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The following is a summary of top news stories Tuesday.
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COMPANIES
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Twitter said it is ‘committed’ to closing the takeover agreement ‘on the price and terms agreed’ with Elon Musk. Twitter said it plans to pursue legal action to enforce the agreement and is ‘confident [it] will prevail’ in court. In a letter to Musk, Twitter said the termination is ‘invalid and wrongful’ and ‘constitutes a repudiation of their obligations under the agreement’. Musk ditched the $44 billion buyout of the social media firm last Friday.
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Renault's unit sales declined in a first quarter, hit by semiconductor shortages, the carmaker said. Worldwide sales totalled 1.0 million units in the first half, down 12% from a year earlier. The figures for each are given on an ‘equivalent basis’, meaning they exclude the Russian market. Renault in May signed deals to cut ties with its Russian operations. It agreed to fully divest of its shares in Renault Russia to a Moscow City entity. It also struck a deal to sell its 68% controlling interest in AvtoVAZ, the largest carmaker in Russia with the country's top brand Lada, to NAMI. NAMI is Russia's Central Research & Development Automobile & Engine Institute.
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GSK started shipping doses of its quadrivalent influenza vaccines to US healthcare providers and pharmacies in preparation for the 2022-23 season. It said its flu shot has been licensed by the US Food & Drug Administration. It expects to distribute over 50 million doses of its flu vaccine in the US. Temi Folaranmi, vice president and Vaccines Therapeutic area head for US Medical Affairs at GSK, said: ‘The Covid-19 pandemic has shone a light on health disparities in the US and that there is still much more to be done to close the gap. GSK is committed to working alongside our public health partners to increase education and awareness about annual flu vaccination across the board, but especially in underserved communities of colour.’
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United Utilities said it has agreed to sell its non-appointed renewable energy business, United Utilities Renewable Energy, to FTSE 250-listed SDCL Energy Efficiency Income Trust for an enterprise value of £100 million. United Utilities said it has developed a portfolio of solar, wind and hydro renewable assets since 2014 and noted the UURE unit comprises 69 megawatts of renewable generation assets across 70 sites. Following the sale, the assets will continue to provide long-term green energy to its regulated water & wastewater business, United Utilities Water. Further, United Utilities said the sale allows it to recycle the capital employed in the UURE business back into the next phase of the group's path to net-zero carbon emissions.
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German chemicals firm BASF on Monday reported a rise in second-quarter profit, even as concern mounts over the possible impact on the sector of stoppages of deliveries of Russian gas. BASF's net profit rose to €2.09 billion in the period from April to June from €1.65 billion a year earlier, according to preliminary figures. The Ludwigshafen, Germany-based company attributed the increase primarily to higher income from its shareholding in oil and gas company, Wintershall Dea, as energy prices have risen dramatically recently. BASF said sales in the second quarter rose 16% year-on-year to €22.97 billion, from €19.75 billion. Analyst consensus according to Vara had estimated €21.74 billion for the period.
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Plus500 said its revenue in the first half of 2022 surged as the contract-for-difference provider benefits from ‘substantial progress in the significant and fast-growing US futures market’. For the six months to June 30, revenue was $511.4 million, up 48% from $346.2 million last year. Ebitda was $305.3 million, up 63% from $187.6 million. Ebitda margin was 60% in the first half, up from 54% a year before. The firm said it delivered a strong operational performance, supported by its ability to ‘attract and retain’ higher-value customers, despite lower trading volumes across financial markets during the period. Active customers were 216,928, down 35% from 333,940.
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MARKETS
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The euro fell to parity with the dollar on Tuesday, for the first time in almost 20 years, as the market priced in a widening interest rate differential between the US and eurozone following strong US employment figures on Friday last week.
‘The June job reports underlined the solid momentum in the labour market and reinforced Fed officials' desire to hike by 75 basis points at the July meeting,’ commented Deutsche Bank. ‘Shortly after the employment report, Atlanta Fed President Bostic indicated his 'full support' for another super-sized 75bps hike in July and expected it not to cause protracted damage to the economy.’ Meanwhile, UBS said it expects the European Central Bank to raise interest rates by just 25 basis points next week, its first rate hike in years.
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CAC 40: down 0.3% at 5,979.26
DAX 40: down 0.6% at 12,752.93
FTSE 100: down 0.3% at 7,177.14
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Hang Seng: closed down 1.3% at 20,844.74
Nikkei 225: closed down 1.8% at 26,336.66
S&P/ASX 200: closed up 0.1% at 6,606.30
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DJIA: called down 0.6%
S&P 500: called down 0.6%
Nasdaq Composite: called down 0.6%
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EUR: down at $1.0000 ($1.0087)
GBP: down at $1.1830 ($1.1898)
USD: down at JP¥137.20 (JP¥137.31)
Gold: down at $1,734.80 per ounce ($1,738.10)
Oil (Brent): down at $105.12 a barrel ($106.35)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Higher interest rates in the US are needed to help cool demand and rein in sky-high inflation, but the Federal Reserve must take care not to hike too quickly, a US central banker said. Kansas City Fed President Esther George warned that going too fast can be ‘unsettling’ and has raised concerns about a possible recession. The Fed's policy-setting committee last month announced the biggest rate hike in nearly 30 years, but George dissented from the decision, preferring a smaller increase. ‘Moving interest rates too fast raises the prospect of oversteering,’ she said in a speech at a conference in Missouri. George explained that markets rates already were increasing in response to the Fed's stated intention to hike the benchmark lending rate. ‘Communicating the path for interest rates is likely far more consequential than the speed with which we get there,’ she said.
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US President Joe Biden will make his first visit as US president to Saudi Arabia on Friday, where he will seek to persuade Riyadh to pump more oil to bring down prices that are fuelling inflation to the highest levels in decades. Prior to his election, Biden had vowed that Saudi should be a ‘pariah’ state following the 2018 murder of dissident journalist Jamal Khashoggi, in a recalibration of relations with the oil-producing country that is a kingpin of the OPEC oil cartel. However, since then, key crude producer Russia had invaded Ukraine, propelling oil prices to levels last seen during the 2008 global financial crisis. Biden's chances could be boosted by the looming expiry of a crucial deal among the wider OPEC+ group to boost oil production.
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Economic sentiment in Germany slumped in July, falling to levels not seen since the start of Covid-19 lockdowns in 2020. The latest ZEW economic sentiment tracker fell to minus 53.8 points in July, from minus 28 in June. July's figure was well below market expectations of minus 38.3. The sentiment index measures expectations for Germany's economy over the next six months. The more short-term current situation tracker, meanwhile, fell 18.2 points to minus 45.8 points in July, from minus 27.6 in June. It was below the FXStreet-cited consensus forecast of minus 34.5 points.
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Gas deliveries from Russia to Germany have stopped for 10 days of planned maintenance work on the Nord Stream 1 Baltic Sea pipeline, causing even more uncertainty in Europe's biggest economy over energy supplies as the war in Ukraine rages. Deliveries through Nord Stream 1 - the most important conduit for Russian gas to Germany - had already been reduced to about 40% of capacity in recent weeks. This has had a knock-on effect on gas supplies to other countries further west as well. With tensions between Europe and Russia at their highest in decades over the war in Ukraine, officials are concerned that gas supplies may not be resumed on July 21 once the scheduled maintenance work is complete. ‘We are hoping for the best and preparing for the worst,’ German Economy Minister Robert Habeck said, adding that anyone who was able to save energy was making a contribution to European energy security.
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A midnight deadline for EU member states to block European Commission plans to classify certain investments in gas and nuclear energy as sustainable has passed. This means that from January 2023, investments in gas and nuclear energy are to be classified as climate-friendly despite widespread criticism from environmentalists. To block the investment system from entering into force, 20 EU member states representing 65% of the EU's population needed to join forces. The deadline passed after a major bid across the European Parliament to block the classification failed last week to achieve the 353 votes necessary, with just 328 EU lawmakers voting against it.
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UK retail sales fell for the third month in a row in June, figures showed, as consumers put off purchases of home appliances and also turned to value food offerings in a bid to cope with a cost of living crisis. According to the latest British Retail Consortium-KPMG tracker, UK retail sales fell 1.0% yearly in June, slowing from May's 1.3% decline. In June 2021, however, sales had jumped 10%. Sales have fallen for three months in a row, snapping a sequence of 14 successive months of growth. Over the three months to June, food sales rose 2.2%, beating the 12-month average growth of 0.6%. Food sales were higher year-on-year in June alone, the BRC noted. Non-food sales fell 3.3% over the three months to June, however, lagging behind the 12-month average growth of 5.0%. Non-food sales fell in June alone.
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Rishi Sunak is set to launch his bid to become UK prime minister with a pledge to cut taxes but only once inflation has been brought back under control. At his campaign launch event on Tuesday, the former chancellor will insist he has a plan to deal with the economic ‘headwinds’ the country is facing, saying it is a matter of ‘when’ not ‘if’ the tax burden starts to fall. He will receive heavyweight support from another ex-chancellor, Lord Lamont, who said Sunak had the courage to take the ‘tough decisions’ needed to deal the ‘extremely serious’ economic situation. Meanwhile, former foreign secretary Jeremy Hunt is promising to increase defence spending while his fellow contender Tom Tugendhat will set out more details of his economic approach. Nominations for the election open and close on Tuesday, with candidates requiring the support of 20 fellow Tory members of Parliament to make it onto the ballot a hurdle some of the 11 hoping to stand may struggle to overcome.
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The Irish government will face a confidence vote later Tuesday as main opposition party Sinn Fein presses to secure an early general election. The administration in Dublin is confident it has the numbers to win this evening's vote in the Dail. Sinn Fein tabled a motion of no confidence after the Fianna Fail, Fine Gael and Green Party coalition lost its parliamentary majority last week. Fine Gael TD Joe McHugh's decision to relinquish his party whip last week left the government with 79 seats in the Dail one short of a majority. However, the coalition is confident that McHugh and several other TDs outside of the government will still back the coalition in the vote.
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Hundreds of thousands of people were under lockdown in a small Chinese city on Tuesday after just one case of Covid-19 was detected, as Beijing's strict no-tolerance virus strategy showed no sign of abating. After reporting a new domestic infection, the steelmaking hub of Wugang in Henan province announced Monday that it would implement three days of ‘closed control’ in response to ‘the needs of disease prevention’, according to an official notice. None of the city's 320,000 people are allowed to set foot outside their homes until midday Thursday, the notice said, adding that basic necessities would be delivered by local authorities.
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Customers of rural Chinese banks whose withdrawals have been frozen will begin to get some money back Friday, regulators said, after depositors clashed with authorities at a rare protest over the weekend. China's rural banking sector has been hit hard by Beijing's efforts to rein in a property bubble and spiralling debt, in a financial crackdown that has had ripple effects across the world's second-largest economy. Four banks in Henan province froze cash withdrawals in mid-April in the face of regulatory scrutiny into alleged mismanagement, leaving thousands of savers without funds and sparking sporadic demonstrations. In one of the largest such rallies, hundreds gathered Sunday outside a branch of the People's Bank of China in Henan's capital Zhengzhou demanding their money.
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Japan's producer price inflation was hotter than expected last month, official figures showed. According to preliminary figures from the Bank of Japan, producer price rose 9.2% yearly in June, slowing from May's 9.3% growth, but beating expectations of a greater slowdown to 8.8% - according to FXStreet. On a monthly basis, producer prices climbed 0.7% in June from May, beating FXStreet cited consensus of a 0.5% rise. In May, producer prices had inched up 0.1%.
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Family and friends of assassinated former prime minister Shinzo Abe gathered at a Tokyo temple Tuesday for a private funeral, as mourners outside condemned the leader's ‘despicable’ murder. Abe was shot at close range on Friday while giving a campaign speech in the city of Nara, days ahead of upper house elections that saw his ruling party strengthen its hold on power. The murder suspect, 41-year-old Tetsuya Yamagami, is in custody and has told police he targeted Abe because he believed the politician was linked to an organisation he resented. Although the funeral rites were for family members and close associates only, long lines of people, some dressed in black, came to the Zojoji temple to pay respects to Japan's longest-serving prime minister.
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Some Australians are already grappling with the effect of rising interest rates, research from Commonwealth Bank of Australia showed. CBA's latest CommBank Household Spending Intentions Index rose by 0.9% on-month to a record equalling 117.3 points. Yearly, it rose 12%. ‘However, it's important to note that the gains in the HSI Index for June were relatively narrowly based,’ CBA explained. ‘The more interest rate sensitive sectors of the economy are clearly starting to show the impact of the [Reserve Bank of Australia's] monetary policy tightening cycle, with entertainment, home buying and retail all declining on the month.
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