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The following is a summary of top news stories Monday.
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COMPANIES
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The billionaire finance guru Warren Buffett, who complained recently that he did not know where to put his money, said Saturday he has invested billions of dollars so far this year, even as he took jabs at Wall Street. Buffett, 91, took questions for five hours at the much-anticipated annual shareholder meeting of his holding company Berkshire Hathaway in Omaha, Nebraska, its first in-person gathering since before the Covid-19 pandemic. He did so along with his right-hand man Charlie Munger, who is 98. The event, dubbed a ‘Woodstock for Capitalists,’ draws thousands of shareholders from around the world to hear the investment wisdom of Buffett, revered among investors as the ‘Oracle of Omaha.’ As markets vacillated since the start of the year, Berkshire Hathaway spotted bargains and bought shares worth more than $51 billion from January through March. Bottom line, Berkshire's war chest of cash on hand dropped from $147 billion to $106 billion. But Buffett said investors need not worry because Berkshire ‘will always have a lot of cash’ to weather hard times. Before the meeting, Berkshire said its net profit plunged by 53% in the first quarter due to a drop in the paper value of its investments.
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Mitsui & Co posted profit growth in its recently ended financial year but guided to a slip in the year ahead. Tokyo-based conglomerate said revenue for the financial year to March 31 rose 47% to JP¥11.758 trillion - around $90.18 billion - from JP¥8.010 trillion the year before. Behind this growth were the energy, chemicals and mineral & metal resources segments. Pretax profit more than doubled to JP¥1.164 trillion from JP¥450.20 billion. Profit attributable to owners of the parent jumped to JP¥914.72 billion from JP¥335.46 billion. For the year ahead, Mitsui expects to post profit attributable to owners of the parent of JP¥800.00 billion, which would be down 13% from that achieved in the recently ended financial year. The total dividend for the 2022 financial year was JP¥105, up from JP¥85 the year before. Despite guiding to a dip in profit in 2023, the firm expects to pay out an increased dividend of JP¥120.
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Bayer on Friday said it was ‘operationally and strategically successful’ in 2021 and has got off to a good start in 2022. ‘In the agriculture business in particular, we see a much more positive market environment than in previous years. We believe the strategic alignment of our company has proven to be the right one. That is also true when it comes to our societal relevance. People will be able to count on Bayer to support the global food supply,’ said Werner Baumann, chair of the management board, at Friday's annual general meeting in Leverkusen. For the full year, Bayer expects the good growth in its businesses to continue. However, the consequences of the war in Ukraine are ‘currently still unclear’.
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Heineken has said it will create more than 700 jobs across the UK as part of a £42 million investment plan into its pub operation. The brewing giant said that 660 pubs more than a quarter of its Star Pubs & Bars venue business will be upgraded as part of the move. It comes as the UK hospitality industry targets a strong period of recovery in 2022 after two years hampered by pandemic regulations. Heineken UK said that 137 of its pubs will receive a makeover costing at least £125,000 as it continues to refresh its property estate. The company said the latest cash injection will bring the total investment in refurbishing its pubs to £115 million since the pandemic first hit. The investment will focus on suburban pubs and those on high streets near residential neighbourhoods which have benefited from an increase in homeworking, the firm added.
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MARKETS
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Markets had a shaky start to May with investors bracing for a 50 basis points interest rate hike from the US Federal Reserve later this week. ‘After traders spent the better part of last week re-testing the mid-March lows, the market is searching for a price it feels comfortable to clear risk into the FOMC...we are in an incredibly fragile market that is delivering outsized moves on shallow levels of liquidity especially in Tech, where growth is getting slammed,’ said Stephen Innes at SPI Asset Management.
Wall Street was on course for a bright start following Friday's brutal losses. Though Innes added: ‘Until we get through the FOMC, I do not see any change in the violent price action which is why I am a bit nervous to see what the rest of Monday will bring when giant bears return the fore I would rule out nothing.’
The Fed begins its two-day meeting on Tuesday, revealing its latest interest rate decision on Wednesday.
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CAC 40: down 1.5% at 6,438.41
DAX 40: down 0.8% at 13,987.28
Financial markets in the UK closed for Early May bank holiday
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Financial markets in Hong Kong closed for Labour Day holiday
Nikkei 225: closed down 0.1% at 26,818.53
S&P/ASX 200: closed down 1.2% at 7,347.00
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DJIA: called up 0.5%
S&P 500: called up 0.4%
Nasdaq Composite: called up 0.5%
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EUR: down at $1.0523 ($1.0547)
GBP: firm at $1.2577 ($1.2568)
USD: up at JP¥129.97 (JP¥129.68)
GOLD: down at $1,877.86 per ounce ($1,906.75)
OIL (Brent): down at $104.05 a barrel ($110.30)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The eurozone manufacturing sector saw growth slow at the start of the second quarter as the war in Ukraine and Covid lockdowns in China compounded supply chain problems and inflationary pressures. S&P Global's eurozone manufacturing purchasing managers' index fell to a 15-month low of 55.5 points in April. The reading beat the flash figure of 55.3 and remained above the no-change level of 50.0, but marked a decline from 56.5 in March. ‘The slower expansion was accompanied by a subdued increase in new orders and sustained supply-side pressures as Covid restrictions in China and the ongoing war in Ukraine caused disruptions,’ said S&P Global. Amid supply chain issues, vendors raised raw materials prices. This was exacerbated by soaring fuel and energy costs, resulting in the strongest rate of input price inflation for five months. In turn, eurozone manufacturers increased their factory gate charges by the greatest extent on record.
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Industrial powerhouse Germany saw its manufacturing PMI drop to a 20-month low of 54.6 in April from 56.9 in March. This did beat April's flash reading of 54.1, however. ‘The headline PMI masked sub-50 readings for both the output and new orders components. Production fell into contraction for the first time since June 2020 amid reports of materials shortages and reduced demand,’ said S&P Global. Separately, data on Monday showed German retail sales contracted in March. Retail sales declined 0.1% month-on-month in March, slipping into reverse after a 0.2% rise in February. Consensus, according to FXStreet had pencilled in growth of 0.3%. ‘Retail turnover in real terms has thus stagnated from the beginning of the year as the decline in March offset the increase in February 2022,’ noted statistical body Destatis.
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Manufacturing growth in Italy lost momentum in April, slowing to a 16-month low, according to the latest S&P Global survey. The seasonally adjusted S&P Global Italy manufacturing purchasing managers' index posted 54.5 points in April, down from March's 55.8 and below the flash figure of 55.0. Though still above the no-change level of 50.0, the reading was the lowest since December 2020, with stagnating factory production driving the slowdown. Output growth dropped in fact to its weakest level in 22 months, hampered by supply issues and material shortages.
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Growth slowed at Japanese factories in April with delays and supply shortages compounded by the war in Ukraine and Covid lockdowns in China, data showed. The S&P Global manufacturing purchasing managers' index fell to 53.5 points in April from 54.1 in March. While remaining above the no-change mark of 50.0, the latest reading indicates growth softened in April. ‘Firms were increasingly commenting that delivery delays and material shortages had weighed on demand and output, notably as input prices continued to rise at a substantial rate that was among the sharpest in the survey history,’ said S&P Global. The war in Ukraine and a spike in Covid cases in China weighed ‘heavily’ on export orders. Input prices rose for the twenty-third month running and accelerated to the fifth-highest in the survey history. As a result, the output price inflation surged to a new series record.
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China's manufacturing activity slumped to its lowest level since February 2020, official data showed Saturday, the latest sign of economic pain as Beijing doggedly pursues its zero-Covid response. The official purchasing managers' index, a key gauge of manufacturing activity, clocked 47.4 points in April below the 50-point mark separating growth from contraction as authorities said that a ‘decline in production and demand’ has deepened. The figure comes as Beijing's policy of swiftly stamping out infections with lockdowns and mass testing has been severely challenged by an Omicron-fuelled pandemic resurgence. Dozens of cities, including economic powerhouses like Shenzhen and Shanghai, have been either fully or partially sealed off in recent months. The inflexible approach even as most of the world learns to live with the virus has inflicted mounting economic pain, with the curbs snarling supply chains and leaving goods piling up at the world's busiest container port.
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Many Chinese are marking a quiet May Day holiday this year as the government's zero-Covid approach restricts travel and enforces lockdowns in multiple cities. All restaurants in Beijing are closed to dine-in customers from Sunday through the end of the holiday on Wednesday, open only for takeaways and deliveries. Parks and tourist attractions in the Chinese capital are limited to 50% of their capacity. The Universal Studios theme park in Beijing, which opened last year, said it had shut down temporarily. The pandemic situation varies across the vast nation of 1.4 billion people, but the Transport Ministry said last week that it expected 100 million trips to be taken from Saturday to Wednesday, which would be down 60% from last year. Many of those who are traveling are staying within their province as local governments discourage or restrict cross-border travel to try to keep out new infections.
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The EU will propose a phased out ban on Russian oil imports as part of a fresh round of sanctions against Russia for its invasion of Ukraine, sources said on Sunday. The European Commission, which draws up sanctions for the bloc, is currently preparing a text that could be put to the 27 member states as early as Wednesday, diplomats said. Several diplomats said the ban on oil was made possible after a U-turn by Germany, which had said the measure would do too much harm to its economy. EU foreign policy chief Josep Borrell said Russia was intensifying its attacks in Ukraine, making new sanctions ‘absolutely essential’. ‘We must use our economic and financial abilities to make Russia pay the price for what it's doing,’ he said. The commission will propose introducing the ban over six to eight months to give countries time to diversify their supply, the sources said.
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By Lucy Heming; lucyheming@alliancenews.com
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