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The following is a summary of top news stories Wednesday.
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COMPANIES
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BP is taking just shy of a 41% stake in an Australian energy project being billed as one of the world's largest renewable power stations. BP said it would operate the $36 billion ‘Asian Renewable Energy Hub’, an array of solar and wind facilities sprawled over 6,500 square kilometres of Australia's sparsely populated west coast. The project is expected to have a generating capacity of 26 gigawatts, exceeding China's vast Three Gorges hydroelectric dam which is by some measures the world's largest existing power station. It would also produce 1.6 million tonnes of green hydrogen each year, with plans to export much of this to major Asia-Pacific markets such as Japan and South Korea. The hub was first proposed in 2014 as a large-scale wind and solar renewable energy project, and has been slowly going through the process of site surveys and approvals ever since.
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Natural gas distributor Italgas outlined plans to up investments as it eyes ‘consolidating in the energy efficiency sector’. Green plans are key to the Milan-based firm's 2022 to 2028 strategic plan, as it looks to ‘play a leading role in achieving the EU climate targets’. Italgas plans €8.6 billion worth of investments under the plan, lifted by €700 million from the 2021 to 2027 plan.
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Copper miner Antofagasta said repairs to concentrate pipeline at Los Pelambres, Chile, have started. The pipeline is expected to resume operations by the end of the month. ‘Total expenditure to repair the pipeline and bring it back to normal operations is not expected to be material,’ said Antofagasta, though it cautioned that full-year copper production is expected to be at the bottom end of its original 660,000 to 690,000 guidance range.
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Rio Tinto said it has delivered first ore from the Gudai-Darri iron ore mine. The capital cost for the mine - its first greenfield mine in the Pilbara, Western Australia, in more than a decade - is estimated at $3.1 billion, with the firm's total capital expenditure guidance for 2022 unchanged at around $8 billion. Production from the mine will continue to ramp up through the remainder of this year and is expected to reach full capacity during 2023, Rio Tinto said.
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BT workers start voting on Thursday on whether to strike in a dispute over pay. Ballot papers have been sent out to members of the Communication Workers Union, with the result expected before the end of the month. The union said a national strike would be the first since the company was privatised by the UK government in the mid-1980s. The CWU has accused BT of attempting to impose an ‘incredibly low’ flat rate pay rise. BT said it had awarded a £1,500 consolidated pay increase to 58,000 employees, effective from April, including engineers, contact centre and retail staff. The company said this represented an increase of up to 8% for some workers and more than 3% for the highest paid frontline workers.
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Premier Inn hotel chain-owner Whitbread said trading has been ahead of expectations. Whitbread said it plans to invest around £20 million to £30 million in labour, refurbishments and IT in its current financial year given a ‘tight’ jobs market and its focus on maintaining a market leading position. ‘However, our high levels of occupancy and continued strong sales performance mean we remain confident in our continued margin recovery in the UK,’ it said. For its first quarter ended June 2, total sales were up 22% on their pre-pandemic level and up 11% on a like-for-like basis from pre-pandemic, meaning financial year 2020. UK total sales were 18% above pre-pandemic times.
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Elon Musk will address Twitter employees at a meeting this week, the company confirmed, in a first since launching his troubled $44 billion takeover bid for the social media platform. The meeting is set for Thursday and comes as Musk is in a standoff with Twitter's leadership over the service's user numbers that have put the buyout in doubt. Twitter, referring to the gathering, said ‘We can confirm this is true and happening.’ Since Musk's takeover move became public in April, Twitter has been roiled by uncertainty over its future but also by concerns about being led by the Tesla chief.
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MARKETS
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Stock prices in Europe were higher and the dollar slightly lower, as financial market participants established positions ahead of the all-important US Federal Reserve policy decision on Wednesday. The Fed will announce the decision - expected to be a 75-basis-point interest rate hike - at 1800 GMT, followed by a press conference with Chair Jerome Powell at 1830 GMT. ‘There is no dilemma here yet because the economy's at full employment and the Fed's job is straightforward get to grips with inflation, as fast a possible,’ said Kit Juckes of Societe Generale.
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CAC 40: up 1.0% at 6,007.48
DAX 40: up 1.1% at 13,454.65
FTSE 100: up 1.3% at 7,282.26
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Hang Seng: closed up 1.1% at 21,308.21
Nikkei 225: closed down 1.1% at 26,326.16
S&P/ASX 200: closed down 1.3% at 6,601.00
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DJIA: called up 0.5%
S&P 500: called up 0.6%
Nasdaq Composite: called up 0.7%
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EUR: up at $1.0480 ($1.0414)
GBP: up at $1.2078 ($1.2011)
USD: down at JP¥134.55 (JP¥134.88)
Gold: up at $1,823.80 per ounce ($1,814.44)
Oil (Brent): down at $119.85 a barrel ($124.93)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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US President Joe Biden blamed Republicans and the Russian invasion of Ukraine for soaring inflation, in a bid to deflect voter anger over his inability to keep prices down. Speaking to trade unions in Philadelphia on the eve of the Fed's likely decision to raise interest rates again, Biden said inflation is ‘sapping the strength of a lot of families.’ Biden said he feels Americans' pain, having grown up in a family where news that the price of gasoline had gone up ‘was a conversation at the dinner table. It mattered.’ But he rejected arguments that his government's massive spending to stimulate the economy at the tail end of the Covid-19 pandemic was to blame, instead citing shockwaves from Ukraine and Republican obstruction.
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The European Commission launched new legal action against Britain, accusing London of threatening peace in Northern Ireland by trying to overhaul the post-Brexit trade deal. ‘The UK government tabled legislation confirming its intention to unilaterally break international law,’ EU Commission Vice-President Maros Sefcovic said. ‘More precisely to break an agreement that protects peace and stability in Northern Ireland,’ he said. ‘Let there be no doubt. There is no legal nor political justification whatsoever for unilaterally changing an international agreement. Opening the door to unilaterally changing an international agreement is a breach of international law, as well. So let's call a spade a spade. This is illegal.’
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European Central Bank policymakers called an emergency meeting on Wednesday, as more indebted eurozone states have come under pressure from rising borrowing costs. A week after a regular gathering, the governing council will hold an ‘ad-hoc meeting’ to discuss ‘current market conditions,’ an ECB spokesperson said. The ECB drew a line under years of ultra-loose monetary policy at last week's meeting, calling an end to its massive bond-buying stimulus programme at the beginning of July. Under pressure from soaring inflation in the eurozone, the ECB also announced its first planned interest rate hike in over a decade for the same month. The switch in the central bank's policy has raised the spectre of ‘fragmentation’ in the eurozone, where the borrowing costs for some, more indebted members rise faster than for others.
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The eurozone industrial production figures came in short of expectations in April, figures on Wednesday showed, while its trade deficit similarly disappointed, ballooning to €31.7 billion. According to Eurostat, the single currency area's industrial production rose 0.4% monthly in April, swinging from a 1.4% decline in March. Output was below FXStreet cited market expectations of a stronger 0.5% climb for April, however. Annually, April's industrial output fell 2.0% in the eurozone, undershooting expectations of a smaller 1.1% decline. In March, production had fallen 0.5% on-year.
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European trade data for April similarly disappointed. A first estimate from Eurostat showed eurozone exports climbed 13% annually to €223.9 billion in April from €198.8 billion. However, export growth was outpaced by the jump in imports. Imports climbed 39% yearly to €256.4 billion from €183.9 billion, driven by the energy sector. On a monthly basis, exports rose 1.5%, while imports increased by 7.1%. The eurozone's trade deficit widened to €32.4 billion in April from €17.8 billion in March, and swinging from a €14.9 billion surplus in April 2021.
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French consumer prices increased year-on-year in May, pushed up by the rampant energy sector. According to Insee, France's annual inflation rate accelerated to 5.2% in May from 4.8% in April. Iness said energy price growth accelerated to 28% annually in May from 27% in April. Food prices rose 4.3% yearly, having grown 3.8% in April. On a harmonised basis, a measure which allows for EU-wide comparison, yearly consumer price growth raced to 5.8% in May from 5.4% in April. May's harmonised figure was in line with the FXStreet- cited market estimate.
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Rampant Swiss factory gate inflation continued in May, while separately, the State Secretariat of Economic Affairs downgraded its growth forecast. According to the Federal Statistics Office, producer and import prices grew 6.9% yearly in May, quickening from a 6.7% climb in April. May's figure was in line with FXStreet-cited consensus. The producer price index alone rose 4.4% yearly in May, easing slightly from 4.5% in April. On a monthly basis, producer prices rose 0.4% in May, after climbing 1.0% in April. SECO cut its economic growth forecast for Switzerland. It now expects Swiss gross domestic product to expand by 2.6% in 2022, lowered from the previous 2.8% forecast. SECO also upwardly revised its inflation forecast to 2.5% for 2022 from 1.9% in the previous outlook.
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Switzerland reopened its airspace after a brief closure on Wednesday for safety reasons because of an unspecified ‘technical malfunction’, authorities said. Skyguide, the air navigation service, initially said the closure would be in effect ‘until further notice’ after the malfunction early on Wednesday morning. A few hours later, it said the airspace closure was lifted at 8.30am local time and air traffic over Switzerland was resuming along with operations at the country's two national airports in Geneva and Zurich.
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China's factory output and retail sales remained weak in May, official data showed Wednesday, with tepid demand and lingering Covid restrictions putting a damper on growth in the world's second-largest economy. The government is persisting with a zero-Covid strategy to stamp out clusters as they emerge, but this has placed companies and consumers at the mercy of snap, economically damaging lockdowns. Retail sales sank 6.7% on-year in May, the National Bureau of Statistics said, though that was an improvement from April's 11% drop. The figure was also slightly better than forecasts from analysts polled by Bloomberg. Industrial production was up 0.7% after falling 2.9% in April, while the urban unemployment rate ticked down to 5.9%.
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Japan machinery orders saw surprising growth in April, figures from the Cabinet Office showed. Total machinery orders surged 34% in April on the month before, following 2.5% growth in March. Excluding volatile orders for ships and those from electric power companies, machinery orders rose 11% monthly in April, accelerating from March's 7.1% climb. April's core reading came in markedly ahead of an FXStreet cited forecast predicting a 1.5% decline in orders. On an annual basis, machinery orders jumped 19%, beating an FXStreet-cited estimate of 5.3% growth. In March, machinery orders had risen 7.6% annually.
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Australia raised the minimum wage by more than 5%, a slower-than-inflation increase as prices for basic goods soar. The Fair Work Commission set the new minimum rate at A$21.38, about $14.75, an hour, a 5.2% increase. Inflation is forecast to hit 7% by the end of the year, according to Reserve Bank of Australia Governor Philip Lowe. Food, fuel and other costs have been pushed higher by Russia's invasion of Ukraine, supply chain problems from Covid lockdowns in China and floods on Australia's east coast. At the same time, wage growth has been stalled in Australia for years, despite ultra-low unemployment of 3.9% and many businesses struggling to find staff.
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Australia's energy regulator seized control of the national power grid, suspending a market-based system roiled by soaring prices and the threat of widespread blackouts. The Australian Energy Market Operator said it had ‘suspended the spot market’ for electricity in ‘all regions’ because it was no longer providing ‘secure and reliable supply’. Australia is one of the world's top three producers of gas and coal, but about a quarter of the east coast's coal-fired power stations are currently offline because of outages and maintenance.
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Canada's Covid-19 vaccination requirement for domestic and outbound travelers, as well as federal bureaucrats and transportation workers, will be suspended starting next week, officials said Tuesday. Masking, however, will still be required on planes and trains. ‘I'm pleased to announce that on June 20 our government will suspend the requirement to be vaccinated in order to board a plane or train in Canada,’ Transport Minister Omar Alghabra told a news conference. He cited a high rate of inoculations and a falling number of Covid cases and hospitalizations across the country. The move also comes as most other pandemic restrictions have been lifted.
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