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The following is a summary of top news stories Wednesday.
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COMPANIES
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Parker-Hannifin said UK Secretary of State for Business, Energy & Industrial Strategy Kwasi Kwarteng is ‘minded to accept’ its proposed undertakings on competition and national security matters to allow its acquisition of defence contractor Meggitt. Late Tuesday, the UK government said Parker-Hannifin, a Cleveland-Ohio based engineering and aerospace company, has addressed competition and national security concerns over its £6.3 billion takeover of its Coventry, England-based peer. ‘The business secretary is minded to accept undertakings offered by Parker-Hannifin to address the concerns. This decision follows advice from the Ministry of Defence and the Competition & Markets Authority,’ the UK government said. The government added that Business Secretary Kwarteng proposes to accept Parker's undertakings but has launched public consultations and will wait until the consultation period concludes on July 13 before making a final decision.
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Siemens Energy rejected Russian claims that gas deliveries to Germany had to be reduced due to the firm's failure to repair a turbine used in the Nord Stream 1 pipeline in a timely manner. ‘It is very convenient to drag in a company that is well-known in Russia,’ Joe Kaeser, the chair of the Siemens Energy supervisory board, told Germany's daily Suddeutsche Zeitung. ‘Even if that were the case, it would never justify so severely cutting back the gas supply,’ he added. Russia cited the delays as the reason for Gazprom's massive reduction in gas deliveries through the Nord Stream 1 pipeline, though German Chancellor Olaf Scholz subsequently rejected the explanation as a pretext.
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Exxon Mobil said it will dispose of its interests in the Montney and Duvernay assets in Canada through the sale of XTO Energy Canada to Calgary-based oil and gas producer Whitecap Resources for $1.47 billion in cash. XTO Energy Canada is jointly owned by Imperial Oil Resources Ltd and ExxonMobil Canada on a 50-50 basis. The assets include 567,000 net acres in the Montney shale, 72,000 net acres in the Duvernay shale and additional acreage in other areas in Alberta. Collective net production is about 140 million cubic feet of natural gas per day, and 9,000 barrel per day of crude oil, condensate and natural gas liquids.
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UK energy regulator Ofgem set out its price control plan for the next five years, saying most consumers could see a small drop in costs related to electricity network charges. In response, power utility SSE called Ofgem's initial determination ‘tough and stretching’. It said it will review the plan and engage with Ofgem ahead of its final determination. National Grid also said it will work with Ofgem in the coming months, saying final determinations are expected in December. Ofgem noted the average customer in the UK pays £100 per year toward the costs of operating local grids, which is in addition to what they pay for the electricity itself. The new price controls for 2023 to 2028 set the revenue that Britain's 14 distribution network operators can earn from these charges. Ofgem also proposed a £20.9 billion package of funding to build greener power grids. This will come at the expense of investors, rather than consumers, the regulator vowed.
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Japanese carmakers Nissan Motor and Honda Motor said that sales dropped in May, confirming a trend reported by peer Toyota Motor. Nissan's global sales slumped 34% in May to 230,918, with sales in Japan down 9.5% and sales outside Japan dropping 36%. Global production, however, improved 1.7% to 231,732. Production in Japan was up 78% but production outside Japan dropped 3.7%. Honda's world production in May was 244,368, which it noted was 86% of the total seen a year earlier. Sales in Japan were only 60% of the year before at 13,668, but sales outside the country rose to 3,802. Earlier, Toyota said worldwide sales in May fell 9.5% year-on-year to 818,972. Sales in Japan declined 21% to 123,050, while sales outside Japan were down 7.1% to 695,922. Worldwide production fell 9.0% to 700,331, with production in Japan down 33% to 183,057 and production outside Japan down 4.4% to 517,274.
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Walt Disney said its board voted unanimously to extend Chief Executive Officer Bob Chapek's contract for three more years. Chapek has been part of the California-based entertainment company for 29 years, and has been CEO for two years since 2020. Prior to this, Chapek was chair of Disney Parks, Experiences & Products for two years from 2018 to 2020, and before that was chair of Walt Disney Parks & Resorts for three years from 2015 to 2018.
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The US Federal Trade Commission sued Walmart, alleging the retail giant allowed its money transfer services to be used by fraudsters. The FTC case puts forward that Walmart had inadequate safeguards in place to prevent fraudulent use of money transfer services, such as MoneyGram, Western Union, and Ria. This included the failure to train its employees, to warn its customers, and the use of procedures that allowed fraudsters to ‘cash-out’ at its stores. ‘The complaint cites numerous instances in which law enforcement investigations found that scammers relied on Walmart money transfers as a primary way to receive payments, including in telemarketing schemes like IRS impersonation schemes, relative-in-need 'grandparent' scams, sweepstakes scams, and others,’ the FTC said. Walmart responded, characterising the civil lawsuit as ‘factually flawed and legally baseless’. The firm vowed to defend its ‘robust anti-fraud efforts’.
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B&M European Value Retail said revenue declined in its financial first-quarter as the variety goods retailer left guidance unchanged. For the 13 weeks to this past Saturday, group revenue was down 2.2% to £1.16 billion from £1.19 billion in the first quarter last year. For B&M UK, revenue was down to £957 million from £1.02 billion. Looking ahead, B&M said there is no change to the guidance issued at its annual results in May, with financial 2023 adjusted earnings before interest, tax, depreciation, and amortisation expected to be in the range of £550 million to £600 million. Adjusted Ebitda in financial 2022 came in at £619 million.
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The UK government has said it will publish a White Paper into gambling reform in coming weeks. The prime minister is set to announce restrictions on the industry as part of the review of the 2005 Gambling Act amid concerns current regulations require changes to accommodate the growth of online betting. The Times reported proposals to prohibit gambling companies from shirt sponsorship were set to be rejected in favour of reaching a voluntary agreement with Premier League clubs, while also keeping the option of legislation in reserve. A spokesperson for the Department for Digital, Culture, Media & Sport refused to comment on speculation, but added: ‘We are undertaking the most comprehensive review of gambling laws in 15 years to ensure they are fit for the digital age. ’We will be publishing a White Paper as part of a review of gambling legislation in the coming weeks.‘ The government will reportedly announce measures including online casinos having maximum stakes of between £2 and £5, a ban on free bets and VIP packages for those who incur heavy losses, as well as ’non-intrusive‘ affordability checks.
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MARKETS
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Stock markets were lower globally on Wednesday, after US investors took fright from a survey showing a marked deterioration in consumer confidence. The index derived from the survey fell to 98.7 points from 103.2, its lowest level since February 2021, according to the Conference Board's monthly survey. Expectations for income and business in the next six months dropped even more sharply, to 66.4 points from 73.7, the lowest level since March 2013, the report said.
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CAC 40: down 0.9% at 6,031.06
DAX 40: down 1.5% at 13,032.53
FTSE 100: down 0.7% at 7,272.73
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Hang Seng: closed down 1.9% at 21,996.89
Nikkei 225: closed down 0.9% at 26,804.60
S&P/ASX 200: closed down 0.9% at 6,700.20
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DJIA: called marginally higher, up 3.00 points
S&P 500: called down 0.1%
Nasdaq Composite: called down 0.1%
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EUR: soft at $1.0525 ($1.0531)
GBP: soft at $1.2183 ($1.2191)
USD: soft at JP¥136.15 (JP¥136.22)
Gold: down at $1,817.00 per ounce ($1,820.14)
Oil (Brent): firm at $117.46 a barrel ($117.21)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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An EU ban on insuring ships transporting Russian oil could potentially hurt Moscow more than its embargo on the nation's crude, analysts said. The EU recently unveiled the insurance ban in a sixth set of economic sanctions aimed at punishing Russia over its invasion of Ukraine. In a further knock, G7 leaders are seeking a price cap for Russian oil to further hurt Kremlin revenues. The EU insurance and reinsurance ban, covering all maritime transportation of Russian oil, comes as Moscow seeks to ramp up sales to China and India to help offset the embargo. The insurance ban ’would have further-reaching consequences for the oil market than the EU oil embargo‘, noted Commerzbank analyst Carsten Fritsch. Companies will no longer be permitted to transport oil from Russia by sea, or to insure such shipments. EU insurers have until the end of this year to implement the ban, while those in Britain are expected to follow suit.
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A sanctions task force of leading Ukraine allies has frozen more than $330 billion in financial resources owned by Russia's elite and its central bank since Moscow's invasion, the group announced. The Russian Elites, Proxies & Oligarchs Task Force said in a joint statement that they had blocked $30 billion in assets belonging to Russian oligarchs and officials, and immobilized $300 billion owned by the Russian central bank.
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NATO leaders are expected to sign off on a major reinforcement of the alliance's Eastern European members on Wednesday when they meet in Madrid to project a united stance amid the Russian invasion of Ukraine. The decision is a ’fundamental shift of deterrence and defence‘ in the alliance, NATO Secretary General Jens Stoltenberg said as the three-day summit began on Tuesday. Stoltenberg was echoing previous comments ahead of the summit that described the move as ’the biggest overhaul of [NATO's] collective deterrence and defence since the Cold War.‘
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Economic sentiment took a hit in the eurozone in June, data from the European Commission showed. The economic sentiment indicator dropped in both the EU - falling 1.7 points to 102.5 - and the euro area - down 1.0 point to 104.
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UK shop price inflation accelerated to a near 14-year high in June, numbers showed. According to the latest British Retail Consortium-NielsenIQ tracker, the UK shop price index grew 3.1% yearly in June, racing from a 2.8% increase in May. June's climb was markedly above the 12-month average annual growth rate of 1.0%, highlighting how much inflationary pressures have intensified in recent months. It was also the highest rate of shop price inflation since September 2008. Annual food inflation quickened to 5.6% in June, from 4.3% in May, to mark the highest rate since 11 years earlier. Yearly fresh food inflation alone raced to 6.2% in June from 4.5% in May. It was the highest fresh food inflation rate since May 2009.
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Retail sales growth in Japan rose above market expectations in May, both on a monthly and annual basis, data from the Ministry of Economy, Trade & Industry showed on Wednesday. On an annual basis, retail sales increased 3.6% in February, accelerating from 3.1% growth in April, and was also above forecasts of a 3.3% rise, according to FXStreet-cited consensus. On a monthly basis, sales in May slowed to a 0.6% increase compared to 1.0% in April, however this still beats consensus expectations, which were for sales to decline 0.1%.
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The EU approved a plan to end the sale of vehicles with combustion engines by 2035 in Europe, the 27-member bloc announced early Wednesday, in a bid to reduce CO2 emissions to zero. The measure, first proposed in July 2021, will mean a de facto halt to sales of petrol and diesel cars as well as light commercial vehicles and a complete shift to electric engines in the EU from 2035. The plan is intended to help achieve the continent's climate objectives, in particular, carbon neutrality by 2050. At the request of countries including Germany and Italy, the EU-27 also agreed to consider a future green light for the use of alternative technologies such as synthetic fuels or plug-in hybrids. While approval would be tied to achieving the complete elimination of greenhouse gas emissions, the technologies have been contested by environmental NGOs. Environment ministers meeting in Luxembourg also approved a five-year extension of the exemption from CO2 obligations granted to so-called ’niche‘ manufacturers, or those producing fewer than 10,000 vehicles per year, until the end of 2035.
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Nicola Sturgeon has insisted ’now is the time for independence‘ as she unveiled plans to hold a second referendum on Scotland's place in the UK on October 19, 2023. The Scottish first minister outlined plans to hold a consultative vote on that date, with her government publishing a bill to enable a second referendum. She also revealed to MSPs at Holyrood that Scotland's most senior law officer, Lord Advocate Dorothy Bain will refer the Scottish independence referendum bill to the UK Supreme Court, to see if such a vote would be legal. However, UK Prime Minister Boris Johnson has insisted the focus should be on the economy, as he argued the UK would have a ’stronger economy and stronger country together‘. A Number 10 spokesman made clear Johnson continues to believe it is ’not the time to be talking about‘ a second referendum on Scottish independence.
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