The following is a summary of top news stories Thursday.
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COMPANIES
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Toshiba shareholders voted against a proposal to split the Japanese conglomerate into two, dealing a fresh blow to management that will likely spell further turmoil for the embattled company. The results of the ballot held at an extraordinary shareholder meeting are non-binding, but Toshiba had been hoping to shore up support ahead of a final vote next year on the plan to spin off its electronic devices unit. The result is the latest setback for the engineering firm, which was once a symbol of Japan’s tech and business prowess but has faced a series of scandals, financial troubles and shock high-level resignations in recent years. A proposal by a key Singapore-based shareholder to explore alternatives including going private was also rejected, however, highlighting the deadlock between management and activist investors over the future of the company. ‘Our company will review any and all strategic options in order to increase our corporate value, taking into account the opinions expressed by shareholders,’ Chief Executive Taro Shimada said at the end of the meeting.
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Lloyd’s of London said it made a big swing back into profit last year, but the insurance market warned that the conflict in Ukraine ‘will be a major claim to the market in 2022’. Lloyd’s said it swung to an overall profit of £2.3 billion in 2021 from a £900 million loss in 2020, as an 11% rise in premium rates lifted underwriting profitability. The market’s combined ratio improved to 93.5% last year from 110.3% in 2020. A ratio below 100% indicates profitable underwriting, so the lower the better. The insurance market said it is speaking with partners to understand exposures to the war in Ukraine. It said business underwritten in Ukraine, Russia and Belarus represents less than 1% of its global footprint. ‘Direct and indirect claims are expected to fall within manageable tolerances and will not create solvency challenges,’ Lloyd’s said.
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UK retailer Next lowered annual guidance after closing websites in Russia and Ukraine and ‘moderating’ its growth outlook for other overseas units. A strong showing for the financial year just gone makes the comparative for the current period even stronger, the company said. Although it noted a decent start to the year for its UK arm. For the financial year that ended January 29 revenue rose 31% to £4.63 billion from £3.53 billion the year before. Pretax profit surged to £823.1 million from £342.4 million. Compared to two years earlier, so before the onset of the pandemic, revenue was up 8.4% and pretax profit was 10% higher.
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AstraZeneca said a Phase 3 trial for its immunotherapy Imfinzi did not achieve its primary endpoint in the treatment of patients with locally advanced cervical cancer. The Cambridge, England-based pharmaceutical company said that Imfinzi was given in combination with chemoradiotherapy in the trial. The immunotherapy did not achieve statistical significance for the primary endpoint of improving progression-free survival compared to chemoradiotherapy alone. AstraZeneca said that 770 patients with locally advanced cervical cancer were treated in the trial. It was conducted at 120 centres across 15 countries. Imfinzi is approved in the US, EU, Japan, China and ‘many other countries’ for the treatment of extensive-stage small-cell lung, the company said.
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Swiss food giant Nestle announced it will further scale back its products sold in Russia but would maintain baby products and medicalised foods, despite a scathing attack by Ukraine. The group said it would pull brands such as KitKat chocolate bars or Nesquik chocolate powders from Russian shelves. A spokesman said the suspension would include pet products and coffee. ‘We have already halted non-essential imports and exports into and out of Russia, stopped all advertising, and suspended all capital investment in the country,’ it added.
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Renault said it has halted activities in its manufacturing plant in Moscow with immediate effect after coming under pressure to leave the Russian market in the aftermath of the Kremlin’s invasion of Ukraine. As a result, Renault has had to revise down its full-year outlook, now expecting an operating margin of around 3%, previously equal to or above 4%, and unspecified ‘positive’ automotive operating free cash flow versus guidance of at or above €1 billion before.
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MARKETS
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European stock markets started higher Thursday, following a mostly positive lead from Asia, but turned lower by midday, with only London’s FTSE 100 clinging onto a slight gain. The index was led by gold miner Fresnillo, up 2.5%. Wall Street was called lower.
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CAC 40: down 0.4% at 6,558.53
DAX 40: down 0.6% at 14,197.90
FTSE 100: up 0.1% at 7,464.66
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Hang Seng: closed down 0.9% at 21,945.95
Nikkei 225: closed up 0.3% at 28,110.39
S&P/ASX 200: closed up 0.1% at 7,387.10
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DJIA: called up 0.3%
S&P 500: called up 0.5%
Nasdaq Composite: called up 0.5%
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EUR: down at $1.0980 ($1.1005)
GBP: down at $1.3185 ($1.3201)
USD: up at JP¥121.68 (JP¥121.03)
GOLD: up at $1,943.70 per ounce ($1,933.76)
OIL (Brent): down at $121.68 a barrel ($121.99)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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US President Joe Biden is meeting NATO and EU leaders in Brussels on Thursday in a show of trans-Atlantic unity exactly one month after the start of Russia’s war in Ukraine. Biden joins Western allies for a special meeting of NATO leaders, a G7 summit and an EU leaders’ summit for talks on how to support the Ukrainian people, how to further punish Russia and the long-term changes necessary to ensure Europe’s security. A proposal to strengthen NATO’s eastern flank with permanent troop deployments, supported by air and naval power, is still on the table. The move would mark a violation of the NATO-Russia Founding Act, and would likely escalate tensions with Russia.
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President Vladimir Putin said Russia will only accept payments in rubles for gas deliveries to ‘unfriendly countries’, which include all EU members, after Moscow was hit by unprecedented sanctions over Ukraine. Immediately after his announcement, the ruble – which has plummeted since the start of the Ukraine conflict – strengthened against the dollar and euro, while gas prices rose. ‘I have decided to implement a set of measures to transfer payment for our gas supplies to unfriendly countries into Russian rubles,’ Putin said during a televised government meeting. He added, however, that Russia will continue supplying the volume of gas outlined in its contracts.
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Business activity in the eurozone slowed during March, as the impact of the war in Ukraine offset the recovery of demand following the easing of Covid restrictions. The S&P Global flash composite purchasing managers’ index decreased to 54.5 points in March, from 55.5 points in February. This was a two-month low for the eurozone. The figure came closer to the 50.0 mark, which separates expansion from contraction, as the rate of growth slowed. The manufacturing PMI fell to a 14-month low of 57.0 points in March, down from 58.2 in February. The manufacturing output index fell to 53.6 in March, from 55.5 a month before. The services PMI fell to 54.8 in March from 55.5 the month before.
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Germany’s private sector growth moderated and inflationary pressures intensified, as Europe’s largest economy counts the cost of Russia’s invasion of Ukraine. The S&P Global flash composite PMI fell to 54.6 points in March, a two-month low, from 55.6 points in February. The manufacturing PMI declined to a three-month low of 57.6 points, from 58.4 in February. The services PMI eased to a two-month low of 55.0 from 55.8.
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France’s private sector economy continued its growth trajectory in March despite a slowdown in manufacturing. The S&P Global flash composite PMI rose to 56.2 points in March, from February’s final figure of 55.5. This was the highest composite PMI for France in eight months. The flash manufacturing PMI fell in March, however, to 54.8 points from 57.2 in February, as growth noticeably slowed to a five-month low. S&P said this was due to ongoing supply chain problems, and partly the war in Ukraine. The flash manufacturing output index fell to 51.0 points, a two-month low, and down from 55.1 points in February. France’s services activity reached a four-month high with the flash services PMI activity at 57.4 points in March, up from 55.5 in February.
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A strong contribution from the UK services sector helped to offset weaker manufacturing sector growth in March, preliminary survey results from S&P Global showed. The flash UK services PMI registered 61.0 points in March, up from 60.5 in February. The latest reading was above the market forecast, cited by FXStreet, of 58.0. However, the manufacturing PMI fell to a 13-month low of 55.5 points in March from 58.0 in February, and was well below market expectations of 56.7. The composite PMI slipped to 59.7 in March from 59.9 in February as a result, but was above market consensus of 57.8.
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Chancellor of the Exchequer Rishi Sunak has warned the UK is facing ‘challenging and uncertain’ times after official forecasters predicted the biggest fall in living standards on record. Following his spring statement on Wednesday, the chancellor insisted the government was ‘on the side of hard-working families’. But the opposition Labour party said that he had done nothing to tackle the cost-of-living crisis facing households up and down the country. In his Commons statement, Sunak announced a 5p cut in fuel duty and an increase in the threshold at which people pay national insurance contributions. Appearing on an LBC radio phone-in on Wednesday evening, Sunak said 70% of people would be better off as a result – despite an impending increase in national insurance rates to pay for the NHS and social care.
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The Swiss National Bank left interest rates unchanged but said it is willing to step in and place ‘upward pressure’ on the franc, which has benefited from a flight to safety after the Russian invasion of Ukraine. The Swiss franc reached parity against the euro earlier in March, at one point it fetched €1.002, its highest level since 2015. In 2015, the SNB abandoned a cap on the franc’s value versus the euro. The SNB left its policy rate rate unchanged at negative 0.75%, as widely expected. The Swiss central bank lifted its inflation forecasts. It projects a yearly inflation rate of 2.2% for both the first and second quarters, 2.1% in the third quarter and 1.8% in the fourth.
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Japan’s private sector economy remained in contraction territory in March, though it got closer to growth after an improved month for the manufacturing sector. The Au Jibun Bank Japan flash composite PMI rose to 49.3 points in March from February’s final tally of 45.8. The figure was closer to the 50.0 mark, which separates growth from decline. The flash manufacturing PMI rose to 53.2 in March, from 52.7 in February, suggesting growth has quickened. The services PMI remained in decline. The flash services PMI rose to 48.7 in March from 44.2 in February, ‘indicating the softest decline in services activity in the current three-month sequence,’ IHS Markit added.
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Australia’s services sector had its best showing for 10 months in March, propelling the wider private sector economy to similar heights. The S&P Global flash services PMI surged to a 10-month high of 57.9 points from in March from February’s 57.4. The manufacturing PMI climbed to a three-month high of 57.3 points from 57.0, marking a 22 successive month of growth. The composite PMI, a weighted average of both the services and manufacturing readings, reached a 10-month high of 57.1 points in March, according to the flash estimate. February’s final tally was 56.6.
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The US government announced it will reinstate tariff exemptions for 352 Chinese products first hit with punitive duties in 2018, when then-president Donald Trump started a trade war with Beijing. The exemptions lapsed in late 2020, but Biden’s administration last October began seeking opinions on which of 549 eligible Chinese products should once again be excluded from the tariffs. In a statement, the US Trade Representative said, ‘Today’s determination was made after careful consideration of the public comments, and in consultation with other US agencies.’ The exclusions are retroactive to October 12 of last year and extend through the end of 2022, USTR said.
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