The following is a summary of top news stories Friday.
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COMPANIES
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Alibaba shares sank in Hong Kong after a report said the technology giant’s executives had been called in for meetings with Chinese officials over the theft of a vast police database. A hacker last month put on sale what they claimed was the personal information of hundreds of millions of Chinese citizens – which, if true, would make it one of the biggest data heists in history. Cybersecurity analysts subsequently confirmed that the data – partly verified by AFP – was stored on Alibaba’s cloud servers, apparently by the Shanghai police. The company’s shares dropped 6.0% to HK$102.20 in Hong Kong on Friday, hours after The Wall Street Journal reported that Shanghai authorities had called in its executives for talks in connection with the heist. The Journal cited unnamed people familiar with the matter as saying the executives included Alibaba Cloud vice president Chen Xuesong, who heads the unit’s digital public security work.
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Fashion retailer Burberry said its sales growth in the first quarter was held back by lockdowns in mainland China. For the 13 weeks ended July 2, Burberry’s retail revenue increased 5.4% to £505 million from £479 million in the same period a year before, driven by stronger sales outside of China from the Europe, Middle East, India & Africa region and higher tourist spend in the Americas. However, comparable store sales growth was 1%, compared to a 90% increase a year prior, hindered by Covid-related lockdowns in mainland China. Excluding that region, comparable store sales grew 16%. Looking ahead, Burberry has started its £400 million share buyback, and is expected to be completed by the end of the financial year.
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Sales and support services firm DCC said its continues to expect its financial year ending March 31, 2023 to be ‘another year of profit growth’, following a robust performance in the first quarter. DCC said operating profit for the three months ended June 30 was in line with expectations and is well ahead of the same period a year before, driven by a strong performance from DCC Energy and DCC Healthcare.
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Rio Tinto produced less aluminium in the first half of 2022 due to strikes in Canada, while titanium dioxide slag production fell due to cyclones in Madagascar. The Anglo-Australian miner produced 1.5 million tonnes of aluminium for the six months ended June 30, down 9% from the same period a year before. Following this, it lowered its aluminium production guidance for 2022 to 3.0 to 3.1 million tonnes from 3.1 to 3.2 million tonnes in its previous guidance. Titanium dioxide slag production fell 2% to 566,000 tonnes for the first half. Pilbara iron ore production decreased 1% to 150.3 million tonnes due to stronger rainfall in May in Pilbara, Australia. For the second quarter, Pilbara production was up 4% year-on-year to 78.6 million tonnes as production volumes ramped up. Rio Tinto mined 7% more copper in the first half of 2022, at 252,000 tonnes.
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Luxury carmaker Aston Martin Lagonda set out plans to raise £653 million in equity, with backing from the sovereign wealth fund of Saudi Arabia, after rejecting an alternative £1.3 billion investment offer. Aston Martin proposed an equity raise of £653 million, led by Public Investment Fund. PIF, the Yew Tree Consortium and Aston Martin peer Mercedes-Benz are together expected to invest £335 million in total. Aston Martin will raise the new equity through a placing of 23.3 million shares at a price of £3.35 each for £78.0 million, followed by an underwritten rights issue to raise £575 million. The stock was up 22% Friday morning in London at 454.48 pence. Aston Martin said PIF will be given two seats on the board, assuming it has a 10% stake in the company following the equity raise. Meanwhile, the Mercedes stake will slip to 9.7% from 11.7% currently, despite it taking up its full entitlement of shares. Aston Martin also confirmed that it rejected an offer from Investindustrial and Geely - collectively the Atlas Consortium - for an equity investment of up to £1.3 billion, comprising a £203 million firm placing and subsequent £1.11 billion underwritten rights issue. Aston Martin said it doesn’t need so much new equity, and the investment would have been too dilutive for existing shareholders.
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US online retailer Amazon.com has agreed to make concessions and stop using data from competitors after being accused by the EU of using the data to benefit itself at the expanse of others retailers. The company runs a marketplace where independent sellers can sell products directly to customers. As a result, Amazon has access to large sets of data about the activities of the independent sellers, including non-public data. Threatened by a multibillion-dollar fine, Amazon also vowed to apply equal treatment to all sellers when ranking their offers for the ‘buy box,’ a platform that displays the offer of one single seller and allows products to be swiftly purchased by directly clicking on a buy button.
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Technology fitted to vehicles sold in Austria made by Volkswagen ‘constitutes a prohibited defeat device’, the European Court of Justice ruled, opening the door to consumer claims in certain circumstances. Technology ‘which reduces the effectiveness of the emission control system at normal temperatures during most of the year’ is not permissible, an ECJ statement said. ‘Since such a vehicle default is not minor,’ the statement added, terminating the vehicles’ sales contracts is possible, referring such instances back to national courts in Austria to decide. The ruling for the three cases - referred jointly to the top EU court by judges in Austria - centred on whether consumers were deceived by the German carmaker over the eco-friendly credentials of the cars they bought that used so-called temperature or thermal window software.
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MARKETS
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Brent oil was threatening to recover back above $100 a barrel on Friday, while Europe shares and US stock index futures were higher, as the market priced in a lower chance of a full percentage point interest rate hike by the US Federal Reserve at its next meeting on July 26 and 27. According to the CME FedWatch tool, market expectations are almost equally split. Expectations for a 75-basis-point hike at the July meeting are at 54%, while those for a 100 point rise are at 46%.
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CAC 40: up 0.9% at 5,965.62
DAX 40: up 1.9% at 12,751.19
FTSE 100: up 1.1% at 7,116.01
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Hang Seng: closed down 2.2% at 20,297.72
Nikkei 225: closed up 0.5% at 26,788.47
S&P/ASX 200: closed down 0.7% at 6,605.60
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DJIA: called up 0.3%
S&P 500: called up 0.4%
Nasdaq Composite: called up 0.4%
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EUR: up at $1.0039 ($1.0010)
GBP: up at $1.1841 ($1.1803)
USD: down at JP¥138.78 (JP¥139.09)
Gold: down at $1,705.14 per ounce ($1,707.30)
Oil (Brent): up at $99.80 a barrel ($96.82)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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China logged its slowest economic growth since the initial Covid outbreak, official data showed, with gross domestic product expanding just 0.4% in the second quarter from a year before, with lockdowns and property market weakness nudging a government target further out of reach. This print fell short of FXStreet-cited expectations of a 1.0% annual rise. The slowdown comes after China’s biggest city Shanghai was sealed off for two months as it battled a Covid-19 resurgence, tangling supply chains and forcing factories to halt operations. ‘Domestically, the impact of the epidemic is lingering,’ NBS spokesman Fu Linghui said Friday, noting shrinking demand and disrupted supplies. GDP for the second quarter of 2022 in the world’s second-biggest economy was down 2.6% compared with the first three months of the year, the National Bureau of Statistics said. Industrial production rose 3.9% on-year in June, up from 0.7% in May as Covid controls eased. But retail sales picked up 3.1% after plummeting 6.7% in May, in what analysts called an encouraging sign.
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Saudi Arabia announced it is lifting restrictions on ‘all carriers’ using its airspace, an apparent gesture of openness towards Israel ahead of US President Joe Biden’s arrival. The US leader welcomed the ‘historic’ decision, the latest conciliatory move by Riyadh concerning the Jewish state, which it has refused to recognise despite intensive efforts by the Israelis to establish ties with Arab countries. The Saudi civil aviation authority ‘announces the decision to open the Kingdom’s airspace for all air carriers that meet the requirements of the authority for overflying’, it said in a statement on Twitter. Prior to Biden’s arrival in Israel at the start of his Middle East trip on Wednesday, Washington had hinted that more Arab nations could take steps to pursue relations with Israel, spurring speculation about whether Riyadh would alter its long-held position of not establishing official bilateral ties until the conflict with the Palestinians is resolved.
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Italian Premier Mario Draghi’s offer to resign after a populist coalition ally refused to support a key government Bill has been rejected by the nation’s president. Sergio Mattarella told Draghi to see if he can find a majority in Parliament willing to support him. Draghi’s broad unity coalition government - which includes parties from the right, the left, the centre and the populist 5-Star Movement - was designed to help Italy recover from the coronavirus pandemic. He took office in February 2021. Hours earlier, Draghi and his government won a confidence vote, 172-39, in the Senate despite the refusal by the 5-Star Movement to back the Bill, which earmarked €26 billion to help consumers and industries struggling with soaring energy prices. But the snub, orchestrated by 5-Star leader Giuseppe Conte, Draghi’s predecessor, did its damage.
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Consumer price inflation in Italy accelerated to a 36-year high in June, data from Italian national statistics office Istat showed. The annual inflation rate accelerated to 8.0% in June from May’s 6.8% rise, touching a ‘level that had not been recorded since 1986 - when it posted 8.2%,’ said Istat. The harmonised index of consumer prices, used for EU-wide comparison, was 8.5% higher annually, following a 7.3% rise the month before.
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Group of 20 finance ministers and central bank chiefs met in Indonesia on Friday for talks on the fallout from Russia’s invasion of Ukraine, with the host warning them failure to tackle energy and food crises would be catastrophic. The two-day meeting on the resort island of Bali started under the shadow of a war that has roiled markets, spiked food prices and stoked breakneck inflation, a week after Moscow’s top diplomat walked out of talks with the forum’s foreign ministers. In her opening remarks, Indonesia Finance Minister Sri Mulyani Indrawati called on ministers to work together with a spirit of ‘cooperation’ because ‘the world is watching’ for solutions. Top global finance figures, including US Treasury Secretary Janet Yellen, were to discuss the rebound from the coronavirus pandemic, but the Ukraine war and its impact on an already brittle global recovery have dominated the agenda.
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The Federal Reserve watchdog has cleared two top officials of wrongdoing over stock trades that created an uproar, prompting several to leave their posts and led to rule changes at the US central bank. A key focus was trading by former Fed vice chair Richard Clarida in February 2020, just as the central bank was preparing to slash interest rates to support the economy, which sent stock prices higher. Clarida resigned in January 2022, two weeks before his term was up. Fed Chair Jerome Powell also was a target of the probe for trading by his family trust in 2019, during trading blackout periods around Fed policy meetings. In a memo to Powell, the Office of Inspector General for the Federal Reserve Board, said ‘we did not find evidence to substantiate the allegations that former vice chair Clarida or you violated laws, rules, regulations, or policies related to trading activities.’
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