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The following is a summary of top news stories Thursday.
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COMPANIES
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UK-based home repairs and improvements company HomeServe has agreed to be taken over by Brookfield Infrastructure Partners in a deal worth £4.08 billion. Brookfield has offered 1,200 pence per share in cash for each HomeServe share. This represents a 71% premium to HomeServe's closing price on March 23, being the last business day before the start of the offer period, and is 14% above Wednesday's closing price of 1,053.65p. The HomeServe directors intend to recommend unanimously that shareholders back the deal. Brookfield Infrastructure is a listed infrastructure company of Toronto- and New York-listed Brookfield Asset Management, which has $725 billion in assets under management.
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Cisco Systems shares tumbled after hours in New York on Wednesday after its top- and bottom-line figures for the third quarter fell short of estimates. In addition, the San Jose, California-based computer networking company cut its annual guidance. In the third quarter ended April 30, revenue increased 0.2% year-on-year to $12.84 billion from $12.80 billion. Revenue fell short of a $13.3 billion estimate cited by CNN. Pretax profit rose 5.8% to $3.80 billion from $3.59 billion. Earnings per share climbed 7.4% to $0.73, but fell short of a CNN-cited forecast of $0.86. Cisco lowered annual guidance, meanwhile. It expects revenue growth between 2% and 3%, lowered from the previous range of 5.5% to 6.5%.
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Italian insurer Generali reported a drop in profit in the first quarter, hurt by lower underwriting profitability. In the first three months of 2022, Trieste-headquartered Generali recorded net profit of €727 million, dropping from €802 million in the same period a year prior. The insurer's combined ratio worsened to 90.4% from 88.0%, holding back profit. Any combined ratio under 100% represents underwriting profit. Operating profit improved to €1.63 billion from €1.61 billion. Generali's gross written premiums increased 6.1% in the first quarter to €22.32 billion from €19.71 billion. It noted Property & Casualty premiums increased 6.4%, while Life premiums were up 6.0%. The firm's solvency ratio stood at 237% at the end of the quarter, rising from 227% at the same point the year prior.
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International Consolidated Airlines Group said it has reached an agreement to order 50 short-haul aircraft from Boeing. The London-based airline said it will buy 25 737-8200 and 25 737-10 jets, plus 100 options. The planes, worth $6.25 billion at list prices, will be delivered between 2023 and 2027 and can be used by any airline in the group for fleet replacement. IAG's airlines include British Airways, Iberia, Aer Lingus, and Vueling. IAG did not disclose the price paid for the planes, but did note it has negotiated a ‘substantial’ discount from the list price of $120 million per B737-8200 and $130 million per B737-10.
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UK postal operator Royal Mail said there is ‘downside risk’ to consensus expectations for the year ahead after registering a drop in annual profit. Revenue for the financial year that ended March 27 rose 0.6% to £12.71 billion from £12.64 billion, with its domestic UK arm registering a 1.6% sales decrease but GLS revenue up 4.4% in sterling terms. However, pretax profit dropped 8.8% to £662 million from £726 million. In its UK unit, adjusted operating profit jumped 21% with the margin up 90 basis points, but European and North American parcel operation GLS reported a 4.5% decline in profit on sterling terms with a 80 basis points margin drop. Royal Mail proposed a final dividend of 13.3 pence, taking its full-year payout to 20p. This is double on the 10p paid out the year before. Looking ahead, it said current adjusted operating profit consensus of £303 million sits within range of potential outcomes but ‘with downside risk’. This would be down sharply on the £758 million posted for the recently ended financial year. ‘Whilst a difficult environment persisted over the last year, with operational challenges caused by Omicron and tight labour markets, we continued to see financial tailwinds from the pandemic, which are now dissipating. We also have clear headwinds as we enter 2022-23, such as weakening GDP and growing inflationary pressures,’ said Chair Keith Williams.
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Scottish Mortgage Investment Trust reported a net asset value total return of minus 13% for the 12 months to March 31, lagging its benchmark, the FTSE All-World Index, which returned positive 13%. ‘There was cause for optimism as the global economy reopened following the initial period of lockdown. However, it did so in a stuttering fashion that brought with it the spectre of higher inflation and rising interest rates. These factors, together with concerns about Chinese regulation and Russia's assault on Ukraine, spread fear amongst markets and significantly reduced the valuations of many growth companies,’ the investment firm said.
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MARKETS
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After tumbling on Wednesday, Wall Street was called for a lower open again on Thursday. The sell-off, which saw the Nasdaq Composite index fall almost 5%, was triggered by retailer Target reporting first-quarter profit ‘well below’ expectations due to surging costs. This followed larger peer Walmart earlier in the week posting an ‘unexpected’ result for the same period, amid inflation and supply chain issues. Target, which fell 25% on Wednesday, was down 1.9% in the New York pre-market on Thursday. Walmart fell 6.8% on Wednesday and was down 0.8% in the pre-market.
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CAC 40: down 2.0% at 6,224.79
DAX 40: down 2.0% at 13,727.41
FTSE 100: down 2.5% at 7,255.44
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Hang Seng: closed down 2.5% at 20,120.68
Nikkei 225: closed down 1.9% at 26,402.84
S&P/ASX 200: closed down 1.7% at 7,064.50
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DJIA: called down 1.3%
S&P 500: called down 1.4%
Nasdaq Composite: called down 1.6%
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EUR: flat at $1.0492 ($1.0497)
GBP: down at $1.2383 ($1.2402)
USD: down at JP¥127.94 (JP¥128.21)
Gold: up at $1,823.03 per ounce ($1,817.50)
Oil (Brent): down at $108.91 a barrel ($109.83)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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China's premier called for greater ‘urgency’ in rolling out measures to support the virus-battered economy, state media reported Wednesday, days after data highlighted the stark impact of Covid-19 restrictions. China the last major global economy sticking to a rigid zero-Covid policy is battling an economic slump due to prolonged virus lockdowns that have constricted supply chains, quelled demand and stalled manufacturing. ‘All localities and departments should step up their sense of urgency, and new measures that can be used should be used,’ Li Keqiang said at a symposium on Wednesday, according to state broadcaster CCTV.
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US President Joe Biden leaves Thursday for South Korea and Japan to cement US leadership in Asia at a time when the White House's attention has been pulled back to Russia and Europe and amid fears of North Korean nuclear tests overshadowing the trip. The visits are being touted as proof that the US is building on recent moves to cement its years-long pivot to Asia, where rising Chinese commercial and military power is undercutting decades of US dominance. But highlighting competing demands from two sides of the world, Biden will meet at the White House with the leaders of Finland and Sweden to celebrate their applications for joining NATO before he boards Air Force One for Seoul. The Democrat is headed to South Korea, then Japan on Sunday to hold summits with the leaders of both countries, as well as joining a regional summit of the Quad a grouping of Australia, India, Japan, and the US while in Tokyo.
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Eurozone construction growth slowed sharply in March. Month-on-month, output was flat in the eurozone after growth of 1.1% in March, figures from Eurostat showed. On an annual basis, production rose 3.3%, a significant slowdown from 8.9% in February.
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G7 partners met in Germany on Thursday hoping to find a solution for Kyiv's budget troubles as the fallout from Russia's invasion of Ukraine continues to roil the global economy. ‘I'm quite optimistic that we will be able at this G7 meeting to raise funding which allows Ukraine to defend itself over the next months,’ German Finance Minister Christian Lindner said at the opening of the meeting in Koenigswinter, near Bonn. The outbreak of the war has blown a hole in Kyiv's finances, with tax incomes having fallen sharply. A ‘double-digit billion euro’ figure was needed to assure Ukraine's ‘liquidity’, Lindner said.
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Turkey has blocked the start of NATO accession talks for Finland and Sweden, NATO sources confirmed to dpa on Wednesday. As a result, NATO's governing body, the North Atlantic Council, was unable to begin the planned accession process straight away. Sweden and Finland formally submitted applications for NATO membership to Secretary General Jens Stoltenberg in an online video ceremony earlier on Wednesday. Turkish President Recep Tayyip Erdogan said that Ankara was unable to accept a proposed enlargement of the alliance that would compromise NATO's own security, reiterating his claims that Sweden and Finland were effectively supporters of terrorism for their alleged support of the banned Kurdistan Workers' Party and the Kurdish People's Defence Units militia in Syria.
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The US reopened its embassy in Kyiv Wednesday after closing it for three months due to the Russian invasion of Ukraine, the State Department said. ‘The Ukrainian people, with our security assistance, have defended their homeland in the face of Russia's unconscionable invasion, and, as a result, the Stars and Stripes are flying over the embassy once again,’ Secretary of State Antony Blinken said in a statement. ‘We stand proudly with, and continue to support, the government and people of Ukraine as they defend their country from the Kremlin's brutal war of aggression.’ Late Wednesday evening, the US Senate also confirmed Bridget Brink, a career foreign service officer, to be the country's new ambassador to Ukraine. The US has not had a permanent Senate-confirmed envoy to Ukraine since 2019, when former president Donald Trump removed Ambassador Marie Yovanovitch from her post.
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The Russian government forecast its own oil and gas production will fall in 2022 due to Western sanctions. Production of oil and oil condensate could fall by about 9% to 475.3 million tonnes, compared to 524 million tonnes in 2021, the Russian Economy Ministry said. Oil exports are expected to stay almost at the same level at 228.3 million tonnes, compared to 231 million tonnes in 2021. However, the level of exports for 2022 was expected to be significantly higher last year. The production of gas and gas condensate may fall to 721 billion cubic metres, down from 764 billion cubic metres last year, Russian news agencies reported. The ministry forecast exports of 185 billion cubic metres in 2022, down from 206 billion cubic metres the year before, again lower than recent forecasts for the current year.
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