASX 200: closed up 1.0% at 7,053.00
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DJIA: called up 1.4%
S&P 500: called up 1.7%
Nasdaq Composite: called up 2.1%
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EUR: up at $1.0982 ($1.0890)
GBP: up at $1.3169 ($1.3110)
USD: up at JP¥115.82 (JP¥115.62)
Gold: down at $2,008.40 per ounce ($2,056.80)
Oil (Brent): down at $126.06 a barrel ($132.65)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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EU diplomats agreed to widen a third round of sanctions on Russia to target more oligarchs and officials after Russian President Vladimir Putin decided to invade Ukraine. The measures target those ‘implicated in the Russian aggression in Ukraine’, the French EU presidency announced on Twitter. EU diplomats also agreed to enforce existing sanctions with greater coordination. The third round of sanctions on Russia, the largest EU package agreed since the invasion, includes a freeze on the Russian Central Bank's assets in the bloc and a ban on Kremlin media in the EU. The EU has now sanctioned 680 people and 53 entities since Russia annexed Crimea in 2014, recognized the independence of the regions of Luhansk and Donetsk in eastern Ukraine and invaded the country in February. Three Belarusian banks are to be excluded from SWIFT, the banking communications payment system. Seven Russian banks including VTB - Russia's second largest bank - are already expelled.
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Russia has suspended the sale of foreign currencies until September 9, the central bank said Wednesday, amid unprecedented economic sanctions on the country following its offensive in Ukraine. Between March 9 and September 9 ‘the banks will not be able to sell foreign currencies to citizens,’ said the statement, which added that Russians would however be able to change foreign currencies into the local ruble unit during that window. Ratings agency Fitch, meanwhile, again downgraded Russia's sovereign debt rating farther into junk territory from 'B' to 'C', saying the decision reflects the view that a default is 'imminent'.
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For the first time since the war in Ukraine began, a safety corridor has been used to successfully evacuate thousands of civilians trapped inside the town of Sumy in north-eastern Ukraine. However, just hours beforehand, at least 21 people, including two children, were killed in Russian airstrikes on the town. The Russian military enforced a ceasefire on Tuesday and opened so-called ‘humanitarian corridors’ in five cities. These include the capital Kiev, the major cities of Chernihiv and Kharkiv, Sumy and the particularly embattled port city of Mariupol. According to the deputy head of the Ukrainian President's Office, Kyrylo Tymoshenko, a total of 61 buses left Sumy for Poltava on Tuesday. Among the passengers were some 1,100 foreign students, he said.
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The US and UK announced they are cutting off imports of Russian oil, in the most far-reaching action yet by Western allies to punish Moscow for invading Ukraine. The US ban has support from both parties in Washington, although economists have been divided on the effect of turning off the spigot, with oil prices already soaring above $120 a barrel. But EU nations, who are far more reliant on Russian energy than the US, have declined to take similar action.
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Moscow criticized the US decision to impose a blanket ban on the import of Russian crude oil and has warned that it could have global repercussions. The ban, announced by US President Joe Biden on Tuesday, is yet another sanction on Russia due to its invasion of Ukraine. ‘The US sanctions pressure on Russia has long crossed all the boundaries of political and economic sense,’ the Russian embassy in Washington wrote on its Facebook page. ‘As usual, the US does not give a thought to the fact that restrictions are always a double-edged weapon,’ it said.
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The controversial Nord Stream 2 pipeline that was halted over Russia's invasion of Ukraine is ‘dead,’ a senior US official said, appearing to dash any hopes that the $12-billion gas venture could have a future. ‘I think Nord Stream 2 is now dead,’ Undersecretary of State for Political Affairs Victoria Nuland told US lawmakers about the Kremlin's prize geopolitical energy project that became a victim of Western sanctions. ‘It is a hunk of metal at the bottom of the sea, I don't think it will ever be revived,’ she added.
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UK government ministers were considering steps that could lead to a fracking rethink after committing to phasing out imports of Russian oil by the end of the year. Prime Minister Boris Johnson said the move over Moscow's oil was an important ‘first step’ to ‘punish’ Putin's invasion of Ukraine as substitute fuels are lined up. Amid concerns over soaring energy costs, it was understood two Cuadrilla Resources sites in Lancashire may be handed over to the Royal Geographical Society rather than being concreted over. Fracking, or hydraulic fracturing, has been under a ‘moratorium’ for over two years, but the move could allow for the sites to be opened up at a later date.
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France warned that further delays could stymie a revived nuclear agreement between world powers and Iran, with the West at loggerheads with Russia over its invasion of Ukraine, while Washington said it would cede nothing to Moscow. Moscow is a direct party along with Britain, China, France and Germany to the ongoing talks in Vienna aimed at reviving the 2015 nuclear deal to limit Iran's nuclear programme in exchange for sanctions relief. Washington is participating indirectly, as former president Donald Trump withdrew from the agreement in 2018.
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China's factory-gate inflation eased to its slowest pace in eight months in February as consumer price growth also softened, after new coronavirus curbs and a drop in food prices. The producer price index rose 8.8% on-year, the slowest rate since June last year, according to the National Bureau of Statistics, tracking a fall in coal prices. It was above the 8.6% forecast in a Bloomberg survey of economists, but below the 9.5% in January. The consumer price index, a key gauge of retail inflation, rose 0.9% on-year in February, the same level as in January.
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Japan's fourth-quarter growth was weaker than initially thought, revised data showed, with household spending less robust than first estimated. The world's third largest economy grew 1.1% in the three months to December, less than the initially estimated 1.3% rebound, according to the Cabinet Office. The downward revision was due in part to weaker corporate investment and household spending. The recovery in the last quarter of 2021 comes after a 0.7% contraction in the July-September quarter. For all of 2021, the economy grew 1.6%, slightly less than the initial estimate of 1.7%.
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The French employment market closed out 2021 with another improvement, though figures showed job creation slowed. According to INSEE, 106,900 jobs were added to the French economy in the final three months of 2021, meaning employment rose by 0.4% quarter-on-quarter. On an annual basis, jobs growth was 2.8% in the fourth quarter. Compared to pre-pandemic levels, the number of jobs was up 1.5%.
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Industrial production in Italy made a weak start to the new year, figures from national statistics office Istat revealed. Industry output fell by 3.4% in January from December after decreasing by 1.1% in December from November, while the market expected a flat monthly figure for January, according to FXStreet. On an annual basis, the decrease of 2.5% in January followed the increase of 4.8% in December, confounding estimates for a rise of 3.2% in January. The value of industrial production is still negative compared to February 2020, the month before the start of the health emergency in Italy, remaining 1.9% lower.
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