TOP NEWS SUMMARY: Pound sinks as UK economy shrinks in March

Writer,

The following is a summary of top news stories Thursday.

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COMPANIES

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SoftBank logged a record annual net loss after a bruising period that saw its assets hit by a US tech-share rout and a regulatory crackdown in China. The technology investor reported a net loss of JP¥1.708 trillion, about $13.17 billion, in the financial year that ended in March2 – a vertiginous plunge from a JP¥4.99 trillion net profit the previous year, when huge market rallies boosted results. Reporting an eye-watering investment loss of JP¥3.4 trillion, SoftBank said its tech-focused Vision Fund has suffered falls ‘due to a decline in the share prices of most listed portfolio companies’. The losses have been deepened by the many shares they hold on Chinese ride-hailing giant Didi Chuxing and e-commerce group Alibaba, which have been hit by a crackdown by Beijing on the country's private sector.

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Siemens reported higher quarterly revenue but a significant drop in income, as the Munich-based conglomerate also announced that it is winding down its operations in Russia. Net income for the three months ended March 31 - the company's second quarter - fell 49% to €1.21 billion from €2.39 billion the previous year. Earnings per share dropped further, falling 54% to €1.29 from €2.82. Revenue for the second quarter rose to €20.98 billion from €15.88 billion a year ago as orders climbed 32% year-on-year, reaching €21.0 billion. Profit in its Industrial Business came in lower at €1.78 billion, down from €2.03 billion the previous year. This, Siemens explained, was burdened by a €600 million impact as a result of Russian sanctions. Earlier on Thursday, Siemens announced that it will exit the Russian market as a result of the war in Ukraine. Siemens said it has now started proceedings to wind down its industrial operations and all industrial business activities.

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BT reported an annual profit climb and has agreed to a sports broadcasting joint venture with Warner Bros Discovery, having entered talks three months ago. BT also reported its Openreach broadband infrastructure arm ‘continues to build like fury’. The UK telecommunications operator backed its yearly guidance but noted a tough economic outlook. In the year ended March 31, revenue declined 2.3% to £20.85 billion from £21.33 billion. Pretax profit, however, rose 8.8% to £1.96 billion from £1.80 billion. Operating costs were 4.2% lower at £17.97 billion. Adjusted revenue was also £20.85 billion, though down 2.5% from £21.37 billion. The figure fell just short of company-compiled consensus of £20.88 billion. BT noted revenue growth from its Openreach business was offset by a fall in Enterprise and Global, while Consumer - its biggest unit - was flat. BT's adjusted earnings before interest, tax, depreciation and amortisation rose 2.2% to £7.58 billion. The figure landed in line with BT's £7.5 billion to £7.7 billion guidance range.

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Soft drinks bottler Coca-Cola HBC reported strong growth in the first quarter, with organic revenue - minus its Russian and Ukrainian operations - surged 26%. In the three months to March 31, the bottling partner of Coca-Cola Co reported group revenue growth of 31% to €1.77 billion from €1.35 billion, with Established markets up 20%, Developing up 40% and Emerging up 36%. Coca-Cola Co suspended its business in Russia during the quarter and stopped taking orders for concentrate. As a result, Coca-Cola HBC said it will now have a ‘much smaller presence’ in the country moving forward. ‘We are evaluating all options here and will share more in due course, alongside the financial implications of any decision made for both 2022 performance and the level of non-cash charges,’ it added. Group volume was up 23% in the first quarter to 605.5 million cases from 490.8 million the year prior.

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Jet engine maker Rolls-Royce said its performance year-to-date has been in line with expectation, and it has left its 2022 guidance unchanged. ‘We are well positioned for the anticipated growth in our end markets and continue to expect positive momentum in our financial performance in 2022 despite the ongoing risks around macroeconomic uncertainties,’ the company said. It noted its Civil Aerospace business saw large engine long-term service agreement flying hours for the first four months of 2022 jump 42% versus the prior year period. ‘Passenger demand is recovering on routes where travel restrictions have been lifted, such as in Europe and the Americas, but additional Covid-19 restrictions have resulted in fewer flights in China where the situation is still evolving,’ Rolls said.

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Tokyo Electron saw a significant jump in annual income as both domestic and overseas soared on positive demand for semiconductors. The Tokyo-based semiconductor manufacturer reported income of JP¥437.08 billion, around $3.39 billion, for the year ended March 31. This represented an 80% increase against the previous year's figure of JP¥242.94 billion. Earnings per share surged by the same percentage to JP¥2,793.89 from JP¥1,562.20. Tokyo Electron booked sales totalling JP¥2.004 trillion, up 43% against JP¥1.399 trillion the previous year. Domestic sales rose 17% year-on-year while overseas sales surged 48% above the previous year. For the year ending March 2023, the company expects to deliver sales totalling JP¥2.350 trillion on net income of JP¥523.0 billion. Earnings per share are expected to come to JP¥3,357.96.

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BP said it has made a bid for two individual offshore wind leases in the Netherlands, consistent with plans to make €2 billion worth of clean energy investments in the nation. The assets, Hollandse Kust West sites VI and VII, have the potential to achieve a combined 1.4 gigawatt generating capacity. They are located 53 kilometres off the country's west coast and contain two wind farm sites, with a total area of 176 square kilometres. The bid for HKW VI includes a commitment to invest €75 million in ecological monitoring. The cash will also go towards applying technology to ‘enhance North Sea environment and ecology’. ‘Success in the bids will enable a series of additional integrated clean energy investments in the Netherlands of up to €2 billion in line with BP's strategy – including integrating offshore wind with electrification of industry and mobility and green hydrogen production, supporting decarbonisation of refining, aviation and transportation,’ BP said.

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Walt Disney late Wednesday reported a rise in subscriber growth for its Disney+ streaming platform in stark contrast to rival Netflix which lost subscribers. For the three months to April 2, revenue was $19.25 billion, up 23% from $15.61 billion in the second quarter last year. The rise in revenue came despite a $1.0 billion reduction for the amount due to a customer for the early termination of license agreements for film and television content delivered in previous years in order for Disney to use the content on its direct-to-consumer services. Disney posted second-quarter net income of $470 million, or $0.26 per diluted share, down from $912 million, or $0.50 diluted EPS. However, excluding certain items, diluted EPS for the quarter increased to $1.08 from $0.79 in the prior-year quarter. Disney said that total Disney+ subscriptions rose to 137.7 million during the second quarter, up 33% from 103.6 million the year before. The average monthly revenue per paid subscriber for domestic Disney+ increased to $6.32 from $6.01, due to an increase in retail pricing and a lower mix of wholesale subscribers, partially offset by a higher mix of subscribers to multi-product offerings.

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MARKETS

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Wednesday's relief rally in Europe proved to only be temporary, with stocks sinking on Thursday. Wall Street futures pointed to a sour start, with equities in New York set to extend recent losses. Investors were continuing to digest Wednesday's hot US inflation print. ‘While yesterday’s report was scrutinized for signs of peak inflation, more importantly it provided evidence of persistent inflation,’ said Rabobank.

In the UK, stagflation fears heightened following data that showed the economy contracted in March, defying expectations for modest growth. The pound was trading against levels not seen since May 2020 against the dollar as a result.

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CAC 40: down 2.6% at 6,106.90

DAX 40: down 2.4% at 13,494.14

FTSE 100: down 2.3% at 7,175.57

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Hang Seng: closed down 2.2% at 19,380.34

Nikkei 225: closed down 1.8% at 25,748.72

S&P/ASX 200: closed down 1.8% at 6,941.00

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DJIA: called down 0.6%

S&P 500: called down 0.8%

Nasdaq Composite: called down 1.2%

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EUR: down at $1.0432 ($1.0540)

GBP: down at $1.2184 ($1.2323)

USD: down at JP¥128.81 (JP¥130.23)

GOLD: firm at $1,850.00 per ounce ($1,849.37)

OIL (Brent): down at $106.01 a barrel ($107.27)

(currency and commodities changes since previous London equities close)

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ECONOMICS AND GENERAL

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The UK's economy ground to a halt over the course of the first three months of 2022, preliminary data from the Office of National Statistics showed. For the first quarter of 2022, UK gross domestic product is estimated to have increased 0.8% versus the immediately previous quarter, which is behind market consensus - according to FXStreet - of 1.0% quarter-on-quarter expansion. In the final quarter of 2021, the GDP grew by 1.0% on quarterly basis. Annually, GDP rose 8.7% in the first quarter, but this too was behind market forecasts of 9.0% growth. The ONS noted that the economy was 0.7% bigger than its pre-coronavirus level, which covers the final three months of 2019. However, economic performance deteriorated during the course of the first three months of this year. Monthly estimates show that GDP rose by 0.7% in January, followed by no growth in February 2022 and a fall of 0.1% in March 2022.

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UK Prime Minister Boris Johnson has refused to rule out a windfall tax on the profits of energy companies to help relieve the pressure of the cost-of-living squeeze. Chancellor Rishi Sunak has reportedly told Treasury officials to examine plans for a levy on the soaring profits of the oil and gas giants. It follows an admission by BP Chief Executive Bernard Looney, who said his firm's investment plans would not be affected by a windfall tax. In an interview with LBC, Johnson said that, while he still does not like such taxes because of the impact on investment, it is something that will have to be considered. Pressed on Looney's comments, Johnson said: ‘Well, you know, then we'll have to look it.’ However, he added: ‘The disadvantage with those sorts of taxes is that they deter investment in the very things that they need to be investing in – new technology, in new energy supply.’

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Around 50 more fines have been issued by police investigating possible lockdown-breaking parties in Downing Street and across Whitehall. It brings the number of fines to more than 100, including PM Johnson, his wife Carrie and Chancellor Sunak, who were hit with fixed penalty notices in April over a birthday party held for the prime minister in the Cabinet Room in No 10 in June 2020. It is understood that Johnson has not received another fine, but the police investigation continues.

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Finland's president and prime minister said they are in favour of joining NATO and a formal decision would be taken this weekend, after Russia's war in Ukraine sparked a swift u-turn in opinion. ‘Finland must apply for NATO membership without delay,’ President Sauli Niinisto and Prime Minister Sanna Marin said in a joint statement. Niinisto has often served as a mediator between Russia and the West. ‘NATO membership would strengthen Finland's security. As a member of NATO, Finland would strengthen the entire defence alliance,’ the statement said. A special committee will announce Finland's formal decision on a membership bid on Sunday, the statement added.

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Top EU officials are set to be in Tokyo on Thursday to meet Prime Minister Fumio Kishida, in hopes of deepening ties with Japan, a strategic ally and neighbour to both Russia and China. European Commission President Ursula von der Leyen and European Council President Charles Michel aim to bolster the bloc's presence in the Indo-Pacific region, against the backdrop of EU tensions with China and war in Ukraine. Japan is one of five countries in the Indo-Pacific region that adopted sanctions on Russia following the invasion of Ukraine. As a member of the G7, Japan agreed on Sunday to phase out Russian oil imports, among other new punitive measures beyond what EU member states have agreed.

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