TOP NEWS SUMMARY: Eurozone factory gate inflation slows slightly

Writer,

The following is a summary of top news stories Monday.

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COMPANIES

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The European Central Bank is eyeing up plans to stop lenders from securing a windfall in profit from the pandemic-era loan schemes it has in place when it raises interest rates, the Financial Times reported on Sunday. The ECB is concerned banks will earn billions of extra profit from the ultra-cheap lending scheme it launched during the pandemic once it starts to raise interest rates. Over €2 trillion in cheap loans were issued by the central bank in order to avoid a credit crisis in the eurozone, but banks are now in line to secure up to €24 billion in additional profit when interest rates are increased. The ECB's governing council is due to discuss how it could curb the extra margin, the FT reported. One solution offered is simply placing them back on deposit at the central bank, according to three people familiar with the plans. Another idea is for the ECB to change the terms of the loans to reduce the chance for banks to make an automatic return on the money.

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Spirax-Sarco Engineering said it has entered exclusive negotiations for the acquisition of a European industrial electric heating group. The Cheltenham, England-based thermal energy management and pumping company is in talks to acquire Vulcanic SA from French private equity firm Qualium. The consideration is €261.7 million, on a cash and debt-free basis, and would be financed through an acquisition bank facility. Paris-headquartered Vulcanic is an industrial electric heating group, with 10 manufacturing facilities and 700 employees, mostly based in the Europe, Middle East & Africa region. The acquisition would help to grow Spirax-Sarco's Electric Thermal Solutions business, through its existing customers, products and operations, which are also mostly based in the EMEA region. It will also complement its Chromalox business, which is mostly focused on the Americas.

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Wizz Air Holdings reported sharp growth in traffic in June, as it mulls hydrogen-powered aircraft operations. The Budapest-based budget airline said it carried 4.3 million in June this year, nearly tripled from 1.6 million in June 2021. The figure is also 19% higher than in pre-pandemic June 2019, when it recorded 3.6 million passengers. Capacity rose year-on-year to 5.0 million seats from 2.4 million and load factor improved to 86.1% from 64.0%. The capacity was higher than the 3.8 million seats in June 2019, however load factor lagged behind June 2019 levels of 95.0%. The figures come as airports across the globe are gripped with cancellations and delays. Carriers, which cut jobs in the wake of the Covid-19 pandemic, have struggled to cope with a pick-up in demand as restrictions have eased.

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Peer Ryanair, meanwhile, said its June passenger numbers surged to 15.9 million from 5.3 million a year earlier. Ryanair's June passenger numbers were its best so far this year, eclipsing May's 15.4 million, and also topped the 14.2 million passengers reported in June 2019. However, Ryanair's July could be more turbulent as cabin crew staff have planned further strikes in Spain for better working conditions. The walkouts have been scheduled for July 12-15, 18-21, and 25-28, the Spanish unions USO and Sitcpla announced on Saturday. Numerous airports are affected by the Ryanair strikes: Madrid, Barcelona and Mallorca, as well as Malaga, Seville, Alicante, Valencia, Girona, Ibiza and Santiago de Compostela. Ryanair cabin crew had already gone on strike in Spain at the end of June and also between Thursday and Saturday. The cabin crew of rival easyJet will also stop work in Spain on a total of nine days between through the end of July - as early as this weekend, as well as between July 15-17 and between July 29-31.

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British Airways and Heathrow Airport welcomed measures to help airlines prevent last-minute flight cancellations over the summer. UK government regulations will allow a one-off ‘amnesty’ on airport slots rules, enabling airlines to plan ahead and deliver a more realistic summer schedule with a view to minimising disruption at airports. Airlines will be able to cancel flights without being penalised for not using their airport slot, but must finalise their summer schedule by this Friday.

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Tesla produced 258,580 vehicles and delivered 254,695 in the second quarter of 2022. The electric car maker noted that June was the highest vehicle production month in its history, despite supply chain challenges and factory shutdowns.

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Amazon.com founder Jeff Bezos has criticized President Joe Biden for calling on oil companies to lower sky-high gasoline prices, prompting the White House to come to the US leader's defense on Sunday. ‘My message to the companies running gas stations and setting prices at the pump is simple: this is a time of war and global peril,’ Biden tweeted Saturday. ‘Bring down the price you are charging at the pump to reflect the cost you're paying for the product. And do it now,’ Biden added. Bezos said Biden's remarks amounted to ‘either straight ahead misdirection or a deep misunderstanding of basic market dynamics.’ ‘Ouch. Inflation is far too important a problem for the White House to keep making statements like this,’ the US billionaire tweeted Saturday. Gasoline prices at the pump have become a symbol of broader price rises in the US, and they are sapping Biden's approval rating ahead of legislative elections in November.

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Amazon will deliver packages to customers by bike and on foot for the first time in the UK as the retailer announces new methods of reducing emissions. The delivery giant said its new ‘micromobility’ hub in London will lead to a million more customer deliveries each year, while others are expected to open across the UK in the coming months. Delivery drivers will ride e-cargo bikes and walk to customers' homes and offices in central London, replacing thousands of traditional van journeys in the city's congested roads. Amazon has taken steps to electrify its fleet with 1,000 electric vans now on UK roads, as it strives to deliver half its shipments with net-zero carbon by 2030 and all by 2040. In March, it also announced the launch of five 37-tonne electric heavy goods vehicles operating from centres in Tilbury and Milton Keynes and replacing diesel trucks.

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MARKETS

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European markets made strides on Monday with Wall Street sitting out the session for the Independence Day holiday. London's FTSE 100 index was being driven by energy firms as the price of oil increased, while TotalEnergies topped Paris's CAC 40. ‘A sliver of optimism has broken through on global markets at the start of the week, but overall caution is still the name of the game as investors nurse wounds from a bruising first half of the year,’ said Susannah Streeter, an analyst at Hargreaves Lansdown.

US financial markets will re-open on Tuesday.

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CAC 40: up 1.1% at 5,998.64

DAX 40: up 0.4% at 12,860.65

FTSE 100: up 1.1% at 7,249.16

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Hang Seng: closed down 0.1% at 21,830.35

Nikkei 225: closed up 0.8% at 26,153.81

S&P/ASX 200: closed up 1.1% at 6,612.60

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EUR: up at $1.0445 ($1.0406)

GBP: up at $1.2124 ($1.2034)

USD: up at JP¥135.50 (JP¥135.19)

GOLD: down at $1,805.50 per ounce ($1,806.73)

OIL (Brent): up at $111.06 a barrel ($110.84)

(currency and commodities changes since previous London equities close)

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ECONOMICS AND GENERAL

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Eurozone factory gate inflation eased slightly in May, figures showed. According to Eurostat, the producer price index rose 36.3% annually in May, easing from 37.2% in April. The figure came in slightly below FXStreet-cited consensus of 36.7%. On a monthly basis, producer prices rose by 0.7% in May, cooling off from 1.2% in April. This undershot the consensus estimate of 1.0% for the monthly change. On a monthly basis, the prices of intermediate goods rose by 1.7%, non-durable consumer goods rose 1.3%, durable consumer foods rose 0.9%, and capital goods rose by 0.6% Energy sector prices decreased 0.2% on a monthly basis. In contrast, they rose 94% annually.

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Germany reported a surprising trade deficit in May, figures showed, as imports surged and exports to Russia continued to decline year-on-year in the wake of the Kremlin's invasion of Ukraine. According to Destatis, Germany swung to a trade deficit of €1.0 billion in May, from a surplus of €3.1 billion in April. The trade surplus in May 2021 stood at €13.4 billion. May 2022 deficit fell short of market expectations of a surplus of €2.4 billion, according to FXStreet. At €125.8 billion, exports were down 0.5% monthly in May but up 12% yearly. Imports stood at €126.7 billion, up 2.7% monthly and 28% annually. Exports to Russia were down 55% annually in May, Destatis noted. However, on a monthly basis, exports to Russia were 29% higher. They had dropped 9.9% monthly in April and roughly 60% in March. Imports from Russia fell 9.8% monthly in May.

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The Ukrainian army retreated from the strategic city of Lysychansk over the weekend, as Russia claimed a major victory by seizing control of the entire eastern Lugansk region. The Ukrainian withdrawal followed weeks of fierce fighting and marked a decisive breakthrough for Moscow's forces more than four months after their invasion and after turning their focus away from the capital Kyiv. Leaders from dozens of countries and international organisations will meet Monday in Switzerland to map out a ‘Marshall Plan’ to rebuild Ukraine – aimed to begin even as Russia's war efforts continue to rage. A major flashpoint in the conflict, Lysychansk had been the final holdout in the Lugansk area of the eastern Donbas region and Moscow's capture of it frees up Russian forces to advance on Kramatorsk and Sloviansk in neighbouring Donetsk. ‘The continuation of the defence of the city would lead to fatal consequences’ in the face of Russia's superiority in numbers and equipment, the Ukrainian army said in a statement announcing its retreat Sunday evening.

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Unemployment fell in Spain during June, figures from the Spanish Ministry of Labour & Social Economy showed on Monday. On a monthly basis, unemployment numbers in June decreased by 42,409, leaving the total at 2.9 million people. This remains at the lowest levels since October 2008, the year of the financial crisis. On an annual basis, unemployment numbers fell by 733,757, or 21%.

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Inflation in Switzerland accelerated in June, figures showed. According to the Federal Statistics Office, the annual inflation rate quickened to 3.4% in June from 2.9% in May. June's figure topped FXStreet cited consensus of 3.2%. On a monthly basis, consumer prices rose 0.5% in June, slowing from May's 0.7% increase, but topping market expectations of a 0.3% rise. ‘The 0.5% increase compared with the previous month is due to several factors including rising prices for fuel. Heating oil also recorded a price increase, as did fruiting vegetables. In contrast, prices for red wines and salads decreased,’ the FSO said.

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China placed 1.7 million people under lockdown in central Anhui province, where authorities reported nearly 300 new cases Monday in the latest of a string of outbreaks testing Beijing's no-tolerance approach to Covid-19. The country is the last major economy wedded to a zero-Covid strategy, responding to all cases with strict isolation orders and tough testing campaigns. The outbreak in Anhui – where officials first found hundreds of cases last week – comes as the Chinese economy begins to rebound from a months-long lockdown in Shanghai and disruptive Covid restrictions in the capital Beijing. Two counties in the province – Sixian and Lingbi – announced lockdowns last week, with more than 1.7 million residents only permitted to leave their homes if they are getting tested. The province reported 287 new infections on Monday, including 258 people who had no symptoms, according to China's National Health Commission, bringing the total cases found to just over 1,000.

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