TOP NEWS SUMMARY: Drop in eurozone factory output not as bad as feared

Writer,

The following is a summary of top news stories Friday.

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COMPANIES

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Deutsche Telekom reported an impressive surge in its first quarter net profit thanks to the strength of its US business, leading to the company raising its full-year guidance. The Bonn, Germany-based telecommunications provider reported a net profit of €3.95 billion in the first three months of 2022, up significantly from €936 million achieved the previous year. Earnings per share multiplied to €0.79 from €0.20 as revenue climbed 6.2% to €28.02 billion from €26.39 billion. Service revenue grew further, rising 10% to €22.29 billion from €20.26 billion. In its home market of Germany, revenue inched up 0.9% against the previous year, which the company said was due the strength of its fixed-network core business. Revenue growth in the US of 9.5% was mainly attributable to exchange rate effects. The US represents 64% of overall operating revenue. The T-Mobile owner said it does not operate any networks in Russia or Ukraine and is discontinuing its developer activities in Russia.

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Atlantia, the Rome-based transport infrastructure company, reported revenue in first quarter grew 13% year-on-year to €1.49 billion from €1.32 billion. The company swung to pretax profit of €132 million, from loss of €227 million. Earnings before interest, tax, depreciation and amortisation stood at €917 million, up 16% from €792 million. Atlantia said the esults benefited from upturns in motorway and airport traffic.

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Sumitomo Mitsui Financial reported a surge in annual profit as activity recovered in both its domestic and overseas markets during the recent year. For the financial year that ended March 31, the Tokyo-based company reported JP¥706.63 billion in profit, around $5.50 billion, and up 38% against the previous year's figure of JP¥512.81 billion. Ordinary income climbed 5.4% to JP¥4.111 trillion from JP¥3.902 trillion and earnings per share surged 27% to JP¥515.51 from JP¥374.26. Sumitomo said the growth was driven by three business units related to customer service, which recovered corporate activities in both domestic and overseas markets. However, it added that Covid-19 is still hurting consumer finance and that its loan balance is bottoming out.

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Mizuho Financial reported a strong set of annual results with revenue rising as a result of a steady performance in its Customer Groups segment. The Tokyo-based financial services company reported ordinary income of JP¥3.963 trillion in the year ended March 31, around $30.82 billion, up 23% from JP¥3.218 trillion the previous year. Profit rose 13% to JP¥530.48 billion from JP¥471.02.

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KDDI reported that, despite a year hit by Covid-19, it increased its annual revenue on the strength of headset sales and its energy business. The Tokyo-based telecommunications company reported profit of JP¥732.54 billion, around $5.69 billion, for the year ended March 31. This represented a 3.7% increase against the previous year's JP¥706.61 billion. Operating revenue rose 2.5% to JP¥5.447 trillion from JP¥5.313 trillion.

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Accounting software firm Sage left its full-year outlook unchanged, after what Newcastle Upon Tyne, England-based company called a strong first-half performance, with its Business Cloud offering leading a rise in recurring revenue. In the six months to March 31, Sage recorded pretax profit of £189 million, down slightly from £190 million in the same period a year prior. Revenue also was broadly flat, slipping to £934 million from £937 million. It noted, however, organic revenue was up 5%, driven by Sage Business Cloud growth of 21%. Meanwhile, annualised recurring revenue rose by 10% to £1.78 billion from £1.63 billion a year before. ‘Cloud native’ ARR growth was 43%, Sage said. Sage upped its interim dividend by 5.0% to 6.30 pence from 6.05p.

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Twitter confirmed that two senior executives are heading for the exit and it has paused most hiring, as Elon Musk stands poised to become the global messaging platform's new owner. Kayvon Beykpour, a general manager who leads research, design and engineering at Twitter, is leaving along with head of products Bruce Falck, a Twitter spokesperson told AFP. Beykpour however said he was ousted from the San Francisco-based tech company. ‘The truth is that this isn't how and when I imagined leaving Twitter, and this wasn't my decision,’ Beykpour, who is on paternity leave, said in a tweet. Twitter chief Parag Agrawal ‘asked me to leave after letting me know that he wants to take the team in a different direction,’ he added. Twitter also confirmed that, effective this week, it is pausing all hiring except for business-critical roles.

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MARKETS

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The dollar remained strong on Friday, after the Federal Reserve chair confirmed the US central bank remains set on its path of half-point interest rate hikes. Jerome Powell expressed confidence that the US economy is strong enough to withstand tighter monetary policies. Oil prices were lower, as traders continue to weigh up the balance between supply restriction stemming from the war in Ukraine and demand reduction cause by China's zero-Covid policy. In equities, Asian markets closed higher, Europe was higher near midday, and Wall Street was pointed to a positive open.

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CAC 40: up 1.5% at 6,298.60

DAX 40: up 1.3% at 13,919.09

FTSE 100: up 1.5% at 7,343.31

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Hang Seng: closed up 2.7% at 19,898.77

Nikkei 225: closed up 2.6% at 26,427.65

S&P/ASX 200: closed up 1.9% at 7,075.10

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DJIA: called up 0.9%

S&P 500: called up 1.2%

Nasdaq Composite: called up 1.8%

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EUR: down at $1.0391 ($1.0417)

GBP: down at $1.2199 ($1.2229)

USD: up at JP¥128.82 (JP¥128.25)

Gold: down at $1,822.80 per ounce ($1,838.71)

Oil (Brent): firm at $108.64 a barrel ($108.55)

(currency and commodities changes since previous London equities close)

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ECONOMICS AND GENERAL

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Industrial production in the eurozone fell in March, official data showed, but the drop was not as bad as feared. Factory output in the euro area fell 1.8% in March from the previous month, worsening from February's 0.5% month-on-month growth, but better than market predictions - according to FXStreet - of a 2.0% fall. In the EU as a whole, industrial production was down 1.2% compared to February, dropping from the 0.6% growth registered the previous month. Annually, production was down 0.8% in the euro area, which, again, beat market consensus of a 1.0% drop. In all of the EU, industrial production was up 0.7%.

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The US Senate confirmed Jerome Powell to a second term as head of the Federal Reserve, as the central bank ramps up its fight to crush soaring inflation. The vote came amid inflation that has hit a 40-year high, fuelled by the conflict in Ukraine and sanctions imposed on Russia, as well as Covid-19 restrictions in China that have raised concerns the global supply snarls may worsen. The Fed chair has said his primary focus is on getting inflation under control, but acknowledged the effort could be painful. Powell, who first joined the Fed board in 2012, led the central bank as it slashed the benchmark interest rate to zero at the start of the pandemic in March 2020 and pumped money into the financial system to prevent a severe downturn in the world's largest economy. Now, he is overseeing efforts to cool price pressures affecting American families.

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International economics expert Swati Dhingra has been appointed to the Bank of England's interest rate-setting committee, as it faces a tough balancing act amid soaring inflation and the threat of recession. The UK Treasury announced that Dhingra will join the bank's nine-strong Monetary Policy Committee in August, replacing current external member Michael Saunders, who leaves after a six-year stint. Dhingra is an associate professor of economics at the London School of Economics, specialising in international economics and applied microeconomics. She will take the number of women sitting on the committee to three, joining Catherine Mann and Silvana Tenreyro.

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UK Prime Minister Boris Johnson has tasked government ministers with cutting around 90,000 civil service jobs to free up cash for measures to ease the cost-of-living crisis with possible tax cuts. Johnson was understood to have told his cabinet on Thursday that the service should be cut by a fifth, PA reported. Johnson made the demand during an away day with ministers in Stoke-on-Trent as his government comes under intense pressure to ease the pain of soaring prices. But the FDA civil servants union warned the ‘ill thought out’ proposal would not lead to a more cost-effective government and could have impacts on passport processing, borders and health. Sources familiar with Johnson's cabinet conversation said he told ministers to return the civil service to its 2016 levels in the coming years. It was said its numbers have grown by 2016 since then to 475,000 full-time equivalent jobs.

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European Commission Vice President Maros Sefcovic called for ‘honesty about what the [UK] signed up to’ amid tensions about a trade agreement to avoid border checks on the island of Ireland. ‘Honesty about the fact that the EU cannot solve all the problems created by Brexit and the type of Brexit that the [UK] government chose,’ Sefcovic said speaking in Brussels before lawmakers from the EU and the UK. Earlier on Thursday, UK Foreign Secretary Liz Truss repeated threats to override the Northern Ireland protocol during a phone call with Sefcovic, in favour of a policy that would remove trade barriers between Britain and Northern Ireland. Truss warned Britain ‘would have no choice but to act’ if issues related to the trade agreement persisted in Northern Ireland and if the EU failed to show ‘the requisite flexibility’. The EU had offered Britain ‘wide-ranging and impactful solutions,’ but was still waiting for a response from the British government, Sefcovic said in a statement after the call.

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The new Northern Ireland Assembly will meet later Friday with the DUP set to block the election of a speaker. Ninety MLAs will gather in the chamber after last week's Northern Ireland Assembly election saw Sinn Fein emerge as the largest party for the first time. The DUP had previously indicated that it will not nominate for the position of deputy First Minister, which will prevent the forming of a new Executive, as part of its protest against the Northern Ireland protocol. Unionists oppose the post-Brexit treaty because of the economic barriers it creates between Northern Ireland and the rest of the UK. Party leader Sir Jeffrey Donaldson has now said his party will not back a Speaker, which will leave the Assembly unable to function.

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Finland took a step towards fast-track NATO membership, triggering a blunt warning from the Kremlin, as the war in Ukraine throttled supplies of Russian gas to Europe and the number of people who fled the country passed six million. In Geneva, the UN Human Rights Council decided to probe alleged Russian atrocities in Ukraine, in a vote overwhelmingly approved by its members but snubbed by Russia. Finland's leaders declared their nation must apply to join NATO ‘without delay’ – a seismic change in policy since Russia invaded its neighbour in February. ‘As a member of NATO, Finland would strengthen the entire defence alliance,’ President Sauli Niinisto and Prime Minister Sanna Marin said in a joint statement.

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Stalled negotiations over Iran's nuclear programme have been unblocked after fresh talks in Tehran, EU foreign policy chief Josep Borrell said, adding that he believed a final deal is within reach. Borrell said a mission by EU envoy Enrique Mora this week to help revive the 2015 nuclear pact between Iran and world powers had gone ‘better than expected’. ‘The negotiations had stalled and now they have been reopened,’ Borrell told reporters on the sidelines of a G7 meeting in Germany. ‘There is a perspective of reaching a final agreement.’ Mora held two days of meetings with Iran's chief negotiator Ali Bagheri in Tehran this week.

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Shanghai will try to reopen within a few days as a Covid-19 outbreak in China's largest city subsides, an official has said. The strict lockdown of the city – now in its seventh week – is part of the ruling Communist Party's ‘zero-Covid’ goal that has exacted a mounting economic toll that even the World Health Organisation says may be unsustainable. Vice mayor Wu Qing said at a news conference that the goal in Shanghai is to achieve ‘elimination in society’ of the coronavirus, meaning any new cases would only be in people already in isolation. That would allow for an ‘orderly opening, limited [population] flow, and differentiated management’, Wu said. No exact date beyond the middle of the month was given, nor did Wu say how the reopening would occur except that the city intends to gradually restore industrial production, education and medical services.

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