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The following is a summary of top news stories Friday.
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COMPANIES
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BHP said its shareholders will receive an in specie dividend in the form of new Woodside Petroleum shares, following the merger of its oil and gas portfolio with Woodside. The London and Melbourne-based mining firm said eligible shareholders will receive one newly issued Woodside share for every 5.5340 BHP shares they hold at the close of business on Thursday next week. BHP will receive 914.8 million Woodside shares in total as part of the merger. On Thursday, Woodside shareholders approved its merger with BHP's oil and gas business, with the deal set to complete on June 1. It will create one of the 10 largest independent energy producers in the world. Woodside shareholders will hold 52% of the new company, while 48% will be held by BHP shareholders.
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Zurich Insurance will divest from its Russian operations and exit the Russian market, it said. The Swiss insurer will sell Zurich Russia to 11 members of the unit's team, who will operate the business independently under a different brand name. Zurich Insurance will no longer conduct business operations in Russia. Its Russian business is focused on property and casualty insurance, with 0.3% of the Russian non-life insurance market. Its main activities consist of supporting Zurich's international customers with their activities in the country.
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Tokio Marine, a Tokyo-based insurer, said income rose 7.4% to JP¥5.864 trillion - around $45.80 billion - in the financial year that ended March 31 from JP¥5.461 trillion. Ordinary profit doubled to JP¥567.41 billion from JP¥266.74 billion, as net income attributable to parent jumped to JP¥420.48 billion from JP¥161.80 billion. The company declared a final dividend of JP¥135 per share, bringing full year total to JP¥255, up year-on-year from JP¥235. For financial 2023, guides total payout of JP¥300. It also announced plans to repurchase its shares for an amount of up to JP¥50 billion or up to 12.5 million shares, which is around 1.8% of the total.
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Croda International backed its full-year forecasts following a strong start to 2022 which saw the firm ‘successfully’ mitigate inflation pressures. The Yorkshire, England-based chemicals maker recorded continued sales and profit growth across the business and said it has continued to recover significant input cost inflation. Demand was particularly strong in North America and Asia, Croda said. ‘Notably, April sales in China were ahead of the prior year despite local Covid-19 lockdowns,’ it said. By division, the Consumer Care unit saw robust demand, Croda said,while there was also ‘good growth’ in Beauty Actives, Beauty Care, Home Care, and Fragrances & Flavours.
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Compagnie Financiere Richemont reported a surge in annual profit and revenue, with double-digit sales growth across all business areas, regions, and channels. The Swiss luxury goods firm reported pretax profit of €2.58 billion in the year ended March 31, up 70% from €1.51 billion the previous year. Revenue improved by 46% to €19.18 billion - an all-time high, Richemont said - from €13.14 billion, with double-digit growth across all business area, regions and channels. Momentum is particularly noted in retail and the Americas. Sales in the Americas grew 77% against the previous year, followed by the Middle East & Africa with 53% growth and Europe with 51%.
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Ross Stores posted a first quarter sales fall, heaping more misery on the US retail sector, have a string of poorly-received results this week. In the first quarter ended April 30, the company's sales fell 4.1% year-on-year to $4.33 billion from $4.52 billion. Its pretax profit declined 28% to $449.5 million from $623.6 million a year earlier. The company is cautious about its second quarter. The company expects same store sales for the second quarter to fall between 4% and 6%, swinging from a 15% jump a year earlier.
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Applied Materials reported a double-digit rise in profit and sales for the second quarter of its financial year, attributed to strong demand for the company's products and services. For the three months ended May 1, the Santa Clara, California-based semiconductor manufacturer posted net income of $1.54 billion, up 15% from $1.33 billion the same period a year before. Diluted earnings per share meanwhile rose 22% to $1.74 to $1.43, on net sales which grew 12% year-on-year to $6.25 billion from $5.58 billion.
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MARKETS
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Stock markets were rising on Friday, trying to end a volatile week on a positive note. Investors took confidence from an interest rate cut by the Chinese central bank, suggesting authorities will take steps to keep the world's second largest economy growing.
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CAC 40: up 1.2% at 6,349.14
DAX 40: up 1.9% at 14,141.91
FTSE 100: up 1.9% at 7,443.69
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Hang Seng: closed up 3.0% at 20,717.24
Nikkei 225: closed up 1.3% at 26,739.03
S&P/ASX 200: closed up 1.2% at 7,145.60
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DJIA: called up 1.0%
S&P 500: called up 1.2%
Nasdaq Composite: called up 1.7%
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EUR: down at $1.0577 ($1.0590)
GBP: down at $1.2483 ($1.2503)
USD: up at JP¥128.26 (JP¥127.40)
Gold: down at $1,845.13 per ounce ($1,848.44)
Oil (Brent): up at $112.12 a barrel ($110.05)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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China announced it will cut a key interest rate in a boost to home buyers and debt-mired developers as the country's economy is slowed by Covid-19 restrictions in major cities. Prolonged virus lockdowns have constricted supply chains, quelled demand and stalled manufacturing in the last major economy welded to a zero-Covid approach to the pandemic. The five-year loan prime rate on which many lenders base their mortgage rates was trimmed to 4.45% from 4.6%, China's central bank said.
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Japan's core consumer prices posted their biggest jump in seven years in April, official data showed Friday, as global commodity prices soared and the yen slumped against the dollar. The core consumer price index, which excludes fresh food, jumped 2.1% year-on-year, according to figures released by the internal affairs ministry. It was the first time since March 2015 that the figure has breached the 2.0% set by the Bank of Japan as its long-term inflation target. The reading, against market expectations of 2.0%, is the eighth consecutive monthly increase following a 0.8% rise in March. And excluding energy, prices were up 0.8% in April, against market expectations of a 0.7% rise.
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US President Joe Biden arrived in South Korea on Friday, his first Asia trip as US leader, aiming to cement ties with regional security allies as concern over a North Korean nuclear test grows. Biden wants the trip to build on recent moves accelerating a years-long US pivot to Asia, where rising Chinese commercial and military power is undercutting Washington's dominance. He will receive a warm welcome from South Korea's new staunchly pro-US President Yoon Suk-yeol, who took office last week, but there is growing concern North Korea's unpredictable leadership could conduct a nuclear test during Biden's visit to the region. Despite a spiralling Covid outbreak, Pyongyang's ‘preparations for a nuclear test have been completed and they are only looking for the right time,’ South Korean lawmaker Ha Tae-keung said after being briefed by Seoul's spy agency.
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Biden's nominee for the role of the top Federal Reserve banking cop on Thursday downplayed the central bank's influence over climate change policies, an issue that torpedoed the US president's first choice for the role. Michael Barr, a former Treasury official who worked on banking reform and the creation of the consumer protection agency in the wake of the 2008 global financial crisis, assured legislators he would not try to steer financing away from fossil fuel companies. Senate Republicans blocked a vote on Sarah Bloom Raskin for the post of Fed vice chair for supervision, after she became a lightning rod for critics who said she was hostile to the oil industry.
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Congress approved a $40 billion aid package for Ukraine Thursday, the latest tranche of US assistance under President Biden's promise of unwavering support for Kyiv in its fight against Russia's invasion. The vote was an unusually bipartisan move for harshly divided Washington. ‘Aid for Ukraine goes far beyond charity,’ Republican Senate Minority Leader Mitch McConnell said. ‘The future of American security and core strategic interests will be shaped by the outcome of this fight,’ he said ahead of the vote.
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Russian Defence Minister Sergei Shoigu said Moscow was nearing full control of the separatist region of Lugansk in eastern Ukraine. ‘The liberation of the Lugansk People's Republic is nearing completion,’ Shoigu said at a meeting in remarks carried by Russian news agencies. He also said that 1,908 Ukrainian soldiers have surrendered at the besieged Azovstal steel plant in the port city of Mariupol, which is under Moscow's control.
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China hit out at Ottawa for blocking Chinese telecommunications equipment makers Huawei and ZTE from Canadian 5G networks, describing the ban as ‘groundless’ ban and based on spurious security risks. Canada's long-awaited move follows the US and other key allies, and comes on the heels of a diplomatic row between Ottawa and Beijing over the detention of a senior Huawei executive on a US warrant, which has now been resolved. ‘China is firmly opposed to this,’ foreign ministry spokesman Wang Wenbin told reporters of the 5G block, adding Beijing would ‘take all necessary measures’ to protect Chinese companies. ‘This move runs counter to market economy principles and free trade rules,’ he added. Canadian Industry Minister Francois-Philippe Champagne made the announcement on Thursday of the country's ‘intention to prohibit the inclusion of Huawei and ZTE products and services in Canada's telecommunication systems.’
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China has lifted a ban on Canadian canola imports, a Canadian official said Thursday, calling it ‘very good news’ for producers that Ottawa argued had been caught up in a diplomatic row. ‘We got the news yesterday from the Chinese authorities that our Canadian canola can go to China,’ Agriculture Minister Marie-Claude Bibeau said. ‘We had two big companies who were suspended for a while, so it's very good news for our producers,’ she told reporters in Ottawa. Beijing had imposed the ban on Viterra Inc and Richardson International in March 2019 as tensions flared between Ottawa and Beijing, saying harmful organisms had been detected in their canola shipments.
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Rules against overspending by EU governments will remain suspended through 2023, extending a pandemic-era reprieve because of the war in Ukraine, sources said on Thursday. The EU suspended the public spending rules for national governments in March 2020 as the bloc sank into its deepest recession since World War II because of Covid-19 restrictions. Known as the Stability & Growth Pact, the EU rules limit deficit spending at three percent of a country's overall economy and debt at 60%. The pact was supposed to be reactivated on January 1, 2023, with the return of solid growth, but Russia's invasion of Ukraine has changed the situation, sources said.
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German producer prices jumped more than a third in April on an annual basis, figures from Destatis showed. April's 34% factory price surge was the highest ever annual increase, Destatis said. In March, the producer price index had increased 31%. Energy prices as a whole were up 87% year-on-year, largely due to natural gas prices. Stripping out energy costs, the producer price index rose just 16%. Month-on-month, prices rose 2.8%, and this marked a slowdown from growth of 4.9% in March.
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Industrial production in Switzerland continued its growth trajectory in the first quarter of the year, according to provisional data. Industrial production in the three months to April 1 grew by 7.9% compared to the same period a year before, according to the country's Federal Statistics Office. The figure shows annual growth sped up slightly from 7.3% annual rise in the previous quarter. However, the growth was quite uneven during the period, with production up by 5.1% in January, by 15% in February and by 4.2% in March.
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UK retail sales fared better-than-hoped in April against a backdrop of weakening consumer confidence. Retail sales volumes rose 1.4% in April on a month before, figures from the Office for National Statistics showed, reversing a month-on-month fall of 1.2% in March. This was driven by food store sales, which rose 2.8%, largely due to higher spending on alcohol, tobacco and confectionery in supermarkets. Consensus, according to FXStreet, had anticipated a decline of 0.2% in April. Heather Bovill, deputy director for Surveys & Economic Indicators at the ONS, noted that along with an uplift for supermarkets, off-licenses also reported a boost, ‘possibly due to people staying in more to save money’. While retail sales picked up in April, she cautioned that the figures ‘still show a continued longer term downward trend’. Year-on-year, sales tumbled 4.9% in April, after growth of 1.3% in March. However, this was not as bad as the 7.2% drop forecast by analysts.
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GfK said its long-running UK consumer confidence monitor dropped by two points to minus 40 in May, the lowest score since records began in 1974. ‘May's result is one point lower than the previous record set in July 2008 when the headline score plunged to -39. This means consumer confidence is now weaker than in the darkest days of the global banking crisis, the impact of Brexit on the economy, or the Covid shutdown,’ said Joe Staton, client strategy director at GfK. In May 2021, the figure stood at just minus 9. ‘Even the Bank of England is pessimistic, with Governor Andrew Bailey this week offering no hope of tackling inflation,’ said GfK's Staton. ‘The outlook for consumer confidence is gloomy, and nothing on the economic horizon shows a reason for optimism any time soon.’
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Interest rates might need to rise further in the future as the economy is hit by high levels of inflation, the Bank of England's chief economist has said. Huw Pill said the 9% inflation rate the highest in 40 years is a ‘very uncomfortable situation’ for decision-makers at the bank. In a speech to the Association of Chartered Certified Accountants in Wales, he said the tightening of monetary policy which means higher interest rates ‘still has further to run’. Pill is a member of the Bank's Monetary Policy Committee, which sets the base rate used to decide the interest rates charged on mortgages and other loans.
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