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The following is a summary of top news stories Monday.
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COMPANIES
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Italy's Eni said Gazprom was further reducing the supply of gas, as the Russian giant began 10 days of routine maintenance on its Nord Stream 1 pipeline. ‘Gazprom announced that today it will supply to Eni volumes of gas for approximately 21 million cubic meters/day, while the average for the last few days was of about 32 million cubic meters/day,’ Eni said. Part of Gazprom's gas supplies reach Italy via the Trans Austria Gas Pipeline, but some of it comes through the Nord Stream 1, which has officially been shut off due to annual maintenance work. The fear is that with relations between Russia and the West at their lowest in years because of the invasion of Ukraine Gazprom might take the opportunity to simply refuse to reopen the valves. A long-term shutdown of the pipeline would hit EU countries particularly Germany hard, deepening an energy crisis in which uncertain supplies have pushed prices up ahead of Europe's winter.
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Uber Technologies said it is a different company than it was five years ago after a joint media investigation unearthed ethically questionable tactics the ride-hailing firm employed to expedite its global expansion. The company admitted there has been ‘no shortage of reporting on Uber's mistakes prior to 2017’. The scandals are what prompted the firm to turn to Dara Khosrowshahi as its chief executive. He joined in 2017. The company is wholly different now than it was prior to Khosrowshahi's leadership, Uber said. It noted 90% of its employees joined after Khosrowshahi became CEO. ‘We've moved from an era of confrontation to one of collaboration,’ said Uber. The somewhat magnanimous statement on Monday came after the release of findings from a joint media investigation on Sunday, which found that company officials leveraged the sometimes violent backlash from the taxi industry against drivers to garner support and evaded regulatory authorities as it looked to conquer new markets early in its history.
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Elon Musk on Friday pulled the plug on his $44 billion deal to buy Twitter, accusing the social media firm of ‘misleading’ statements about the number of fake accounts, a regulatory filing showed. Musk's effort to terminate the deal that he inked in April sets the stage for an epic court battle over a billion-dollar breakup fee and more. ‘Mr Musk hereby exercises [the] right to terminate the Merger Agreement and abandon the transaction,’ his lawyers said in a letter to Twitter, a copy of which was filed with the Securities and Exchange Commission. Musk's change of heart appeared to suggest some ‘buyer's remorse’ for offering a price of $54.20 per share that now appears ‘laughable,’ CFRA Research senior equity analyst Angelo Zino said in a note to investors before the deal was officially nixed. Twitter has held firm that no more than five percent of accounts are run by software instead of people, while Musk has said he believes the number to be much higher.
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Macau casino shares plunged on Monday as the Chinese city embarked on a week-long lockdown to curb its worst coronavirus outbreak while neighbouring Hong Kong said it was mulling a mainland-style health code system. Share prices of six gaming conglomerates Sands China, Galaxy Entertainment, SJM Holdings, Melco International, MGM China and Wynn Macau dropped by between 6% to nearly 9% on Monday morning trade. It is the first casino lockdown in more than two years, overriding a previous deal between the industry and the Macau government that only those found with infections would need to close temporarily. Macau is the only place in China where gambling is legal but the pandemic has hammered the city's fortunes as it sticks to Beijing's zero-Covid model. Authorities announced a week of lockdowns starting Monday after recording more than 1,500 infections in the past three weeks despite multiple rounds of compulsory mass testing of the city's 650,000 people.
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London's Heathrow Airport has warned it will ask airlines to cancel more flights this summer if it does not believe previous schedule reductions will sufficiently reduce disruption. Carriers were ordered by the government and the Civil Aviation Authority last month to make sure their timetables are ‘deliverable’ after the sector was unable to cope with demand during the Platinum Jubilee half-term school holiday period. The punctuality of arriving flights is ‘very low’ and there have been ‘periods in recent weeks where service levels have not been acceptable’, Heathrow admitted. Problems include ‘long queue times, delays for passengers with reduced mobility (and) bags not travelling with passengers or arriving late’, according to the airport. Heathrow Chief Executive John Holland-Kaye said: ‘We have already seen times recently when demand exceeds the capacity of the airport, airlines and ground handlers.’
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Wizz Air Holdings said it expects a ‘material’ profit in the second quarter but cautioned it will trim flight utilisation over the summer as with grapples with recent travel chaos. The Budapest-based budget airline said it continued to ramp up its operations against a ‘challenging macro and operational backdrop’ during the first quarter of the current financial year. For the first quarter to June 30, Wizz Air said it registered a €285 million operating loss but expects a ‘material’ operational profit in the second quarter on strong summer demand. However, it warned: ‘To be able to avoid cancellations and secure a more punctual operation to our customers, we have further improved the agility and resilience of our network including adjusting schedules where we have seen a higher occurrence of issues...In total for the peak summer period we expect to reduce utilization a further 5% versus the plan outlined at the full year results to reduce the impact of ongoing external disruptions.’
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Dechra Pharmaceuticals reported annual revenue progress, though it cautioned that growth rates are normalising as pandemic tailwinds ease. The veterinary products firm saw a surge in demand due to larger pet care spending during the Covid-19 lockdowns. Revenue growth is slowing, however, as the effects of the pandemic unwind. For the year ended June 30, revenue increased by 14% at constant exchange rates and 12% at actual exchange rates. In financial 2021, revenue grew 20% at constant currency and 18% on a reported basis to £608.0 million. European Pharmaceuticals revenue growth was 8% at constant currency and 5% at actual exchange rates, while North American Pharmaceuticals revenue growth was 24% at constant currency and 25% at actual exchange rates, Dechra added on Monday.
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MARKETS
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European markets were lower at the start of the new week, with worries over Covid cases in China and concerns over Russia's energy supply to Europe weighing on sentiment. The latest bout of risk-off trading resulted in further gains for the US dollar. ‘Fridays payrolls have continued to feed the narrative that the US economy is in a less vulnerable spot compared to Europe and other parts of the world,’ commented ING.
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CAC 40: down 0.8% at 5,984.60
DAX 40: down 0.8% at 12,905.83
FTSE 100: down 0.6% at 7,155.31
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Hang Seng: closed down 2.8% at 21,124.20
Nikkei 225: closed up 1.1% at 26,812.30
S&P/ASX 200: closed down 1.1% at 6,602.20
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DJIA: called down 0.4%
S&P 500: called down 0.5%
Nasdaq Composite: called down 0.7%
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EUR: down at $1.0111 ($1.0185)
GBP: down at $1.1947 ($1.2040)
USD: up at JP¥137.02 (JP¥135.88)
GOLD: down at $1,736.31 per ounce ($1,744.88)
OIL (Brent): down at $105.67 a barrel ($106.00)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Gas supplies from Russia to Germany are being halted for 10 days for scheduled maintenance work on the Nord Stream 1 Baltic Sea pipeline, the most important connection for natural gas flows to Germany. Gas is set to stop flowing at 6 am (0400 GMT) on Monday and is due to commence again early in the morning of July 21. However, officials are highly concerned that the supply might not be reinstated, as Russia's war continues against Ukraine. Germany and other Western countries have imposed multiple rounds of sanctions on Moscow in an effort to halt the fighting. However, many countries also depend heavily on Russian energy and Moscow has in response halted gas supplies to several nations, in what is widely seen as a retaliatory response.
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China's consumer inflation climbed up in June to the highest point in two years, official data showed Saturday, following rising food prices as pork costs spiked due to tighter supplies. The world's second-largest economy has largely been spared the impact of a global surge in food prices caused by Russia's war in Ukraine, but the relative stability could be upended by the rising cost of pork a staple meat in the country. In June, the consumer price index, a key gauge of retail inflation, rose 2.5% on-year in line with analyst expectations but stayed flat from May due to a price drop in most foods except pork. ‘Prices of fresh vegetables, eggs, fresh fruit and seafood dropped...due to factors such as increased supply and improved logistics,’ said National Bureau of Statistics senior statistician Dong Lijuan in a statement. ‘Influenced by factors such as the stabilisation of the epidemic and increase in consumer demand, pork prices continued to rise by 2.9%.’
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Japan's ruling party and partners won enough votes to form a supermajority in an upper house election held just days after the assassination of former prime minister Shinzo Abe, local media said Monday. The ex-premier's ruling Liberal Democratic Party and its coalition partner Komeito strengthened their hold by winning more than 75 of the 125 upper house seats up for grabs, according to national news outlets. The parties are part of what is now a two-thirds supermajority willing to amend the country's pacifist constitution, thereby strengthening its military role on the global stage a longtime Abe goal. Even before the former prime minister's murder, the LDP and Komeito were expected to cement their majority, though the final number of seats will be scrutinised for signs of whether the attack bolstered support for them. ‘I think it is significant we were able to complete the elections,’ Prime Minister Fumio Kishida told NHK, adding he wants to tackle the pandemic, Ukraine-related issues and inflation.
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UK Foreign Secretary Liz Truss has pledged to reverse the controversial national insurance hike if made Tory leader, as she insisted she can be ‘trusted to deliver’. The senior Cabinet minister, who is widely expected to be a front-runner in the already crowded race, promised to ‘start cutting taxes from day one’ to help with the cost of living. With newly appointed Foreign Office minister Rehman Chishti also declaring his candidacy on Sunday evening, there are now 11 Tories in the running for the top job. Other contenders include former health secretaries Sajid Javid and Jeremy Hunt, ex-chancellor Rishi Sunak, his successor Nadhim Zahawi, Transport Secretary Grant Shapps and trade minister Penny Mordaunt. Former minister Kemi Badenoch and senior backbencher Tom Tugendhat have also thrown their hats into the ring. The PA news agency understands Home Secretary Priti Patel is yet to decide whether to launch her own bid, and will likely make a final decision on Monday.
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The price of energy will increase further if oil fields like Cambo do not go ahead, a UK government minister has warned. Energy minister Greg Hands said the UK will need to import more oil if the North Atlantic development does not come online, increasing emissions. Environmental groups have called for an end to new oil and gas fields, with Scotland's First Minister Nicola Sturgeon also opposed to the Cambo field. The Cambo development was paused in December and is awaiting final approval from regulators. Speaking to journalists last week, Hands was asked what the impact on households would be if Cambo and projects like it do not go ahead.
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Retail sales in Italy rose further in May, boosted by non-food goods, figures from national statistics office Istat showed. Retail sales increased by 1.9% month-over-month in May after growing by 0.3% in April. Year-over-year, the 7.0% increase in May, slowing from an 8.3% climb in April. April's figure was revised from the initial 8.4% jump. Sales of non-food goods rose by 2.4% on a monthly basis and jumped by 9.1% year-on-year, while sales of food goods increased by 1.4% in May from April and by 4.5% in May from a year before.
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