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The following is a summary of top news stories Thursday.
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COMPANIES
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Samsung Electronics became the first chipmaker in the world to mass produce advanced 3-nanometre microchips, the company said, as it seeks to catch up with Taiwan's TSMC. The new chips will be smaller, more powerful and efficient, and will be used in high-performance computing applications before being put into gadgets such as mobile phones. ‘Compared to 5nm process, the first-generation 3nm process can reduce power consumption by up to 45%, improve performance by 23% and reduce area by 16%,’ Samsung said in a statement. The South Korean conglomerate last month announced a five-year plan to invest ₩450 trillion, about $356 billion, saying it would ‘bring forward the mass production of chips based on the 3-nanometer process’.
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Bunzl said it expects to deliver ‘very strong’ growth over the six period to June 30, reflecting the ‘resilience and strength’ its business model. Bunzl said revenue in the first half is expected to increase year-on-year by 16% at actual exchange rates and by 12% to 13% at constant exchange rates, with inflation continuing to drive underlying revenue growth and acquisitions further supplementing growth. Adjusted operating margin for the first half is expected to be slightly higher than historical annual levels, it noted. Bunzl upgraded its guidance for the year on the basis of the strong revenue growth to date and announced acquisitions, though no actual figures were provided. At constant exchange rates, Bunzl now expects ‘very good’ revenue growth in 2022, driven by good organic revenue growth and the positive contribution of acquisitions announced over the past year. Growth of the base business is expected to be only partially offset by the further normalisation of sales of Covid-19 related products, albeit these are expected to remain ahead of 2019 levels, the company said. Bunzl also continues to expect its operating margin in 2022 to be slightly higher than historical levels.
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IAG said it is converting 14 A320neo family Airbus jet options, announced in back in 2013, into firm orders for 11 A320neos and three A321neos. IAG said this was in addition to the conversion of eight A320neo family options which IAG exercised in March 2022 for six A320neos and two A321neos. These aircraft will be delivered in 2024 and 2025 and will be used to replace A320ceo family aircraft in airline group's short-haul fleet, said IAG, which owns British Airways, Iberia, Aer Lingus and other airlines.
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AstraZeneca said its antibody Imfinzi, when used with chemotherapy, significantly improved responses in a form of cell lung cancer. The study researched resectable non-small cell lung cancer. In a phase 3 trial, Imfinzi, also known as durvalumab, ‘demonstrated a statistically significant and meaningful improvement,’ when used in combination with a form of chemotherapy before surgery. The improvement was compared to patients who received almost the same treatment, but without Imfinzi.
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German energy supplier Uniper has cut its earnings forecasts for the current year due to the restricted gas supplies from Russia and is talking to the federal government about stabilization measures. The company is examining how the liquidity of the company can be further secured, Uniper said Wednesday evening. Chief Executive Klaus-Dieter Maubach explained: ‘We already had a significantly increased liquidity requirement at the end of last year due to the enormous increase in gas prices. To meet this, we had already extended our credit lines and, among other things, received a facility from the state-owned KfW [investment bank] in the amount of €2 billion [$2.1 billion], which we have not drawn on to date.’ Now business has ‘noticeably worsened’ due to the war in Ukraine and the consequently strongly reduced gas deliveries from Russia, Maubach explained.
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German carmaker Mercedes-Benz and labour unions reached an agreement on Wednesday that will ensure a trio of factories in Germany will remain at full productivity for the coming decades, said works advisory council official Ergun Lumali. ‘We managed to make a breakthrough,’ he said. The deal foresees the factories in Bremen, Rastatt and Sindelfingen focusing on electric cars. The agreement notes that Rastatt will also continue to focus on compact vehicles. Given Mercedes' growing focus on luxury vehicles, there had been concerns these models would be discontinued. The three employ about 53,000 people. However, the Rastatt factory, as well as one in Kecskemet in Hungary will switch to a new platform for electric cars. They will also only work with four chassis models, instead of seven. The Bremen factory will also switch to a new platform in about five years. However, Sindelfingen will continue to focus on top-of-the-line models.
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MARKETS
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Stock markets fell deep into the red on Thursday after central bankers reaffirmed their determination to fight inflation, even at the risk of triggering recessions around the world.
‘Federal Reserve chair, Jerome Powell, made it clear when he spoke on Wednesday defending the need to hike interest rates, that the looming economic slowdown is a price worth paying in order to halt the rise in consumer prices,’ said Ricardo Evangelista, senior analyst at ActivTrades. ‘Against this backdrop, with the Fed leading the pack, there may be further upside for the US dollar, especially as recession fears will also support it, due to the greenback's haven appeal.’
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CAC 40: down 2.5% at 5,881.38
DAX 40: down 2.5% at 12,676.98
FTSE 100: down 1.9% at 7,175.80
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Hang Seng: closed down 0.6% at 21,859.79
Nikkei 225: closed down 1.5% at 26,393.04
S&P/ASX 200: closed down 2.0% at 6,568.10
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DJIA: called down 1.2%
S&P 500: called down 1.5%
Nasdaq Composite: called down 1.9%
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EUR: down at $1.0436 ($1.0470)
GBP: up at $1.2137 ($1.2126)
USD: down at JP¥136.20 (JP¥136.69)
Gold: down at $1,815.36 per ounce ($1,816.73)
Oil (Brent): down at $115.78 a barrel ($118.78)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Major oil producers led by Saudi Arabia and Russia are expected to stick to a previously decided output boost at their meeting on Thursday, despite pressure to further increase production. Russia's invasion of Ukraine has exacerbated concerns about oil supplies, sending prices to record highs this year. Hard on the heels of an EU ban on Russian oil imports over the invasion, the OPEC+ cartel agreed at their last meeting in early June to open the taps wider than expected. But prices continue to be high, and analysts say a respite is not in sight when the 23 members of OPEC+ meet via video conference from 1100 GMT. The 13 members of the Organization of the Petroleum Exporting Countries, chaired by Saudi Arabia, and their 10 partners, led by Russia, drastically slashed output in 2020 as the coronavirus pandemic and the resulting lockdowns sent demand plummeting.
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China's factory and services activity picked up in June, fuelled by the easing of Covid-19 restrictions in major cities such as Shanghai and Beijing. The official non-manufacturing purchasing managers' index defied expectations and surged to 54.7 points in June after three months of sluggish performance. It was the first time since February that the reading was above the 50-point mark separating growth from contraction. It sat at 47.8 in May. In particular, business activity in industries severely hit by the pandemic such as rail and air transport picked up in June, the statement said. Construction activity also helped fuel the PMI boost. But the ‘surprisingly rapid recovery in services’ likely reflects a one-off boost from reopening, said Julian Evans-Pritchard, senior China economist at Capital Economics.
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Industrial production in Japan continued to weaken in May, with the monthly output suffering a sharper fall than expected, figures showed. Data from the Ministry of Economy, Trade & Industry, industrial output in Japan dropped 2.8% annually in May, a slower decline compared to a 4.9% drop in April. Output for May was expected to fall 5.9% on an annual basis, according to FXStreet-cited consensus. On a monthly basis, industrial production shrank by 7.2% in May, accelerating from a 1.5% drop in April, falling short of expectations of a 0.3% decline.
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The UK economy grew at the same pace as previously estimated, data from the Office of National Statistics showed. On an annual basis, UK gross domestic product expanded an unrevised 8.7% in the first quarter, picking up pace from 6.6% growth in the final quarter of 2021. On a quarterly basis, the UK economy grew an unrevised 0.8% in the first quarter, slowing from a 1.3% expansion in the fourth quarter. ‘Our latest estimate for economic growth in the first quarter is unrevised as a whole, showing the UK economy continued to recover from the pandemic,’ said ONS Director of Economic Statistics Darren Morgan.
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UK house prices set another record high in June, according to figures from mortgage lender Nationwide, although growth slowed amid tentative signs of a slowdown in the housing market. On an annual basis, the Nationwide house price index rose by 10.7% in June, slowing from the 11.2% climb in May. The print also was just shy of the market forecast of 10.8%. House prices grew 0.3% monthly in June, easing from 0.9% growth in May and missed the 0.5% consensus estimate. The average price for a UK home climbed to a new record high at £271,613 in June, up from £269,914 in May, Nationwide said.
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UK car production in May increased for the first time since June of last year, according to figures from Society of Motor Manufacturers & Traders. The country produced 62,284 units, up 13% from May of last year. Production for UK buyers jumped by 40%, while production for export rose 8.9%. However, the SMMT noted that output of cars remains 46% below 2019, before the pandemic, and still is suffering from supply chain problems, rising costs and disruption caused by the war in Ukraine.
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Soaring inflation will hit Britain harder than any other major economy during the current energy crisis, the governor of the Bank of England warned. Andrew Bailey said the UK's economy would likely weaken earlier and be more intense than others as a result of the energy price shock that all European economies face. The situation was further exacerbated in Britain by the ‘structural legacy’ left by Covid in the labour market as companies struggled with a lack of workers. ‘Unfortunately, there is going to be a further step-up in UK inflation later this year because that's a product of the way the energy price cap interacts with the energy prices we have observed over the last few months,’ Bailey told a European Central Bank conference in Sintra, Portugal, on Wednesday. ‘I think the UK economy is probably weakening rather earlier and somewhat more than others.’
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Inflation is expected to take another turn higher in France in June, provisional estimates from the National Institute of Statistics & Economic Studies showed. Annually, the consumer price index is expected to rise by 5.8% in June, accelerating from May's 5.2% increase. On a harmonised basis, designed for EU-wide comparison, France's annual inflation is expected to heat up to 6.5% from 5.8% in May, while it will remain flat on a monthly basis at 0.8%.
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The unemployment rate in the eurozone edged lower in May, according to Eurostat. The euro area seasonally-adjusted unemployment rate was 6.6% in May, ticking down from 6.7% in April. The print was lower than the market forecast, cited by FXStreet, of 6.8%.
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Employment levels improved slightly in Germany in May, provisional data from Destatis showed. Destatis also said retail sales rebounded, while export and import prices were on the rise. Turning back to employment, the government stats agency said about 45.4 million people in Germany were in employment in May 2022, exceeding pre-Covid levels by more than 100,000. Destatis noted the highest employment figure recorded so far is still 45.5 million, seen in November 2019. The adjusted unemployment rate in May was down to 2.8% from 2.9% in April.
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The unemployment rate in Italy unexpectedly fell in May, to the lowest level in over two years, figures from national statistics office Istat showed. The jobless rate in Italy decreased to 8.1% in May from 8.2% in the prior month. An increase to 8.4%, was expected, according to consensus cited by FXStreet. May's figure was the lowest unemployment level since April 2020.
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Finding the right monetary policy response to tackle soaring inflation is an ‘art’, ECB President Christine Lagarde said Wednesday. ‘It is not a science,’ Lagarde said at the ECB conference in Portugal. ‘What we are doing there is an element of art,’ she said. The ECB is set to trigger its first rate hike in over a decade at its next meeting on July 21, as inflation in the eurozone surges. ‘I think we now understand better how little we understand’ about inflation, Fed Chair Jerome Powell said on the panel alongside Lagarde. The rapid tightening in monetary policy has prompted fears that economies on both sides of the Atlantic could pitch into recession. But the US is in ‘strong shape’ to avoid shrinking the economy, while returning inflation to the Fed's two-percent target, Powell said.
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Indirect talks in Qatar's capital between Iran and the US on reviving a 2015 nuclear deal have concluded with ‘no progress made’, a State Department spokesperson said late Wednesday. The negotiations in Doha were an attempt to reboot long-running EU-mediated talks on a return to the 2015 agreement between Tehran and world powers. No time limit was previously announced on the most-recent negotiations, which had been taking place in a Doha hotel with special envoy Robert Malley heading the US delegation. But by Wednesday night, a US State Department spokesperson said the ‘indirect discussions in Doha have concluded’. ‘While we are very grateful to the EU for its efforts, we are disappointed that Iran has, yet again, failed to respond positively to the EU's initiative and therefore that no progress was made,’ the spokesperson told AFP in an email.
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