The following is a summary of top news stories Monday.
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COMPANIES
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HSBC posted a decline in half-year profit and said it aims to restore its dividend to pre-Covid levels ‘as soon as possible’. In the six months to June 30, pretax profit fell to $9.18 billion from $10.84 billion the year before. Keeping a lid on profit was HSBC racking up $1.09 billion in expected credit losses, swinging from a $719 million gain the year prior. In the first half, net interest income rose to $14.45 billion from $13.10 billion, aided by rising central interest rates around the world. The lender’s net interest margin improved to 1.30 % from 1.21%. Net fee income slipped to $6.06 billion from $6.67 billion. ‘We are confident of achieving a return on tangible equity of at least 12% from 2023 onwards, which would represent our best returns in a decade,’ said Chief Executive Noel Quinn. ‘As a result, we are providing more specific dividend payout ratio guidance of around 50% for 2023 and 2024. We understand and appreciate the importance of dividends to all of our shareholders. We will aim to restore the dividend to pre-Covid-19 levels as soon as possible.’
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NatWest is contemplating making an offer for London- and Johannesburg-listed Quilter, the Daily Mail reported. According to the newspaper, a slew of private equity firms also are eyeing up the London-based wealth manager - with CVC Capital Partners, Bain Capital and BC Partners tipped to kick the tyres on a potential deal for Quilter. NatWest is looking to add its current wealth management offering, which already includes private bankers Coutts.
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Pearson shares jumped 9.0% after London-based education-materials publisher lifted its dividend as profit for the first half of 2022 surged. Pearson reported pretax profit of £179 million for the six months to June 30, multiplied from £4 million a year before, as operating expenses fell 7.3% to £690 million from £744 million. It had booked £85 million in restructuring costs a year earlier. Adjusted operating profit was 26% higher year-on-year at £160 million from £127 million. Revenue rose 12% year-on-year to £1.79 billion from £1.60 billion. Pearson lifted its interim dividend by 4.8% to 6.6 pence from 6.3p year-on-year. Pearson backed its full-year expectations for revenue and adjusted operating profit. Pearson is launching a strategic review of its Online Program Management business, which is part of its Virtual Learning segment. The OPM review comes ahead the end of Pearson’s contract with Arizona State University next June.
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Thousands of BT and Openreach workers went on strike again on Monday in a dispute over pay. Members of the Communication Workers Union, including call centre workers and engineers, were set to walk out for 24 hours following action on Friday. The union will mount picket lines outside company offices across the country and are asking people to bring food which it will deliver to local food banks. The strike is against a £1,500 pay increase for all employees, which the CWU says means a real terms wage cut because of the soaring rate of inflation.
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Dutch brewer Heineken reported growth at the half-year stage on solid consumer demand despite inflationary pressures strengthening. Revenue rose 37% to €16.40 billion from €11.97 billion a year before. Beer volume increased 7.6% organically from a year before and was 4.2% ahead of 2019 on an organic basis. Growth was faster in the second quarter, at 9.7%, led by the Americas, an ongoing recovery in Asia Pacific, and the on-trade - bars and restaurants - sector in Europe. Pretax profit rose 24% to €2.00 billion from €1.61 billion. Operating profit rose 20% to €2.07 billion from €1.72 billion. Heineken warned there is a growing risk that the squeeze on disposable incomes will start to weigh on beer consumption.
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A unit of embattled Chinese property developer Evergrande has failed to repay its loans and must pay a guarantor $1.1 billion, the company said in a Hong Kong stock exchange filing. Evergrande has been involved in restructuring negotiations after racking up $300 billion in liabilities in the wake of Beijing’s crackdown on excessive debt and rampant speculation in the real estate sector. The announcement comes after the company failed to publish a ‘preliminary restructuring proposal’ by the end of July, despite assuring creditors it was on track to meet the deadline. Evergrande said on Friday it had made ‘positive progress’ in its restructuring process, floating the potential use of equity in its offshore subsidiaries to repay bondholders but falling short of providing concrete details. And on Sunday, the company said subsidiary Evergrande Group (Nanchang) had failed to fulfil its debt obligations to an unnamed third party.
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Elon Musk on Friday filed claims against Twitter as he fights back against the tech firm’s lawsuit demanding he be held to his $44 billion buyout deal. Musk’s counter-suit was submitted along with a legal defense against Twitter’s claim that the billionaire is contractually bound to complete the deal he inked in April to buy Twitter, the Chancery Court in the state of Delaware said in a notice. The 164-page filing was submitted as being ’confidential’, meaning the documents were not accessible by the public, the notice indicated. Rules of the court, however, require Musk to submit a public version of the filing with trade secrets or other sensitive information redacted. A judge has ordered a five-day trial over Twitter’s lawsuit against Musk to begin on October 17. The Tesla boss wooed Twitter’s board with a $54.20 per-share offer, but then in July announced he was ‘terminating’ their agreement on accusations the firm misled him regarding its tally of fake and spam accounts.
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MARKETS
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Asian and European stock markets were higher on Monday, but Wall Street was called for a lower open as the new month gets underway. As the second-quarter earnings season passes it peak, focus remains on central bank policy this week. A decision from the Reserve Bank of Australia is due on Tuesday and one from the Bank of England on Thursday. The dollar was lower across the board.
Matthew Ryan at financial services firm Ebury said the market has largely priced in a 50-basis-point interest rate hike by the BoE’s Monetary Policy Committee, stepping up from previous 25-point increases. ‘We think it will be difficult for the MPC to buck the hawkish trend among G10 central banks and expect the larger move, with a consequent rally in sterling as a side effect. This rally may, however, be dependent on the voting pattern among policymakers, and the tone of communications in the bank’s latest inflation report,’ Ryan said.
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CAC 40: up 0.4% at 6,475.79
DAX 40: up 0.3% at 13,527.93
FTSE 100: up 0.3% at 7,444.10
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Hang Seng: closed marginally higher, up 9.33 points at 20,165.84
Nikkei 225: closed up 0.7% at 27,993.35
S&P/ASX 200: closed up 0.7% at 6,993.00
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DJIA: called down 0.2%
S&P 500: called down 0.3%
Nasdaq Composite: called down 0.3%
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EUR: up at $1.0262 ($1.0196)
GBP: up at $1.2245 ($1.2163)
USD: down at JP¥132.33 (JP¥133.45)
GOLD: up at $1,766.63 per ounce ($1,763.38)
OIL (Brent): down at $102.43 a barrel ($105.24)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Eurozone manufacturing activity shrank in July as inflation ‘squeezed’ demand, according to S&P Global. The manufacturing purchasing managers’ index declined to 49.8 in July from 52.1 in June, signalling the sharpest production downturn since the first wave of strict Covid lockdowns in May 2020. Any reading below the no-change level of 50.0 indicates a contraction, while one above signals expansion. New orders fell sharply. Excluding the pandemic, manufacturing order book volumes fell at the fastest rate since the eurozone debt crisis in 2012.
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Germany’s manufacturing PMI fell to 49.3 in July from 52.0 in June, slumping below the no-change mark of 50.0 for the first time in over two years. In France, the PMI dropped to 49.5 from 51.4 in June, again weighed down by a decline in new business. Italy was the worst performer, with a score of 48.5, down from 50.9 in June.
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German retail sales undershot expectations in July and registered the worst fall since records began in 1994. Retail sales plunged 8.8% on an annual basis in July, reversing a 1.1% increase in June and coming in below already downbeat expectations of an 8% decline, according to FXStreet-cited consensus. ‘This was the largest year-on-year decrease since the beginning of the time series in 1994,’ said statistics body Destatis. Month-on-month, sales were down 1.6%, having been expected to rise 0.2% after June’s growth of 1.2%.
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The eurozone unemployment rate held steady in June at its lowest figure on record. The jobless rate remained at 6.6% in June, statistics body Eurostat said, stable compared with the month before and down from 7.9% a year ago. There were 10.9 million unemployed in June, down by 2.0 million on a year before.
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Growth in the UK manufacturing sector weakened in July, with pressure from a cost of living crisis and even a heatwave hitting new work. The latest S&P Global/CIPS UK manufacturing PMI fell to 52.1 points in July, from 52.8 in June. Though remaining above the 50.0 no change mark, the PMI hit its weakest level in over two years.
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China’s official manufacturing PMI fell into contraction, registering 49.0 points in July, down from 50.2 June, according to the National Bureau of Statistics. While sweeping Covid curbs have eased in major cities such as Shanghai and Beijing, sporadic lockdowns around the country have kept businesses and consumers worried. ‘In July, the manufacturing PMI dropped...due to factors such as the traditional off-season for production, insufficient release of market demand, and decline in prosperity of high-energy-consuming industries,’ said NBS senior statistician Zhao Qinghe in a statement. Meanwhile, the Caixin manufacturing PMI slipped to 50.4 in July from 51.7 in June, largely due to a ‘softer’ rise in new business.
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Japan’s manufacturing sector took a hit in July, with growth in activity slowing to a 10-month low, survey results from S&P Global showed, as new orders suffered from ‘rising inflationary pressures’. The headline au Jibun Bank Japan manufacturing PMI slipped to 52.1 points in July from 52.7 in June. Despite the slowdown, July’s performance was the 18th consecutive month of increasing activity. S&P Global said the headline number masked ‘some worrying trends’, however. Amid rising costs and raw material shortages, it said, ‘new order inflows fell for the first time in ten months and at the fastest pace since November 2020, which contributed to a renewed contraction in production levels - the first since February.’
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US House of Representatives Speaker Nancy Pelosi was expected to begin her Asia tour on Monday in the shadow of diplomatic tensions with China, with no word yet if she will make a stop in Taiwan. Her reported plans to visit the island have sparked strong warnings from Beijing, and even unease in the White House with President Joe Biden trying to lower the temperature with China. Beijing considers self-ruled Taiwan its territory – to be seized one day, by force if necessary – and would see a visit by Pelosi as a provocation. ‘The trip will focus on mutual security, economic partnership and democratic governance in the Indo-Pacific region,’ Pelosi’s office said Sunday in a statement, referring to the Asia-Pacific. The statement did not mention Taiwan. Pelosi is expected to begin the tour in Singapore, where meetings with the prime minister and president are on the agenda. Her itinerary also includes Malaysia, South Korea and Japan.
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Biden tested positive for the coronavirus again on Sunday, one day after it was discovered that he had contracted the disease again just days after being given a clean bill of health following a coronavirus infection earlier this month. Biden’s physician, Kevin O’Connor, said in a statement that the president ‘continues to feel well’ and will remain in strict isolation. After the US leader tested positive on Saturday, O’Connor said that rebound infections are common in patients like Biden, who are treated with Paxlovid, an antiviral medication. Biden initially tested positive for the coronavirus on July 21. He isolated, but never reported serious symptoms. He had his second negative test on Tuesday, which qualified him as recovered.
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