1st Sep 2022 10:57
(Alliance News) - The following is a summary of top news stories Thursday.
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COMPANIES
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Rio Tinto said it has reached an agreement to take full ownership of Turquoise Hill, owner of the massive Oyu Tolgoi copper-gold project in Mongolia, at an improved price of CAD43, around USD32.64, per share. In August, Turquoise Hill said it was no longer considering Rio Tinto's takeover offer of CAD34 per share, saying conditions in both equity and copper markets had "changed significantly" since the March offer. Rio Tinto returned last week with an improved offer of CAD40 per share, which Turquoise Hill acknowledged. On Thursday, the two said they have reached agreement in principle on a CAD43-per-share deal, valuing the Turquoise Hill minority share capital at USD3.3 billion. Rio Tinto currently holds a 51% stake in Turquoise Hill. If the deal is successful - it needs approval from just under 67% of Turquoise Hill shareholders - Rio Tinto will have increased its stake in the Oyu Tolgoi project to 66%, with the government of Mongolia holding the remaining 34%. The mine is expected to be the fourth largest copper mine in the world by 2030.
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Reckitt Benckiser said Chief Executive Laxman Narasimhan, who was appointed in September 2019, is stepping down to relocate back to the US. He will step down from the role at the end of this month. "Laxman has decided for personal and family reasons to relocate back to the United States and has been approached for an opportunity that enables him to live there," Reckitt explained. He will be replaced by Senior Independent Director Nicandro Durante while the company "evaluates and selects" the future leadership. Durante has previous experience heading up a FTSE 100 listing, having been the boss of British American Tobacco for eight years before leaving in 2019. "The chairman and the Nomination Committee have begun the process to identify the best long-term candidate to take Reckitt on the next phase of its growth and transformation journey," said Reckitt. Durante was appointed to the Reckitt board in December 2013.
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Barclays said it has agreed to sell its entire 7.4% stake in South African lender Absa for ZAR10.66 billion, around GBP538 million. Barclays sold 63.1 million shares at a price of ZAR169.0 each, being a 5.1% discount to Absa's closing price of ZAR178.02 in Johannesburg on Wednesday.
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Pernod Ricard posted record annual sales, as it lifted dividends and planned further share buybacks. In the financial year ended June 30, the Paris-based alcoholic beverages maker said net sales jumped 21% to EUR10.70 billion from EUR8.82 billion year-on-year. This was the fastest rate of growth in over 30 years, according to Chair & Chief Executive Officer Alexandre Ricard, who hailed the "newfound appreciation for conviviality since the Covid outbreak". The company, which houses brands such as Jameson whiskey and Malibu flavoured rum, said net profit surged 54% to EUR2.00 billion from EUR1.31 billion, as diluted earnings per share rose 33% to EUR8.18 from EUR6.16.
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German flagship airline Lufthansa said it was cancelling 800 flights scheduled for Friday due to planned strike action by pilots. The cancellations represent almost all of the firm's flights out of the main hubs of Munich and Frankfurt. The Vereinigung Cockpit union confirmed overnight that Lufthansa pilots would stage an all-day strike on Friday. Negotiations on a new wage deal failed to produce a result after a round of exploratory talks, an improved offer from the company last week and a final attempt at talks on Wednesday.
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Massmart and Walmart confirmed they entered into an implementation agreement in which Walmart indicated its firm intention to make an offer for the remaining shares in Massmart. Shareholders of the Johannesburg-based retailer will receive ZAR62 per share, about USD3.61, in cash. This represents a 53% premium to the closing share price on August 26, which was ZAR40.51. "Walmart and the Massmart board are of the view that the proposed transaction will enable Walmart to continue its overweight support as a long-term shareholder and allow eligible Massmart shareholders the opportunity to realise value now," the companies stated. Walmart had acquired a 51% stake in Massmart in 2010 for USD2.3 billion.
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US chipmaker Nvidia warned that new rules from the US government concerning exports to China, including Hong Kong, and Russia would mean its integrated circuits would be subject to new licence requirements. "The USG indicated that the new license requirement will address the risk that the covered products may be used in, or diverted to, a ‘military end use’ or ‘military end user’ in China and Russia. The company does not sell products to customers in Russia," it said. The need for a license may delay its ability to develop the H100 integrated circuit, and potentially could even require the firm to move certain operations out of China, it said. Its third-quarter forecast included some USD400 million in potential Chinese sales, which would be at risk "if customers do not want to purchase the company’s alternative product offerings or if the USG does not grant licenses in a timely manner". The firm's shares fell 6.6% in after hours trading in New York.
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The EU's drug regulator is on Thursday expected to authorise the first Covid-19 vaccines for the Omicron variant, although they do not target the latest strains. The adapted vaccines made by Pfizer/BioNTech and Moderna will be discussed during an extraordinary meeting of the European Medicines Agency. European nations have been keen to rush through the new generation of jabs so they can start booster campaigns ahead of a feared Covid surge this winter. The two so-called "bivalent" vaccines protect against the earlier BA.1 strain of Omicron, as well as the original Covid virus that emerged in China in 2019. They do not however target the newer and more infectious BA.4 and BA.5 types, which have emerged in recent months as the dominant strains worldwide.
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MARKETS
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A warning by Cleveland Fed President Loretta Mester that US interest rates will continue to rise this year and won't be cut next year knocked equity markets globally on Thursday.
"A jump higher in Treasury yields partly reflects expectations of continued Fed tightening (the curve finally prices higher rates for longer), is partly a reaction to higher inflation in Europe, but is also a reaction to the prospect of Fed balance sheet normalisation accelerating," explained Kit Juckes of Societe Generale. On Wednesday, new figures showed eurozone inflation hit a fresh high of 9.1% in August.
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CAC 40: down 1.7% at 6,018.35
DAX 40: down 1.6% at 12,630.71
FTSE 100: down 1.5% at 7,175.36
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Hang Seng: closed down 1.8% at 19,597.31
Nikkei 225: closed down 1.5% at 27,661.47
S&P/ASX 200: closed down 2.0% at 6,845.60
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DJIA: called down 0.6%
S&P 500: called down 0.8%
Nasdaq Composite: called down 1.3%
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EUR: down at USD1.0044 (USD1.0064)
GBP: down at USD1.1602 (USD1.1638)
USD: up at JPY139.20 (JPY138.64)
GOLD: down at USD1,702.52 per ounce (USD1,720.40)
OIL (Brent): down at USD93.23 a barrel (USD97.05)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Another top Fed Reserve official signalled the US central bank is determined to keep lifting borrowing costs, mirroring comments by Chair Jerome Powell last week that there would be no let-up in the fight against inflation. "My current view is that it will be necessary to move the Fed funds rate up to somewhat above 4% by early next year and hold it there," said Cleveland Fed President Mester in remarks prepared ahead of an event for the Dayton Area Chamber of Commerce. "I do not anticipate the Fed cutting the Fed funds rate target next year." In a further warning that policymakers had a win-at-all-costs mentality, Mester later told the audience: "Even if the economy were to go into a recession, we have to get inflation down."
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US Treasury Secretary Janet Yellen has warned that a failure to place a price cap on Russian oil would hurt the global economy. "Without a price cap, we face the threat of a global energy price spike if the majority of Russian energy production gets shut in," Yellen said at the start of a meeting with her UK counterpart, Chancellor Nadhim Zahawi. The EU has decided to ban nearly all oil from Russia by the end of the year. The UK and other Group of Seven countries tentatively agreed in June to pursue a ceiling on the price of Russian oil. Getting as many other nations as possible to agree to join a buyers' cartel has been one of the US Treasury's main objectives as it seeks to curb Russia's ability to finance its war in Ukraine. Yellen said there has been "substantial progress" towards making the price cap a reality and she was optimistic it would happen.
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China's manufacturing sector slipped into contraction in August, as power cuts and temporary factory closures hindered growth. Caixin's manufacturing purchasing managers' index slipped past the no-change mark of 50.0, as the reading fell to 49.5 points in August from 50.4 in July, indicating a marginal decline. Consensus as cited by FXStreet had been expecting a reading of 50.2.
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Around 16 million people in the Chinese city of Chengdu will be effectively under lockdown from Thursday as authorities race to snuff out a new Covid-19 outbreak. Chengdu, in the southwest, has become the latest to announce a shutdown, saying in an official notice that residents must "stay home in principle" from 6 pm on Thursday to combat a new wave of infections. Each household will be allowed to send one person out to buy groceries and essential goods per day, provided they have tested negative in the previous 24 hours, the notice said.
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A UN report said claims of torture and forced labour in China's Xinjiang are credible and warned crimes against humanity may have taken place, allegations condemned by Beijing as a "political tool" aimed at containing the country. The landmark report detailed a string of rights violations against Uyghurs and other Muslim minorities in the far-western region, bringing the UN seal to many of the allegations long brought by activist groups, Western nations and the Uyghur community in exile. However, the report stopped short of calling China's actions in Xinjiang genocide – claims made by the US and several Western lawmakers.
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Growth in Japan's manufacturing slowed over the past month, as output and new orders continued to fall. The headline au Jibun Bank Japan manufacturing PMI fell to 51.5 points in August versus the score of 52.1 in July. This came in slightly better than consensus of 51.0 points, as cited by FXStret.
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The pace of manufacturing growth slowed down in Australia in August, the latest S&P Global PMI data showed. The S&P Global reported that headline seasonally adjusted PMI was at 53.8 points in August, down from 55.7 in July. This shows an improvement in the overall health of Australia’s manufacturing sector, for the 27th month in a row. Nonetheless, the rate of growth slipped to a 12-month low.
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The eurozone manufacturing sector contracted further in August, S&P Global said, with the bulk of the single-currency bloc recording declines. The final manufacturing PMI for August came in at 49.6 points, down from July's 49.8. With August's reading moving further below the no-change mark of 50.0, the latest data signals a deterioration in manufacturing conditions. It also come in below the flash reading of 49.7.It was the lowest reading since June 2020, S&P Global noted. Only three countries under S&P Global's coverage notched growth, being the Netherlands, France, and Ireland. The remaining five reported scores under 50.0, with industrial powerhouse Germany posting a 26-month low of 49.1. On a positive note, inflationary pressures continued to cool, with input and output prices rising at this slowest rates in 19 and 16 months respectively.
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Unemployment in the eurozone and the EU fell slightly in July. According to Eurostat, the eurozone seasonally adjusted unemployment rate was 6.6% in July, down from 6.7% in June. In July 2021, unemployment stood at 7.7%.
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The German retail sector held up better-than-expected in July. Sales were up 1.9% month-on-month, statistics body Destatis said, reversing a 1.5% decline the month before. The figure beat forecasts, according to FXStreet, as analysts had expected zero growth. On an annual basis, sales fell 2.6%, but again this marked an improvement on June, when sales had dropped 9.6%, and also beat the consensus forecast for a 6.5% decrease.
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Swiss inflation sped up slightly faster than expected. According to the Federal Statistics Office, the consumer price index rose 0.3% on a monthly basis in August, having remained stable month-to-month in July. Annually, prices rose 3.5% in August, picking up slightly from a 3.4% annual rise in July. This was slightly faster than FXStreet-cited consensus, which had expected inflation to remain stable at 3.4%. Harmonised CPI - which allows for comparison across EU countries - rose by 0.3% on a monthly basis and 3.3% annually. This compares with a 0.1% monthly rise and a 3.3% annual rise in July.
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The UK manufacturing sector performed better than first feared in August, but still saw conditions deteriorate sharply. The S&P Global/Chartered Institute of Procurement & Supply manufacturing PMI fell to 47.3 points in August from 52.1 in July. "This is the first sub-50.0 PMI reading since May 2020," S&P Global noted. However, the reading beat the even worse flash estimate of 46.0.
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UK house price growth moderated a touch in August but remains elevated, the latest Nationwide house price index has shown. Nationwide said annual house price growth in the UK was 10% in August, easing from 11% in July but remaining in double-digits for the tenth month straight. The monthly rise accelerated to 0.8% from 0.2%. The average UK house price now stands at GBP273,751, up from GBP271,209 in July and having risen by almost GBP50,000 over the past two years. The UK housing market has shown resilience in recent months given higher interest rates and a squeeze on household incomes.
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Ireland's factory sector grew at its slowest pace in almost two years last month, survey results showed. The AIB Ireland manufacturing PMI fell to 51.1 points in August from 51.8 in July, indicating the weakest growth since October 2020, according to survey compilers S&P Global. "The impact of weakening demand on Irish manufacturing activity is clearly evident in the third consecutive monthly contractions in both output and new orders," said AIB Chief Economist Oliver Mangan. More positively, employment in the sector continued to expand, though at its slowest pace since January 2021.
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By Tom Waite; [email protected]
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