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The following is a summary of top news stories Tuesday.
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COMPANIES
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BHP Group reported it nearly tripled its annual profit as a result of higher commodity prices and exceptional gains from its merger with Woodside Energy Group. The Australian mining company reported revenue for the financial year ended June 30 rose 14% to $65.10 billion from $56.92 billion. It posted an attributable profit of $30.90 billion. This was nearly treble the $11.30 billion achieved the previous year. Basic earnings per share saw a similar surge, rising to 610.6 US cents from 223.5 cents a year prior. Pretax profit was 36% higher at $33.14 billion from $24.29 billion and profit after tax from continuing operations rose 34% to $34.11 billion from $25.52 billion. This, BHP explained, was driven by higher coal and copper prices. It noted an exceptional gain of $7.1 billion after tax on the merger of its petroleum business with Woodside, an Australian petroleum exploration and production company.
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A securities filing on Monday showed that hedge fund Elliott Management sold its entire stake in Twitter during the second quarter of 2022. The filing showed Elliott had 10 million common stock shares, worth around $386.9 million, at March 31 as well as 2 million call options worth $77.3 million. These were gone at June 30. Elliot continued to hold 40 million convertible bond positions, however, this had dropped from 50 million previously. The bond positions were worth $35.7 million as of June 30. The stake was sold during a volatile period for the social media firm. Twitter shares have faced a bumpy ride ever since Telsa boss Elon Musk agreed to buy the social media platform in a $44 billion takeover in April. Musk agreed to buy Twitter for $54.20 per share but has since tried to walk away from the deal. He has accused the company of fraud and alleged the company misled him about the number of fake accounts on the platform, arguing the deal could not go through.
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Twitter wasn't the only move Elliott has made recently, with the Financial Times reporting on Tuesday that the investor had also dropped nearly all of its stake in Japanese conglomerate SoftBank Group. The newspaper said the US-based investor decided to sell down the ‘vast majority’ of its shareholding, having previously bought as much as $2.5 billion in the group. The FT said the exact size and timing of its selldown could not be learnt but people familiar with the sale said the investor made its move after ‘losing conviction’ in the company's founder, Masayoshi Son, and his ability to close the gap between the value of its holdings and its market capitalisation. Last week, SoftBank said it swung to a sizeable loss in its financial first quarter, with valuations in its tech-heavy Vision Funds battered by falling stock markets. SoftBank posted a loss on its investments totalling JP¥2.834 trillion, an eye-popping swing from a JP¥1.263 trillion gain a year earlier.
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UK grocery price inflation reached its highest level in nearly 15 years, according to figures from data analytics firm Kantar. Grocery price inflation reached just under 12% over the past four weeks ending August 7, with the average household's annual grocery bill now set to soar by £533, or around £10.25 a week - if consumers buy the same products as they did last year. ‘As predicted, we've now hit a new peak in grocery price inflation, with products like butter, milk and poultry in particular seeing some of the biggest jumps,’ said Fraser McKevitt, head of retail & consumer insight at Kantar. Supermarket sales in the 12 weeks to August 7 rose by 2.2% year-on-year to £30.17 billion. Kantar said this was the fastest growth the industry has seen since April 2021 as it continues its post-pandemic recovery. Tesco remained the largest supermarket with a 26.9% share of the grocery UK market and sales of £8.12 billion, up 1.0% year-on-year. Tesco's market share dipped from 27.2% a year earlier, however. J Sainsbury sales slipped 0.1% annually to £4.48 billion. Its market share weakened to 14.8% from 15.2%. Ocado's market share was unchanged at 1.8%, though sales rose 6.2% year-on-year to £551 million.
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Chinese tech giants including Alibaba, Tencent and ByteDance have submitted details to a state regulator of algorithms used in some of their products, in an unprecedented move as authorities strengthen oversight of the sector. The country's internet watchdog on Friday published a list of 30 algorithms that companies use to gather information on users and promote content or services. Algorithms used by tech companies are closely guarded globally but in March China rolled out regulations obliging firms to disclose these tools as concerns grow about data misuse. Beijing has in recent years embarked on a wide-ranging clampdown on the tech sector, which saw years of runaway growth and the emergence of supersized monopolies before regulators stepped in. The rules issued in March require companies to ensure they will not engage in activities that may threaten national security, social stability or encourage over-indulgence, said Angela Zhang, associate professor of law at the University of Hong Kong.
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Edinburgh-based investment company abrdn said it has sold a 6% stake in HDFC Asset Management Co for £225 million. abrdn's wholly owned subsidiary abrdn Investment Management Ltd has sold 12.8 million HDFC shares on the National Stock Exchange of India and Bombay Stock Exchange. This represents 6.0% of HDFC's issued share capital and the divestment was worth £225 million, based on an average price of ₹1,935.50. abrdn said it plans to use the proceeds for ‘general corporate purposes’. Following the sale, abrdn Investment Management will retain a 10% stake in HDFC, valued at around £437 million. This means it also retains the right to nominate a director to HDFC's board.
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Darktrace on Monday confirmed that it is in early stages of discussions with Thoma Bravo on a possible cash offer for the Cambridge-based cybersecurity company. Under the City Code on Takeovers & Mergers, Chicago, Illinois-based private equity firm Thoma Bravo has until September 12 to make a firm offer for Darktrace, or state that it will not be making an offer. Darktrace stressed that there was no guarantee that any offer will be made.
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AstraZeneca said its prostate cancer drug candidate Lynparza has received priority review from the US Food & Drug Administration. The drug, developed and commercialised with New-Jersey based partner Merck & Co Inc, will be reviewed for adult patients in the US with metastatic castration-resistant prostate cancer. Metastatic is when cancer spreads to distant parts of the body. Lynparza, also known as Olaparib, since 2014 has been approved for the treatment of some forms of ovarian cancer in adults in the US and EU. The priority review will gauge the efficacy of Lynparza in combination with both abiraterone and prednisone, or solely with prednisolone. Abiraterone is a prostate cancer medication while prednisolone is used to treat a plethora of diseases such as cancer, high blood calcium and multiple sclerosis.
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MARKETS
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European markets pushed higher on Tuesday despite some mixed jobs data out of the UK and weakening economic sentiment in Germany. ‘It seems investors are gaining confidence amid a recovery in stock markets in recent weeks rather than feeling anxious about its sustainability against a worrying economic backdrop. I wonder how long that can last even if US inflation shows further signs of pulling back from the peak. Recessions around the world are coming and inflation is not falling fast enough,’ said Craig Erlam senior market analyst at Oanda.
Wall Street was pointed to a subdued start despite Europe's positive lead. Investors are awaiting Wednesday's release of Federal Reserve meeting minutes.
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CAC 40: up 0.2% at 6,585.88
DAX 40: up 0.5% at 13,889.09
FTSE 100: up 0.6% at 7,552.14
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Hang Seng: closed down 1.1% at 19,830.52
Nikkei 225: closed flat at 28,868.91
S&P/ASX 200: closed up 0.6% at 7,105.40
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DJIA: called down 0.1%
S&P 500: called down 0.2%
Nasdaq Composite: called down 0.2%
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EUR: down at $1.0138 ($1.0184)
GBP: down at $1.2026 ($1.2075)
USD: up at JP¥134.11 (JP¥133.07)
GOLD: down at $1,776.40 per ounce ($1,778.71)
OIL (Brent): flat at $94.28 a barrel ($94.22)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The EU said Tuesday it was studying Iran's response to a ‘final’ draft agreement on reviving a 2015 nuclear accord with major powers it presented at talks in Vienna. The US had already said Monday that it was informing EU foreign policy chief Josep Borrell of its response to the text he submitted on August 8. The possibility of a deal which might lead to the lifting of US sanctions on Iran's oil output of 2.5 million barrels per day has already helped trigger a fall in prices on world markets, with US oil futures dropping nearly three percent to finish below $90 a barrel. A spokesperson for Borrell who coordinated talks to bring Iran and the US back into the deal said the Iranian response was received late Monday. ‘We are studying it and are consulting with the other JCPOA participants and the US on the way ahead,’ the spokesperson said, referring to the formal title of the nuclear pact. Iran's official IRNA news agency reported earlier Tuesday that ‘an agreement will be concluded if the US reacts with realism and flexibility’ to Iran's response.
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The UK unemployment rate was steady in June, while wage growth figures came in slightly ahead of expectations, but continued to lag red-hot inflation, figures showed. The UK unemployment rate was 3.8% in the three months to June, unchanged from the three months to May, according to the Office for National Statistics. A year earlier, the unemployment rate had sat at 4.7%. The latest figure was in line with FXStreet-cited consensus. Wage growth figures, meanwhile, came in above expectations. Regular pay, so excluding bonuses, was 4.7% higher annually in the three months to June. The figure topped FXStreet cited consensus of 4.5% growth. Including bonuses, wage growth was 5.1% year-on-year, beating a forecast of 4.5% growth. That means UK earnings by both measures continue to lag consumer price inflation, which ran at an annual rate of 9.4% in June. ‘In real terms (adjusted for inflation), over the year, total pay fell by 2.5% and regular pay fell by a record 3.0%,’ the ONS added. This fall in regular pay was the fastest on record.
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Economic sentiment in Germany took a hit in August, with inflation and rising energy costs weighing on expectations. According to the latest Zew survey, the economic outlook for Germany fell to negative 55.3 points in August, from negative 53.8 in July. ‘The financial market experts therefore expect a further decline in the already weak economic growth in Germany. The still high inflation rates and the expected additional costs for heating and energy lead to a decrease in profit expectations for the private consumption sector,’ Zew analyst Michael Schroder commented. The current situation tracker also fell, slipping to minus 47.6 points in August from 45.8 in July. For the eurozone, the more forward-looking economic sentiment index fell to minus 54.9 points in August from minus 51.1 in July. The current situation tracker rose, however, to minus 42.0 points from minus 44.4 in July.
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Australia's central bank anticipates enacting more interest rate hikes, minutes from its latest meeting showed on Tuesday, though it eyes normalising monetary policy in a way that keeps the economy on ‘an even keel’. The Reserve Bank of Australia earlier in August lifted interest rates by another 50 basis points as it tackles high inflation. The RBA raised the cash rate by half a percentage point to 1.85%, as expected by markets, and also increased the interest rate on exchange settlement balances by 50 basis points to 1.75%. August's move followed similar 50 basis point hikes in both July and June. Minutes from that meeting showed the RBA ‘expects to take further steps in the process of normalising monetary conditions over the months ahead’.
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Just two possible Covid-19 cases have sparked chaotic scenes in Shanghai, with crowds of people seen running out of a building and an Ikea store to try and escape a lockdown under China's strict coronavirus rules. The country's zero-Covid strategy involves snap lockdowns and quarantines, sometimes over just a handful of cases, and the measures have sparked anxiety and anger in some cities. Videos widely shared on social media and verified by AFP showed a small group of PPE-clad personnel trying to keep the main doors of a Shanghai building closed on Friday after a worker there was identified as a close contact of a Covid case. A large crowd is then seen bursting past the outnumbered staff, running away from the building as onlookers film the scene on their mobile phones. Some people were seen dragging what appeared to be a metal barricade several metres as they fled the mall.
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Chinese lithium hub Sichuan province will ration electricity supply to factories until Saturday, state media reported, as a heatwave sends power demands soaring and dries up reservoirs. Temperatures in the province home to nearly 84 million people have hovered above 40-42 degrees Celsius since last week, according to data from China's Meteorological Administration, increasing the demand for air conditioning. The region relies on dams to generate 80% of its electricity, but rivers in the area have dried up this summer, Beijing's Water Resources Ministry said. The province in China's southwest produces half the nation's lithium, used in batteries for electric vehicles, and its hydropower projects provide electricity to industrial hubs along the country's east coast. But the local government has decided to prioritise residential power supply, ordering industrial users in 19 out of 21 cities in the province to suspend production until Saturday, according to a notice issued Sunday.
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