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The following is a summary of top news stories Tuesday.
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COMPANIES
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BT Group said the UK government will take ‘no further action’ over the increase of Altice UK's shareholding in the telecommunications company. Back in December, Patrick Drahi's Altice lifted its stake in BT to 18% from 12% previously. At the time, Altice confirmed it had no plans to mount a takeover offer and would be bound by that statement under UK takeover rules. In May, BT said it had received notification from the UK secretary of state for Business, Energy & Industrial Strategy saying that the government was exercising its power under the National Security & Investment Act 2021 to investigate the increase in the French company's stake. The act was introduced in January and it allows government ministers to more closely scrutinise approaches by overseas interests. It also means the UK government will be able to impose certain conditions on a takeover or block it. BT, a former state-owned company, is particularly sensitive, as its Openreach arm maintains most of the UK's broadband network.
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International Consolidated Airlines Group's British Airways said it is reducing the number of its planned flights at London's Heathrow airport through the winter as the aviation sector continues to struggle with staffing issues amid resurging travel demand. The announcement of the cut in 10,000 flights through the month of March follows the announcement last week by Heathrow that it was extending into October the passenger cap it introduced in July. ‘We're now adjusting our winter short-haul schedule until the end of March, reducing our schedule by around 5,000 round-trips,’ the airline said in a statement. BA added it is making adjustments to its short-haul schedule for the next two months following Heathrow's announcement last week that the airport is extending its summer-long cap on passenger numbers by six weeks to October 29.
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Gatwick Airport said passenger demand was 74% of the pre-pandemic level in second quarter of 2022 and 59% in all of the first half. The airport, located south of London, said 13.1 million passengers passed through its terminals in the first half of the year, prompting it to raise its forecast for all of 2022 to 32.8 million passengers. Having restricted passenger numbers in July and August, the airport said it is now ‘business as usual’, and it sees no need to extend the capacity restrictions. Gatwick is 50.01% owned by Paris-based infrastructure firm Vinci.
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Woodside Energy said it produced 4.4 million tonnes of liquefied natural gas, equivalent to around 36.1 million barrels of oil, in the first half of 2022. The Perth, Australia-based oil and gas firm will release half-year results on August 30. It expects no changes to reservoir outcomes in the reserves and resources update from the figures issued back in February. Before its merger with BHP's oil and gas portfolio, when it was known as Woodside Petroleum, the firm reported total production of 46.3 million boe in the first half of 2021, comprised of gas production of 37.6 million boe and liquids production of 8.7 million boe.
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John Wood Group reported a widened interim loss as revenue stalled, and said cash generation is its ‘top priority’ going forward. Revenue for the six months to June 30 edged 0.4% lower to $2.56 billion from $2.57 billion a year before. However, the engineering and consulting firm's pretax loss nearly doubled to $31.5 million from $18.4 million as finance expenses rose 19% to $64.1 million from $53.9 million. For the full year, John Wood expects revenue to be around $5.2 billion to $5.5 billion and adjusted Ebitda around $370 million to $400 million. Revenue in 2021 was $6.40 billion, so the decline in 2022 would be at least 14%. Revenue had fallen by 15% in 2021 from $7.56 billion in 2020. Adjusted Ebitda was $554 million in 2021, down from $630 million.
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Zoom cut its annual revenue guidance, with the video conferencing firm explaining dollar strength hit its top line. In the second quarter ended July 31, revenue rose 7.6% year-on-year to $1.10 billion from $1.02 billion. Revenue landed largely in line with CNN cited consensus. Pretax profit jumped annually to $44.6 million from $6.8 million. Non-GAAP income from operations for the second quarter amounted to $393.7 million, ahead of what was expected but down 7.3% from $424.7 million. Chief Financial Officer Kelly Steckelberg said: ‘While we saw continued momentum with our Enterprise customers and our non-GAAP operating income came in meaningfully higher than our outlook, our revenue was impacted by the strengthening of the US dollar, performance of the online business, and to a lesser extent sales weighted to the backend of the quarter.’
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Palo Alto Networks swung to a profit in the final quarter of its financial year, leading the firm to post a sunny outlook, though it remained at a loss for the year as a whole. In the year ended July 31, the California-based cybersecurity firm narrowed its net loss to $267.0 million from $498.9 million the year prior. Palo Alto's basic loss per share narrowed to $2.71 from $5.18 year-on-year, while revenue surged 29% to $5.50 billion from $4.26 billion. In the fourth quarter of its financial year, the firm swung to a $3.3 million profit, from a loss of $119.3 million the previous year.
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Elon Musk has subpoenaed his friend and former Twitter chief executive Jack Dorsey as part of an effort to back out of his $44 billion agreement to acquire the company Dorsey helped found, according to a court document. Twitter and Tesla Chief Executive Musk are heading for an October 17 trial in Delaware that should determine whether or not Twitter can force the billionaire to go through with the acquisition. Twitter has subpoenaed a host of tech investors and entrepreneurs connected to Musk, including prominent venture capitalist Marc Andreessen and David Sacks, the founding chief operating officer of PayPal.
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MARKETS
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European markets started lower on Tuesday, following a negative day for Asian markets and a tumble on Wall Street overnight. However, as midday approached, Paris, Frankfurt and Milan had turned higher, benefiting from a weak euro, as the single currency slipped further below parity with the dollar.
Kit Juckes at Societe Generale said the euro is suffering from the Russian threat to European gas supplies, with Tuesday's economic data not providing a further reason to sell. ‘This morning's PMI data were bad, but not quite as bad as the market consensus and the currency is steadyish,’ he said. ‘I still can't see how it can rally much on anything other than short covering, but if risk markets don't interfere, the euro can find a base here.’
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CAC 40: up 0.2% at 6,390.74
DAX 40: up 0.4% at 13,278.16
FTSE 100: down 0.4% at 7,500.63
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Hang Seng: closed down 0.8% at 19,503.25
Nikkei 225: closed down 1.2% at 28,452.75
S&P/ASX 200: closed down 1.2% at 6,961.80
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DJIA: called up 0.2%
S&P 500: called up 0.2%
Nasdaq Composite: called up 0.2%
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EUR: down at $0.9936 ($0.9964)
GBP: down at $1.1773 ($1.1787)
USD: unchanged at JP¥137.25 (JP¥137.26)
Gold: up at $1,740.69 per ounce ($1,736.39)
Oil (Brent): up at $97.79 a barrel ($93.26)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The eurozone economy slowed again in August, preliminary survey results from S&P Global showed, as cost-of-living pressures damped the service sector's Covid recovery and waning demand knocked manufacturers. The flash eurozone purchasing managers' index composite output index fell to an 18-month low of 49.2 points in August, from 49.9 in July. Nonetheless, the reading did beat consensus, according to FXStreet, of 49.0. Any reading below the no-change mark of 50 indicates contraction, signalling that the eurozone's downturn worsened in August. The deterioration was driven by the services PMI dropping to 50.2 in August from 51.2 in July. The manufacturing PMI posted a smaller decline, but remained in contraction territory with a score of 49.7 versus 49.8 the month before.
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Germany's composite PMI fell deeper into contraction territory in August, with a reading of 47.6, compared to 48.1 in July. In France, the PMI fell to 49.8 from 51.7.
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Economic growth in the UK slowed slightly in August as manufacturers were pummelled by weaker demand, but the services sector held up better than expected. The S&P Global-Chartered Institute of Procurement & Supply flash UK composite PMI slipped to an 18-month low of 50.9 points in August from 52.1 in July. This was due to the manufacturing PMI slumping to 46.0 points from 52.1, well below expectations of 51.1. Excluding the pandemic, the fall in manufacturing output was the quickest seen since the start of 2009, noted Annabel Fiddes at S&P Global Market Intelligence. The UK's all-important services sector was resilient with a score of 52.5, down only marginally from 52.6 in July. Consensus had pencilled in a larger drop to 52.0.
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The UK economy shrank by 11% in 2020, its sharpest contraction in more than 300 years, as a result of the coronavirus pandemic, revised data from the Office for National Statistics showed. The ONS had originally estimated that Britain's gross domestic product shrank by 9.3% in 2020, but the latest revision came about due to changes to the way the data are calculated, it said. The contraction represents the sharpest since the 'Great Frost' of 1709, according to data held by the Bank of England. The UK economy has therefore shrunk by more than all other G7 economies, but the ONS pointed out that only the US had so far undertaken the same type of in-depth revisions.
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Japan's private sector is expected to suffer its first drop in activity in six months, data from S&P Global showed, as both services and manufacturing firms suffered setbacks. The au Jibun Bank flash Japan composite PMI fell to 48.9 in August versus the final score of 50.2 in July. The flash services business activity index fell to 49.2 in August from 50.3 in July, while the manufacturing business activity index dropped to 48.3 from 49.7.
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The Australian private sector saw its first contraction in output since January in August, preliminary figures show. The S&P Global flash PMI fell to 49.8 points in August from 51.1 points in July. ‘A renewed contraction in Australia's private sector economy indicates that recent interest rate hikes made by the RBA, as well as sustained inflationary pressures, have begun to take a toll on overall demand levels,’ commented economist Laura Denman of S&P Global Market Intelligence. The flash services PMI also fell into contraction, hitting 49.6 points in August from 50.9 in July. The flash manufacturing PMI managed to stay in growth territory for August, but dropped to 54.5 points from 55.7 in July, showing growth slowed.
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Germany is returning another hard coal-fired reserve power plant into service next week, as the country tries to save its gas supplies for the coming winter. The Heyden plant in Petershagen, near Hanover in western Germany, is scheduled to return to the market from August 29 until the end of April, operator Uniper said. Germany plans to phase out coal-fired power generation no later than 2038. But the war in Ukraine and the ensuing disruptions to the energy market means some plants are being reactivated. Since July 14, a regulation has allowed coal-fired power plants from the so-called grid reserve to come fully back online to help the country save gas.
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OPEC leader Saudi Arabia's energy minister said that the oil cartel and its allies have the means to deal with market challenges including by ‘cutting production’. ‘OPEC+ has the commitment, the flexibility, and the means within the existing mechanisms...to deal with such challenges including cutting production at any time’, Prince Abdulaziz bin Salman said in an interview with Bloomberg, according to Saudi state news agency SPA.
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Former US president Donald Trump filed a lawsuit urging a court to name an independent party to screen files that the FBI seized from his Florida home for materials protected by personal privilege. Claiming in a court filing that he had been targeted for political reasons, Trump demanded that a ‘special master’ be named to review the more than two dozen boxes of files taken in the unprecedented August 8 raid. The special master who would not act at the direction of the Justice Department, which ordered the raid would evaluate the documents and determine which ones Trump could retain as ‘privileged,’ or protected from use in investigations. ‘The Mar-a-Lago break-in, search and seizure was illegal and unconstitutional, and we are taking all actions necessary to get the documents back,’ Trump said in a statement.
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