TOP NEWS SUMMARY: Yen hits 24-year low ahead of central bank decisions

Writer,

The following is a summary of top news stories Monday.

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COMPANIES

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Sanofi said its Covid-19 booster jab developed alongside GSK delivers a stronger immune response to the Omicron variant than other jabs. The jab produced a significant boost in antibody titers above baseline against multiple variants of concern. ‘Covid-19 keeps evolving and the combination of emergence of variants and waning immunity is likely to lead to the need for additional booster shots, at least in some populations,’ said Thomas Triomphe, executive vice president at Sanofi Vaccines. ‘The Beta variant expresses similar mutations across multiple variants of concern, including Omicron, making it a strong vaccine candidate to confer broad protection against multiple strains of Covid-19.’ Sanofi said over 76% of trial participants saw a more than 10-fold increase in neutralizing antibody levels for the original D614 SARS-CoV-2 strain up to day 15.

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The US announced on Friday that Covid-19 tests will no longer be required for international travellers arriving by air, a major step in the country's gradual lifting of pandemic restrictions. White House Assistant Press Secretary Kevin Munoz confirmed the news on Twitter, with US media saying the measure would end this past weekend after strong lobbying from the travel industry. All passengers had needed to show a negative Covid viral test taken shortly before travel – or proof of having recovered from the virus in the past 90 days – before boarding a flight. Munoz said President Biden's work on vaccines and treatments had been ‘critical’ to easing the travel restrictions, and added that the Centers for Disease Control & Prevention would continue to evaluate Covid data amid a recent rise in cases. Last month, the US crossed the threshold of one million Covid deaths, with Biden acknowledging the ‘unrelenting’ pain of bereaved families, and urging Americans to remain vigilant.

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US electric carmaker Tesla announced a stock split to make its share certificates more affordable for small investors. Tech billionaire Elon Musk's company announced on Friday after the US stock market closed that its board of directors would approve a 1-into-3 split if shareholders approve of the move at their annual meeting in August. Tesla had already announced in March that it was planning a split.

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Australia will pay compensation to French shipbuilder Naval Group in a bid to mend relations with Paris after tearing up a multi-billion-dollar submarine deal last year. Australian Prime Minister Anthony Albanese announced Saturday that Canberra would pay €555 million in compensation. Australia's former government, with the agreement of Albanese's party, scrapped a $66 billion submarine deal with France for conventional submarines and to create a joint security alliance with Britain and the US. The AUKUS alliance, aimed at countering China's power in the Indo-Pacific region, will give Australia access to US technology to build and operate nuclear submarines.

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Go-Ahead said it has received two takeover proposals at terms it ‘would be minded to recommend’ should a firm offer materialise. Go-Ahead shares were 17% higher at 1,412.00 pence each in London on Monday, giving it a market capitalisation of above £600 million. The Newcastle, England-based public transport operator said it has received a takeover proposal from Sydney-listed transport Kelsian and another from a consortium consisting of Kinetic and Globalvia Inversiones. Kinetic is a bus operator in Australia and New Zealand, while Globalvia is a Madrid-based transport infrastructure firm. Kelsian operates transport services in the UK, Singapore and Australia. In May, Kelsian sold its Lea Interchange depot in east London to Stagecoach for £20 million.

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The first branch of the revamped Russian McDonald's opened on Sunday after the US fast food chain exited the country and sold its Russian business. Fifteen branches will open in Moscow and the surrounding area under a new name and logo but in the same locations, with the same staff and almost identical menu items on offer. After more than 30 years, McDonald's shut down its Russian business in March in response to Russian President Vladimir Putin's invasion of Ukraine. The chain had more than 62,000 local employees in the country. Some individual restaurants at airports and train stations will continue to operate under the McDonald's US logo for the time being due to special franchise agreements that are not easily terminated. The new owner is Alexander Govor, who has served as a licensee operating 25 McDonald's restaurants in Siberia since 2015.

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MARKETS

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The yen plunged to its lowest level against the dollar since 1998 on Monday amid the widening interest rate gap between Japan and the US. Japan's currency has been weakening for months, accelerated by the US Federal Reserve's aggressive monetary tightening to tackle soaring inflation. At the same time, the Bank of Japan is sticking with its long-standing monetary easing programme. The increasingly polar-opposite policies have strengthened the dollar, rising above JP¥135 on Monday. It is a level not seen since October 1998 during the Asian currency crisis, and marks a dramatic rise for the US currency from January rates of around JP¥115.

Stock markets also were lower on Monday amid indicators of weak economies and expectations of further interest rate hikes. In New York, the Nasdaq Composite was called to open down more than 3%. The Fed announces its latest decision on Wednesday, followed by the Bank of England on Thursday and BoJ on Friday.

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CAC 40: down 2.2% at 6,048.78

DAX 40: down 2.2% at 13,459.43

FTSE 100: down 1.8% at 7,186.98

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Hang Seng: closed down 3.4% at 21,067.58

Nikkei 225: closed down 3.0% at 26,987.44

S&P/ASX 200: Sydney market closed for holiday.

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DJIA: called down 1.9%

S&P 500: called down 2.4%

Nasdaq Composite: called down 3.1%

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EUR: down at $1.0474 ($1.0518)

GBP: down at $1.2220 ($1.2321)

USD: up at JP¥134.37 (JP¥134.13)

GOLD: down at $1,854.77 per ounce ($1,862.37)

OIL (Brent): down at $120.17 a barrel ($120.90)

(currency and commodities changes since previous London equities close)

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ECONOMICS AND GENERAL

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The UK economy unexpectedly contracted again in April, leaving the Bank of England in a tough spot when it meets later this week. Data from the Office for National Statistics on Monday showed gross domestic product contracted by 0.3% in April on a month before, badly missing FXStreet-cited market consensus of 0.2% growth. The reading also marked a deterioration from March's 0.1% fall. The ONS said April was the first time that all main sectors - services, production and construction - have contributed negatively to a monthly GDP estimate since January 2021.

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The UK trade in goods deficit, excluding precious metals, widened by £10.3 billion to £61.5 billion in the three months to April compared with the three months to January. Exports to the EU increased for the third consecutive month in April and are at the highest level since records began, the ONS noted.

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A leading UK business group has downgraded its outlook for economic growth amid calls for government action to avoid a recession. The CBI downgraded its growth outlook to 3.7% for this year, from 5.1% previously, and just 1% in 2023, from 3%. The CBI said it believes inflation is expected to remain high into the Autumn, rising to 8.7% in October, leading to a ‘historic squeeze’ in household incomes, which will hit consumer spending. Rain Newton-Smith, CBI chief economist, said: ‘This is a tough set of statistics to stomach. War in Ukraine, a global pandemic, continued strains on supply chains – all preceded by Brexit – has proven to be a toxic recipe for UK growth.’

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The UK government on Monday will introduce legislation to unilaterally rip up post-Brexit trading rules for Northern Ireland, despite the potential for a trade war with the EU. London says it still prefers a negotiated outcome with the EU to reform the Northern Ireland protocol, whose provisions have become anathema to pro-UK unionists in the divided territory. But absent a deal through dialogue, the bill would take effect to override Britain's EU withdrawal treaty – although the government insists it is not breaking international law. Northern Ireland Secretary Brandon Lewis said Sunday that the protocol was disrupting trade and had crippled the territory's power-sharing government, due to unionist objections. ‘So it's right that we repair that,’ he said, adding that the need to protect a 1998 peace agreement in Northern Ireland had ‘primacy’ over the protocol.

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French President Emmanuel Macron's centrist alliance was in danger of falling short of a majority after the first round of parliamentary elections on Sunday saw a surge in support for a new left-wing coalition. Macron's 'Ensemble' alliance ran neck-and-neck with the left-wing NUPES grouping in Sunday's first round, with the former netting 25.75% of the popular vote compared to the latter's 25.66%. Extrapolating from these figures, four polling firms projected that Ensemble would win 225-295 seats in the decisive second round of voting next Sunday, possibly short of a majority of 289 but comfortably the biggest group. ‘We have a week ahead of us to mobilise,’ Prime Minister Elizabeth Borne told reporters. ‘One week to convince, one week to obtain a powerful and clear majority.’

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European Commission President Ursula von der Leyen says member states face a ‘historic decision’ at a June 23 to 24 summit on whether to grant Ukraine membership status. ‘I hope that in 20 years, when we look back, we will be able to say that we did the right thing,’ von der Leyen told journalists on her way back from a visit to Kiev. The challenge would be to emerge from the EU summit later in June with a unified position ‘that reflects the scope of this historic decision.’ Von der Leyen had travelled to Kiev earlier in the week to discuss with President Volodymyr Zelensky, among other things, remaining points of contention in Ukraine's application for membership.

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China will ‘fight to the very end’ to stop Taiwanese independence, the country's defence minister vowed Sunday, stoking already soaring tensions with the US over the island. The superpowers are locked in a growing war of words over the self-ruled, democratic island, which Beijing views as part of its territory awaiting reunification. Frequent Chinese aircraft incursions near Taiwan have raised the diplomatic temperature, and on Saturday US Defense Secretary Lloyd Austin accused Beijing of ‘destabilising’ military activity, in a speech to the Shangri-La Dialogue security summit. Defence Minister Wei Fenghe hit back in a fiery address at the same event, saying Beijing had ‘no choice’ but to fight if attempts are made to separate Taiwan from China.

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A bipartisan group of US senators on Sunday proposed steps to curb gun violence following devastating mass shootings in Texas and New York, but the limited measures fall far short of the president's calls for change. The shootings in May – one at a Texas elementary school that killed 19 young children and two teachers, and another at a New York supermarket that left 10 Black people dead – have piled pressure on politicians to take action. But Republicans lawmakers, who have repeatedly blocked tougher measures, are still resisting major changes to gun regulations, instead pointing to mental health issues as the root of the problem. The new proposals include tougher background checks for gun buyers under 21, increasing resources for states to keep weapons out of the hands of people deemed a risk, and adding domestic violence convictions and restraining orders to the national background check database.

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