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The following is a summary of top news stories Thursday.
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COMPANIES
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Fast Retailing raised annual revenue and profit guidance following a strong performance in the third quarter from its Uniqlo brand. For the three months ended May 31, the Yamaguchi, Japan-based fashion retailer posted a pretax profit of JP¥136.6 billion, around $983.3 million, an 84% jump from JP¥74.1 billion the same period a year before. This was on revenue which grew 10% year-on-year to JP¥546.1 billion from JP¥495.2 billion. Fast Retailing said the majority of its growth in the quarter stemmed from Uniqlo Japan, through strong sales during Golden Week and the Uniqlo anniversary sale. Looking ahead, Fast Retailing raised its guidance for the financial year ending August 31. Revenue is now expected to reach JP¥2.250 trillion, up from prior guidance of JP¥2.220 trillion, while operating profit is set to reach JP¥290 billion, compared to previous guidance of JP¥270 billion.
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Deutsche Telekom said it has agreed to dispose of a 51% stake to Digital Bridge Group and Brookfield Asset Management in mobile telecoms tower business GD Towers at an enterprise value of €17.5 billion on a cash and debt free basis. Digital Bridge is an infrastructure-focused private equity firm based in Boca Raton, Florida, while Brookfield is a Toronto, Ontario, Canada-based asset manager. GD Towers operates around 40,000 sites in Germany and Austria. Deutsche Telekom will keep a 49% stake in GD Towers, and is expected to generate cash proceeds of €10.7 billion from the sale. The group said the proceeds will go towards deleveraging purposes, and accelerating its path towards a targeted 50.1% stake in T-Mobile US.
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Hindenburg Research said it has built a ‘significant’ long position in Twitter as the social media firm's takeover spat with billionaire Elon Musk deepens. Twitter on Tuesday sued Tesla boss Elon Musk for breaching the $44 billion contract he signed to buy the micro-blogging platform, calling his exit strategy ‘a model of hypocrisy,’ court documents showed. Hindenburg, usually known as a short seller, on Wednesday tweeted it had ‘accumulated a significant long position’ in Twitter. ‘Twitter's complaint poses a credible threat to Musk's empire,’ said Hindenburg. Hindenburg back in May noted the ‘overpriced’ Twitter deal was placing pressure on Tesla shares. At that time, it also warned that Twitter shares could slump if Musk's deal evaporated, and there was a risk the deal could be repriced lower. Since agreeing to Musk's takeover bid in late April, Twitter shares have tumbled nearly 30%.
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Hugo Boss lifted its full-year outlook after a ‘successful’ start to the year, attributing the strength to a branding refresh. Revenue rose 40% in the second quarter to €878 million, to mark the Metzingen, Germany-based fashion house's strongest second quarter in its history. Compared to the second quarter of 2019, a pre-pandemic period, sales were up 30%, driven by particularly strong demand in Europe and the Americas. In the Asia-Pacific region, however, revenue was in line with a year ago, with growth in South East Asia & Pacific offsetting a decline in China due to Covid lockdowns. Hugo Boss said it generated an operating profit of €100 million in the quarter, more than double the €42 million achieved a year before. Hugo Boss raised its full-year outlook. Operating profit is now seen in a range of €285 million to €310 million, up to 35% above the year prior. The previous guidance range had topped out at €285 million.
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Experian reported slowing revenue growth in its first quarter as growth in all regions shrank, with the expectation of the Americas. ‘Overall performance was affected by weak macroeconomic conditions in some markets,’ Experian explained. In May, the firm had said it expects full year growth of 7% to 9% as it monitors global macroeconomic trends. Total revenue for the quarter that ended June 30 is set to grow 7%, slowing from 31% a year ago. Revenue for UK & Ireland fell by 6%, in contrast to revenue growth of 35% a year ago. Europe, Middle East, Africa & Asia Pacific decreased by 8%, compared to growth of 78% a year ago. The Dublin-based credit checking company's total revenue growth was kept above zero due to continued growth in the Americas. Latin America grew 30%, down from growth of 33%, while North America grew 8%, down from growth of 26% a year ago.
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Barratt Developments said it delivered an ‘excellent’ performance for its recently ended financial year, reflecting strong customer demand for homes and the productivity of its sites despite build cost inflation. For the financial year that ended June 30, the Leicestershire-based property developer said adjusted pretax profit is anticipated to be in the range of £1.05 billion and £1.06 billion, slightly ahead of current market consensus expectations at £1.048 billion, and up from £919.7 million in financial 2021. Barratt said total home completions returned to pre-pandemic levels, with 17,908 homes completed in the year, up 3.9% from 17,243 homes the year before.
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MARKETS
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Stock prices were lower in Europe on Thursday, and Wall Street was pointed to open in the red, having closed only slightly lower on Wednesday. Investors continued to take positions on the expectation of more aggressive interest rate hikes by the US Federal Reserve in the next several months, after US consumer price inflation hit a 40-year high in June.
The market now is forecasting a 100-basis-point rate hike by the Fed at its July 26-27 policy meeting, followed by a 75-point hike in September, both following the 75-point hike in June, noted Marshall Gittler at BDSwiss. At the same time, expectations for the amount of policy loosening in 2023 have increased. ‘This is probably why the US stock market didnt fall that much [on Wednesday after the CPI report] the more the Fed tightens now, the earlier the recession comes and the sooner they loosen again,’ he said.
Meanwhile, fears of recession pushed oil prices unambiguously below $100 a barrel.
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CAC 40: down 0.7% at 5,956.34
DAX 40: down 0.5% at 12,688.02
FTSE 100: down 0.7% at 7,106.96
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Hang Seng: closed down 0.2% at 20,751.21
Nikkei 225: closed up 0.6% at 26,643.39
S&P/ASX 200: closed up 0.4% at 6,650.60
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DJIA: called down 0.9%
S&P 500: called down 1.0%
Nasdaq Composite: called down 0.8%
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EUR: down at $1.0045 ($1.0089)
GBP: down at $1.1875 ($1.1929)
USD: up at JP¥138.82 (JP¥137.35)
GOLD: down at $1,716.00 per ounce ($1,739.37)
OIL (Brent): down at $97.70 a barrel ($100.80)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The European Commission slashed growth forecasts for the eurozone, saying the consequences from the war in Ukraine were continuing to destabilise the economy because of record high inflation. The EU executive, which tracks the economy for the 27 countries in the EU, said GDP growth in the eurozone would reach 2.6% in 2022 and a sharply lowered 1.4% in 2023. Inflation would end the year at 7.6%, much higher than previously forecast, and 4.0% in 2023. This is still well above the EU's target level of 2.0% and up from a previous prediction of 2.7%.
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US Treasury Secretary Janet Yellen said that Russia's war in Ukraine posed the ‘greatest challenge’ to the global economy, as G20 ministers prepare to start talks in Indonesia. ‘Our greatest challenge today comes from Russia,’ she told a news conference on the resort island of Bali ahead of a meeting between finance ministers from the world's top economies and central bank governors on Friday and Saturday. ‘The international community must be clear-eyed about the economic and humanitarian consequences of his [President Vladimir Putin's] war.’ The conflict caused rapid inflation at a time when the world was struggling to recover from the Covid-19 pandemic, endangering the gains of the past two years and threatening widespread hunger and poverty. Yellen said she will continue to press G20 allies at the meeting for a price cap on Russian oil to choke off Putin's war chest and pressure Moscow to end its invasion while bringing down energy costs.
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Signs of slowing demand, including for housing, have emerged in several US regions as soaring prices have increased fears about a coming recession, according to a US Federal Reserve report. The US central bank has been raising interest rates aggressively to tamp down inflation pressures, hoping to avoid pushing the world's largest economy into a downturn. But while growth continued nationwide, ‘several Districts reported growing signs of a slowdown in demand, and contacts in five Districts noted concerns over an increased risk of a recession,’ the Fed said in its latest ‘beige book’ survey of business conditions. ‘Most Districts reported that consumer spending moderated as higher food and gas prices diminished households' discretionary income.’ Prepared ahead of the July 26-27 policy meeting, where the Fed is widely expected to produce another super-sized rate increase, the report indicating slowing demand could be viewed as a sign the central bank's efforts are having an impact.
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Jeremy Hunt has thrown his weight behind Rishi Sunak after being knocked out of the race to succeed UK Prime Minister Boris Johnson in the first round of voting by Tory members of Parliament. The endorsement gives the former chancellor a boost ahead of the second ballot on Thursday, which will eliminate the least popular candidate. Hunt, who along with Chancellor Nadhim Zahawi failed to garner the 30 votes needed to progress to the next stage of the contest, described Sunak as ‘one of the most decent, straight people with the highest standards of integrity’ in politics. Sunak, whose resignation from No 11 helped trigger the Tory leadership race, topped Wednesday's ballot, as trade minister Penny Mordaunt emerged as his leading rival in second place.
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Chinese homebuyers in dozens of cities have stopped making mortgage payments for unfinished projects, according to data from industry groups, worsening fears of financial contagion in the country's troubled real estate sector. Authorities launched a crackdown on excessive debt in the property sector in 2020, and giants such as Evergrande and Sunac have since struggled to make payments and renegotiate with creditors. In the latest blow, a growing number of homebuyers have refused to make mortgage payments if developers do not resume construction on units already sold. As of Wednesday, homebuyers had halted payments for units in at least 100 residential property projects in 50 cities, according to data from research firm China Real Estate Information. This was up from 28 projects on Monday and 58 on Tuesday, according to a report by analysts at financial firm Jefferies.
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Australia's unemployment rate declined in June, beating market expectations, figures showed. Data from the Australian Bureau of Statistics showed that the seasonally-adjusted unemployment rate slowed to 3.5% in June, compared to 3.9% in May. The figure was above FXStreet-cited expectations for a 3.8% jobless rate. The number of those out of work dropped 9.9% to 493,900 in June from 548,100 in May. The figure is down 28% on an annual basis. In addition, the participation rate edged upwards to 66.8% from 66.7%.
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