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The following is a summary of top news stories Tuesday.
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COMPANIES
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Novartis reported a drop in second-quarter income and a fall in sales but nonetheless reconfirmed its guidance for 2022 as a whole. The Basel, Switzerland-based pharmaceutical company posted net income of $1.70 billion in the second quarter of 2022, representing a 36% drop against the previous year's figure of $2.65 billion. Earnings per share fell by a similar percentage, dropping 36% to $0.77 per share from $1.19 the previous year. Net sales declined more modestly, slipping 1.4% to $12.78 billion from $12.96 billion. The firm explained that price erosion and competition from generic drugs was the reason behind the drop in sales. In contrast, key sales drivers were arthritis and psoriasis drug Cosentyx, heart failure treatment Entresto, spinal muscular atrophy drug Zolgensma, breast cancer drug Kisqali, multiple sclerosis therapy Kesimpta, and cholesterol drug Leqvio - all of which grew in double digits, Novartis added.
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AstraZeneca said a breast cancer drug developed with partner Daiichi Sankyo has been approved in the EU. The drug, Enhertu, is aimed at treating those with unresectable or metastatic HER2-positive breast cancer, who have received one or more prior anti-HER2-based regimens. HER-2 is a growth promoting protein. Unresectable tumours cannot be removed with surgery, while metastatic refers to cancer that spreads from where it started to another part of the body.
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Toyota Motor revised its global production volume for August downwards by 150,000 units. The Japanese car maker now expects production in August at around 700,000 units, with approximately 200,000 units in Japan and 500,000 units overseas. The global production volume for August to October is estimated to average about 850,000 units per month. The production forecast for the year remains unchanged at around 9.7 million units. The firm cited semiconductor shortages and the spread of Covid-19 for the revision in guidance.
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Alstom reported that sales grew 8% in the first quarter against the previous year, in line with its targeted trajectory. Paris-based Alstom is a rolling stock manufacturer active in passenger transportation, signalling, and locomotives. The company built the Eurostar and other high-speed trains. In the three months to June 30, sales reached £4.0 billion, up 8.1% from €3.70 billion a year previous, and the company's backlog stood at €83.4 billion at the end of the quarter, providing ‘strong’ visibility on future sales. First quarter order intake stood at €5.60 billion, down 13% from €6.43 billion the previous year. Europe accounted for the majority of the orders, at 70% of the group total.
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BHP reported a subdued output performance in its recently ended financial year, with declines in copper, iron ore and metallurgical coal. For the year ended June 30, copper production dropped 4.3% to 1.57 million tonnes from 1.64 million tonnes. For the 2023 financial year, BHP is guiding for copper output to come between 1.64 million tonnes and 1.83 million tonnes. Iron ore production for the year dipped 0.1% to 253.2 million tonnes from 253.5 million tonnes the prior year. For the year ended June 2023, BHP expects iron ore production to be between 249 million tonnes and 260 million tonnes. Metallurgical coal output declined 8.8% to 29.1 million tonnes from 31.9 million tonnes the prior year. BHP has guided for metallurgical coal production for the current financial year to be between 29 million tonnes and 32 million tonnes.
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UK business publisher and events organiser Informa backed annual expectations. Informa still expects revenue between £2.15 billion to £2.25 billion for 2022, with adjusted operating profit between £470 million to £490 million. At best, this would represent revenue growth of 25% from £1.80 billion in 2021 and adjusted operating profit growth of 26% from £388.4 million. Guidance does not include any contribution from Industry Dive, which Informa announced it has acquired for up to $525 million. The initial cash consideration is $389 million. ‘Industry Dive brings a scalable, single proprietary technology platform, which will enable us to expand our digital services capabilities and deliver content led services to our B2B audiences,’ Informa said. Informa said that for the first half of 2022, it expects to report underlying revenue growth of 40%, helped by a return of live events.
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Japanese technology investor SoftBank has paused plans for a dual UK-US listing of its semiconductor and software design company Arm, the Financial Times reported on Monday. Arm is the designer of processor chips used in most major smartphones, including those of Apple and Samsung Electronics, as well as other devices such as laptops. The plans have been put on hold because of the political turmoil in the UK government after the resignation of PM Johnson, the newspaper said, citing ‘people briefed on the talks’. Johnson had personally lobbied SoftBank's founder Masayoshi Son to secure at least a partial listing on the London Stock Exchange. Son had originally favoured a US listing.
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UK grocery price inflation neared double-digits in recent weeks while supermarket sales nudged up for the first time in over a year, according to figures from data analytics firm Kantar. UK supermarket sales rose by 0.1% in the 12 weeks to July 10, the first time the market has registered growth since April 2021. At the same time, supply chain issues pushed up costs across the industry, resulting in like-for-like grocery price inflation of 9.9% over the past four weeks. For the 12-week period, inflation was 8.1%, meaning price growth has accelerated in recent weeks. By supermarket, Tesco was resilient over the 12-week period, its market share steady at 27.1% and sales up 0.1%, in line with the broader market trend. J Sainsbury saw its market share edge down to 14.9% from 15.2%, however, and sales fell 2.2%. Online-only grocer Ocado's market share was steady at 1.8% and sales rose 0.7%.
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IBM reported a rise in revenue for the second quarter, but the technology consulting company downgraded its guidance for annual free cash flow. For the three months to June 30, revenue was $15.54 billion, up 9% from $14.22 billion in the second quarter last year. Second quarter net income was $1.39 billion, or $1.53 earnings per share, up from $1.33 billion, or $1.47 EPS last year. Looking ahead for 2022, IBM said it continues to expect constant currency revenue growth at the high end of its mid-single digit model. However, IBM said it now expects about $10 billion in free cash flow for 2022, down from the range of $10 billion to $10.5 billion that it originally guided for in April.
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MARKETS
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European share prices were recovering from opening declines on Tuesday, and Wall Street was pointed to a positive open, having suffered a late decline on Monday. Aside from interest rate decisions by the Bank of Japan and European Central Bank, both due on Thursday, focus remains on the second-quarter US earnings season. Scheduled for Tuesday are Johnson & Johnson and Netflix. J&J reports before the New York open and Netflix after the close. Tesla follows on Wednesday. In Zurich at midday on Tuesday, Novartis shares were up 0.8%, after maintaining annual guidance.
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CAC 40: down 0.2% at 6,082.47
DAX 40: down 0.1% at 12,946.01
FTSE 100: marginally higher, up 1.68 points at 7,224.92
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Hang Seng: closed down 0.9% at 20,661.06
Nikkei 225: closed up 0.7% at 26,961.68
S&P/ASX 200: closed down 0.6% at 6,649.60
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DJIA: called up 0.5%
S&P 500: called up 0.7%
Nasdaq Composite: called up 0.6%
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EUR: up at $1.0223 ($1.0167)
GBP: firm at $1.2003 ($1.1994)
USD: down at JP¥137.67 (JP¥138.17)
GOLD: up at $1,712.29 per ounce ($1,709.33)
OIL (Brent): unchanged at $105.57 a barrel ($105.55)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The eurozone annual inflation rate increased to 8.6% in June from 8.1% in May, confirming an earlier estimate, according to the latest data from Eurostat. A year earlier, consumer price inflation stood at just 1.9%. The highest contribution to euro area inflation came from energy, up 4.2%. This was followed by food, alcohol & tobacco, services and, non-energy industrial goods. In the wider EU, annual inflation was 9.6% in June, picking up pace from 8.8% the previous month. In June 2021, EU inflation was 2.2%. The data confirmed a flash estimate from Eurostat earlier in July.
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The UK unemployment rate remained unchanged in the three months to May, in line with market expectations. The jobless rate was 3.8%, the same level as in the three months in April, according to the Office for National Statistics. A year earlier, the unemployment rate had sat at 4.9%. The latest figure was in line with FXStreet cited consensus.
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UK wage growth figures, meanwhile, showed average earnings including bonuses rose 6.2% on an annual basis, slowing from 6.8% in the reading for April and below FXStreet-cited consensus of 6.9%. Excluding bonuses, wages grew 4.3%, in line with consensus and picking up from 4.2% growth in April. That means UK earnings by both measures continue to lag consumer price inflation, which ran at 9.1% in May.
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Rishi Sunak's place in the final two of the Tory leadership race looked increasingly secure on Monday, with Penny Mordaunt still clinging on to second place as the contest intensifies. On one of the hottest days in British history, the race to replace UK Prime Minister Boris Johnson heated up as Mordaunt fended off a challenge by Liz Truss, receiving 82 votes to the Foreign Secretary's 71 in the third ballot of Tory MPs. All eyes will already turn to the next ballot on Tuesday, with Kemi Badenoch now the candidate with the lowest share of the vote after backbencher Tom Tugendhat was eliminated. Sunak, who got 115 votes, edged closer to 120 votes required to guarantee a place in the final two, who will face a vote of the Tory membership to decide the next party leader and prime minister.
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The Reserve Bank of Australia will need to implement further interest rate hikes to get its cash rate to ‘neutral’ territory, minutes from the central bank's latest meeting showed. Members from Australia's central bank discussed the ‘neutral interest rate’ at the July 5 meeting. Policymakers said assessing what the neutral rate is was difficult to work out as it cannot be directly observed, instead it needs to be inferred through data. At the July meeting, the RBA raised the cash rate by half a percentage point to 1.35% from 0.85%, meeting market expectations. It also increased the interest rate on exchange settlement balances by 50 basis points to 1.25%.
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