TOP NEWS SUMMARY: HSBC Profit Drops By Third; IHG Swings To Loss

(Alliance News) - The following is a summary of top news stories Tuesday.

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COMPANIES

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Metal fatigue has emerged as chief suspect in last week's spectacular engine failure on a United Airlines Holdings plane, which scattered debris over suburban Denver and led to dozens of Boeing's 777 aircraft being grounded worldwide. The incident on the Hawaii-bound flight - which quickly returned to the airport after part of the engine caught fire and broke off - prompted United and other airlines to ground planes with the same engine from Raytheon Technologies subsidiary Pratt & Whitney. While no one was injured in the Denver incident, the episode is the latest setback for Boeing, which only recently resumed deliveries of the long-grounded 737 MAX following two fatal crashes of that plane. "A preliminary on-scene exam indicates damage consistent with metal fatigue," Robert Sumwalt, chair of the US National Transportation & Safety Board, told a briefing Monday. He said two fan blades fractured on the number 2 engine on the Boeing 777-200. One of them was later found on a soccer field, while the other remained lodged in the engine. Boeing said all 128 of the 777s with Pratt & Whitney engines were grounded following Saturday's emergency landing of United flight 328.

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HSBC Holdings reported a sharp drop in profit in 2020, as the lender saw its global operations struggle to keep up with its Asian business but has offered some "cautious optimism" going forward. For 2020, the China-focused lender saw its pretax profit drop to USD8.78 billion from USD13.35 billion in 2019. The 34% fall was blamed on higher expected credit losses and other credit impairment charges and lower revenue. "The shutdown of much of the global economy in the first half of the year caused a large rise in expected credit losses, and cuts in central bank interest rates reduced revenue in rate-sensitive business lines," the lender explained. Despite the sharp drop, HSBC's pretax profit came in ahead of market consensus, which forecast the figure at USD8.33 billion. The bank upped its expected credit losses to USD8.82 billion in 2020 from USD2.76 billion in 2019. Allowance for ECL on loans and advances to customers rose to USD14.5 billion at the end of 2020, up from USD8.7 billion at the end of 2019. HSBC's reported revenue fell 10% year on year to USD50.43 billion from USD56.10 billion. Looking ahead, HSBC said it recognises a number of "fundamental changes", including the prospect of prolonged low interest rates, the significant increase in digital engagement from customers and the enhanced focus on the environment. As a result, the lender said it has "aligned its strategy accordingly".

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InterContinental Hotels Group posted a swing to loss for 2020, a year in which the hospitality industry was hammered by coronavirus restrictions across the globe. Total revenue for 2020 slumped 48% to USD2.39 billion from USD4.63 billion, with the company swinging to a pretax loss of USD280 million from a USD542 profit in 2019. RevPAR - revenue per available room, a key metric in the hotels industry - fell 53%, though IHG noted the variation by region reflected local market Covid-19 restrictions and recovery pace. Greater China's recovery was most advanced, with fourth quarter RevPAR down 18%, while the Americas was down 50% and Europe, the Middle East & Africa down 71%. "The shape of recovery remains varied globally, but we've continued to outperform the industry in key markets thanks to the strength of our teams, business model and segments in which we compete. This includes our industry-leading position in upper midscale, where demand remains stronger," said Chief Executive Keith Barr. IHG proposed no final dividend for 2020 and did not pay out anything at the interim stage, though the FTSE 100 constituent said it will consider future dividends once visibility over the pace and scale of market recovery has improved. In 2019, IHG paid out 39.9 cents per share.

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Standard Life Aberdeen has agreed to sell the nearly 200-year-old 'Standard Life' brand to Phoenix Group Holdings and come up with a new brand for itself. Standard Life Aberdeen said the sale of its iconic brand was part of an agreement to simplify and extend its strategic partnership with Phoenix Group. The strategic asset management partnership - under which Standard Life Aberdeen currently manages around GBP147.4 billion of Phoenix Group assets - will be extended and will now operate until at least 2031. Meanwhile, Standard Life Aberdeen will sell the 'Standard Life' brand to Phoenix Group during the course of 2021. Standard Life Aberdeen has initiated a branding review, the outcome of which it will announce later this year. Standard Life was founded in 1825. In 2017, it merged with Aberdeen Asset Management to become Standard Life Aberdeen. In 2018, Standard Life Assurance became part of the Phoenix Group.

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Aviva said it has sold its French business to Aema Groupe for EUR3.2 billion in cash. The blue-chip insurance firm said the sale is part of its strategic transformation to focus on its strongest businesses in the UK, Ireland and Canada. The transaction is expected to complete by the end of 2021. Aviva said the deal "significantly" strengthens its capital and liquidity with an increase in excess capital of about GBP2.1 billion and centre cash of about GBP2.8 billion.

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Facebook said Tuesday it will lift a contentious ban on Australian news pages, after the government agreed to amend a world-first media law fiercely opposed by the tech giant. Treasurer Josh Frydenberg and Facebook indicated a compromise had been reached on key aspects of a law that would force global tech companies to pay news companies for content that appears on their platforms. "As a result of these changes, we can now work to further our investment in public interest journalism, and restore news on Facebook for Australians in the coming days," said Will Easton, managing director of Facebook Australia. The social media firm sparked global outrage last week by blacking out news for its Australian users and inadvertently blocking a series of non-news Facebook pages linked to everything from cancer charities to emergency response services. The compromise means that Facebook and Google - the main targets of the law – are unlikely to be penalised so long as they reach some deals with local media firms to pay for news.

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MARKETS

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Despite the somewhat distant promise of a return to normal life from government-imposed lockdowns, stock markets were lower in Europe and Wall Street was called down. London's FTSE 100 index was held back by a strong pound, which was closing in on USD1.41, and heavyweight constituent HSBC. The bank was down 2.4% after posting a big drop in 2020 profit. Hotelier IHG was down 0.6% after swinging to loss in the pandemic-hit year. Tech stocks that benefited from virus restrictions were suffering. Frankfurt's key index was the laggard in Europe, held back by declines for Infineon Technologies, down 3.7%, and Delivery Hero, down 4.0%. The tech-heavy Nasdaq Composite was pointed down 1.5% in New York. Facebook was 1.3% lower in pre-market trade after reaching a compromise with the Australian government.

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CAC 40: down 0.3% at 5,748.04

DAX 30: down 1.4% at 13,757.98

FTSE 100: down 0.4% at 6,585.62

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DJIA: called down 0.2%

S&P 500: called down 0.6%

Nasdaq Composite: called down 1.5%

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S&P/ASX 200: closed up 0.9% at 6,839.20

Hang Seng: closed up 1.0% at 30,632.64

Nikkei 225: Tokyo market closed for holiday.

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EUR: flat at USD1.2149 (USD1.2145)

GBP: up at USD1.4081 (USD1.4060)

USD: up at JPY105.30 (JPY105.07)

GOLD: down at USD1,807.86 per ounce (USD1,810.01)

OIL (Brent): up at USD65.83 a barrel (USD64.45)

(currency and commodities changes since previous London equities close)

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ECONOMICS AND GENERAL

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The US passed 500,000 deaths from Covid-19 on Monday – the world's highest toll – and President Joe Biden was set to mark the grim milestone with a national remembrance ceremony, even as signs of optimism emerged over an end to the pandemic. With the US death toll hitting half a million Biden ordered flags on federal government buildings to be flown at half mast for five days. The president was scheduled to address the nation from the White House before attending a candle-lighting ceremony and moment of silence with wife Jill, Vice President Kamala Harris and her husband Doug Emhoff. The event will "highlight the magnitude of the loss," Press Secretary Jen Psaki told reporters. But "he will also speak to the power of the American people to turn the tide on this pandemic by working together." Unlike his predecessor Donald Trump, who often sought to minimize the disease, Biden has made the pandemic his top priority, simultaneously pushing an aggressive vaccine rollout and making frequent, public shows of empathy. It is a strategy that could make or break the Biden presidency, already juggling high-stakes economic challenges and the tense political aftermath of the Trump era. Biden has warned that the US toll could still go "well over" 600,000.

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UK Prime Minister Boris Johnson said spring and summer in England will usher in changes to make lives "incomparably better" as he set out a plan to fully ease the lockdown by June 21. The prime minister defended his "cautious but also irreversible" approach to relaxing restrictions with a four-step plan on Monday, arguing he will not be "buccaneering" with people's lives. But despite billing his plans as a "one-way road to freedom", he admitted he cannot guarantee that the vaccination programme will prevent restrictions from ever returning. His tentative schedule for easing restrictions will be followed on Tuesday afternoon by First Minister Nicola Sturgeon detailing her own plan for easing Scotland's lockdown. Johnson said he accepted that scientific modelling suggested that lifting measures will increase Covid-19 cases and ultimately deaths, but said restrictions cannot continue indefinitely.

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The UK unemployment rate edged up in the three months to December, as expected, but showed signs of stabilising as the UK government set out its plans to permanently lift the lockdown in England. Figures from the Office for National Statistics on Tuesday showed the UK unemployment rate nudged up to 5.1% for the final three months of 2020 from 5.0% in the three months to November, and being 1.3 percentage points higher than a year ago. This rise was in line with market expectations, as cited by FXStreet. The ONS noted that the claimant count - the number of people claiming unemployment benefits - decreased slightly in January, down 0.8% on the month before to 2.6 million. Still, this was double March 2020's level. Also in January, 83,000 more people were in payrolled employment when compared with December - the second consecutive monthly increase - but 726,000 fewer people were in employment when compared with February 2020.

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The eurozone annual inflation rate bounced into positive territory at the start of the year. The bloc's annual inflation rate was confirmed at 0.9% for January, figures released by Eurostat showed, versus a 0.3% fall in consumer prices in December. The figures mark an end to a streak of deflation - not seen in the eurozone since 2016 - driven by tumbling energy prices as the pandemic slammed demand for fuel. In January 2020, the euro area annual inflation rate was 1.4% - a figure which slipped into negative territory as the year progressed and the pandemic's hit became more pronounced in Europe. The eurozone posted a 0.2% decline in consumer prices for August 2020, and was unable to shake off this deflation until the start of the new year.

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