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The following is a summary of top news stories Thursday.
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COMPANIES
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Pershing Square Holdings said it disposed of its entire stake in Netflix, after shares in the streaming service plunged, potentially taking a hit of roughly $400 million from the bet. The investor, managed by Bill Ackman-founded Pershing Square Capital Management, was full of praise for Netflix's management, but said the company is unpredictable. It had snapped up 3.1 million shares over the course of several days in late January. It made Pershing a ‘top-20 shareholder in the company’. The investment came after Netflix shares had slumped 22% on January 21, when investors sold off the streaming services after it reported subscriber growth slowed. Based on closing prices on January 21, Pershing's stake was worth $1.12 billion. However, Netflix shares closed down 35% to $226.19 each in New York on Wednesday. Based on Wednesday's closing price, Pershing's stake was valued at $701.2 million, implying roughly a $400 million valuation fall. ‘While we have a high regard for Netflix's management and the remarkable company they have built, in light of the enormous operating leverage inherent in the company's business model, changes in the company's future subscriber growth can have an outsized impact on our estimate of intrinsic value,’ Pershing explained.
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Tesla late Wednesday reported a sharp rise in first-quarter earnings as demand for electric vehicles continued. For the three months to March 31, total revenue was up 81% to $18.76 billion from $10.39 billion in the first quarter last year. Tesla posted first-quarter net income of $3.74 billion, or $3.22 per diluted share, up sharply from $1.05 billion, or $0.93 diluted EPS, the year before. The Austin, Texas-based firm said the first quarter of 2022 was another record quarter for the company by several measures including revenue, vehicle deliveries, operating profit and an operating margin of over 19%.
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Nestle said sales grew in its first quarter, despite a challenging global backdrop. The Vevey, Switzerland-based food and drink conglomerate said total sales in the first quarter increased 5.4% to fr.22.24 billion, or $23.46 billion, from fr.21.09 billion a year prior. Sales grew across all geographies, with the exception of North America, where they declined by 1.5% year-on-year. This was due to the divestment of regional water brands, which more than offset the acquisition of Essentia Water. The Health Science business reported a surge in growth of 56%. Nestle said the Purina PetCare brand was the largest contributor to organic growth by product category. ‘Amid [a] challenging environment, we delivered strong organic sales growth with resilient real internal growth of 2.4%. We stepped up pricing in a responsible manner and saw sustained consumer demand. Cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the course of the year,’ said CEO Mark Schneider.
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ABB said high customer activity in the first quarter of the year lifted profit and expanded its order pipeline. The Zurich-based industrial conglomerate said net profit in the first quarter grew 20% to $604 million from $502 million a year prior, as basic earnings per share increased 25% to $0.31 from $0.25. This was primarily due to increased earnings from continuing operations and lower net finance expenses, ABB said. Revenue for the period remained flat year-on-year, increasing 1% to $6.97 billion from €6.90 billion, as orders increased 21% to $9.37 billion from $7.76 billion.
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AstraZeneca said a study found its Evusheld antibody therapy markedly reduced the risk of developing symptomatic Covid-19. The drugmaker added that in a six-month follow-up of the Provent phase III trial, there were no severe Covid-19 cases of deaths. ‘While Covid-19 vaccines have been highly effective at reducing hospitalisation and death, cases continue to surge and many individuals remain at high risk, including immunocompromised individuals and those who cannot be vaccinated,’ Myron Levin, a trial investigator, explained.The company said Evusheld reduced the risk of developing symptomatic Covid-19 by 77% in primary analysis and by 83% in the six-month follow-up analysis, compared to a placebo.
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Rentokil Initial said 2022 has started well, with first quarter revenue growth of 1.8%, or 12% when excluding the disinfection business that got a Covid-19 boost last year. Organic growth, excluding disinfection, was 8.0%. The pest control and hygiene firm said it has experienced inflationary pressures in the period, but it has managed to mitigate this squeeze on margins via annual price increases. ‘Total price increases achieved in Q1 have entirely offset input cost inflation in the quarter and we remain confident that we will be able to continue to counter rising inflation through APIs during the course of the year,’ said Rentokil. The company said it is performing in line with expectations. Though it will lap strong disinfection revenue in the first half amid a backdrop of macro economic uncertainty, it expects to deliver ‘good operational and financial progress’ in the coming year.
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Miner Anglo American reported a 10% decline in output in its ‘normally slower’ first quarter amid Covid-related absences, high rainfall in South Africa and Brazil, and operational challenges at metallurgical coal and iron ore operations. Copper production was down 13% year-on-year, platinum group metals production was down 6%, metallurgical coal production dropped by 32% and iron ore production decreased by 19%. The only category to see an increase was diamonds, with output up by a quarter. Full year cost guidance has increased by 9%, with a 4% hit from stronger producer currencies and 3% from inflationary pressures. At the same time, Anglo America reduced output guidance for its PGM, iron ore and metallurgical coal operations.
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Peer BHP cut annual guidance for copper production as well as nickel output, as the miner also grapples with Covid-19-related labour market woes. Its outlook for iron ore, metallurgical coal and energy coal for the year ending June 30 were unchanged, however. In the third quarter ended March 31, copper production fell 6% annually to just under 370,000 tonnes. Quarter-on-quarter it rose 1%. For the year, however, BHP now expects total copper output between 1.57 million and 1.62 million tonnes, lowered from the previous guidance range of 1.59 tonnes and 1.76 million tonnes. This means that at worst it expects copper output to fall 2.8% from 1.64 million tonnes in financial 2021.
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Data analytics provider Relx said it expects full-year underlying growth rates in revenue and adjusted operating profit, as well as constant currency growth in adjusted earnings per share, to remain above historical trends. In a trading update ahead of its annual general meeting, Relx said 2022 has started well, ‘with growth in key business metrics remaining in line with or ahead of historical trends’.
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THG said it has received indicative takeover proposals from ‘numerous parties’ in recent weeks, but rejected them all on the grounds the offers failed to reflect the full value of the firm. The online beauty products platform confirmed it is not currently in receipt of any approaches. ‘We continue to focus on delivering our exciting growth strategy across a number of large global sectors, and prepare to step up to the premium segment of the LSE at the appropriate time,’ said Chief Executive Matthew Moulding. The update came alongside THG's annual results, which showed revenue in 2021 jumped 35% to £2.18 billion from £1.61 billion the year before. Its pretax loss slimmed to £186.3 million from £534.6 million.
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MARKETS
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Equities mostly were on the rise on Thursday, as investors digested a high volume of earnings reports from around the world, including from Nestle, Tesla and big miners. Nestle was up 1.3% in Zurich, while Tesla was up 6.5% in the New York pre-market. Still ahead on Thursday are speeches and panel discussions by a number of key central bankers, including US Fed Chair Jerome Powell and European Central Bank President Christine Lagarde.
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CAC 40: up 1.4% at 6,718.92
DAX 40: up 1.1% at 14,513.60
FTSE 100: down 0.1% at 7,624.26
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Hang Seng: closed down 1.3% at 20,682.22
Nikkei 225: closed up 1.2% at 27,553.06
S&P/ASX 200: closed up 0.3% at 7,592.80
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DJIA: called up 0.6%
S&P 500: called up 0.8%
Nasdaq Composite: called up 1.1%
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EUR: up at $1.0924 ($1.0860)
GBP: up at $1.3062 ($1.3045)
USD: up at JP¥128.07 (JP¥127.70)
Gold: down at $1,946.74 per ounce ($1,952.11)
Oil (Brent): up at $108.15 a barrel ($107.55)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The eurozone's annual inflation rate for March was revised down a touch, but remained at a sharply elevated level, data from Eurostat showed. The consumer price index for the bloc rose 7.4% year-on-year in March, accelerating from 5.9% in February. The preliminary rate for March was 7.5%. Despite the revision, the confirmed figure remains a record high for eurozone inflation. The largest contributor was energy, with prices up 44%. Excluding energy, the consumer price index rose 3.4% in March.
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The European Central Bank ‘should’ end its stimulus programme at the beginning of the third quarter, its vice-president said in an interview published, opening the door to raising interest rates from historic lows. The ECB bond-buying scheme ‘should end in July’, Luis de Guindos said told Bloomberg News. The timeline laid out by de Guindos would be the earliest possible end date under the guidance set out by the ECB after the meeting of its governing council last week. The Frankfurt-based institution has been under pressure from rising prices to withdraw its stimulus faster and follow other central banks towards interest rate hikes in order to tame inflation.
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Relentless Russian attacks pounded the last Ukrainian stronghold in the besieged city of Mariupol as a fighter apparently on the inside issued a video plea for help, saying defenders holed up in a giant steel factory ‘may have only a few days or hours left’. Another attempt to evacuate civilians trapped in the pulverised port city failed on Wednesday because of continued fighting, and the number of people fleeing Ukraine passed five million. Meanwhile, the Kremlin said it submitted a draft of its demands for ending the war as the West raced to supply Ukraine with heavier weapons to counter the Russians' new drive to seize the industrial east. The UK's Ministry of Defence said in an assessment on Thursday that Russia likely wants to demonstrate significant successes ahead of its annual May 9 Victory Day celebrations. ‘This could affect how quickly and forcefully they attempt to conduct operations in the run-up to this date,’ it said.
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German Foreign Minister Annalena Baerbock has assured the Baltic states of Berlin's support against a possible threat from Moscow. NATO would ‘protect every corner of territory together,’ Baerbock said on Wednesday after meeting her Latvian counterpart Edgars Rinkevics in the capital Riga. As NATO allies, Latvia, Estonia and Lithuania could ‘rely 100% on Germany,’ she said.
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US Treasury Secretary Janet Yellen led a multinational group of finance chiefs on a walkout Wednesday as Russian officials spoke during a meeting of the G20, in the latest protest by Western nations over Moscow's invasion of Ukraine. Russia's attack on its neighbor loomed over the meeting of finance ministers and central bank governors from the world's most developed countries, the first since President Vladimir Putin ordered the invasion in late February. British and Canadian officials also took part in the boycott, officials confirmed, underscoring the boiling tensions at the gathering convened to address global challenges like rising debt and a possible food crisis.
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China has ratified two UN conventions against forced labour. The Standing Committee of the People's Congress voted in Beijing to approve the International Labour Organization's Forced Labour Convention Number 29 from 1930 and the Abolition of Forced Labour Convention Number 105 from 1957. Ratification of these two instruments brings the total number of ILO Conventions ratified by China to 28, the ILO said in a statement. Although China is a member of the UN organization, it had not yet ratified the two conventions. China has increasingly faced allegations of forced labour by members of the Uighur Muslim minority in Xinjiang in the north-west of the country. The ILO expressed its ‘deep concern’ about the allegations in February.
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The US government is appealing a court ruling that controversially lifted a federal mask mandate on US public transport earlier this week, the Justice Department said Wednesday. After the US Centers for Disease Control & Prevention, the country's top health body, assessed ‘that an order requiring masking in the transportation corridor remains necessary to protect the public health, the Department has filed a notice of appeal,’ spokesman Anthony Coley said. A US federal judge on Monday struck down the Covid-19 mask mandate, stating that it exceeded the CDC's statutory authority. Policymakers in Washington had decided just the prior week to extend it through May 3. Although the public has a ‘strong interest’ in combating the spread of Covid, the mask mandate ‘exceeded the CDC's statutory authority’, and it ‘failed to adequately explain its decisions’, US District Judge Kathryn Kimball Mizelle of the Middle District of Florida said in her decision.
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French President Emmanuel Macron and far-right rival Marine Le Pen on Wednesday clashed bitterly over relations with Russia and the Islamic headscarf as they sought to sway undecided voters in an acrimonious debate four days ahead of presidential elections. There was little cordiality in the bruising three-hour live televised debate, with Macron repeatedly seeking to land punches on Le Pen over her record, while she sought to keep the focus on the government's performance. The most explosive clash came when Le Pen confirmed she was sticking to her controversial policy of banning the wearing of the Islamic headscarf by women in public. Macron is favourite to win the run-off, with most polls showing an advantage of over 10%, which would make him the first French president to win a second term since Jacques Chirac in 2002. But analysts and allies of the president have warned the result is far from a foregone conclusion, with polls indicating over 10% of French who intend to cast their ballots have yet to decide who to vote for.
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The UK government will attempt to delay a vote on a probe into whether Prime Minister Boris Johnson misled Parliament over partygate, after Johnson suggested the scandal matters little to voters. Johnson will be on an official trip to India when a Labour-led motion calling for a parliamentary investigation into whether he lied to the Commons takes place on Thursday. The PM tried to avoid discussing partygate on the flight to Gujarat, as he vowed to fight the next election no matter how many times he is fined for breaching Covid laws. The government has tabled an amendment to defer the vote on the Commons inquiry until the Metropolitan Police's own probe into lockdown-busting parties in Downing Street and Whitehall has concluded, and the Sue Gray report has been published. This will allow MPs ‘to have all the facts at their disposal’ when they make a decision, it said. It is understood that all Tory MPs are being whipped to support the amendment.
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