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The following is a summary of top news stories Tuesday.
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COMPANIES
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UBS reported growth in second-quarter net profit, despite total revenue for the Swiss bank coming in flat. In the three months that ended June 30, the lender recorded a net profit of $2.12 billion, an increase of 5% year-on-year from $2.01 billion. Diluted earnings per share rose to $0.61 from $0.55. Net interest income rose 2% to $1.67 billion from $1.63 billion, as net free & commission income dropped 14% year-on-year to $4.77 billion from $5.56 billion. Total revenue came in flat at $8.92 billion, compared to $8.90 billion. The bank set aside $7 million for expected credit losses, reversed from a $80 million release the year prior. CET1 capital ratio at the end of the quarter was 14.2%, compared with guidance of around 13%.
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Consumer goods firm Unilever said it delivered a first half performance that built on the momentum of 2021, despite challenges posed by high inflation and slower global growth. The Dove soap maker highlighted that high input cost inflation has been ‘widespread’ across its markets, and it is expected to remain elevated in the second half. For the six months to June 30, revenue was €29.62 billion, up 15% from €25.79 billion last year. Unilever posted first-half pretax profit of €4.359 billion, down 0.2% from €4.369 billion a year before. Operating profit was €4.5 billion, up 1.7% from €4.4 billion. Underlying operating profit growth was 4.1%. Operating profit margin was 15.2% in the first half, down by two percentage points from a year before, though underlying operating profit margin was 17.0%. Unilever said it generated underlying sales growth of 8.1% in the first half as it raised prices to counter rising costs and slumping volumes. The company declared a €0.4268 quarterly dividend. Looking ahead, Unilever expects 2022 underlying sales growth to be above its previous 4.5% to 6.5% guidance range. It had previously forecast full-year underlying sales growth at the top end of a range of 4.5% to 6.5%.
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Jet engine maker Rolls-Royce has hired former BP executive Tufan Erginbilgic as its new chief executive officer. Erginbilgic will take up his new role on January 1, succeeding Warren East who had previously announced his intention to step down at the end of this year. In his last role before leaving in 2020, Erginbilgic led BP's downstream business, which included Refining, Petrochemicals, Service Station Network, Lubricants, Midstream operations and the Air BP jet fuel operation.
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Contract caterer Compass said the strong growth momentum seen throughout the first half of the year continued into the third quarter, with all three of its geographic regions operating above 2019 levels. For the three months to June 30, Compass said underlying revenue was up 109%. North American revenue was up 112%, while revenue from Europe and the rest of the world were 104% and 106% stronger, respectively. Compass said new business growth continued to accelerate, benefiting from an increase in first time outsourcing due to ongoing operational challenges and heightened inflation. Looking ahead, Compass raised its 2022 organic revenue growth guidance to around 35% from around 30%. It also confirmed financial 2022 operating margin guidance of over 6% and now expects exit margin to ‘moderate slightly’ from around 7% due to the strong net new performance and ongoing inflationary pressures. ‘While we are mindful of the challenging macroeconomic environment, we remain excited about the significant structural growth opportunities globally. With a clear strategy, operational scale, and market leading offer, Compass is very well positioned to capitalise on the increase in outsourcing opportunities. Longer term, we expect revenue and profit growth above historical rates, returning margin to pre-pandemic levels, and rewarding shareholders with further returns,’ the company said.
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E-commerce firm Alibaba said it will seek a primary listing in Hong Kong, potentially giving access to China's vast pool of investors, as mainland officials indicate a long-running crackdown on the tech sector could be coming to an end. The move also comes as Chinese tech companies traded in New York grow increasingly worried about a regulatory drive by US authorities amid simmering tensions between the superpowers. While Alibaba has a secondary listing in Hong Kong, that does not allow it to join a popular Stock Connect programme that links to bourses in Shanghai and Shenzhen. The primary listing, which is expected to take place before the end of the year, would open that door.
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Walmart said its annual profit will be weaker than expected as rampant food inflation means consumers are doing less general merchandise spending. Second quarter sales will top expectations, though the top-line will be boosted by lower margin offerings, such as food. For its second quarter, which concludes on Sunday, Walmart expects comparative sales in the US to rise 6% annually, excluding fuel. Consolidated net sales for the quarter are expected to rise 7.5% yearly. For the full-year, Walmart expects growth of 4.5%. Excluding disposals, annual sales are to rise 5.5%, Walmart said. There will be a double-digit profit fall, however. Operating income for the second quarter will decline 13% to 14%. For the full-year, it will slump 11% to 13%.
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Amazon is to hike the price of its Prime delivery and streaming service due to ‘increased inflation and operating costs’. The technology giant offers free unlimited delivery, entertainment streaming and live sport through the Prime service. It said it will increase the price of Prime from £7.99 each month to £8.99 from September 15 for new customers, or on the date of the customer's next renewal. Annual membership will increase from £79 to £95 per year in the UK. A spokeswoman for the company said: ‘Prime offers the best of shopping and entertainment, and continues to improve each year...With increased inflation and operating costs in the UK continuing to rise, we will change the price of Prime.’
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Shell said that it has taken the final investment decision to develop the Jackdaw gas field in the UK North Sea. The offshore project is expected to come online in the mid-2020s, and will comprise a wellhead platform which is not permanently attended, as well as subsea infrastructure which will tie back to the London-based oil major's existing Shearwater gas hub. At peak production rates, the project is expected to reach 40,000 barrels of oil equivalent per day, reflecting around 6% of production from the UK North Sea projected for the middle of the decade. Separately on Tuesday, it announced Shell USA will acquire all the common units representing limited partner interests in Shell Midstream Partners for $15.85 per common unit in cash, or $1.96 billion. A Shell USA subsidiary currently owns around 269.5 million units, or a 69% stake.
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Siemens Energy said it is ready to immediately deliver a repaired turbine for the Nord Stream 1 gas pipeline, but that a lack of necessary customs paperwork from Russia is holding up the process. ‘Siemens Energy already had all the necessary documents for export from Germany to Russia at the beginning of last week and had also informed Gazprom about this,’ it said in a statement on Monday. ‘What is missing, however, are required customs documents for import to Russia.’ The company said this information could only be provided by the customer. The turbine in question is used on the Baltic Sea pipeline that is the main route of natural gas from Russia to Germany. It had undergone repairs in Canada and was then trapped there by Western sanctions against Russia.
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Swiss computer accessory company Logitech International downgraded guidance after a tough start to its new financial year. For the first quarter ending June 30, sales fell 12% year-on-year to $1.16 billion, as net profit dropped to $100.8 million from $186.8 million. Diluted earnings per share were 61 US cents, compared to $1.09 a year prior. The firm downgraded its outlook for the full year, having already done so at the end of the last financial year. It now expects negative growth between 4% and 8% in sales in constant currency, compared to 2% to 4% positive growth previously expected at the end of March. It anticipates $650 million to $750 million in non-GAAP operating profit, compared with the previous range of $875 million to $925 million.
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French satellite operator Eutelsat said it is in talks with UK counterpart OneWeb for a tie-up to create a ‘global champion’ in broadband internet, rivalling US services such as Elon Musk's Starlink. Satellite broadband promises to bring coverage to the most remote areas of the planet by doing away with the need for antennas and other infrastructure. It will also supply internet on commercial aircraft and to products like connected cars. While Starlink heads the market with more than 2,000 tiny satellites orbiting just a few hundred kilometres above the Earth, OneWeb has 428 low-orbiting satellites.
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MARKETS
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Share prices and currencies were mixed on Tuesday, with individual stock movers as the second-quarter earnings season continued in full flow but with the overall market on hold ahead of a key US Federal Open Market Committee monetary policy decision due on Wednesday.
‘Tomorrow's FOMC decision is almost certain to see a 75bp rate hike, accompanied by enough hawkishness to keep the debate about whether September will see another 75bp hike, or a marginal slowdown to 50bp, alive and well,’ said Kit Juckes of Societe Generale. ‘I can't see any scope for Jay Powell to back off a hawkish message, despite the market concerns about the economic outlook.’
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CAC 40: marginally lower, down 1.91 points at 6,235.64
DAX 40: down 0.2% at 13,186.60
FTSE 100: up 0.6% at 7,352.75
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Hang Seng: closed up 1.7% at 20,905.88
Nikkei 225: closed down 0.2% at 27,655.21
S&P/ASX 200: closed up 0.3% at 6,807.30
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DJIA: called down 0.3%
S&P 500: called down 0.2%
Nasdaq Composite: called down 0.2%
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EUR: down at $1.0206 ($1.0215)
GBP: down $1.2028 ($1.2041)
USD: down at JP¥136.50 (JP¥136.71)
GOLD: up at $1,724.00 per ounce ($1,718.56)
OIL (Brent): up at $106.88 a barrel ($104.78)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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EU member states have agreed an emergency gas plan that aims to soften the impact of a potential total stoppage in Russian gas supplies, dpa has learned. The plan provides for a voluntary 15% reduction in member states' natural gas consumption between August 1, 2022 and March 31, 2023, diplomats told dpa. In addition, a mechanism will be created to trigger a bloc-wide alert in the event of widespread gas shortages and to implement binding savings targets. The agreement sees the stringent terms of the commission's first draft considerably watered down, with various get-out clauses introduced and the threshold for the introduction of binding savings targets also being raised. Under the terms of the amended agreement, binding savings targets can now only be enforced by the European Council rather than by the EU Commission.
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German Economy Minister Robert Habeck has accused Russian President Vladimir Putin of a ‘duplicitous game’ over a cut in Russian gas supplies because of supposed issues with a repaired turbine in Germany. Russian state energy giant Gazprom is set to lower gas flows through the Nord Stream 1 pipeline to Germany to 20% on Wednesday. ‘There are no technical reasons for the delivery cuts. The turbine is ready for delivery to Russia,’ Habeck told dpa. He said Siemens Energy's export documents are complete, but Russia refuses to issue import documents. The firm confirmed it could transport the part immediately from Germany to Russia once it has the paperwork.
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Ukraine said it expects to export its first grain shipments under a UN-backed deal to lift Russia's blockade ‘this week’, days after missile strikes by the Kremlin threw the accord into doubt. Kyiv and Moscow on Friday agreed a landmark plan to release millions of tonnes of wheat and other grain trapped in Ukraine's Black Sea ports in a move hailed as a major step to averting a global food crisis. Less than 24 hours later, Moscow struck the port in Odessa one of three exit hubs designated in the agreement sparking fury in Kyiv and heightening fears the Kremlin would not go through with the deal. But despite the weekend attack, Ukraine's infrastructure minister Oleksandr Kubrakov said Kyiv expected to see the agreement begin ‘working in the coming days’.
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Industrial price inflation in Spain continued at pace in June, according to Spains National Institute of Statistics. The industrial price index increased annually to 43.2% in June, easing ever so slightly from the 43.6% annual increase reported in May. On a monthly basis, industrial prices increased by 1.9% in June from May, picking up pace from the 1.0% increase in May from April.
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Minutes released from the Bank of Japan's monetary policy meeting said that, as a trend, the nation's economy has picked up, but there remains some weakness as a results of the continued impact Covid-19 and rising commodity prices. The central bank said it would maintain its current monetary policy as a result, choosing to continue monetary easing ‘until it becomes certain that wages have increased as a trend and the price stability target [of 2%] is achieved in a sustainable and stable manner’. The minutes suggested that the Japanese economy is likely to recover, though it is expected to remain under downward pressure due to higher commodity prices. The year-on-year rate of change in the consumer price index has been at around 2% and the Bank of Japan believes the rate of increase is likely to remain at that percentage ‘for the time being’. Nonetheless, the central bank said that Japan's private sector consumption has picked up, particularly in the services sector as the impact of Covid-19 wanes.
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President Joe Biden said he does not expect the US to go into recession, although GDP figures due later this week may show the economy shrinking for a second consecutive quarter.‘We're not going to be in a recession in my view,’ Biden told reporters. Citing strong employment figures, the president said he hoped instead for a soft landing where ‘we go from this rapid growth to steady growth.’ Biden said he expects to speak with his Chinese counterpart Xi Jinping this week, but is waiting for confirmation. Asked whether the long-awaited call would take place this week, Biden told reporters: ‘That's my expectation, but I'll let you know when that gets set up.’
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Biden is ‘almost completely’ over his Covid-19 symptoms, his official White House doctor said Monday, adding that the 79-year-old continues to receive treatment for the potentially deadly virus. ‘His symptoms have now almost completely resolved,’ Biden's physician Kevin O'Connor said in a memorandum to the White House press secretary. ‘He only notes some residual nasal congestion and minimal hoarseness.’ Biden's lungs remain clear and his pulse, blood pressure and respiratory rate are all normal, the doctor said. The president continues to take the antiviral therapeutic Paxlovid and ‘is experiencing no shortness of breath,’ the memorandum said.
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