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The following is a summary of top news stories Wednesday.
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COMPANIES
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US regulators fined Wall Street firms a total of $1.8 billion over failures to keep electronic records such as text messages between employees, the Securities & Exchange Commission announced. Barclays, Bank of America, Deutsche Bank and Goldman Sachs were among the firms that agreed to pay $125 million each to settle the charges. An SEC press release faulted the companies over ‘long-standing failures’ to maintain and preserve electronic communications that must be available to regulators in the course of oversight.
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Commerzbank says it still expects net profit of more than €1 billion in 2022, despite additional provision at its Polish subsidiary, mBank. mBank books additional provisions for its Swiss franc portfolio of around €490 million. The total provisions for credit agreements indexed on foreign currencies now amount to around €1.43 billion. Commerzbank's third quarter operating results will be impacted as a result. The firm maintains its earnings target for the full-year, nonetheless.
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Twitter and Elon Musk sparred in court on Tuesday, each digging for evidence to prevail in a high-stakes trial next month over the billionaire's bid to break his buyout deal. Musk has been keen to find evidence to back his accusation that Twitter misled regulators and investors about what portion of accounts are actually spam or software ‘bots,’ as well as its key measures regarding growth. A Twitter attorney told the judge it was a struggle to get documents from data scientists Musk used to estimate the portion of fake accounts on the social network, and that what they finally got did not back his accusation about it being much higher than 5%. Musk attorneys, in turn, pressed the judge to make Twitter hand over more messages or other material, particularly regarding ‘monetizable daily active users’ and ‘user active minutes.’
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BP signed a memorandum of understanding for the development of a network of electric vehicle charging stations with car rental firm Hertz for North America. The London-based oil & gas firm said that the deal includes the management of Hertz's charging infrastructure by BP Pulse. BP Pulse is a supplier of charging infrastructure for electric vehicles. Further, BP Pulse will customize its Omega software to ensure Hertz's fleet of electric rental cars are recharged between rentals.
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Luxury fashion brand Burberry has named Daniel Lee as its new creative chief, starting on Monday next week, after incumbent Riccardo Tisci stepped down from the post. Tisci was in the role for five years. The company hailed Tisci for improving the brand's fortunes, including offering it much-needed relevance with younger shoppers. Tisci will leave the company at the end of September. Lee has had roles with Italian fashion brand Bottega Veneta, as well as Balenciaga and Donna Karan. His first runway collection will be presented at London Fashion Week in February 2023.
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Online clothing retailer boohoo swung to a first-half loss with earnings hurt by weak consumer confidence and a staggering number of clothing returns. Return rates were ‘up significantly year-on-year’, the fast-fashion firm explained. In the six months to August 31, revenue fell 10% year-on-year to £882.4 million from £975.9 million. Revenue was up 56% from pre-virus levels, however. boohoo swung to a £15.2 million pretax loss from a £24.6 million profit a year earlier. Margins weakened markedly. Its adjusted earnings before interest, tax, depreciation and amortisation margin fell to 4.0% from 8.7%. ‘As a result of the impact that the macro-economic and consumer backdrop has had on the group's revenues in the first half, our expectation is for a similar rate of revenue declines to persist over the remainder of the financial year if these conditions continue,’ boohoo cautioned. It lowered its margin outlook. boohoo now expects an annual adjusted Ebitda margin between 3% and 5%, trimmed from its previous 4% to 7% guidance range. While sales have jumped post-Covid, its margins have weakened. In the six months to the end of August 2019, its adjusted Ebitda margin was 10.8%.
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Spirax-Sarco Engineering said it has agreed a deal to acquire privately-owned custom electric thermal solutions specialist Durex International for $342.2 million. The thermal energy management and pumping systems firm will acquire the Illinois-based firm on a cash- and debt-free basis. ‘The transaction will be financed through acquisition bank facilities and will be accretive to group earnings in 2023,’ it said. ‘Durex provides [original equipment manufacturers] with custom-designed precision thermal solutions with embedded electric heating, cooling and sensing technologies.’
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MARKETS
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A suspicious leak from the pipelines bringing gas to Europe from Russia provided a new reason to sell shares on Wednesday, with stock indices globally down at least 1%, while the dollar remained firm.
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CAC 40: down 1.7% at 5,658.18
DAX 40: down 2.2% at 11,870.83
FTSE 100: down 1.8% at 6,861.62
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Hang Seng: closed down 3.4% at 17,250.88
Nikkei 225: down 1.5% at 26,173.98
S&P/ASX 200: down 0.5% at 6,462.00
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DJIA: called down 1.0%
S&P 500: called down 1.2%
Nasdaq Composite: called down 1.5%
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EUR: down at $0.9545 ($0.9596)
GBP: down at $1.0674 ($1.0756)
USD: unchanged at JP¥144.79
GOLD: down at $1,618.12 per ounce ($1,633.10)
OIL (Brent): down at $86.35 a barrel ($86.44)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The governments of Denmark and Sweden said they suspected acts of sabotage after three leaks were discovered on the Nord Stream pipelines that carry gas from Russia to Europe via the Baltic Sea. Denmark Prime Minister Mette Frederiksen said it was not yet known who was behind the incidents that affected the Nord Stream 1 and 2 pipelines that run from Russia to Germany but that they were not accidents. The incidents occurred in the exclusive economic zones of Denmark and Sweden off the Danish island of Bornholm.
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Kremlin-installed authorities in four Ukrainian regions under Russian control claimed victory Tuesday in annexation votes, drawing global outrage, as Moscow warned it could use nuclear weapons to defend the territories. Ukraine and its allies have denounced the so-called referendums as a sham, saying the West would never recognise the results of the ballots, which have dramatically ratcheted up the stakes of Russia's seven-month invasion.
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The US is unlikely to enact a Plaza Accord-style currency pact to temper the bullish dollar, Bloomberg reported. A White House economist said something similar to the 1985 agreement, which saw the US, UK, France, Japan and what was then known as West Germany collude to keep a lid on the dollar's strength, is not expected to occur now. Bloomberg reported that White House National Economic Council Director Brian Deese told an event in Washington that he does not anticipate a foreign exchange intervention to happen. Deese's comment came hours after Treasury Secretary Janet Yellen told reporters in North Carolina that ‘markets are functioning well’, Bloomberg reported.
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China's yuan hit a record low against the surging dollar in offshore trading, despite recent efforts by the country's central bank to shore up the currency. The offshore yuan which is circulated outside mainland China and is more freely traded than currency in the domestic market fell to ¥7.2386 per dollar on Wednesday. That is its weakest level since clearing banks in Hong Kong were given the go-ahead to open renminbi accounts freely in 2010. The onshore yuan, which is not freely convertible and limited to a 2% range on either side of a central parity rate set each day, also extended its slump to a 14-year low of ¥7.2297 per dollar.
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UK Chancellor Kwarteng will step up efforts to reassure the City about his economic plans after the International Monetary Fund criticised the measures and the Bank of England signalled sharp interest rate rises could be on the way. The chancellor will meet investment banks on Wednesday, following days of turmoil which saw the pound buffeted and government borrowing costs increase after his mini-budget spooked the markets with its package of tax cuts and increased borrowing. In an extraordinary statement, the IMF said it was ‘closely monitoring’ developments in the UK and was in touch with the authorities, urging the chancellor to ‘reevaluate the tax measures’.
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The Bank of England's chief economist indicated that the markets shock caused by Britain's tax-slashing budget called for a ‘significant’ monetary policy action at its next meeting in November. ‘We have all seen recent significant fiscal news that has had significant market consequences,’ Huw Pill told a London event hosted by UK lender Barclays. ‘It's hard not to draw the conclusion that all this will need a significant monetary policy response.’ Pill was speaking one day after sterling tanked to a record dollar low on fears a UK government tax-cutting plan could derail public finances. But the bank also signalled that it would wait until its next policy meeting on November 3 before fully assessing the impact of the contentious UK plan.
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UK food inflation has hit its highest rate on record, with shoppers now paying just under 11% more than they were a year ago. Overall UK shop price inflation accelerated to 5.7% in September, quickening from 5.1% in August, to mark another record since the British Retail Consortium-Nielsen IQ index began in 2005. Food price inflation soared to just shy of 11%, from the past last month's 9.3%, driven by the war in Ukraine continuing to push up the price of animal feed, fertiliser and vegetable oil, particularly affecting products such as margarine. Fresh food products are now a record 12% higher than last year, up from just under 11% in August the highest inflation rate for the category on record.
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Ireland's finance minister has said that a windfall tax or surplus will be used to fund any further cost-of-living measures that may be needed. Paschal Donohoe said that the country's expected surplus or a windfall tax either at EU level or by Ireland will be used to fund any further help for people struggling to pay their energy bills. The minister was speaking on Tuesday evening after he and Public Expenditure Minister Michael McGrath officially unveiled Budget 2023 in the Irish parliament's lower house. The government's €11 billion budget package comprises €6.9 billion in budgetary measures for next year, as well as a €4.1 billion package of one-off measures to help tackle the rising cost of living for individuals, families and households.
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German consumer confidence is set to slump in October, with income expectations dropping sharply. The latest GfK German consumer confidence tracker is to fall to negative 42.5 points for October, from minus 36.8 in September. Meanwhile, consumer confidence in France faded in September as worries over living costs increased. According to Insee, the consumer confidence tracker fell to 79 in September from 82 in August, returning to July's reading, which also was 79.
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Hurricane Ian strengthened to a Category 4 storm as it headed towards the US state of Florida on Wednesday, with forecasters warning of life-threatening storm surges and ‘devastating’ winds after it reportedly killed two and left millions without power in Cuba. As of 5 am local time, mandatory evacuation orders had been issued in a dozen coastal Florida counties, with voluntary evacuation recommended in several others, according to the state's emergency officials. The storm was expected to make landfall later on Wednesday before moving across central Florida and emerging in the western Atlantic by late Thursday.
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US President Joe Biden's push for green energy tax credits will help boost a massive ramp up in private investment that will create jobs and lower energy costs for American families, Treasury Secretary Janet Yellen said Tuesday. Yellen called the administration's plan ‘the most aggressive action that we've ever taken to address the climate crisis.’ She travelled to North Carolina to tour a solar plant and tout policies included in the recently approved Inflation Reduction Act, which together with the Infrastructure Law includes more than $430 billion in energy investments. The legislation provides tax credits to households to make their homes more energy efficient or switch to cleaner sources, which will help lower costs, Yellen said.
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Retail sales in Australia climbed at a faster pace than expected last month. According to the Australian Bureau of Statistics, retail sales rose 0.6% in August from July, beating an FXStreet cited forecast of a 0.4% climb. Monthly growth slowed from 1.3% in July. On an annual basis, retail sales jumped 19% in August, quickening from July's 17% rise. It was the sharpest yearly rise since a 25% jump in April 2021.
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