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The following is a summary of top news stories Friday.
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COMPANIES
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The Bank of England said the UK's high street banks are no longer ‘too big to fail’ after it completed its assessment of the the eight ‘major’ lenders in the country. In its Resolvability Assessment Framework, the UK central bank said shareholders and investors, and not taxpayers, are in line to ‘bear the costs’ if any bank suffers a collapse. ‘In 2007-08, the UK did not have a regime to enable resolving banks without the use of public money. This left two choices when some got into trouble: let banks fail and cause huge disruption or bail them out with taxpayers' money,’ the BoE said. Now, however, the central bank said it now has a ‘robust’ framework to deal with the fallout of a banking crisis. The eight banks to take part in the assessment were HSBC, Barclays, NatWest, Lloyds Banking, Standard Chartered, Banco Santande's UK operations, Virgin Money UK and Nationwide Building Society.
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Drugmaker GSK unveiled positive pivotal phase three data for its respiratory syncytial virus vaccine candidate AReSVi 006 for adults. RSV is a common contagious virus affecting the lungs and breathing passages. The RSV vaccine candidate showed statistically ‘significant and clinically meaningful efficacy’ in adults aged 60 years and above, GSK explained. GSK said interim analysis was reviewed by an Independent Data Monitoring Committee, and the primary endpoint was exceeded with no unexpected safety concerns observed. Chief Scientific Officer Hal Barron said: ‘These data suggest our RSV vaccine candidate offers exceptional protection for older adults from the serious consequences of RSV infection. RSV remains one of the few major infectious diseases without a vaccine, and these data have the potential to meaningfully impact the treatment of RSV and may reduce the 360,000 hospitalisations and more than 24,000 deaths worldwide each year. Given the importance of these data, we plan to engage with regulators immediately and anticipate regulatory submissions in the second half of 2022.’
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US regulators expanded a probe into Tesla's ‘Autopilot’ system, moving the investigation closer to a potential recall of a controversial feature in Elon Musk's electric vehicles. The National Highway Traffic Safety Administration is investigating whether ‘Autopilot and associated Tesla systems may exacerbate human factors or behavioral safety risks by undermining the effectiveness of the driver's supervision,’ according to a summary statement. The agency now considers the probe an ‘engineering analysis’ which in NHTSA parlance upgrades the status from a ‘preliminary evaluation’ to determine ‘whether a safety recall should be initiated or the investigation should be closed.’ Tesla did not immediately respond to a request for comment. NHTSA opened the probe in August 2021 after identifying 11 crashes involving a first responder vehicle and a Tesla in which Autopilot or Traffic Aware Cruise Control was engaged, and five additional cases were later found that fit into this group.
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MARKETS
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Market activity was effectively on hold on Friday ahead of the US consumer price index reading for May at 1330 BST. Asian and European equities were mostly lower, though Wall Street was called for a mixed start.
That all could change when the CPI report is issued before the New York open. Economists at Lloyds Bank said they expect the headline annual inflation rate to continue to slow, to 8.2% in May from 8.3% in April and 8.5% in March. The core rate of inflation is seen falling to 5.9% from 6.2% in April and 6.5% in March. They said risks for the headline figure are skewed to the upside, due to the recent rise in energy prices. ‘Core inflation seems more likely to have declined but there will be considerable interest in whether services inflation is continuing to accelerate. That would be an indication that inflationary pressures are broadening out,’ Lloyds said. ‘Overall, the report is not expected to ease the pressure on the Federal Reserve to continue to raise interest rates.’
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CAC 40: down 1.3% at 6,277.45
DAX 40: down 1.5% at 13,989.29
FTSE 100: down 1.2% at 7,388.61
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Hang Seng: closed down 0.3% at 21,806.18
Nikkei 225: closed down 1.5% at 27,824.29
S&P/ASX 200: closed down 1.3% at 6,932.00
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DJIA: called down 0.1%
S&P 500: called marginally higher, up 1.50 points
Nasdaq Composite: called up 0.3%
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EUR: down at $1.0611 ($1.0657)
GBP: down at $1.2480 ($1.2536)
USD: down at JP¥133.85 (JP¥134.16)
Gold: up at $1,844.25 per ounce ($1,842.36)
Oil (Brent): flat at $123.34 a barrel ($123.37)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Consumer prices in Spain saw another surge in May, in line with market expectations, official data showed. Spain's annual consumer price index rose by 8.7% in May from a year ago, INE said, accelerating from April's 8.3% growth. The 8.7% inflation rate was in line with market expectations, according to FXStreet. Versus the previous month, the CPI increased 0.8% in May, in line with expectations, reversing from the 0.2% decrease in April from March. The harmonised index of consumer prices rose by 8.5% in May from a year before, picking up pace from 8.3% in April. Month-on-month, prices rose by 0.7%.
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Industrial production in Italy grew at a faster pace in April than March, both on a monthly and yearly basis, figures from national statistics office Istat showed. Italy industrial output rose by 1.6% on a monthly basis in April after the 0.2% increase in March - revised from the preliminary flat figure - and confounded market estimates of a 1.1% decline, as reported by FXStreet. Year-on-year, the 4.2% increase in April follows the 3.2% rise in March - revised from the initial 3.0% - while economists expected a 0.2% decline.
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China's factory-gate inflation dropped to its lowest in a year in May, official data showed, while consumer prices were stable despite Covid-linked transport disruptions. The producer price index measuring the cost of goods at the factory gate rose 6.4% on-year, National Bureau of Statistics figures showed, in line with analyst expectations. The figure was down from an 8.0% rise in April and the lowest since April last year, according to official data. ‘Regions and departments efficiently coordinated epidemic prevention and control in May...ensuring smooth and stable supply chains in key industrial areas,’ NBS senior statistician Dong Lijuan said in a statement. International crude oil prices fluctuated upwards, however, driving up costs in related industries, Dong said. China's consumer price index, a key gauge of retail inflation, rose 2.1% on-year in May, the same level as last month and just below analyst expectations. Domestic prices of flour, grain products and vegetable oil rose ‘due to high international grain prices’, but Dong said consumer prices remained stable overall, with fresh vegetable costs falling while logistics problems eased.
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China President Xi Jinping said China must stick ‘unswervingly’ to its zero-Covid strategy, as more than half of Shanghai's 25 million lockdown-weary residents gird Friday for a weekend virus testing drive. Chinese leaders have attempted to thread the needle between crushing the virus and limiting the damage of lockdowns, with Xi on Thursday calling for ‘efficiently coordinating Covid-19 prevention and control with economic and social development’. But he said China's ‘dynamic zero-Covid approach must be unswervingly upheld’, according to state news agency Xinhua. Experts predict that China will struggle to meet its economic growth target of around 5.5% this year as virus lockdowns force business shutdowns and snarl supply chains. The World Bank has sharply slashed its 2022 growth forecast for China to 4.3%, warning this week that Covid disruptions could further slow recovery.
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The Bank of Japan said the prices of corporate goods remained mostly flat in Japan in May in its monthly report on the corporate goods price index. Preliminary figures for May showed that the producer price index was unchanged in the month compared to April, slowed from the 1.3% rise the previous month. Market consensus, according to FXStreet, had predicted a 0.5% rise for May. On an annual basis, the PPI rose 9.1% in May, slowing from the 9.8% rise in April.
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A US congressional panel investigating last year's mob assault on the US Capitol laid out its case Thursday that Donald Trump and his claims of a stolen election were at the heart of what amounted to an ‘attempted coup’ to remain in power. In a prime-time presentation of its findings from a year-long probe, the special committee sought to persuade a divided country of the existence of a deep-rooted and ongoing plot orchestrated by the former president to overturn the result of the 2020 election won by Joe Biden. ‘President Trump summoned the mob, assembled the mob and lit the flame of this attack,’ the Republican vice chair of the panel, Liz Cheney, said in her opening remarks at the first in a series of hotly anticipated summer hearings. Minutes earlier, Democratic committee chief Bennie Thompson accused Trump of being ‘at the centre of this conspiracy’.
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UK Chancellor Rishi Sunak has been accused of wasting £11 billion of taxpayers' money by paying too much in interest servicing the government's debt. The National Institute of Economic & Social Research said the losses were the result of Sunak's failure to insure against interest rate rises on £900 billion of reserves created through the quantitative easing programme. The losses were said to exceed the amount that the Conservatives have accused Labour former chancellor Gordon Brown of losing when he sold some of the UK's gold reserves at rock bottom prices. The institute's director, Professor Jagjit Chadha, told the Financial Times that Sunak's actions had left the country with ‘an enormous bill and heavy continuing exposure to interest rate risk’. Labour said the losses were ‘astronomical’ and accused the government of ‘playing fast and loose’ with the public finances. In response, the Treasury said that it had a ‘clear financing strategy’ in place to meet the government's funding needs.
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Ukraine President Volodymyr Zelensky said his forces were ‘holding on’ in the flashpoint eastern city Severodonetsk where intense street battles with Russian troops could determine the fate of the Donbas region. Moscow has concentrated its firepower on the industrial city, which it now mostly controls, with the area's governor saying on Friday that Russian forces had destroyed a major sports arena. Pro-Russian rebels sentenced one Moroccan and two British fighters to death on Thursday after they were captured while fighting for Ukraine and accused of acting as mercenaries for Kyiv. Zelensky said in his evening address on Thursday night that several ‘cities in Donbas, which the occupiers now consider key targets, are holding on’. He added that Ukrainian forces have made positive strides in the Zaporizhzhia and Kharkiv regions, and are in the process of ‘liberating our land’.
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