The following is a summary of top news stories Thursday.
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COMPANIES
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Elon Musk notified US regulators that he will rely less on loans in his bid to buy Twitter, as he and partners put $33.5 billion into the deal. Twitter shares were up 5.6% in the New York pre-market on Thursday, as the market evidently took it as a sign the acquisition is moving forward despite Musk declaring it on ‘hold’ due to his concerns about the number of accounts that might be software ‘bots’ instead of real people. The Tesla chief said in a filing with the US Securities & Exchange Commission that he would seek $13 billion in loans for the Twitter buy instead of using nearly double that much debt as previously indicated. Musk has been courting major Twitter investors including co-founder Jack Dorsey in the hope of getting them to partner with him in taking the San Francisco-based company private. Musk said in the regulatory filing that he had new commitments that will allow him to rely less on loans to buy Twitter, but did not specify whether he was reaching into his own pocket for money or had won over others with big stakes in the company.
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Twitter agreed to pay $150 million to settle allegations the platform gave advertisers some user information that was supposed to be employed to strengthen account security, US authorities said Wednesday. The Federal Trade Commission and the Department of Justice accused Twitter of taking phone numbers or email addresses provided to tighten privacy and then letting advertisers use the details to make money. ‘Twitter obtained data from users on the pretext of harnessing it for security purposes but then ended up also using the data to target users with ads,’ commission chair Lina Khan said in a release. The personal information that users hand over to tech companies, and how that data gets used, is a front of repeated conflict between regulators and powerful firms like Facebook parent Meta, Twitter and others. In a five-year period ending in 2019, more than 140 million Twitter users gave phone numbers or email addresses to the San Francisco-based service to help secure accounts with two-factor authentication, regulators said.
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Nvidia reported a record rise in first-quarter revenue as the semiconductor maker benefited from increased demand for gaming. For the three months to May 1, revenue was $8.29 billion, up 46% from $5.66 billion in the first quarter last year. Nvidia posted first-quarter net income of $1.62 billion, or $0.64 per diluted share, down from $1.91 billion, or $0.76 diluted EPS, the year before. The Santa Clara, California-based firm said first quarter earnings included an after-tax hit of $0.52 related to the $1.35 billion Arm acquisition termination charge. Looking ahead, Nvidia expects revenue of $8.10 billion, plus or minus 2%, in the second quarter, including loss of $500 million relating to Russia and lockdowns in China.
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BT said the UK government is probing a recent investment in the telecommunications operator on national security grounds. In December, billionaire telecom tycoon Patrick Drahi’s Altice lifted its stake in BT to 18% from 12% previously. The transaction has been referred to the UK’s National Security & Investment Act 2021. ‘BT Group will fully cooperate with this review,’ the company said.
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Auto Trader reported an annual earnings rise and anticipates more growth ahead. It also expects its margins to withstand inflationary pressure. In the year ended March 31, the vehicle marketplace reported a 65% revenue hike to £432.7 million from £262.8 million. Compared to financial 2020, largely pre-pandemic, revenue increased 17% from £368.9 million. The chunkier year-on-year revenue rise stemmed from an easier comparative. Auto Trader noted it provided free advertising to retailer customers in April 2020, May 2020, December 2020 and February 2021 amid the Covid-19 pandemic. It also had provided a discounted rate in June 2020. Auto Trader’s pretax profit jumped 91% to £301.0 million from £157.4 million. It was up 20% from financial 2020’s £251.5 million. The company’s annual payout totalled 8.2 pence per share, up 64% from 5.0p.
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JD Sports Fashion said Peter Cowgill has stepped down as executive chair with immediate effect following long-standing corporate governance issues that have dogged the retailer. JD Sports said that as a result of an ongoing review of its internal governance and controls it has decided to ‘accelerate the separation’ of the roles of chair and chief executive officer. The athletic apparel retailer said non-executive directors Helen Ashton and Kath Smith will assume the roles of interim non-executive chair & interim chief executive officer, respectively. JD said the process to recruit a CEO continues, and it now will begin the search for a new non-executive chair.
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Johnson Matthey said it is determined to ‘restore value to our shareholders’ after recent changes in direction sent shares tumbling. However, its financial outlook for the year ahead was at the low end of expectations, leaving investors unimpressed. The London-based specialty chemicals firm reported an annual revenue increase but profit came under pressure. Results for the financial year that ended March 31 were in line with expectations, however. Revenue climbed 3.8% to £16.03 billion from £15.44 billion. Pretax profit fell 13% to £195 million, from £224 million. Johnson Matthey upped its payout by 10% to 77.0 pence from 70.0p. The one-time FTSE 100 constituent said it was a ‘very challenging year’.
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Westpac Banking has offloaded the superannuation funds of wealth management arm BT to Marsh & McLennan subsidiary Mercer. Westpac bought BT Financial Group in 2002; it is unconnected to the UK telecoms firm. BT will merge its Personal and Corporate superannuation funds into the Mercer Super Trust to create a A$65 billion, about $46 billion, superannuation fund. The deal covers funds including BT Super and BT Super for Life. The merger does not include superannuation funds held on Westpac’s BT Panorama and Asgard platforms. Westpac says the move will lead to a ‘stronger performance’ for the funds. Westpac also will sell its Advance Asset Management business to Mercer Australia. Advance had A$43.7 billion in funds under management at the end of March and manages a number of products available through BT Panorama.
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Boeing’s Starliner capsule returned to Earth on Wednesday in the final step of a key uncrewed test flight to prove itself worthy of providing rides for NASA astronauts to the International Space Station. The gumdrop-shaped spaceship landed in a puff of sand in the New Mexico desert, wrapping up a six-day mission crucial to restoring Boeing’s reputation after past failures.
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US securities regulators unveiled a proposed rule to tighten disclosure requirements on the rising number of investments that tout their commitment to environmental, social & governance goals. Seeking to address the problem of ‘greenwashing,’ where financial investments may fall short of marketing statements, the Securities and Exchange Commission said the measure was meant to standardize disclosure and avoid cases where a fund ‘could exaggerate its actual consideration of ESG factors.’ SEC Chair Gary Gensler said the rule was needed as the scale of the so-called ‘US sustainable investment universe’ has grown to $17.1 trillion, according to one estimate. ‘When an investor reads current disclosures, though, it can be very difficult to understand what some funds mean when they say they’re an ESG fund,’ Gensler said. ‘There also is a risk that funds and investment advisers mislead investors by overstating their ESG focus.’ Funds that integrate ESG factors alongside non-ESG factors would be required to say how ESG is incorporated into the investment process, while ESG impact funds would need to say how they measure progress, the SEC said of the proposed rule.
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MARKETS
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European stock markets were having a more positive day than did Asia, where prices were pulled down by a warning about economic growth by the Chinese premier. The dollar was slightly lower, after the US Fed meeting minutes held few surprises. ‘If the US economy slows slowly as the Fed raises rates, equity markets will be fine, and the dollar may already have peaked,’ commented Kit Juckes of Societe Generale. ‘But if there‘s a hard landing, the dollar is unlikely to stop rising even when the Fed has finished raising rates – because equity markets will still be falling, and volatility will be high.’
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CAC 40: up 0.5% at 6,331.87
DAX 40: up 0.5% at 14,073.90
FTSE 100: up 0.2% at 7,535.21
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Hang Seng: closed down 0.3% at 20,116.20
Nikkei 225: closed down 0.3% at 26,604.84
S&P/ASX 200: closed down 0.7% at 7,105.90
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DJIA: called up 0.2%
S&P 500: called up 0.1%
Nasdaq Composite: called down 0.3%
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EUR: firm at $1.0684 ($1.0678)
GBP: up at $1.2566 ($1.2547)
USD: down at JP¥126.77 (JP¥127.31)
Gold: down at $1,844.56 per ounce ($1,850.30)
Oil (Brent): up at $114.69 a barrel ($113.93)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The US Federal Reserve’s latest meeting minutes showed that Fed officials highlighted that interest rates need to rise quickly to rein in inflation and that hikes similar to the 50-basis-point one agreed at the May meeting may be necessary in the imminent future. Policy makers reaffirmed their determination to restore price stability and agreed that the Federal Open Market Committee should ‘expeditiously’ move the stance of monetary policy toward a neutral posture. This would be achieved through both increases in the target range for the federal funds rate and reductions in the size of the Federal Reserve’s balance sheet. Further, most participants were of the view that 50-basis-point increases in the target range ‘would likely be appropriate at the next couple of meetings’, the meeting minutes showed.
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China’s premier sounded an unusually stark warning about the world’s second-largest economy, saying it must return to normal as the country’s zero-Covid strategy bites into growth. In some ways, the challenges now are ‘greater than when the pandemic hit hard in 2020’, Premier Li Keqiang told a State Council meeting on Wednesday, according to a readout by the official Xinhua news agency. ‘We are currently at a critical juncture in determining the economic trend of the whole year,’ Xinhua quoted Li as saying. ‘We must seize the time window and strive to bring the economy back onto a normal track.’ Li’s remarks are the latest in a growing chorus of calls from officials and business leaders for more balance between stopping the virus and helping the ailing economy.
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China has put forward plans to dramatically expand security and economic cooperation with South Pacific nations, in what one regional leader called a thinly veiled effort to lock them into ‘Beijing’s orbit’ The wide-ranging draft agreement and a five-year plan, both obtained by AFP, will be the subject of discussion during Chinese Foreign Minister Wang Yi’s tour of Pacific nations, which began Thursday. The package would offer 10 small island states millions of dollars in Chinese assistance, the prospect of a China-Pacific Islands free trade agreement and access to China’s lucrative market of 1.4 billion people. It would also offer China the chance to train local police, become involved in local cybersecurity, expand political ties, conduct sensitive marine mapping and gain greater access to natural resources. The ‘comprehensive development vision’ is believed to be up for approval when Wang meets regional foreign ministers on May 30 in Fiji. The South Pacific is increasingly a theatre for competition between China and the US – which has been the primary power in the region for the last century.
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Services producer prices rose in Japan in April at its fastest pace seen in more than two years on an annual basis, but remained stable compared to the previous month, preliminary data from the Bank of Japan showed. The services producer price index reported a 1.7% increase in April, its fastest rate of growth since February 2020, compared to a 1.3% rise in March. In February 2020, the services PPI increased 2.1%. On a monthly basis however, services producer prices in April remained unchanged, compared to a 0.9% increase in March.
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UK Prime Minister Boris Johnson has said he ‘overwhelmingly’ believes he should remain in office despite public anger at the ‘bitter and painful’ conclusions of the inquiry into raucous parties in No 10 during lockdown restrictions. The prime minister said on Wednesday that he recognised people are ‘indignant’ over the damning findings of Sue Gray’s report into law-breaking at the heart of Government, but defied fresh calls to resign. He said he takes ‘full responsibility’ for the scandal but sought to play down his personal involvement in the gatherings detailed in the report. The Gray report detailed events at which officials drank so much they were sick, sang karaoke, became involved in altercations and abused security and cleaning staff at a time when millions of people across the country were unable to see friends and family. Johnson told a Downing Street press conference: ‘I understand why people are indignant and why people have been angry at what took place.’
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UK Chancellor Rishi Sunak will cave in to pressure to impose a windfall tax on the soaring profits of oil and gas firms to fund a relief package for households struggling with rising bills. The opposition Labour party said the chancellor had been ‘dragged kicking and screaming’ into backing its call for a levy on fossil fuel giants which have benefited from high global prices. Sunak is expected to tell members of Parliament he will scrap a requirement to repay the previously announced £200 discount on energy bills, and could increase the level of the grant. Other measures which could form part of a package worth around £10 billion are expected to be targeted at the poorest households.
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The global shortage of semi-conductors and the impact of the war in Ukraine led to a ‘volatile’ April for the UK car industry, with production down by over a tenth compared with the same month last year. A total of 60,554 cars were built, 11% fewer than last April, according to figures from the Society of Motor Manufacturers & Traders. Other issues included vehicle model changes and broader industry structural changes, said the organisation. Production for overseas markets fell by 21%, driven by a 68% decline in shipments to the US and a 10% drop to Asia. Three out of five cars exported from the UK last month headed to the EU, representing a 5% increase in shipments, while production for the UK grew for the second month in a row, up by 60%.
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