TOP NEWS SUMMARY: UK PM feels the heat; Twitter bidder gets cold feet

Writer,

The following is a summary of top news stories Tuesday.

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COMPANIES

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Elon Musk threatened to withdraw his bid to buy Twitter, accusing the social media platform of failing to provide data on fake accounts. A document filed with securities regulators on Monday charged Twitter of being in ‘clear material breach’ of its ‘obligations under the merger agreement’ due to the lack of information regarding bots. ‘Musk reserves...his right not to consummate the transaction,’ the filing continued.

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Pearson said it has agreed to sell its local K12 Courseware businesses in Italy and Germany to European K12 learning services company Sanoma for £163 million, which will be paid in cash. Under the terms, Pearson will also enter into an agreement with Sanoma for it to distribute Pearson's English Language Teaching products in Italy. The sale was part of the education materials company's ongoing strategic review, which Pearson said it continues to ‘make good progress’ in the remaining areas of the review.

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UK waste management firm Biffa said it has received a series of ‘unsolicited and indicative’ proposals from private equity firm Energy Capital Partners. ECP's proposal is in respect of a possible offer at a price of 445 pence per Biffa share in cash, valuing the company at around £1.35 billion. The offer is a 37% premium to Biffa's closing price of 325p on Monday. Biffa said its board has concluded that should a firm offer be made on the same financial terms as the proposal it would be ‘minded to recommend it’ to Biffa shareholders. Turning to current business, Biffa said it continues to trade well, with underlying performance being in line with the board's expectations. Volumes have remained at expected levels, and Biffa continues to mitigate inflationary pressures, it added.

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Ted Baker said it was informed by its preferred bidder late Monday that it does not intend to proceed with an offer for the fashion retailer. The bidder indicated that its reason for not proceeding was not linked to its due diligence review of the company, Ted Baker explained. The London-based seller of clothing and accessories said it will now go back and look at other proposals received as part of its formal sale process, but there can be no certainty that an offer will be made.

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JD Sports Fashion, Rangers Football Club and the latter's branded clothing manufacturer have provisionally been found guilty of price-fixing, the UK's competition watchdog said. JD Sports said it plans to recognise a £2 million provision in its financial statements for the year ended January 29. The figure is the athleisure retailer's ‘best estimate’ for the liabilities involved with the matter, including legal costs. JD Sports, Rangers and LBJ Sports Apparel, which trades as Elite Sports, broke ‘competition law by fixing’ prices for replica kit of the Scottish football club from September 2018 ‘until at least’ July 2019, the Competition & Markets Authority said.

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Apple users will be able to edit and even recall recently sent messages when the next version of its iPhone software is released later this year, the company has announced. The update to the Messages app was one of dozens confirmed by the company at its annual Worldwide Developer Conference event in California. The electronics giant announced a new, redesigned MacBook Air laptop and a new MacBook Pro, both of which would house the second generation of Apple's own-built computer chip, the M2, which the firm says dramatically increases power and performance. WWDC is used each year to preview the new versions of software that power Apple's most popular devices – the iPhone, Apple Watch, iPad and Mac computers. The software will also include an update to Apple Pay called Apple Pay Later, which the company said would enable users to split the cost of an Apple Pay purchase into four payments split over six weeks with no interest or additional fees to be paid – which is being introduced in the US only at first.

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Stellantis said FCA US, its wholly-owned subsidiary, has agreed to a settlement that resolves a US Department of Justice criminal investigation involving 101,482 vehicles equipped with second-generation EcoDisel V-6 engines. The agreement includes a guilty plea, a fine of $96.1 million, and the forfeiture of $203.6 million in gains derived from the conduct. Stellantis had set aside approximately €266 million for this matter. Stellantis said this is sufficient to cover the forfeiture and penalty imposed by the plea agreement.

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Longtime Starbucks boss Howard Schultz is delaying his second departure from the coffeehouse chain until late March 2023 rather than this fall as originally announced. Having stepped down four years earlier, in 2018, Schultz returned in April to serve as interim CEO during the search for a new leader. He said at a quarterly results presentation in early May that he intended to leave the post at the end of this year. But the company said in a statement Monday that the board of directors has reached an agreement with the 69-year-old for him to stay on as the company's head until the end of March 2023.

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MARKETS

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Stock markets were trading lower on Tuesday after a larger-than-expected half-point interest rate hike by the Australian central bank served as a reminder of tightening monetary policy globally. ‘The RBA's move helped to push global bond yields higher as it cements the view that central banks will continue to tighten policy,’ said Marshall Gittler, head of investment research at BDSwiss. ‘Fears of a recession are fading, meaning that central banks can continue to tighten policy. Moreover, inflation is proving a bit more intractable than some people had expected – we don’t hear much about 'transitory' anymore.’

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CAC 40: down 0.7% at 6,502.66

DAX 40: down 0.9% at 14,518.66

FTSE 100: marginally higher, up 1.42 points at 7,609.64

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Hang Seng: closed down 0.6% at 21,531.67

Nikkei 225: closed up 0.1% at 27,943.95

S&P/ASX 200: closed down 1.5% at 7,095.70

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DJIA: called down 0.4%

S&P 500: called down 0.4%

Nasdaq Composite: called down 0.5%

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EUR: soft at $1.0680 ($1.0688)

GBP: down at $1.2500 ($1.2528)

USD: up at JP¥132.65 (JP¥131.61)

GOLD: up at $1,847.05 per ounce ($1,844.10)

OIL (Brent): firm at $119.55 a barrel ($119.27)

(currency and commodities changes since previous London equities close)

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ECONOMICS AND GENERAL

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UK Prime Minister Boris Johnson is set to meet his Cabinet on Tuesday as he seeks to keep his premiership afloat by putting a bruising confidence ballot firmly behind him. Johnson insisted he had secured a ‘decisive’ victory despite 148 of his own members of Parliament voting to oust him on Monday night, arguing the UK government could now ‘move on’ and focus on what ‘really matters to people’. He also poured cold water on the prospect of a snap election, saying he was ‘certainly not interested’ in the idea. But while allies of Johnson have insisted his ballot victory should draw a line under the question of his leadership, Labour is moving to apply further pressure on the PM by pushing a Commons vote on standards. Tory MPs voted by 211 to 148 in support of Johnson on Monday, but the scale of the revolt against his leadership left him wounded. When Theresa May faced a confidence vote in 2018 she secured the support of 63% of her MPs, but was still forced out within six months. For Johnson, this was 59%, as 41% of his MPs voted against him, a worse result than for May.

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The UK services sector saw its weakest performance for over a year in May as rising inflation dented customer demand, according to S&P Global. The S&P Global-CIPS UK services purchasing managers' index printed 53.4 points in May, up from the preliminary reading of 51.8, but down sharply from 58.9 in April. The latest reading was the worst final tally since February 2021. The S&P Global-CIPS UK composite PMI print was 53.1 in May, down sharply from 58.2 in April. Last week, the manufacturing PMI was reported at 54.6 points in May, unchanged from the earlier flash estimate and down from 55.8 in April.

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UK retail sales contracted last month as consumers feel the squeeze from the country's cost-of-living crisis, the latest British Retail Consortium-KPMG retail sales monitor showed on Tuesday. On a total basis, sales fell 1.1% in May on a year before. This compared to a surge of 28% in May 2021, though against a lockdown-marred comparison period in 2020. May 2022's result was below the 3-month average growth of 0.7% and the 12-month average growth of 4.1%. The latest data points to a downwards trend since the start of 2022, with January's sales growth of 12% slipping to a decline of 0.3% by April.

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German industrial orders fell for the third month in a row in April, as Russia's war in Ukraine dampened the outlook for Europe's largest economy. New orders fell by 2.7% over the previous month, according to figures provided by the economy ministry. The renewed drop was ‘primarily due to the escalation of the Ukraine conflict’, the ministry said in a statement. Overall, incoming orders were 6.2% below their level of a year ago, when the coronavirus pandemic was weighing more heavily on industry. The fall was seen particularly in capital goods, used in production, which decreased 4.3% compared with the previous month. Orders for consumer goods were down 2.6%, while those of intermediate goods dipped 0.3%.

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Eurozone construction activity declined in May, as demand was hit by disruptions in the supply chain and output suffered from higher raw material prices. The S&P Global eurozone construction total activity index fell to 49.2 in May from 50.4 in April, signalling a renewed downturn and the sharpest contraction for 15 months.

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In Germany, the headline construction PMI was below the neutral 50 mark for the second month in row in May, slipping to a nine-month low of 45.4 points from 46.0 in April.

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In France, the headline construction activity index improved slightly in May to 50.9 points from 50.7 in April, and marked a second successive expansion.

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Construction activity in Italy grew at a slower pace in May, with an increase in material prices and supply chain blockages hurting the sector, results from a survey of S&P Global showed on Tuesday.

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In Italy, the construction PMI fell to 54.3 points in May from 59.0 in April, marking the 16th consecutive month of growth, albeit the slowest in the current sequence.

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Australia's central bank hiked interest rates, warning as well of more increases as officials try to rein in ‘significantly’ high inflation. The Reserve Bank of Australia upped its main lending rate by half a percentage point to 0.85%. It also increased the interest rate on exchange settlement balances by 50 basis points to 75 basis points. Governor Philip Lowe pointed to ‘significant’ inflation rises as the reason behind the bank's move.

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US President Joe Biden will suspend tariffs for two years on solar panel imports from four countries and invoke a key power to compel domestic manufacture of clean energy technology, the White House said. The moves are aimed at boosting renewable capacity and combating climate change, a priority for the president whose green ambitions have met with mixed success. Duties will be lifted on some solar parts from Cambodia, Malaysia, Thailand, and Vietnam – but not China – as a ‘bridge’ to ensure the US has access to sufficient parts to meet electricity needs while domestic capacity scales up.

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The White House on Monday defended plans for Biden to meet with Saudi Arabia's crown prince, despite US intelligence determining that he ordered the murder of dissident journalist Jamal Khashoggi. Officials said that while Biden's trip to Saudi Arabia was not yet confirmed, the expected visit will serve US national interests, regardless of 36-year-old Crown Prince Mohammed bin Salman's involvement in the 2018 murder of Khashoggi, a columnist for The Washington Post. ‘This trip to Israel and Saudi Arabia – when it comes – would be in the context of significant deliverables for the American people in the Middle East region,’ White House Press Secretary Karine Jean-Pierre told reporters.

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Biden's plan to reboot US engagement with Latin America – especially on critical topics like migration -- took a hit after key partner Mexico snubbed a regional summit opening Monday in Los Angeles to protest Washington's exclusion of three far-left countries. What was meant to be a week-long showcase of cooperation risks becoming a display of division, underlining diminishing US clout over a region where Washington's long-time economic and diplomatic influence faces a growing Chinese challenge. A senior White House official confirmed that Cuba, Nicaragua and Venezuela were barred from the Summit of the Americas due to ‘lack of democratic space and the human rights situations.’ In response, Mexican President Andres Manuel Lopez Obrador said he too would stay away.

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