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The following is a summary of top news stories Tuesday.
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COMPANIES
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Nidec said claims that it is conducting ‘inappropriate’ share buybacks are incorrect. The Kyoto, Japan-based manufacturer and distributor of electric motors was responding to a report from Japanese publication Toyo Keizai. The report said that concerns over buybacks are a ‘taboo issue’ hanging over Nidec, amid suspicions of insider trading. Nidec said the Toyo Keizai article is ‘completely wrong’.
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The world's largest aircraft manufacturer Airbus increased deliveries again in September. In the past month, 55 commercial jets were handed over to customers, the European group announced in Toulouse on Monday evening. That was 16 more than in August. In the first three quarters of 2022 the company delivered 437 aircraft. However, this is only 62% of the annual target of 700 jets, so the manufacturer will have to step-up production before the end of December.
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Heathrow has regained its status as Europe's busiest airport. The west London airport said it was used by more passengers between July and September than rivals in cities such as Paris, Amsterdam, Frankfurt and Madrid. A year ago, Heathrow blamed the UK's comparatively strict coronavirus travel rules for it being just the 10th busiest airport in Europe, after being number one in the ranking in 2019. Heathrow has seen an increase in usage since the UK's restrictions on travellers were lifted in March. Some 5.8 million passengers travelled through Heathrow in September. But demand last month was still 15% below pre-virus levels in September 2019. The airport insisted the outlook for future demand ‘remains uncertain’.
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The personal computing market saw shipments fall in the third-quarter due to waning demand and on-going supply chain issues. Shipments fell 15%, data released by the International Data Corp. However, Apple went against the tide with personal computer shipments climbing 40% in the quarter. Global shipments came in at 74.3 million in the quarter, down from 87.3 million in the same period last year. HP saw PC shipments decline about 28%, Dell shipments were down 21% and Lenovo 16%.
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Givaudan reported a third-quarter sales rise, with both its fragrances and taste units registering growth. The Zurich-based flavour, fragrance, and cosmetic ingredient manufacturer reported sales of fr.1.81 billion, around $1.80 billion, in the third-quarter of 2022, up 6.7% year-on-year. Fragrance & Beauty sales rose 7.1%, while Taste & Wellbeing sales climbed 6.4%.
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Ferrexpo said production at its operations have been ‘temporarily suspended’ as the Ukraine iron ore pellets producer continues to find itself caught up in the Russia-Ukraine war. Following Russian air strikes in Ukraine on Monday, Ferrexpo said state-owned electrical infrastructure close to its operations have been damaged. ‘Limited power supply is available at the group's operations, which is being prioritised for critical equipment required for essential services and local communities. Consequently, production has been temporarily suspended at the group's operations,’ Ferrexpo explained. It did, however, add that it has enough stockpiles to meet expected sales volumes, though it noted this is ‘subject to logistics corridors remaining available to the group’. None of its workforce were injured as a result of the strikes.
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PureTech Health said takeover talks with San Francisco-based biopharmaceutical company Nektar Therapeutics have been terminated. PureTech on Friday had announced that it was in discussions to be acquired by Nektar. The talks were not advanced, PureTech said. ‘These discussions were early in nature and the required announcement created the impression that discussions were more advanced than they were. Given the early stage of the discussions and the potential for an extended period of uncertainty, these discussions were terminated,’ the company explained.
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MARKETS
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Markets continued to face a wall of worry on Tuesday, sending stock prices lower and keeping the dollar elevated. The UK government bond market remained centre stage, as the Bank of England was forced to widen its intervention to calm prices following last month's now-infamous 'mini-budget'.
‘It is going to be an incredibly difficult balancing act at a time when the bank wants to be raising interest rates in order to bring inflation down,’ commented Richard Carter, head of fixed interest research at Quilter Cheviot. ‘It is stuck between a rock and the hard place in combatting inflation at the same time as fiscal policy causes shockwaves in markets.’
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CAC 40: down 0.9% at 5,787.54
DAX 40: down 1.1% at 12,136.25
FTSE 100: down 1.4% at 6,861.69
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Hang Seng: closed down 2.2% at 16,832.36
Nikkei 225: closed down 2.6% at 26,401.25
S&P/ASX 200: closed down 0.3% at 6,645.00
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DJIA: called down 0.8%
S&P 500: called down 1.0%
Nasdaq Composite: called down 0.9%
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EUR: firm at $0.9712 ($0.9700)
GBP: up at $1.1067 ($1.1038)
USD: soft at JP¥145.68 (JP¥145.72)
GOLD: higher at $1,665.31 per ounce ($1,668.45)
OIL (Brent): lower at $93.92 a barrel ($96.99)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The Bank of England once again intervened in a bid to calm volatile bond markets, which are now a ‘material’ threat to the UK's ‘financial stability’. The BoE said early Tuesday it has widened the scope of its bond buying programme, due to end this week, to include purchases of index-linked gilts. The central bank said the measure is a ‘further backstop’ as it bids to restore orderly market conditions. ‘The beginning of this week has seen a further significant repricing of UK government debt, particularly index-linked gilts. Dysfunction in this market, and the prospect of self-reinforcing 'fire sale' dynamics pose a material risk to UK financial stability,’ Threadneedle Street warned. On Monday, it doubled the size of its soon-to-end bond-buying programme to £10 billion.
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The UK unemployment rate unexpectedly declined in August, while wage growth picked up, figures from the Office for National Statistics showed. The jobless rate edged down to 3.5% in the three months to August from 3.6% in the previous three-month period. Market consensus, according to FXStreet, had expected the rate to remain stable at 3.6%. The latest jobless rate was the lowest since December to February 1974. Total pay, which includes bonuses, grew 6.0% annually over the three-month period, ticking up from 5.5% in the three months to July. Regular pay, excluding bonuses, rose 5.4%, accelerating from 5.2% growth. However, in real terms - meaning adjusted for inflation - total pay fell by 2.4% and regular pay fell by 2.9%.
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UK Chancellor Kwasi Kwarteng will have to find spending cuts of more than £60 billion if he is to meet his target to get the public finances back under control, a leading economic think tank has warned. The Institute for Fiscal Studies said it was not possible to deliver cuts on that scale through efficiency savings and ‘trimming the fat’ and that it would require major cuts to public services. At the same time analysts said failure to come up with a credible plan that convinces the markets the government is committed to reducing its debt mountain could result in a worse crisis than 1976, when the Labour government was forced to seek a bailout from the International Monetary Fund. They warned that rising interest rates as the Bank of England seeks to curb spiralling inflation were likely to result in a ‘bruising’ increase in unemployment.
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UK Prime Minister Liz Truss and Kwarteng are facing calls to reverse course yet further on their mini-budget, as MPs return to Parliament after a torrid party conference season for the government. Parliament returns on Tuesday, after a remarkable recess punctuated by Tory infighting and market turmoil in the wake of the chancellor's financial plan. As MPs flock back to Westminster, Labour is calling on Kwarteng to come before the Commons, urging the government to turn its back on the mini-budget. With treasury questions pencilled in on Tuesday afternoon in the Commons, it is likely that Kwarteng could make an early appearance at the dispatch box to take questions from MPs about his fiscal plans.
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UK retail sales grew last month on the back of price rises while sales volumes continued to shrink. The latest BRC-KPMG retail sales monitor for September showed that price inflation offset a decrease in transactions by shoppers over the month. It came as separate spending data from Barclaycard reported an increase in sales, but highlighted growth slowed further as consumer spending was further strangled by cost-of-living concerns. The BRC-KPMG report revealed that total retail sales increased by 2.2% in September, rising slightly from 1% growth in August.
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UK grocery price inflation has hit another peak, prompting customers to switch to ‘wonky’ fruit and vegetables to cut costs, according to survey results from Kantar. Grocery price inflation reached just shy of 14% over the past four weeks ending October 2, with the average household's annual grocery bill now set to soar to £5,265 - if consumers were to buy the same products as they did last year.
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Italy's industrial production increased on both a monthly and annual basis in August, figures from national statistics office Istat showed. The seasonally adjusted industrial production index increased by 2.3% in August, compared to an upwardly revised 0.5% increase in July. On an annual basis, the industrial production index increased by 2.9% rebounding from a decrease of 1.3% in July.
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US President Joe Biden promised to provide advanced air defence systems to Ukraine after Russian missiles rained down on the capital Kyiv and other cities, the White House said in a statement. Biden spoke to President Volodymyr Zelensky and ‘pledged to continue providing Ukraine with the support needed to defend itself, including advanced air defence systems,’ the statement said.
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President Vladimir Putin threatened more ‘severe’ attacks against Ukraine after Russian missiles rained down on the capital Kyiv and other Ukrainian cities in what Washington branded ‘utter brutality’. The biggest wave of strikes across Ukraine in months killed at least 11 and wounded more than 80 in retaliation for an explosion this weekend that damaged a key bridge linking Russia to the Moscow-annexed Crimean peninsula. ‘Let there be no doubt,’ Putin said in televised comments addressed to his security council, ‘if attempts at terrorist attacks continue, the response from Russia will be severe.’
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The websites for a number of major US airports were briefly taken offline Monday after a cyberattack promoted by a pro-Russian hacking group. The distributed denial of service attacks hit the airport websites of several major US cities including Atlanta, Chicago, Los Angeles, New York, Phoenix and St Louis. A DDOS attack involves knocking a website offline by flooding it with traffic. The airport websites were targeted after the pro-Russian hacking group known as ‘KillNet’ published a list of sites and encouraged its followers to attack them.
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Sweden said it would not allow Russia join an ongoing probe of the Nord Stream gas pipeline leaks but added that Moscow could carry out its own inspections. The Nord Stream 1 and 2 pipelines, which connect Russia to Germany, have been at the centre of geopolitical tensions as Russia cut gas supplies to Europe in suspected retaliation against Western sanctions over Moscow's invasion of Ukraine. The pipelines are not currently in operation but they contained gas before falling victim to apparent sabotage. All of the four leaks, which were discovered two weeks ago, are in the Baltic Sea off the Danish island of Bornholm.
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Japan reopened its doors to tourists on Tuesday after two-and-a-half years of tough Covid restrictions, with officials hoping an influx of travellers enticed by a weak yen will boost the economy. By mid-morning, tourists from Israel, France and Britain were already pouring in. Japan slammed its borders shut early in the pandemic, at one point even barring foreign residents from returning, and has only recently begun cautiously reopening. In June, it began allowing tourists to visit in groups accompanied by guides, a requirement that was further relaxed to include self-guided package tours. From Tuesday, visa-free entry resumed for travellers from 68 countries and territories.
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