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The following is a summary of top news stories Tuesday.
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COMPANIES
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Toyota Motor reported a 6.2% decrease year-on-year in total sales for July to 872,757. Worldwide production fell 6.9% to 835,192 vehicles compared to the same month a year before. Exports dropped by 22% to 164,052. Toyota attributed the decline to the spread of Covid-19. Further, the car maker cited a parts shortage as a result of increased demand for semiconductors.
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Woodside Energy reported a strong first half-year performance after its merger with BHP. In the first half of 2022, the Perth, Australia-based oil and gas firm said operating revenue more than doubled year-on-year to $5.81 billion from $2.50 billion, as the result of higher production and higher realised prices. Pretax profit surged to $2.98 billion from $621 million, with diluted earnings per share of 144 cents compared to 33 cents. It delivered total production of 54.9 million barrels of oil equivalent which rose 19% year-on-year. This included 9.7 million boe from former BHP petroleum assets in June, with the figure also benefiting from ‘improved reliability’ at the firm's liquified natural gas facilities. Woodside said it delivered synergies of around $100 million from the BHP merger, with over $300 million in further synergies on its radar.
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London-based distribution firm Bunzl upped its margin guidance after strong first-half trading. Revenue for the first half of 2022 rose 16% to £5.65 billion from £4.87 billion a year before. Revenue was driven by product cost inflation and continued volume recovery in the base business, and growth from acquisitions. Pretax profit improved 7.6% to £296.6 million from £275.7 million. Bunzl said inflation was ‘somewhat supportive’ to margins, though the reduction of Covid-19 sales meant they still narrowed to 7.3% from 7.5%. Still, Bunzl now expects its full-year operating margin to be higher than historical levels and only slightly below 2021. Bunzl declared an interim dividend of 17.3p, up 6.8% on the 16.2p paid out a year before.
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BT and Openreach workers are staging fresh strikes over pay as the summer of industrial unrest across the country continues. The Communication Workers Union said 40,000 of its members at BT Group are showing ‘serious determination’ to get a decent wage rise as they walk out on Tuesday and Wednesday, following action earlier this month.The union said workers are opposing the imposition of an ‘incredibly low’ flat-rate pay rise of £1,500. ‘In the context of RPI inflation levels already hitting 11.7% this year, this is a dramatic real-terms pay cut,’ said the union. CWU general secretary Dave Ward said: ‘These are the same workers who kept the country connected during the pandemic. Without CWU members, there would have been no home-working revolution, and vital technical infrastructure may have malfunctioned or been broken when our country most needed it.
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Dechra Pharmaceuticals said it has bought California-based veterinary pharmaceutical manufacturer Med-Pharmex for $260.0 million. Med-Pharmex has been a ’long-term acquisition target‘, it said, and will bolster Dechra's operations in the US. ’The US market is highly consolidated, therefore this is a unique opportunity to add several new products to our portfolio, enter the US FAP market and improve the manufacturing footprint for our North American business,‘ said Dechra Chief Executive Ian Page.
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Old Mutual said profit fell in the first half of 2022, as a result of an increasingly volatile global economy, which hit gross flows. The Anglo-South African financial services firm's pretax profit dropped by 28% to R 5.12 billion for six months that ended June 30 from R 7.09 billion a year prior. Net earned premiums were almost flat at R 35.87 billion from R 35.61 billion. Funds under management were up marginally by 1.1% to R 1.18 trillion from R 1.17 trillion. In the first half, gross flows decreased by 14% to R 83.39 billion from R 96.99 billion, while value of new business declined by 4% to R 708 million from R 740 million. Old Mutual kept its interim dividend unchanged at 25 rand cents. ’We were able to maintain a dividend in line with our prior interim dividend due to our robust operational performance and our strong capital and liquidity position,‘ it said.
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Elon Musk's legal team is demanding to hear from Twitter whistleblowing former security chief, who could help bolster Musk's case for backing out of a $44 billion deal to buy the social media company. Former Twitter executive Peiter Zatko, also known by his hacker handle ’Mudge‘, received a subpoena on Saturday from Musk's team, according to Zatko's lawyer and court records. Billionaire Tesla chief executive Musk has spent months alleging that the company he agreed to acquire undercounted its fake and spam accounts and that he should not have to consummate the deal as a result. Zatko's whistleblower complaint to US officials alleging Twitter misled regulators about its privacy and security protections and its ability to detect and root out fake accounts might play into Musk's hands in an upcoming trial scheduled for October 17 in Delaware. Zatko served as Twitter's head of security until he was sacked early this year.
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MARKETS
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Stock markets were mostly higher on Tuesday, with the FTSE 100 trailing European counterparts after the UK market resumed trading following a three-day holiday weekend. The dollar remained stronger after Federal Reserve Chair Jerome Powell on Friday last week reaffirmed the US central bank's commitment to containing inflation. However, the euro was trading back above parity to the dollar after similarly hawkish remarks by European Central Bank policymakers.
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CAC 40: up 1.0% at 6,281.55
DAX 40: up 1.4% at 13,073.43
FTSE 100: up 0.1% at 7,437.18
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Hang Seng: closed down 0.4% at 19,949.03
Nikkei 225: closed up 1.1% at 28,195.58
S&P/ASX 200: closed up 0.5% at 6,998.30
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DJIA: called up 0.6%
S&P 500: called up 0.8%
Nasdaq Composite: called up 1.0%
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EUR: up at $1.0030 ($0.9997)
GBP: down at $1.1740 ($1.1764)
USD: up at JP¥138.33 (JP¥137.31)
Gold: down at $1,733.42 per ounce ($1,736.54)
Oil (Brent): up at $104.50 a barrel ($99.59)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Millions of people in areas surrounding China's capital were ordered into lockdown Tuesday, with authorities doubling down on efforts to contain Covid-19 ahead of a key ruling Communist Party meeting this year. Nearly four million people in Hebei province, which surrounds Beijing, were ordered to stay home until the end of the week as officials rush to curb a small virus flare-up. And more than 13 million in the neighbouring port city of Tianjin must undergo mass testing, after 51 mostly mild cases were reported. China is the only major global economy sticking to a zero-Covid policy, and lockdowns, travel restrictions and mass testing have disrupted businesses and cooled growth. Beijing has doubled down on the policy ahead of the Communist Party's 20th National Congress, expected to take place within the next three months.
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Chinese police have arrested more than 200 suspects linked to one of the country's biggest-ever banking scandals, which triggered rare mass protests. Four banks in central China's Henan province suspended cash withdrawals in April as regulators cracked down on mismanagement, freezing the funds of hundreds of thousands of customers and sparking protests that at times ended in violence. Police said Monday they had now arrested 234 people in connection with the scandal and that ’significant progress‘ was being made in recovering stolen funds. ’A criminal gang...illegally controlled four village and town banks...and was suspected of committing a series of serious crimes,‘ police in the city of Xuchang said in a statement on Monday.
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The head of the EU's executive branch and Germany's chancellor have pledged a reform of the continent's electricity market to help bring down power prices that have been pushed higher by skyrocketing gas prices. European Commission president Ursula von der Leyen said in a speech in Bled, Slovenia, that soaring electricity prices ’are now exposing the limitations of our current electricity market design‘. ’It was developed for different circumstances,‘ von der Leyen said. ’That is why we are now working on an emergency intervention and a structural reform of the electricity market.‘ The continent's electricity market is underpinned by a ’merit order‘ system in which the power stations offering the cheapest electricity are tapped first, but prices are determined by the last and most expensive power stations to be tapped at present, those using gas, whose price has risen sharply following cuts in supplies by Russia to several European countries amid the war in Ukraine.
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The European Central Bank should continue to raise interest rates at a ’steady pace‘, its chief economist said Monday, as soaring inflation strengthened calls for the Frankfurt-based institution to hike more aggressively. Lifting interest rates in increments that were ’neither too slow nor too fast‘ was important due to the ’high uncertainty‘ around future inflation, as the war in Ukraine and rocketing energy prices shake the eurozone, ECB Chief Economist Philip Lane said in a speech in Barcelona. Raising rates steadily avoided ’adverse feedback loops‘ and made it ’easier to undertake mid-course corrections if circumstances change‘, Lane said. The ECB raised its interest rates for the first time in over a decade at its meeting in July as energy prices drove inflation ever higher. The unexpectedly large half-point hike vaulted eurozone interest rates out of negative territory and marked the end of ’a distinct first phase in the normalisation‘ of ECB policy, Lane said.
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Economic sentiment continued to decline in the eurozone and the EU in August, though employment expectations saw an uptick. According to Eurostat, the economic sentiment indicator fell to 97.6 points in the eurozone in August from 98.9 points in June. This came in below FXStreet-cited consensus of 98. Eurostat noted significant declines of 4.8 points in the Netherlands, 2.5 points in Germany, 1.8 points in France, and 1.2 points in Italy. However, employment expectations improved slightly, rising 0.8 points to 108.0 points in the eurozone, and by 0.4 points to 107.3 points in the EU.
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Consumer prices in Spain continued to rise in August, preliminary figures from the country's statistics institute showed. According to INES, the annual flash consumer price index rose 10.4% in August, slowing slightly from 10.8% registered for July. This also came in lower than FXStreet-cited consensus of 10.9%. On a monthly basis, prices rose 0.1% in August, compared to a 0.3% fall in July. Meanwhile, retail sales in Spain fell 0.7% on a monthly basis in July, when seasonally and calendar adjusted, compared to a 0.3% decline in June. On an annual basis, sales fell 0.5% in July, compared to a 0.7% rise in June.
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UK mortgage approvals edged up in July, but remained below the pre-pandemic average, data from the Bank of England showed. Approvals for house purchases, an indicator of future borrowing, increased to 63,770 in July from 63,184 in June. However, both figures are below the 12-month pre-pandemic average up to February 2020 of 66,800. July's slight uptick comes despite concerns the UK housing market will cool this year, with rampant consumer price inflation crimping household budgets and rising interest rates adding to borrowing costs. Net borrowing of mortgage debt decreased to £5.1 billion in July from £5.3 billion the month before, but was still above the pre-virus average of £4.3 billion.
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