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The following is a summary of top news stories Wednesday.
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COMPANIES
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Troubled Chinese property developer Evergrande said it will sell its stake in an incomplete development near Shanghai for $575 million as it scrambles to find cash to pay its mammoth debts. The real estate giant is drowning in $300 billion of liabilities, and has struggled to repay bondholders and investors after a clampdown by Beijing suddenly turned off the liquidity taps. On Wednesday the developer said it would sell the Crystal City Project, a vast commercial zone in Hangzhou, an eastern city outside of Shanghai for ¥3.66 billion. Part of the proceeds from the sale will go to repaying construction fees of ¥920.7 million, the company said in a filing to the Hong Kong stock exchange. The remaining cash will be used as ‘general working capital of the group’, Evergrande added.
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Pershing Square Holdings said net asset value rose in 2021, though it saw a drop in profit. The company reported pretax profit dropped 35% in 2021 to $2.52 billion from $3.76 billion the previous year. Investment gains also fell, dropping 31% to $3.14 billion from $4.56 billion. Pershing's net asset value per share rose 26% to $57.30 per share at the end of 2021, from $45.46. Pershing Square Holdings is a Guernsey-based investment trust managed by Bill Ackman's Pershing Square Capital Management. Pershing Square says its growth was driven by a ‘strong’ performance across its portfolio, mostly Lowe's Cos and Universal Music Group. Its most notable detractor was Pershing Square Tontine Holdings.
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Electrocomponents announced a name change and said it expects annual revenue and margins will be at the upper end of market estimates. Electrocomponents, ahead of an investor day on Wednesday, said it expects annual revenue and operating profit margin to be at the top end of current consensus estimates. Electrocomponents ends its financial year on Thursday. The London-based distributor of industrial and electrical parts said trading in recent weeks has been in line with what it reported for the nine weeks to March. During that period, revenue grew 22% on a like-for-like basis compared to a year earlier. In addition, the firm said it will change its name to RS Group PLC in ‘early May’. Chief Executive Lindsley Ruth explained: ‘We will be moving forward from Electrocomponents PLC to RS Group PLC in early May. RS is our primary customer brand, recognised by designers, builders and maintainers of industrial equipment and operations around the world. As RS Group we will bring our business together under one brand, united behind a common ambition and our single purpose: making amazing happen for a better world.’
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Russian gold and silver miner Polymetal said it has seen a hike in demand from Russians trying to stash their cash in gold. The business said that it was still able to sell gold from Russia to East Asia and Kazakhstan, despite crippling sanctions on Russia from Western countries. While export opportunities to Europe and the US have dropped, Polymetal said that Russian retail customers that is to say individuals rather than banks and other institutions have been snapping up the precious metal. ‘Domestic demand for gold is boosted by local retail investment,’ the former FTSE 100 company said.
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John Menzies said it has accepted a final offer from GIL International Holdings V, a subsidiary of Kuwait's Agility Public Warehousing Co. The deal, at 680 pence per share, values the Edinburgh-based aviation services and cargo handling firm at £571 million on a fully diluted basis and offers an enterprise value of £763 million. The price tag is 81% higher than the company's share price of 335p on February 8, the day before the approach by Agility was first announced. Agility, which is listed in Kuwait and Dubai, will combine Menzies with its National Aviation Services unit. NAS provides aviation services in emerging markets, and its customers include British Airways, part of IAG, as well as Air France KLM, Emirates and Qatar Airways. Menzies was founded in 1833 as a bookseller on Princes Street in Edinburgh. The combined Menzies and NAS group will have annual revenue in excess of $1.5 billion, based on 2021 figures. It will operate in 250 airports in 57 countries, handling more than 600,000 aircraft turns a year.
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lululemon athletica reported a strong performance in the fourth quarter of its financial year, robust enough to beat pre-virus levels. For the three months ended January 30, the Vancouver, British Columbia-based athletic apparel retailer posted net income at $434.5 million, up 32% from $329.8 million, and also marking a 46% increase from $298.0 million for the same period in 2020. Diluted earnings per share rose 33% to $3.36 from $2.52 for the 2021 financial year. For the first quarter of lululemon's current financial year, the company expects net revenue to come between $1.53 billion and $1.55 billion, reflecting 24% to 26%, while diluted earnings per share is set to range from $1.38 to $1.43.
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Micron Technology said it delivered a strong second quarter performance prompting the chipmaker to issue an optimistic outlook. For the three months to March 3, Micron generated revenue of $7.79 billion, up 25% from $6.24 billion in the second quarter a year earlier. Second quarter net income was up at $2.26 billion, or $2.00 per diluted share, from $603 million, or $0.53 diluted EPS in the prior year. Looking ahead, the Boise, Idaho-based firm expects third-quarter revenue of $8.7 billion, plus or minus $200 million. It posted revenue of $7.4 billion in the third quarter last year.
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MARKETS
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European stock markets were trading mostly lower, and Wall Street was called for a weak open, after hope for a negotiated peace in Ukraine started to ebb. Oil, gold and the safe-haven yen all rose in response. The yen also was being supported by a new round of bond purchases by the Bank of Japan, reducing yields on the benchmark 10-year bond, noted Marshall Gittler, head of Investment Research at BDSwiss. ‘I don't see why lower bond yields should be positive for the yen,’ he commented. ‘On the contrary, it shows the BoJ's determination to let their monetary policy diverge from what's going on in the rest of the world.’
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CAC 40: down 1.0% at 6,725.38
DAX 40: down 1.3% at 14,627.80
FTSE 100: up 0.1% at 7,545.79
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Hang Seng: closed up 1.4% at 22,232.03
Nikkei 225: closed down 0.8% at 28,027.25
S&P/ASX 200: closed up 0.7% at 7,514.50
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DJIA: called down 0.2%
S&P 500: called down 0.3%
Nasdaq Composite: called down 0.4%
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EUR: up at $1.1150 ($1.1113)
GBP: flat at $1.3140 ($1.3135)
USD: down at JP¥121.66 (JP¥122.57)
GOLD: up at $1,920.80 per ounce ($1,910.78)
OIL (Brent): up at $112.79 a barrel ($109.35)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Germany sounded the first official alarm about gas supplies on Wednesday, as the country comes to grips with the reality that Russia's invasion of Ukraine is very likely to disrupt its energy supplies to some degree. ‘There are no current supply bottlenecks,’ said Economy Minister Robert Habeck. ‘But we have to ramp up our precautionary measures to be ready in case of an escalation from the Russian side.’ Habeck's decision puts the country on an early alert, as detailed in its emergency gas supply plan. The three-stage emergency plan details ways to conserve gas, secure supplies and make sure households have adequate amounts of fuel. The invasion of Ukraine has prompted a series of sanctions on Russia that have left it scrambling for foreign currency reserves. However, Europe has not cut off its purchases of oil and gas. Russian President Vladimir Putin has said that Russia will soon only accept payments gas in roubles, likely an effort to bolster its currency. Western countries have said they will not comply.
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Russia pledged to scale down fighting around Kyiv and a second major city following peace talks on Tuesday that Ukraine's leader said showed ‘positive’ signs, but Western allies made clear their doubts over Moscow's intentions. Details filtering from the talks in Istanbul raised hopes after more than a month of war that has left thousands dead and millions displaced. Kyiv's negotiator David Arakhamia said there were ‘sufficient’ conditions for President Volodymyr Zelensky and his Russian counterpart Vladimir Putin to meet in a push to end Europe's worst conflict in decades. On the Russian side, chief negotiator Vladimir Medinsky called the talks ‘meaningful,’ while the country's deputy defence minister, Alexander Fomin, reported progress on ‘the neutrality and non-nuclear status’ of Ukraine two central Russian concerns. But the US cast clear doubt on Moscow's words, and vowed with fellow Western powers to keep ‘raising the costs’ on Russia. And by Tuesday evening Ukraine's general staff while confirming Russian units were withdrawing from the Kyiv and Chernigiv regions said it was most likely a troop rotation intended to ‘mislead’ Ukraine's military.
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Russian Foreign Minister Sergei Lavrov arrived in China on Wednesday in his first visit to the key ally since Moscow launched its invasion of Ukraine last month. In a post on its Weibo social media account, the Russian embassy in Beijing confirmed Lavrov had landed in the eastern city of Huangshan, posting photos of delegates descending from a plane and being met by health officials in hazmat suits. Lavrov will attend a series of meetings hosted by China to discuss ways to help Afghanistan. Diplomats from the US and the Taliban-led country's neighbours are also expected to attend. But Russia's bloody assault on Ukraine is likely to loom large over proceedings. Unlike many Western nations, China has refused to condemn the invasion and has lagged behind many other countries in providing humanitarian aid to Ukraine.
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The US should focus on achieving economic independence from China rather than pressuring Beijing to change ‘unfair’ trade practices, US Trade Representative Katherine Tai will suggest Wednesday, as a shift in strategy toward the Asian giant. The new approach takes into account Washington's inability to force fundamental changes in business practices under a trade agreement signed by the previous administration, she will argue. ‘We have seen what happened in the steel and solar industries when existing mechanisms were too slow or ill-suited to effectively address the distortions wrought by China's targeting of those sectors,’ she will say. While China is also targeting critical industries such as high-tech, electric cars and semiconductors, Tai advocates ‘strategic investments’ in the US to no longer depend on China.
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Consumer confidence in the eurozone plummeted in March. The European Commission's consumer confidence indicator slumped to minus 18.7 points in March from minus 8.8 points in February. The drop was in line with the consensus estimate cited by FXStreet. ‘[The drop] mostly reflected the collapse in households' expectations about the general economic situation in their country but also in their assessments of their own future financial situation, which fell to a historical low,’ the commission explained.
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Spain's annual inflation rate quickened by more than expected in March, getting perilously close to the 10% mark. According to INE, Spain's annual inflation rate raced to 9.8% in March from 7.6% in February. March's rate is a 37-year high. FXStreet-cited market consensus had forecast the inflation rate to accelerate to just 8.0%, so the figure came in hotter than expected. On a harmonised basis, allowing for EU-wide comparison, inflation hit 9.8% in March, heating up from 7.6% in February. The March rate beat the market forecast of 8.1%.
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Industrial sales in Italy rose on both a monthly and annual basis in January, with the annual increase setting a new record, figures from Istat showed. Industrial sales rose by 2.3% in January from the month before, picking up from a downwardly revised 2.0% decrease in the previous month. December's change from November previously had been reported as a 2.1% decrease. On a yearly basis, industrial sales rose by a record 17%, picking up pace from an upwardly revised 15% increase in December.
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Retail sales in Japan came in below market expectations in February, declining on an annual basis, figures showed. According to the Ministry of Economy, Trade & Industry, retail sales fell 0.8% annually in February, following growth of 1.1% in January. February's figure undershot forecasts of a 0.3% annual decline in February, according to consensus cited by FXStreet.
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