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The following is a summary of top news stories Wednesday.
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COMPANIES
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GlaxoSmithKline said it reached an agreement to acquire late-stage biopharmaceutical company Sierra Oncology Inc for $1.9 billion, or £1.5 billion. The Brentford, England-based pharmaceutical firm has agreed to pay $55 per Sierra share in cash. California-based Sierra focuses on targeted therapies for the treatment of rare forms of cancer. GlaxoSmithKline said that the acquisition will complement its commercial and medical expertise in haematology - diseases related to blood. Further, it will support the development of its portfolio of new speciality medicines and vaccines. At the end of 2021, the value of Sierra's gross assets totalled $109 million and it generated a net loss of $95 million for the year. The transaction is expected to close in the third quarter of 2022 ‘or before’ and is dependent on regulatory and shareholder approval.
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Tesco said it saw annual profit rise following a ‘strong performance’ during the period, leading to the launch of a new £750 million share buyback. However, shares in the supermarket chain traded lower after it warned of a hit to profit in the year ahead amid inflationary pressures and normalising consumer behaviour post-pandemic. ‘Clearly, the external environment has become more challenging in recent months. Against a tough backdrop for our customers and with household budgets under pressure, we are laser-focused on keeping the cost of the weekly shop in check - working in close partnership with our suppliers, as well as doing everything we can to reduce our own costs,’ said Chief Executive Ken Murphy. In the year to February 26, pretax profit ballooned to £2.03 billion from £636 million the year prior. Revenue rose 6% to £61.34 billion from £57.89 billion. For financial 2023, Tesco is guiding for retail adjusted operating profit between £2.4 billion and £2.6 billion - which would be below the £2.65 billion registered in financial 2022. It gave the guidance ‘in the form of a wider than usual range’ to reflect the uncertainties facing the business, such as inflation and normalising customer behaviour.
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LVMH Moet Hennessey Louis Vuitton said on Tuesday it made a good start to the year against a backdrop of continued disruption from the Covid-19 pandemic and the conflict in Ukraine. The Paris-based luxury goods company said first quarter revenue rose 29% to €18.0 billion from €13.96 billion the previous year. It added that all business groups achieved double-digit revenue growth, except for Wines & Spirits which continued to see supply constraints in the quarter. Wine & Spirits grew 8% year-on-year. Fashion & Leather Goods was the company's best performer with 35% revenue growth. The US and Europe also achieved double-digit revenue growth, and LVMH explained that Asia had continued to grow over the quarter despite the impact of a tightening of health restrictions in China in March.
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Key iPhone maker Pegatron has halted operations at two subsidiaries in the Chinese cities of Shanghai and Kunshan, as global supply chains feel the pinch of Beijing's strict zero-Covid measures. The business hub of Shanghai has become the heart of China's biggest Covid-19 outbreak since the virus surfaced more than two years ago. Pegatron's suspensions mark the latest blow to Apple, which has seen disruptions at other suppliers' assembly lines in recent months as Chinese cities struggle to curb virus outbreaks. ‘We have temporarily suspended work,’ said Pegatron in a filing to the Taiwan Stock Exchange on Tuesday. The Taiwanese firm said it ‘actively cooperates with local authorities’ and would try to resume operations as soon as possible. The suspensions apply to two of its subsidiaries, in Shanghai and nearby Kunshan city.
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Tesla Chief Executive Officer Elon Musk is facing a lawsuit after he bought more than 9% of social media platform Twitter's stock. The purchase makes him the largest outside shareholder of the company's stock and saw the share price rise more than 27% after the announcement. However, Musk now faces a class-action lawsuit brought on behalf of investors that allege Musk's late disclosure of his stake in the platform cost shareholders money and saved Musk about $143 million. Legal paperwork filed in New York alleges that Musk was required to alert the Securities and Exchange Commission within 10 days, or March 24, of purchasing 5% of more of Twitter's stock. However, the lawsuit claims Musk did not alert the commission until April 4, by which point he had amassed more than 9% of stock. As a result, the lawsuit alleges Musk had been able to continue buying Twitter shares cheaply until the announcement. Investors who sold during this period were disadvantaged, the legal papers claims.
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PayPal Holdings on Tuesday said its chief financial officer will leave the post to join retailer Walmart. John Rainey joins Walmart as CFO with effect June 6. He has been finance chief at financial technology company PayPal since 2016. Rainey also had a three-year stint as CFO of United Airlines Holdings Inc until July 2015. Walmart had announced back in November that current CFO Brett Biggs will depart from the role after spending 22 years at the retailer. Biggs will remain in the CFO role until a successor is named and then support the transition, staying as an associate until he leaves the company on January 31, 2023, Walmart said in November. PayPal on Tuesday said Rainey will remain with the company until ‘late May’, to ensure an orderly transition.
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Shares in Polymetal International dropped after the company said it has pushed out a decision on its final dividend payment amid ‘significant’ operating challenges following Russia's invasion of Ukraine. The St Petersburg-based gold miner has concluded it is ‘no longer appropriate’ to recommend or declare the final dividend payment for 2021 that was due to be put to shareholders for approval at the annual general meeting scheduled for later in April. It has decided to postpone the decision on the dividend payment to August. It highlighted ‘mounting uncertainty’ over available funds due to sanctions on Russia, higher working capital needs as a result of a ‘liquidity crunch’ and supply chain limitations, and balance sheet constraints due to lower credit availability and significantly higher cost of funding.
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MARKETS
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London's FTSE 100 was trading flat on Wednesday, dodging broader losses in Europe with the blue-chip index supported by its heavyweight natural resources contingent. Mining shares climbed after data showed UK inflation hit a 30-year high last month, coming on the back of sky-high inflation figures in the US on Tuesday. ‘When investors see high inflation figures, they typically look to put money into companies that thrive in an inflationary environment. That includes miners, which might explain why the likes of Antofagasta, Glencore and Anglo American were among the top risers on the FTSE 100,’ said Danni Hewson, financial analyst at AJ Bell.
Wall Street was pointed to a higher start with focus shifting to Wednesday's factory price data.
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CAC 40: down 0.5% at 6,505.60
DAX 40: down 0.9% at 13,992.14
FTSE 100: up 2.60 points at 7,579.26
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Hang Seng: closed up 0.3% at 21,374.37
Nikkei 225: closed up 1.9% at 26,843.49
S&P/ASX 200: closed up 0.3% at 7,479.00
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DJIA: called up 0.3%
S&P 500: called up 0.4%
Nasdaq Composite: called up 0.6%
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EUR: down at $1.0830 ($1.0863)
GBP: down at $1.3009 ($1.3037)
USD: up at JP¥126.05 (JP¥125.14)
GOLD: up at $1,978.63 per ounce ($1,973.44)
OIL (Brent): up at $105.16 a barrel ($104.70)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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China's imports shrank annually in March for the first time in nearly two years, official data showed, hit by coronavirus lockdowns and weakening consumer demand. The world's second-largest economy has stuck to a strict zero-Covid strategy as it tries to contain outbreaks fuelled by the Omicron variant in recent months. The economic costs, however, have mounted the waves of infections and resulting lockdowns have kept consumers at home, halted business operations and snarled supply chains. Imports dropped 0.1% from a year ago, according to data from China's Customs Administration the first such decline since August 2020, in the early phase of the pandemic. The figure was much lower than the forecast from a Bloomberg poll of economists, and a far cry from the 15.5% growth for the first two months this year. ‘Some unexpected factors in the international and domestic environment have gone beyond our anticipation,’ Customs Administration spokesman Li Kuiwen told reporters.
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Some residents of Shanghai were allowed out of their homes as the city of 25 million eased a two-week-old shutdown after a video posted online showed what was said to be people who ran out of food breaking into a supermarket. About 6.6 million people can go outdoors, but some must stay in their own neighbourhoods, the online news outlet The Paper reported, citing city officials. The government said some markets and pharmacies would reopen. A health official warned Shanghai does not have coronavirus under control despite easing restrictions. ‘The epidemic is in a period of rapid growth,’ said Lei Zhenglong of the National Health Commission at a news conference. ‘Community transmission has not been effectively contained.’ The abrupt closure of most businesses starting March 28 and orders to stay home left the public fuming about lack of access to food and medicine.
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Global oil demand will be slightly lower than forecast this year in the wake of strict Covid lockdowns in China, the world's biggest importer of crude, the International Energy Agency said. Russian oil supply, meanwhile, is expected to continue to fall in April by 1.5 million barrels per day amid its invasion of Ukraine, according to the IEA, which advises developed countries on their energy policies. But increased output from the OPEC+ group of oil producing countries and stock releases from the US and other IEA members ‘should prevent a sharp deficit from developing,’ said the agency in a monthly report. Rich countries have agreed to tap an additional 120 million barrels of oil from emergency reserves, with half from the US, in a bid to calm crude prices that have soared following Russia's February 24 invasion of Ukraine. The IEA said it now expects demand to average 99.4 million barrels per day in 2022, 260,000 barrels per day lower than previously estimated, though it will still be higher than last year by 1.9 million barrels.
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UK consumer prices soared to a 30-year high in March, data from the Office for National Statistics showed. The UK consumer price index rose by 7.0% in the 12 months to March 2022, advancing from February's 6.2% rise. Wednesday's print is the highest 12-month inflation rate in the National Statistics series, which began in January 1997. It is also the highest rate in the historic modelled series since March 1992. The market consensus - according to FXStreet - had tipped for a 6.7% rise. Core inflation, which strips out energy, food and alcohol, accelerated to 5.7% from 5.2%, hitting a 30-year high. Market consensus put the rise at 5.4%. Turning to producer prices, the annual headline rate of input prices jumped 19% in March, ticking up from 15% in February - accelerating at the fastest rate since records began.
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US President Joe Biden has for the first time accused Vladimir Putin's forces of committing genocide in Ukraine, where Russia is intensifying its campaign to take the strategic port city of Mariupol. Biden's accusation comes as Moscow already accused by the West of widespread atrocities against civilians is feared to be readying a massive onslaught across Ukraine's east that Washington warned might involve chemical weapons. ‘Yes, I called it genocide,’ Biden told reporters on Tuesday, hours after employing the term during a speech in Iowa its first use by a member of his administration. ‘We'll let the lawyers decide internationally whether or not it qualifies, but it sure seems that way to me,’ Biden said. ‘It's become clearer and clearer that Putin is just trying to wipe out the idea of even being able to be a Ukrainian.’ President Volodymyr Zelensky who has repeatedly accused Moscow of attempted ‘genocide’ swiftly responded by tweeting at Biden: ‘True words of a true leader.’
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An immediate end to Russian energy imports would send Germany into ‘sharp recession’ next year, the country's leading economic institutes said in a forecast published. Germany, which is highly dependent on Russian gas for its energy needs, has so far resisted calls for a European boycott in response to the war in Ukraine. Closing the taps in ‘mid-April’ this year would limit growth to 1.9% in 2022 and push Germany into a recession in 2023, causing the economy to shrink by 2.2%, according to the forecast. The impact of a boycott would ‘not be overcome’ over the next two years, the institutes - DIW, Ifo, IfW Kiel, IWH and RWI - said in a joint statement. Europe's largest economy could yet suffer a ‘setback’ at the end of 2023 into 2024, as demand for energy rises in the European winter, before ‘gradually’ returning to growth.
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Inflation in Spain continued to accelerate in March, reaching a 37-year high, figures from INE showed. Spain's consumer price index increased 9.8% on an annual basis in March, quickening from 7.6% in February, reaching its highest level since May 1985. On a monthly basis, consumer prices rose 3.0%, accelerating from a 0.8% rise in February. On a harmonised basis, allowing for EU-wide comparison, annual inflation was 9.8%, compared to February, where the harmonised CPI was 7.6%. The increase in prices was mainly from housing, where prices rose 33% through a rise in electricity and diesel for heating. There was also rising prices in transport, due to higher prices of fuels and lubricants for personal vehicles.
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UK Prime Minister Boris Johnson looked set to avoid an initial fallout from becoming the first prime minister to be hit with criminal sanctions while in office over a birthday bash held for him in Downing Street against Covid rules. The prime minister, his wife and the chancellor all apologised on Tuesday and confirmed they had paid fines imposed by the Metropolitan Police over a party held on June 19 2020 to mark Johnson's 56th birthday. Johnson said it ‘did not occur’ to him that the gathering might be breaching Covid rules, while Rishi Sunak said he understood that ‘for figures in public office, the rules must be applied stringently in order to maintain public confidence’. But although both politicians said they now accepted the rules had been broken, neither appeared to be considering their positions, as they said they wanted to get on with the job. Cabinet ministers tweeted in support of Johnson, praising his leadership during Covid and Brexit and also pointing to the war in Ukraine.
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Authorities have tightened the security detail for New York's mayor after police uncovered ‘concerning’ social media posts made by a suspect in the Brooklyn subway shooting. Police were trying to track down the renter of a van possibly connected to the violence when they came upon the posts made by someone with the same name. Chief of Detectives James Essig said investigators weren't sure whether the man, identified as Frank R James, 62, had any link to the subway attack. The violence had unfolded on Tuesday when a gunman in a gas mask and construction vest set off a smoke grenade and fired a barrage of bullets in a rush-hour subway train, shooting at least 10 people, authorities said. Authorities said that the social media posts made by someone with the same name as the van renter mentioned homelessness, New York and mayor Eric Adams. It led officials to tighten the mayor's security detail, Essig and Police Commissioner Keechant Sewell said. She said the posts were ‘concerning’.
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By Lucy Heming; lucyheming@alliancenews.com
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