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The following is a summary of top news stories Friday.
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COMPANIES
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Elon Musk faces a lawsuit accusing him of pushing down Twitter's stock price in order to either give himself an escape hatch from his $44 billion buyout bid, or room to negotiate a discount. The suit alleges the billionaire Tesla boss tweeted and made statements intended to create doubt about the deal, which has roiled the social media platform for weeks. Filed Wednesday by a shareholder, the claim seeks class action status and calls on a federal court in San Francisco to back the validity of the deal and award shareholders any damages allowed by law. Musk said last week that his bid to buy Twitter won't proceed unless he gets proof of the number of spam accounts plaguing the platform, adding more uncertainty to his roller-coaster pursuit of the platform. Musk's tweet that the deal to buy Twitter was ‘temporarily on hold’ defied the fact that there is nothing in the purchase contract allowing that to happen, the suit argued. Musk negotiated his Twitter buyout in late April without carrying out due diligence expected in such mega-deals, said the suit filed by William Heresniak of Virginia.
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Qatar Airways and Airbus both said they wanted to settle a bitter billion dollar dispute out of court after the latest hearing Thursday in which each side claimed victory. The airline and leading plane maker have been fighting in the British courts for months over peeling paint on 23 A350 jets which have been grounded. A London high court judge agreed Thursday to the airline's demand for a speeded up trial schedule but refused to order Airbus to stop trying to resell jets intended for Qatar Airways to other airlines whilst they wait for a final ruling. Qatar Airways chief executive Akbar Al Baker, in a rare public comment on the case, told reporters in Doha: ‘Every partnership has disputes and I just hope that this dispute could be resolved outside the courts of law.’ The airline, which is demanding about $1 billion in damages, said in a statement that it was ‘pleased’ that the latest judgement called for an ‘expedited trial’ and more details on the peeling paintwork that it has said is a threat to the A350's lightning conductor.
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McDonald's shareholders overwhelmingly rejected billionaire Carl Icahn's efforts to install two board members to remake the company's animal welfare policies, the restaurant chain said Thursday. Icahn, known on Wall Street for playing hardball in messy corporate battles, had launched the unlikely crusade earlier this spring, accusing the food giant of inhumane pig-farming practices and breaking its promises to address the problem. But Icahn's nominees garnered only about one percent of outstanding shares, according to preliminary results released by McDonald's that said all 12 company directors had been re-elected.
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Pharmaceutical firm GSK said China's National Medical Products Administration has approved a two-dose vaccine schedule for Cervarix to be administered to girls aged between 9 and 14. The jab prevents certain types of cancer-causing human papillomavirus, a viral condition. The green light adds to two-dose approvals in roughly 100 other countries, including in the European Union, Asia, Africa, and Latin America. Earlier in May, the company formally changed its name to GSK from GlaxoSmithKline ahead of the demerger of its Consumer Healthcare business.
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MARKETS
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Most stock markets were set to finish the week on a positive note, following a rally in New York on Thursday, though London lagged on Friday due a gain by the pound. Wall Street took heart from a better outlook from retailers, following the scare received from Walmart and Target last week. ‘With the S&P 500 up 4% so far this week, it looks like the run of down weeks for the index seven consecutive weeks so far - may come to an end. That's good because the index has fallen for eight weeks in a row only twice since the Great Depression,’ said Marshall Gittler, head of Investment Research at BDSwiss.
The latest US personal consumption expenditure price gauge is due at 1330 BST. The core index reading is the Fed's preferred gauge of inflation. Economists at Lloyds Bank forecasts the core PCE inflation rate to ease to 5.1% in April from 5.2% in March. ‘That would confirm the message given by CPI data two weeks ago that inflation probably peaked near term in March,’ the bank said. ‘With inflation still well above the Fed's 2% target, the reduction seems unlikely to be enough to prevent the Fed form hiking interest rates again in June and July. What happens after that point will be partly determined by the pace at which inflation falls in the second half of the year.’
Released at the same time are US personal income and expenditure data. ‘Which would the market consider more significant: a strong income and spending figure, or a slowing PCE deflator?’ asked BDSwiss's Gittler. ‘The income and spending figures are likely to take precedence, especially if the stock market takes heart from them.’
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CAC 40: up 0.7% at 6,455.19
DAX 40: up 0.5% at 14,305.86
FTSE 100: down 0.1% at 7,558.45
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Hang Seng: closed up 2.9% at 20,697.36
Nikkei 225: closed up 0.7% at 26,781.68
S&P/ASX 200: closed up 1.1% at 7,182.70
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DJIA: called marginally higher, up 3.00 points
S&P 500: called up 0.2%
Nasdaq Composite: called up 0.3%
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EUR: flat at $1.0729 ($1.0725)
GBP: up at $1.2615 ($1.2580)
USD: down at JP¥127.02 (JP¥127.37)
Gold: up at $1,856.80 per ounce ($1,846.75)
Oil (Brent): up at $118.01 a barrel ($117.05)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Russia may escape defaulting on its debt on Friday, but the tightening noose of Western sanctions over its invasion of Ukraine is inexorably drawing the nation towards a default. A $71 million payment due Friday may have already been made before US authorities removed this week an exception that allowed Russia to pay its debts in dollars using currency it held outside US financial institutions. But with other payments coming due, the world will likely soon have its first case of a country that unwillingly defaults because of international sanctions rather than not having the money to pay. Russia reiterated Wednesday that it is willing to repay all of its debts in rubles, but the terms on some bonds specify payment in dollars or other currencies. The Russian finance ministry said in a statement last week that it had already transferred the funds for distribution to bondholders.
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The US has rejected Russian President Vladimir Putin's call for the West to lift its economic sanctions. According to the Kremlin, Putin told Italian Prime Minister Mario Draghi that Russia would release ships carrying food and fertilizer in order to ease a looming food crisis around the world, but only ‘on condition of the end of the politically motivated restrictions imposed by the West’. Earlier, Kremlin spokesperson Dmitry Peskov said grain exports from Ukraine would be allowed to resume if the sanctions against Russia are lifted. However, White House spokeswoman Karine Jean-Pierre said it was Russia's naval blockade that had stopped tons of product from being shipped, not sanctions. There was currently no discussion about lifting sanctions, Jean-Pierre said. ‘There is no conversation. This is Russia's doing,’ she said.
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Ukraine's President Volodymyr Zelensky accused Moscow of carrying out a ‘genocide’ in the eastern region of Donbas, where the city of Severodonetsk is suffering an onslaught of Russian shelling. In his daily televised address, Zelensky condemned Moscow's brutal assault on the Donbas where it has redirected its forces after having failed to capture Kyiv adding that its bombardment could leave the entire region ‘uninhabited’. ‘All this, including the deportation of our people and the mass killings of civilians, is an obvious policy of genocide pursued by Russia,’ he said. Pro-Moscow separatist groups have since 2014 controlled parts of Donbas, but Russia now appears set on taking the whole region. Invading forces are closing in on several cities, including the strategically located Severodonetsk and Lysychansk, which stand on the crucial route to Ukraine's eastern administrative centre in Kramatorsk.
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UK Chancellor Rishi Sunak has insisted he did not time handing out £21 billion worth of cost-of-living support to deflect from the controversy over Downing Street lockdown parties. The chancellor bowed to demands for the UK government to step in and help households to deal with ballooning energy bills and rising shop prices, which are being fuelled by 40-year-high inflation, by revealing an emergency package of extra cash for millions of people. Every household will receive a £400 energy bill discount while extra support was also unveiled for the lowest paid, pensioners and those with disabilities. Under the plans, almost all of the eight million most vulnerable households could receive at least £1,200 of support, including a previously-announced £150 council tax rebate. Sunak confronted criticism that the measures were announced as part of a plan to move the focus on from rule-breaking in No 10 following the publication of senior civil servant Sue Gray's report on Wednesday.
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Retail sales in Spain returned to annual growth in April. According to INE, retail sales in Spain rose 1.5% year-on-year, following a decline of 4.1% in March. April's figure markedly topped consensus, with a forecast cited by FXstreet predicting a 1.9% decline. On a monthly basis, sales jumped 5.3% in April, having declined 4.3% in March from February. April's monthly growth was the largest since November.
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Japan announced it will reopen to tourists from 98 countries and regions starting June 10, ending a two-year pandemic closure, but travellers will only be allowed in with tour groups. The decision comes after the government last week said it would test allowing small group tours with visitors from the US, Australia, Thailand and Singapore from this month. On Thursday, the government revised border controls to resume accepting package tours from 98 countries and regions including Britain, the US, France, Spain, Canada, and Malaysia. Japan will also expand the number of airports that accept international flights to seven, adding Naha in its southern Okinawa prefecture and New Chitose near Sapporo in northern Hokkaido. For most of the pandemic Japan has barred all tourists and allowed only citizens and foreign residents entry, though even the latter have periodically been shut out.
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Inflation in Tokyo slowed in May, though excluding food and energy yearly price growth picked up pace. The figure for Tokyo alone is given before numbers for the whole of Japan. May's inflation data for Japan is reported on June 24. In May, annual consumer price growth in Tokyo slowed to 2.4% in Mayfx from 2.5% in April. The figure undershot a market forecast of 2.7%, according to FXStreet. Excluding food and energy, yearly inflation in Tokyo quickened to 0.9% in May from 0.8% in April, topping FXStreet cited forecasts of a slowdown to 0.4%.
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Industrial profits in China hit a two-year low in April, Reuters reported, with high raw material prices and supply chain disruptions hitting company margins. Profits shrank 8.5% from a year earlier, swinging from a 12% rise in March, according to Reuters' calculations based on National Bureau of Statistics data released on Friday. The slump is the biggest since March 2020.
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China will hold naval exercises in the South China Sea on Saturday, its maritime authority said, after a week of recrimination from Western powers over its military ambitions across the Pacific region. The exercises, set to take place in the sea less than 25 kilometres off the coast of south China's Hainan province, come as the US leads warnings over China's growing military and economic presence in an area spanning from the South China Sea to the Pacific Islands. China routinely conducts similar drills in waters near its shores, with an exercise in another area of the sea near Hainan scheduled for next week, as well as multiple others along the country's eastern coastline. But the latest exercises come as Beijing faces a growing chorus of warnings from the US and Western allies over its naval ambitions, which critics say are a beachhead for a wider attempt to change the regional balance of power.
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