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The following is a summary of top news stories Thursday.
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COMPANIES
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British American Tobacco maintained its annual revenue guidance but still expects global tobacco industry volumes to shrink in 2022. The company said its transformation continues at pace, with strong revenue and volume growth in all three New Categories driving share gains across key markets. BAT maintained its 2022 guidance for revenue growth of 2% to 4% at constant currency and mid-single-figure adjusted diluted earnings per share growth at constant currency. At current foreign exchange rates, BAT expects a translation tailwind of 2% on adjusted diluted earnings per share growth for the half year and 5% for all of 2022. Still, BAT flagged that the global tobacco industry volume is now expected to shrink by 3% in 2022, worse than the 2.5% decline previously forecast, due to the continuing global uncertainty over the ongoing Ukraine and Russia war.
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South Africa-based private hospital operator Mediclinic International said it has knocked back an unsolicited offer from a consortium that includes Johannesburg-listed investment firm Remgro. Mediclinic said the offer - which was made by SAS Shipping Agencies Services - came in on May 26 and was for 460 pence per share, plus Mediclinic's proposed final dividend for financial 2022 of 3p. Mediclinic shares were up 4.1% at 442.20p in London on Thursday. Remgro noted that Mediclinic's closing share price on May 25, the day before its proposal was made, was 373p. SAS Shipping Agencies Services is a consortium comprising Remgro and MSC Mediterranean Shipping Co. Remgro currently holds a 45% stake in Mediclinic. ‘The board of Mediclinic (excluding the Remgro representative) considered the proposal, together with its advisers, and concluded that it significantly undervalued Mediclinic and its future prospects,’ Mediclinic said.
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UK transport firm FirstGroup said it has rejected a possible takeover offer from I Squared Capital Advisors, saying the firm cash component undervalues the company and the contingent component doesn't give shareholders enough certainty. Late last month, FirstGroup said it had received a series of offers from I Squared, the last being 118 pence per share in cash, plus 45.6p more contingent on the proceeds of FirstGroup's recent disposals of its First Transit and Greyhound businesses in the US. FirstGroup shares were down 0.5% at 136.00p Thursday. It has a market capitalisation of just above £1 billion. Having considered the proposal, FirstGroup said the cash component undervalues its ‘continuing operations and future prospects’, while the contingent right doesn't provide shareholders with ‘sufficient certainty’.
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Twitter will yield to Elon Musk's demand for internal data central to a standoff over his troubled $44 billion bid to buy the social media platform, the Washington Post reported on Wednesday. The news comes just days after the Tesla chief threatened to back out of his deal to purchase Twitter, accusing it of failing to provide data on fake accounts. The Post cited an unnamed source familiar with the negotiations as saying Twitter's board decided to let Musk access its full ‘firehose’ of internal data associated with the hundreds of millions of tweets posted daily at the service. ‘This would end the major standoff between Musk and the board on this hot button issue which has paused the deal,’ Wedbush analyst Dan Ives said in a tweet. Twitter chief executive Parag Agrawal has said that fewer than five percent of accounts active on any given day at Twitter are bots, but that analysis cannot be replicated externally due to the need to keep user data private.
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German carmaker Volkswagen opened a battery laboratory at its US plant in Chattanooga, Tennessee on Wednesday. Systems for electric cars are to be tested and further developed there, regional boss Scott Keogh announced. Volkswagen already operates a similar specialized centre in the German city of Braunschweig, for example. Another German city, Salzgitter, will also be a hub for all things related to electric car batteries. Construction on a planned factory producing battery cells is due to start there in July. VW chief executive Herbert Diess wants to significantly expand the market share in the US in the coming years. A higher share of electric-powered vehicles should help realise this strategy. The ID.4 compact sport utility vehicle is expected to be built in Chattanooga from autumn onwards - the model has so far been produced in Zwickau and Emden in Germany as well as at two locations in China. The aim is to establish production as locally as possible in the three major regions of North America, East Asia and Europe.
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MARKETS
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The euro and European stock markets were trading lower near midday on Thursday, ahead of a policy announcement by the European Central Bank. The ECB announces its latest monetary policy decision at 1345 CET on Thursday. This will be followed by a press conference with ECB President Christine Lagarde at 1430 CET. The bank is expected to start to end its bond-buying stimulus programme and signal that interest rates will start to rise starting with the July meeting. A hike would be the ECB's first since 2011.
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CAC 40: down 0.1% at 6,442.05
DAX 40: down 0.4% at 14,382.52
FTSE 100: down 0.4% at 7,565.22
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Hang Seng: closed down 0.7% at 21,869.05
Nikkei 225: closed marginally higher, up 12.24 points at 28,246.53
S&P/ASX 200: closed down 1.4% at 7,019.70
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DJIA: called up 0.3%
S&P 500: called up 0.4%
Nasdaq Composite: called up 0.4%
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EUR: down at $1.0710 ($1.0737)
GBP: down at $1.2520 ($1.2545)
USD: flat at JP¥133.90 (JP¥133.94)
Gold: down at $1,849.77 per ounce ($1,858.48)
Oil (Brent): up at $123.47 a barrel ($122.00)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Shanghai will lock down a district of 2.7 million people on Saturday to conduct mass coronavirus testing, city authorities said, as the Chinese metropolis struggles to fully emerge from punishing curbs. The city eased many restrictions last week, after confining most of its 25 million residents to their homes since March as China battled its worst Covid outbreak in two years. But the lockdown was never fully lifted, with hundreds of thousands in China's biggest city still restricted to their homes and multiple residential compounds put under fresh stay-home orders. The southwestern district of Minhang, home to 2.7 million people, will be placed under ‘closed management’ on Saturday morning and all residents will be tested, district authorities said in a social media post on Thursday.
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China's exports rebounded strongly in May, with factories restarting and supply chains untangling as Shanghai slowly emerged from a gruelling lockdown. Strict movement restrictions across multiple cities kept consumers at home and battered the economy, dragging retail sales, factory output and export growth to their lowest levels in about two years. But as restrictions have eased, overseas shipments from the world's second-biggest economy bounced back 17% on-year in May, up from 3.9% in April, according to customs data released on Thursday. Imports rose 4.1% last month, according to customs data, also beating expectations. China's trade surplus was around $79 billion last month, up from $51 billion in April, the Customs Administration said in a statement.
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In the face of strong conservative opposition, European Parliament lawmakers on Wednesday narrowly voted to back a European Commission proposal for a total ban on new CO2-emitting vehicles by 2035. The Commission last year unveiled plans to stop the sale of vehicles using internal combustion engines as part of an ambitious climate target to cut emissions by more than half over this decade and 90% by 2035. The measure passed by 339 votes to 249 with 24 abstentions at a session in Strasbourg in practice limiting future sales to emissions-free all-electric models. Cars currently account for 12% of all CO2 emissions in the 27-member EU bloc, while transportation overall accounts for around a quarter. The conservative European People's Party, the parliament's biggest group of lawmakers, had sought to push a compromise that would have diluted the proposals and allowed sales of hybrid vehicles to continue. Their amendment was narrowly defeated while an ambitious attempt by the Greens to bring the measure deadline forward to 2030 also failed.
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Economic growth in the UK is expected to ‘grind to a halt’ this year before falling briefly into negative territory, a business group is warning. The British Chambers of Commerce said global events continue to weigh heavily on the economy, as it downgraded its expectations for growth for 2022 to 3.5%, from a previous 3.6%. The BCC said it now expects inflation to reach 10% in the final quarter, ‘comfortably outpacing’ average earnings growth. Business investment is set to be hit, with 1.8% growth predicted this year, down from 3.5% in the previous forecast, said its report. BCC director of policy Alex Veitch said: ‘Our latest forecast indicates that the headwinds facing the UK economy show little sign of reducing, with continued inflationary pressures and sluggish growth. ’The war in Ukraine came just as the UK was beginning a Covid recovery, placing a further squeeze on business profitability.‘
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Demand from prospective home buyers in the UK fell in May, in what could be a side-effect of the rising cost of living and higher interest rates, according to surveyors. The Royal Institution of Chartered Surveyors said property professionals reported that new buyer inquiries fell in May, with a net balance of 7% reporting falls rather than rises. This was a turnaround from April when a balance of 8% reported rises in buyer inquiries rather than falls. Some professionals put this down to some buyers tightening their belts as the cost-of-living has an effect, and May's result brings to an end eight months in a row of positive results for new buyer inquiries.
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The White House said it expects a key US consumer price reading to show the inflation rate was still ’elevated‘, following guarded hopes Friday's data will show that rising prices had cooled. ’We expect the headline inflation number to be elevated,‘ Press Secretary Karine Jean-Pierre told reporters Wednesday on Air Force One.
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Citing equity market trading defects revealed in last year's GameStop saga, the US securities regulator endorsed a broad revamp of the stock market trading system. In a speech billed as a first step towards a possible update in the rules likely to rile financial firms, Gary Gensler, chair of the Securities & Exchange Commission, said he favored restructuring the system in order to better protect retail investors. ’It's not clear...that our current national market system is as fair and competitive as possible for investors,‘ Gensler said in a virtual address at a conference hosted by Piper Sandler. The speech marks the SEC's latest action in response to frenzied trading in early 2021 during which extreme volatility in GameStop, AMC Entertainment and a handful of other equities rocked the market and led brokerages to implement sudden trading restrictions that angered investors and spurred congressional probes. Gensler said the current system routes ’the vast majority‘ of stock trades orders to electronic trading wholesalers such as Citadel Securities and Virtu Financial.
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