10th Jun 2015 10:15
LONDON (Alliance News) - The following is a summary of top news stories Wednesday.
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COMPANIES
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J Sainsbury reported a drop in retail sales and a sixth consecutive quarter of declining like-for-like sales in the first quarter of its financial year, as it continues to be hit by food-price deflation amid a highly competitive UK grocery market. The company admitted that it is difficult to establish when sales will return to growth although its chief executive said he is encouraged by the "early trends" it is seeing. Sainsbury's said that total retail sales in the 12 weeks to June 6 were down 0.6% excluding fuel, or 2.3% including fuel on the same period the year before, while like-for-like retail revenue was down 2.1% excluding fuel, or 3.7% including fuel. However, the 2.1% like-for-like fall excluding fuel was slightly ahead of the 2.2% consensus estimate, according to Brewin Dolphin.
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Standard Chartered's capital strength is a top priority, Chief Executive Bill Winters has written in a letter to employees to mark his first day in the role, highlighting its importance as a competitive advantage for banks in tough economic conditions. "Capital strength is a competitive advantage, especially in tough economic times. We are reviewing all aspects of our capital strength as part of our broader business review," Winters wrote in a letter seen by Alliance News. "We need to reinforce our foundations; streamline our business; strengthen our financial position; and re-orient the bank for better returns on our capital," the letter said.
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UK Chancellor George Osborne is expected to set out plans to phase out the GBP3.5 billion bank levy when he delivers his annual Mansion House speech on Wednesday evening, The Times reported. According to the report, the UK's economic and finance ministry is expected to replace the bank levy with a new corporation tax surcharge. Unlike the bank levy, which is imposed on global balance sheets, the new tax would apply only to banks' assets in the UK. The bank levy has been a frustration for banks such as HSBC Holdings and Standard Chartered, both of which conduct the bulk of their business outside the UK. The report in The Times said that Barclays, Lloyds Banking Group and Royal Bank of Scotland Group could contribute a greater share under the new tax plans. Osborne's speech will also include further details of his plans for returning ownership of RBS to the private sector.
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Deutsche Bank, Barclays Bank and the Royal Bank of Scotland Group were among a handful of European banks downgraded on Tuesday by Standard & Poor's, amid concern that state support in a crisis is now 'uncertain', the FT reported. Analysts with the rating agency warned that it was unclear what support even systematically important financial institutions in the UK and Germany would receive, following the recent implementation of the European Union's Bank Recovery and Resolution Directive, the newspaper said. S&P lowered the counterparty credit rating of Barclays Bank one notch to 'A-', with Deutsche Bank and RBS cut to 'BBB+' from 'A' and 'A-', respectively. RBS confirmed the downgrade in a statement.
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Weir Group said it expects its full-year revenue, margins and profit to be weighted more towards the second half than in previous years. Chief Executive Keith Cochrane said the second quarter is proving to be "very challenging" for its oil and gas division, with the US rig count continuing to decline, though at a slower rate over the past month.
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Rolls-Royce Holdings said it has agreed to create a 50:50 joint venture with Liebherr-Aerospace to develop manufacturing capability and capacity for the power gearbox for Rolls-Royce's new UltraFan engine. The venture will be located in Friedrichshafen in southern Germany and will provide production engineering for the power gear drive train components for the new engines. The manufacturing of the components will initially be done in existing Liebherr facilities, but as production volumes increase, the joint venture will look at options for creating a standalone manufacturing infrastructure, Rolls-Royce said.
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Vodafone Group launched broadband and home phone services in the UK, as it continues a push to diversify from its mobile offerings in a market that's increasingly offering a full range of mobile, broadband and TV services. The company's UK unit said it will start rolling out its Vodafone Connect high-speed broadband and home phone services from Wednesday, and said it is investing significantly in the project.
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FirstGroup reported higher profits for its last financial year as its improvement plan delivered higher margins in its US First Student and UK bus operations, and while it expects its plan to drive further improvements in most businesses in the current year it is also facing a hit to its UK rail unit after it lost two key franchises. The company pledged early last year that it would turnaround its underperforming businesses, after rebuffing demands by activist shareholder Sandell Asset Management to break itself up by spinning off its US operations. Sandell said a company breakup would improve shareholder returns, a claim disputed by FirstGroup, even though it currently isn't paying a dividend as it puts money into the turnaround plan.
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SOCO International is considering the options at hand for its African portfolio, including rationalisation and farm-out of all or part of its asset base in the region, as the oil and gas exploration and production company maintained production guidance for 2015. In an update ahead of SOCO International's annual meeting of shareholders at 1000 BST, Chief Executive Ed Story said that more stable Brent crude oil prices, in the USD60 to USD65 range, mean the company can evaluate the "economic attractiveness" of significant investments in future projects.
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Key shareholder meetings are to be postponed as Synergy Health and STERIS Corp respond to the US Federal Trade Commission's plans to block the combination of the two businesses. The news comes almost two weeks after the revelation that the US Federal Trade Commission intends to block STERIS Corp's proposed USD1.9 billion cash and share takeover of Synergy, a result of concerns relating to competition in the market for contract radiation sterilisation services. STERIS and Synergy Health are contesting the FTC's move.
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MARKETS
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UK shares prices are higher as negotiations on Greek debt remain in focus, with Sainsbury's and Standard Chartered leading blue-chip gainers, up 4.3% and 4.2%, respectively.
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FTSE 100: up 0.4% at 6,778.45
FTSE 250: up 0.4% at 17,914.65
AIM ALL-SHARE: up 0.4% at 774.78
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The pound is higher against the dollar after UK industrial production output beat analysts' expectations.
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GBP: up at USD1.5453
EUR: up at USD1.1305
GOLD: up at USD1185.24 per ounce
OIL (Brent): up at USD65.98 a barrel
(changes since end of previous GMT day)
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ECONOMICS AND GENERAL
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UK industrial production grew at a slower pace in April, data from the Office for National Statistics showed. Industrial output increased 0.4% month-on-month in April, weaker than March's 0.6% growth, but better than the expected growth of 0.1%. At the same time, manufacturing output dropped unexpectedly by 0.4%, offsetting a similar 0.4% rise seen in March. Economists had forecast a 0.1% rise. On a yearly basis, industrial output growth edged up to 1.2% in April from 1.1% in March. At the same time, manufacturing growth eased notably to 0.2% from 1.2%. Economists had forecast 0.6% rise in industrial production and 0.4% increase in manufacturing output.
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Greek Prime Minister Alexis Tsipras is due to meet with German Chancellor Angela Merkel and French President Francois Hollande on the sidelines of an EU-Latin America summit starting Wednesday, as they seek to end a stand-off on Greece's bailout programme. The meeting comes at a time when fundamental differences remain about how to prevent Greece from defaulting on its debt and possibly leaving the eurozone, and amid continued scepticism by European officials about the country's economic reform proposals.
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The EU's legislature postponed a planned vote on a mammoth free trade deal being negotiated with the US, amid disagreement over a controversial mechanism to settle trade disputes. If approved, the Transatlantic Trade and Investment Partnership (would create the world's largest free trade zone and could help boost the EU economy. But the deal has been bogged down by concerns that it could allow corporations to challenge national laws.
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French industrial and manufacturing output declined unexpectedly in April, the statistical office Insee revealed. Industrial output dropped 0.9% from March when it remained flat. This was the first decline in five months. Economists had forecast production to grow 0.4%.
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US President Barack Obama has asked the military for recommendations on how to make the effort to train and equip Iraqi security forces more effective, the chairman of the Joint Chiefs of Staff said in Jerusalem Tuesday. "What he's asked us to do is take a look at what we've learned over the last eight months in the train-and-equip program and make recommendations to him on whether there are capabilities that we may want to provide to the Iraqis to actually make them more capable," Army Gen. Martin E. Dempsey told reporters traveling with him.
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