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The following is a summary of top news stories Tuesday.
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COMPANIES
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Barclays said it will kick off a £1.00 billion share buyback programme on Tuesday. The programme, initially announced in February, had been delayed in March after the bank admitted it sold more financial products to investors than it was allowed to. The London-based bank said at the time that securities offered and sold under its US shelf registration statement for an approximate one-year period had exceeded a registered amount. This, the bank explained, gave the purchasers of the affected securities a right of rescission, requiring Barclays Bank to repurchase the affected securities at their original purchase price. Late on Monday, Barclays provided further explanation. Barclays said it had found ‘one material weakness’ in its internal controls. ‘The material weakness that has been identified relates to a weakness in controls over the identification of external regulatory limits related to securities issuance and monitoring against these limits. As a result of this weakness, BBPLC issued securities in excess of the amount registered under the US shelf,’ it said on Monday.
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Siggi Olafsson resigned as chief executive officer of Hikma Pharmaceuticals ‘to pursue other opportunities’, leaving on June 24. Executive Chair Said Darwazah will take over all CEO responsibilities while the board looks for a new CEO. Darwazah is the former CEO of Hikma. Olafsson has been in post for four years.
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Toyota Motor is cutting production by tens of thousands of vehicles globally because of semiconductor shortages. The global production plan for June is about 850,000 units, of which 250,000 units are in Japan and 600,000 units overseas. The average global production plan from June through August is about 850,000 units, and 9.7 million units for the full period of fiscal year 2023. The shortage of semiconductors, spread of Covid-19 and other factors are making it difficult to look ahead, the company said in a statement. In addition, the Japanese car maker announced additional domestic factory line suspension due to supply shortages caused by Covid-19 lockdown in Shanghai.
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Samsung Electronics unveiled a massive $356 billion investment blueprint for the next five years aimed at making it a frontrunner in a wide range of sectors from semiconductors to biologics. The new figure is an increase of more than a third over its earlier plan announced last year. Samsung is South Korea's largest conglomerate and its overall turnover is equivalent to a fifth of the national gross domestic product. Samsung Electronics, its flagship subsidiary, is the world's biggest smartphone maker. The investment plan would bring ‘long-term growth in strategic businesses and help strengthen the global industrial ecosystem of crucial technology’, Samsung said in a statement.
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Zoom Video Communications reported a drop in first-quarter earnings, but the video conferencing software provider raised its annual guidance and sought to promote hybrid work. For the three months ended April 30, revenue was $1.07 billion, up from $956.2 million in the first quarter last year. First quarter net income was $113.6 million, or $0.37 per diluted share, down from $227.4 million, or $0.74 diluted EPS, the year before. For financial 2023, Zoom hiked its forecast earnings to a range of $3.70 to $3.77 a share and kept revenue guidance unchanged. In February, Zoom had forecast earnings of $3.45 to $3.51 a share and revenue of $4.53 billion to $4.55 billion for the year.
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German air carrier Deutsche Lufthansa has submitted a joint bid with Switzerland-based MSC shipyards to purchase a controlling share of ITA Airways, the successor airline to the former Italian flagship airline Alitalia, the airline confirmed on Monday. Bidding ended on Monday and the Lufthansa offer is considered to be a strong contender, though it remained unclear if there were any other bids. US airline investor Indigo, Franco-Dutch airline Air France-KLM and US air carrier Delta were all mentioned by industry analysts as likely bidders. Italian Finance Minister Daniele Franco has said he wants the deal wrapped up by the end of June.
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MARKETS
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The pound dropped against the dollar after a survey of private sector activity in the UK indicated a sharp slowdown in economic growth, as consumers cut back purchases. The pound had rebounded on Monday and was trading above $1.2570 just before the morning announcement, shedding nearly a US cent immediately afterward. ‘The collapse in the composite PMI in May is the clearest sign yet that demand is faltering in response to the intense squeeze on households' real disposable incomes,’ said Samuel Tombs, chief UK economist for Pantheon Macroeconomics.
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CAC 40: down 1.4% at 6,269.69
DAX 40: down 1.1% at 14,024.48
FTSE 100: down 0.4% at 7,483.48
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Hang Seng: closed down 1.8% at 20,112.10
Nikkei 225: closed down 0.9% at 26,748.14
S&P/ASX 200: closed down 0.3% at 7,128.80
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DJIA: called down 1.0%
S&P 500: called down 1.4%
Nasdaq Composite: called down 2.0%
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EUR: up at $1.0715 ($1.0690)
GBP: down at $1.2495 ($1.2575)
USD: down at JP¥127.39 (JP¥127.78)
Gold: up at $1,857.11 per ounce ($1,854.61)
Oil (Brent): up at $113.04 a barrel ($112.23)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Private sector growth in the eurozone is expected to have slowed in May, preliminary survey results from S&P Global showed, as the continent continues to deal with the fallout from the war in Ukraine along with the rising cost of living. The seasonally adjusted S&P Global eurozone purchasing managers' index composite output index slipped to 54.9 in May from 55.8 in April. The figure came in behind market expectations, cited by FXStreet, of 55.3. The flash eurozone services PMI index fell to 56.3 from 57.7, and came in behind market expectations of 57.5. Flash eurozone manufacturing PMI index was down to 54.5 from 55.5, again behind market expectations, which forecast a drop to 54.9.
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In Germany, the flash composite PMI inched higher to 54.6 in May from 54.3 in April. The flash services PMI fell to 56.3 from 57.6, while the manufacturing PMI rose to 54.7 from 54.6.
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In France, the private sector economy expanded for a 14th successive month during May, but fell a hair lower from April's 51-month high. The flash composite PMI fell slightly to 57.1 in May from 57.6 in April. The services PMI slipped to 58.4 from 58.9, while the manufacturing PMI dropped to 54.5 from 55.7.
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UK private sector growth slowed markedly in May. The S&P Global/CIPS flash composite PMI fell to 51.8 points in May, a 15-month low, from April's final tally of 58.2. ‘UK private sector firms signalled a sharp slowdown in business activity growth during May as escalating inflationary pressures and heightened geopolitical uncertainty acted as constraints on customer demand,’ S&P Global explained. The flash manufacturing PMI weakened to 54.6 points in May, a 16-month low, from the final tally of 55.8 in April. The services PMI slumped to a 15-month low of 51.8 points from 58.9 in April.
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UK supermarket sales have weakened in recent weeks, while grocery inflation accelerated to the highest level since May 2009. According to the latest Kantar survey, UK grocery sales declined 4.4% to £29.91 billion in the 12 weeks to May 15 from £31.30 billion a year before. The sales decline eased in the closing weeks of the survey, however. For the full 12 weeks, grocery price inflation stood at 5.7%, accelerating from 4.8% in the 12 weeks to April 17. Over the past four weeks alone, grocery inflation raced to 7.0%, the highest level since May 2009.
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UK government borrowing remains stubbornly high, still above pre-Covid times, according to numbers from the Office for National Statistics. Public sector net borrowing, excluding banks, amounted to £18.6 billion in April. It was the fourth-highest April figure since monthly records began in 1993.The figure was down from £24.2 billion a year earlier but up from £10.7 billion in April 2019. April's figure climbed from £14.7 billion in March 2022. The figure for the financial year ended March, meanwhile, was downwardly revised to £144.6 billion from £151.8 billion. It remains the third-highest borrowing number since financial year records began in March 1947, however.
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UK Prime Minister Boris Johnson is facing fresh accusations he lied to Parliament after photographs emerged of him raising a glass at a Downing Street leaving party during lockdown. The images obtained by ITV News were taken at a do for departing communications chief Lee Cain on 13 November 2020, just days after Johnson had ordered a second national lockdown in England. Asked last December in the Commons whether there had been a party in No 10 on that date, the prime minister said ‘no’ and added he was sure the rules were followed at all times. Labour said there was now ‘no doubt’ that Johnson had ‘lied’ to MPs. The Metropolitan Police is facing questions as to why Johnson was not fined in relation to the event when photographs showed him, drink in hand, alongside a table strewn with food and wine bottles. There were at least eight other people in the room at a time when people were banned from social mixing, other than to meet one person outside, and at least one individual has received a fixed penalty notice in relation to an event on that date.
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Russian forces on Tuesday stepped up their offensive on the last pocket of resistance around Lugansk in Ukraine's eastern Donbas region, as the conflict entered its fourth month. Since Moscow's invasion in late February, Western support has helped Ukraine hold off its neighbour's advances in many areas including the capital Kyiv but Russia is now focused on securing and expanding its gains in Donbas and the southern coast. ‘The coming weeks of the war will be difficult, and we must be aware of that,’ Ukraine's President Volodymyr Zelensky said Monday in his nightly address after regional leaders and residents reported heavy bombardments. ‘The most difficult fighting situation today is in Donbas,’ Zelensky said, singling out the worst-hit towns of Bakhmut, Popasna and Severodonetsk. The governor of Lugansk, in Donbas, said that Russia has sent thousands of troops to capture his entire region and that Severodonetsk was under massive attack, warning residents that it was too late to evacuate.
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Leaders of Japan, India, Australia and the US warned against attempts to ‘change the status quo by force’ as concerns grow about whether China could invade self-ruled Taiwan. A joint statement by the so-called Quad bloc avoided any direct mention of China's growing military power in the region, but left little doubt about where its concerns lie. The carefully worded document also made reference to the conflict in Ukraine, but without offering any joint position on the Russian invasion that India has pointedly declined to condemn. The Quad's other members have been less coy about their view that a strong response to Russia's war is needed, one that would a message that will deter other countries, including China.
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US President Joe Biden on Tuesday said Washington's ‘strategic ambiguity’ policy for Taiwan remains in place, a day after his comment about readiness to defend the island against a Chinese invasion suggested a change. ‘No’, Biden told reporters in Tokyo when asked if the policy was now dead. ‘The policy has not changed at all. I stated that when I made my statement yesterday.’ Biden's latest declaration followed similar insistence from top US officials that a decades-old approach to Taiwan remains in place. This includes arming the democratic island for its own defense, while acknowledging China's legal sovereignty and expressing ‘strategic ambiguity’ on whether American troops would ever intervene. The reassurances follow the president's answer to a question at a press conference in Tokyo on Monday where he said ‘yes,’ when asked if Washington would be willing to get involved militarily in Taiwan's defence.
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Chinese premier Li Keqiang has sent a congratulatory note to newly elected Australian counterpart Anthony Albanese, Beijing's state media reported, ending a year-long freeze in diplomatic contact between the two countries. China cut off diplomatic and trade channels with Australia in a largely symbolic act of fury last May, following clashes over issues including human rights, espionage and the origins of Covid-19. ‘The Chinese side is ready to work with the Australian side to review the past, look into the future... to promote the sound and steady growth of their comprehensive strategic partnership,’ Li said, according to the state-run Xinhua news agency late Monday.
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Japan's private sector remained in expansion territory in May, mainly through fast growth in the services sector, while manufacturing expansion slowed. The au Jibun Bank Japan flash composite PMI edged upwards to 51.4 index points from the final 51.1 points posted for April. The flash manufacturing PMI dipped to 53.2 points in May from 53.5 points in April, marking the softest improvement in operating conditions since February. The flash services PMI rose to 51.7 points in May from 50.7 in April, reaching a five-month high. The increase was due to the easing of pandemic-related restrictions in Japan, allowing for an uplift in new business, particularly in the tourism sector.
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