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The following is a summary of top news stories Monday.
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COMPANIES
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Siemens Energy said it has launched a tender offer to buy up the remaining stake in wind power subsidiary, Spain-based Siemens Gamesa Renewable Energy. Siemens Energy, a subsidiary of Munich-based Siemens, already owns some two-thirds of Gamesa shares. The offer - for €18.05 per share, up from its closing price of €16.75 on Friday in Madrid - will see Gamesa delisted in Madrid, where it currently is an IBEX 35 index constituent, and integrated into Siemens Energy. The deal is expected to total €4.3 billion. Siemens Energy noted it plans to finance up to €2.5 billion of the deal ‘with equity or equity like instruments’.
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BP said it has signed an agreement to supply miner Rio Tinto with marine biofuels for a year. The aim is to ‘help Rio Tinto study ways to reduce its carbon emissions from its marine fleet and inform its future biofuel strategy,’ BP explained. The trial will be on Rio Tinto's RTM Tasman vessel on a mix of transatlantic and Atlantic-Pacific routes, in ‘one of the longest-duration marine biofuel trials to date’, BP said. Rio Tinto wants to reach net-zero emissions from shipping products to customers by 2050 and introduce net-zero carbon vessels into its portfolio by 2030, the miner said.
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Hyundai Motor plans to build its first dedicated full electric vehicle factory in the US, the South Korean company announced. The new plant in Georgia represents an investment of approximately $5.54 billion. E-car batteries are also to be manufactured at the site, Hyundai said in a statement. Construction is scheduled to start in January 2023 and commercial production is expected to begin in the first half of 2025, with a reported annual production capacity of 300,000 vehicles. The planned investments should create more than 8,000 jobs, the carmaker said. Hyundai's announcement coincided with US President Joe Biden's visit to South Korea at the weekend.
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AstraZeneca said its Covid-19 vaccine Vaxzevria has been granted approval in the EU by the European Medicine Agency as a third-dose booster in adults. The approval, which followed a positive recommendation by the EU's Committee for Medicinal Products for Human Use, means that adults who had been given earlier shots of either Vaxzevria or an EU-approved mRNA COVID-19 vaccine can now be given the Astra vaccine as a third booster. Astra noted that while 65% of all people in the world have received at least one Covid-19 vaccine jab, there remains a challenge to ensure people receive both their primary vaccine schedule - normally two shots - and the third dose booster.
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Kingfisher backed its guidance for financial 2023 on first-quarter results that met expectations and announced a return of £300 million in surplus capital via share buyback. The London-based DIY retailer said group sales in the three months to April 30 fell 5.8% to £3.25 billion compared to the same period a year before. At constant currency, sales were down 4.2%. On a like-for-like basis, they were 5.4% lower. Kingfisher said its performance throughout the quarter was ‘in line with our expectations’. It noted that sales were 16% higher on a like-for-like basis compared to three years earlier, before the onset of the pandemic, due to ‘strong market share gains’. In the UK & Ireland unit alone, which includes brands like B&Q and Screwfix, sales were down 14% yearly to £1.57 billion. Compared to three years before, quarterly sales are 17% higher on a like-for-like basis, due to market share gains and good retention of revenue from new and existing customers, Kingfisher said.
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A Saudi billionaire detained in a 2017 anti-graft crackdown is to sell a 16.9% stake of his company to a sovereign wealth fund run by the kingdom's crown prince. The sale by Prince Al-Waleed bin Talal of 625 million shares of the Riyadh-headquartered Kingdom Holding Co is worth roughly $1.5 billion, according to a regulatory filing published by the Saudi stock exchange, or Tadawul. The company owns the famed George V hotel in Paris and has a majority stake in The Savoy in London, according to a breakdown of its portfolio on its website. Al-Waleed, once dubbed the Warren Buffett of Saudi Arabia, struggled to recover his political and financial standing in the kingdom after he was targeted and detained in a crackdown on alleged corruption in 2017.
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MARKETS
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Stock prices were mostly higher in Asia and Europe on Monday, with Hong Kong and Shanghai the laggards. The Heng Seng closed lower, while the Shanghai Composite ended marginally higher. Wall Street was pointed for a higher open, after a late rally on Friday afternoon put the Dow and S&P 500 slightly in the green for the day. The dollar was weaker on Monday.
Due up on Wednesday this week are the minutes of the US Federal Open Market Committee meeting that was held at the start of this month and at which Federal Reserve policy makers decided to raise interest rates by 50 basis points. ‘Investors will hunt for any hints of an eventual 75bp hike from the FOMC in the coming meetings,’ said Ipek Ozkardeskaya of Swissquote Bank. ‘At this point, most of the Federal Reserve hawkishness has already been broadly priced in - including a small chance of a 75bp hike in next meeting. Therefore, we should not see a significant, further erosion in the market mood post-minutes. ’
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CAC 40: down 0.2% at 6,275.17
DAX 40: up 0.5% at 14,049.67
FTSE 100: up 0.7% at 7,442.57
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Hang Seng: closed down 1.2% at 20,470.06
Nikkei 225: closed up 1.0% at 27,001.52
S&P/ASX 200: closed marginally higher, up 3.30 points at 7,148.90
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DJIA: called up 0.4%
S&P 500: called up 0.5%
Nasdaq Composite: called up 0.5%
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EUR: up at $1.0654 ($1.0547)
GBP: up at $1.2576 ($1.2463)
USD: down at JP¥127.54 (JP¥127.86)
GOLD: up at $1,861.98 per ounce ($1,846.32)
OIL (Brent): up at $113.24 a barrel ($112.40)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The European Central Bank will probably draw a line under the era of negative interest rates by September, its president Christine Lagarde said. The ECB is ‘likely to be in a position to exit negative interest rates by the end of the third quarter’, Lagarde wrote in a blog post. First, the end of the bank's bond-buying stimulus programme ‘very early in the third quarter’ would pave the way for a ‘rate lift-off at our meeting in July’, she said. The initial hike would be the ECB's first in over a decade and would lift rates from their current historically low levels. These include a minus 0.5% deposit rate which effectively charges banks to park their excess cash at the ECB overnight.
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The European Commission proposed suspending strict fiscal rules in the EU for an extra year, until 2024, amid the economic fallout from the Ukraine war. The proposal is to help EU member states ‘weather the storm’ of Russia's invasion of Ukraine, EU Trade Commissioner Valdis Dombrovskis said in a Brussels press conference. The commission expected to reinstate the EU's Stability & Growth Pact in 2023 as the bloc's economies improved; however the war in Ukraine renewed calls for an extension. EU member states now have to agree to the proposal. The pact stipulates that member states may not take on more than 60% of their economic output in debt and caps budget deficits at 3% of gross domestic product.
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German Economy Minister Robert Habeck has expressed confidence that the EU will find a consensus on a Russian oil embargo, which is currently being discussed by the member states. ‘It doesn't help if countries all start doing their own thing,’ Habeck told broadcaster Deutschlandfunk. The continent's strength is that it can ‘stand together,’ he said. That also applies to sometimes difficult partners, in this case for example Hungary, he said. Habeck, who is due to speak on Monday at the World Economic Forum in Davos, admitted that he was disappointed that agreeing on an oil embargo has taken so long.
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Business sentiment in Germany has brightened in May, according to the ifo Institute for Economic Research, but expectations were largely unchanged as business owners do not feel the economy is turning around. The ifo Business Climate Index rose to 93.0 points in May, after registering 91.9 points in April. The figure for May topped FXStreet-cited consensus which had predicted in a more slight fall to 91.4 points.
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UK house prices hit yet another record figure in May, numbers on Monday showed, as the housing market shows little sign of being stifled by successive interest rate hikes. According to property portal Rightmove, UK house prices climbed 2.1% monthly to £367,501 in May, from £360,101 in April. Monthly growth accelerated from April's 1.6% rise. Annual growth in May was 10%, largely in line with April's rise. Over the past two years, the average UK asking price has surged £55,000. That growth towers above the £6,000 climb in the two years prior to the pandemic. The UK housing market re-emerged from the initial spring 2020 lockdown strongly. The sector benefited from stamp duty relief that was only recently removed. The May house price surge comes despite the Bank of England raising interest rates again. Earlier in May, the BoE raised interest rates to its highest level since 2009.
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China has issued a strong warning to the US after President Joe Biden pledged to defend Taiwan militarily if necessary. China expressed its ‘strong dissatisfaction’ over the US remarks, Chinese Foreign Minister Wang Yi said, according to state broadcaster CCTV. China has ‘no room for compromise or concession’ on core interests of sovereignty and territorial integrity, he said. ‘No one should underestimate the strong determination, firm will and powerful capabilities of the Chinese people,’ Wang Yi further warned. Biden had warned that China was ‘flirting with danger’ and said the US would defend Taiwan militarily if Beijing invaded, the second time in eight months he has made that vow.
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Biden announced in Tokyo that 13 countries have joined a new, US-led Asia-Pacific trade initiative touted as a counterweight to China's aggressive expansion in the region. ‘The US and Japan, together with 11 other nations will be launching’ the Indo-Pacific Economic Framework for Prosperity, Biden said at a press conference alongside Japanese Prime Minister Fumio Kishida. Biden did not say which countries had already signed up to IPEF, which the White House is billing as a framework for what will ultimately become a tight-knit group of trading nations. Unlike traditional trade blocs, there is no plan for IPEF members to negotiate tariffs and ease market access a tool that has become increasingly unpalatable to US voters fearful of undermining homegrown manufacturing. Instead, the programme foresees integrating partners through agreed standards in four main areas: the digital economy, supply chains, clean energy infrastructure and anti-corruption measures.
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Beijing has extended orders for workers and students to stay home and ordered additional mass testing as cases of Covid-19 again rose in the Chinese capital. Numerous residential compounds in the city have restricted movement in and out, although conditions remain far less severe than in Shanghai, where millions of citizens have been under varying degrees of lockdown for two months. Beijing on Monday reported an uptick in cases to 99, rising from a previous daily average of around 50. In total, China reported 802 new cases on Monday, marking a steady decline interrupted only by small-scale localised outbreaks. Despite that, the government has hewed to strict quarantine, lockdown and testing measures under its ‘zero-Covid’ approach.
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Incoming prime minister Anthony Albanese vowed to reset Australia's relations with the world and sweep aside the country's reputation as a climate laggard Sunday, as he raced to form a government in time for a key Tokyo summit. Fresh from a victory that ended a decade of continuous conservative rule, Albanese signalled an era of fairer, greener and less pugilistic politics for Australia. The 59-year-old Labor leader said Saturday's election was a ‘big moment’ in his life, but insisted he wanted it to be ‘a big moment for the country’. ‘I do want to change the country,’ he said as he waited to see whether his Labor party can command a majority in parliament or will need help from climate-minded independents. Images of smouldering eucalypt forests, smog-enveloped cities and blanched-out coral reefs have made Australia a byword for climate-fuelled destruction. Under conservative leadership, the country already one of the world's largest gas and coal exporters has also become synonymous with playing the spoiler at international climate talks.
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The Davos summit of global political and business elites returned Monday after a Covid-induced two-year break to face another momentous crisis: Russia's invasion of Ukraine. The theme of the World Economic Forum, 'History at a Turning Point', sets the tone for the four-day meeting in the glitzy Swiss mountain resort that will be dominated by the political and economic fallout from the conflict. When the WEF last took place in Davos in January 2020, the coronavirus was just brewing in China before morphing into a devastating pandemic. A Davos forum took place virtually last year, with Russian President Vladimir Putin among the speakers. Russian business and political leaders, who used to participate in debates and mingle with other A-listers at champagne parties, were barred by organisers from attending this year's gathering over the war. WEF founder Klaus Schwab said last week that Davos would do what it can to support Ukraine and its recovery.
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