TOP NEWS SUMMARY: SNB ups Swiss inflation view as US Fed turns hawkish

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

Alliance News 17 June, 2021 | 10:39AM
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(Alliance News) - The following is a summary of top news stories Thursday.

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COMPANIES

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Fintech firm Wise unveiled plans for a London Main Market float, in what it noted would be the first direct listing for a technology company in London. Wise, which has recently been rebranded from TransferWise, provides money transfer services. It argued that a direct listing is a "fairer, cheaper and more transparent way for Wise to broaden its ownership" and that it didn't need to raise funds, being profitable. No details around timing or price of a potential listing were provided. Earlier this week, Sky News reported that the payments app was looking at a value of up to GBP9 billion. Upon listing, Wise said it will have a dual class share structure with 'A' and 'B' shares for a limited time, saying this will allow it to "focus on its mission as it transitions into the public markets".

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Whitbread said it anticipates a boost in demand and a continued improvement in bookings, though sales still remain below pre-virus levels. The Premier Inn hotel chain owner remained upbeat over its prospects as lockdown restrictions ease, noting "very strong" booking trends in tourist locations for the summer. Despite the optimism, Whitbread's first quarter sales were down significantly compared to pre-pandemic levels. Total UK accommodation sales were down 61% in the first quarter, the 13 weeks to May 27, compared to the same period in financial 2020, so the 13 weeks to May 30, 2019. Food & Beverage total sales were down 86% on two years earlier. Total first quarter sales were down 70% from two years earlier, and like-for-like sales were down 71%.

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Dr Martens reported a double-digit revenue hike, but a sharp profit fall due to listing costs, in its maiden yearly results since its float at the start of the year. The boot maker left its guidance unchanged and promised to pay a dividend. It expects "high teens revenue growth" for the new year, but then tips this to slow to a hike in the "mid-teens" range the following year. In the year ended March 31, Dr Martens posted revenue of GBP773.0 million, up 15% from GBP672.2 million. However, pretax profit declined 52% to GBP35.7 million from GBP74.8 million. The company said it was hit with GBP80.5 million in exceptional costs relating to its initial public offering. The boot maker raised GBP1.30 billion in its IPO, giving it a GBP3.70 billion market capitalisation on admission and subsequent inclusion in the FTSE 250 index. On an adjusted basis, pretax profit rose 34% to GBP151.4 million from GBP113.0 million.

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Credit Suisse is readying its first batch of insurance claims related to losses from its supply-chain finance funds linked to collapsed Greensill Capital, the Financial Times reported. Citing people with knowledge of the matter, the FT said the Swiss bank is aiming to recoup billions of dollars. Credit Suisse's recovery team, while largely focused on recouping cash on behalf of investors, has also begun the process of claiming on the related insurance, the FT reported. Credit Suisse is primarily working with Tokyo-based insurance company Tokio Marine Holdings. The FT reported that there are USD2.3 billion of funds linked with three debtors which have so far proved difficult to recoup. The debtors are Sanjeev Gupta-owned industrial firm GFG Alliance, Guatemala-focused miner Bluestone Resources Inc and construction firm Katerra.

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HSBC Holdings will sell its French retail business to private equity firm Cerebus Capital Management, Bloomberg reported, as the bank continues to pivot towards Asia. A deal has been agreed and is expected to be announced over the coming days, Bloomberg said, citing people familiar with the matter. It will bring an end to a more than 18-months long process sales process for the HSBC unit, Bloomberg noted. The bank is aiming to cut its gross risk-weighted assets by more than USD100 billion.

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Microsoft on Wednesday named Chief Executive Satya Nadella as chair of its board, strengthening his grip on a pioneering US technology company he rejuvenated for a new age. Nadella was unanimously elected head of the Microsoft board of directors, where he will guide the agenda "leveraging his deep understanding of the business to elevate the right strategic opportunities and identify key risks," the company said in a post. Nadella, who took over from Steve Ballmer in February 2014, made Microsoft more relevant in a new tech world led by mobile-focused rivals such as Apple and Google.

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Rio Tinto confirmed Peter Cunningham as chief financial officer, having served as interim CFO since January. Cunningham had been promoted from controller after former CFO Jakob Stausholm was promoted to chief executive officer to replace Jean-Sebastian Jacques.

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Australia recommended that AstraZeneca's Covid-19 jab should not be given to people under 60, a fresh blow to the country's glacial vaccine rollout. Health Minister Greg Hunt said concerns over possible links to blood clots meant Pfizer was now "the preferred vaccine" for everyone under 60 years old. Australian authorities had already restricted the AstraZeneca shot to those over 50 in April, after several cases of severe blood clots were possibly linked to it. Thursday's further restriction came after a 52-year-old woman died of blood clotting after receiving the jab.

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A Covid-19 vaccine being developed by Germany's CureVac was shown to be just 47% effective in an interim analysis of its late-stage trial. "CVnCoV demonstrated an interim vaccine efficacy of 47% against Covid-19 disease of any severity and did not meet prespecified statistical success criteria," CureVac said in a statement. The company blamed the "unprecedented context of at least 13 variants circulating within the study population subset assessed" for the disappointing result, as well as varying responses across different age groups. CureVac said it had communicated the results of the Phase 2b/3 study of 40,000 people in 10 countries to the European Medicines Agency and is expecting to conduct a final analysis in the next few weeks.

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MARKETS

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The dollar surged after the US Fed surprised markets with a more hawkish than expected outlook. Gold was sharply lower, and the dollar-earning companies of the FTSE 100 also were suffering. "An FOMC surprise is always a great way to inject some movement into markets, and the past twelve hours or so have been a case in point. Interest rate hikes (if you can call 50 bps a 'hike') brought forward, and no mention of 'transitory' meant that investors were left scrabbling (and scribbling) to update their forecasts and views," commented Chris Beauchamp, chief market analyst at IG. Wall Street was called to open lower, having closed down on Wednesday after the Fed announcement in the New York afternoon.

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CAC 40: up 0.2% at 6,652.65

DAX 30: down 0.1% at 15,710.57

FTSE 100: down 0.5% at 7,149.55

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Hang Seng: closed up 0.1% at 28,471.18

Nikkei 225: closed down 0.9% at 29,018.33

S&P/ASX 200: closed down 0.4% at 7,359.00

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DJIA: called down 0.4%

S&P 500: called down 0.4%

Nasdaq Composite: called down 0.6%

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EUR: down at USD1.1948 (USD1.2117)

GBP: down at USD1.3975 (USD1.4103)

USD: up at JPY110.65 (JPY109.94)

Gold: down at USD1,804.30 per ounce (USD1,857.40)

Oil (Brent): down at USD73.93 a barrel (USD74.88)

(currency and commodities changes since previous London equities close)

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ECONOMICS AND GENERAL

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The US Federal Reserve on Wednesday turned hawkish as the central bank set its sights on rising inflation, with a majority of officials on its policy setting committee predicted a rate hike in 2023. The policy-setting Federal Open Market Committee left its benchmark rate unchanged in the range of 0.00% to 0.25%, as widely expected, and recommitted to "maintain an accommodative stance of monetary policy". The Fed also left its quantitative easing programme unchanged. Fed officials appear to have grown more hawkish since their last meeting in April, with 11 of the 18 committee members expecting at least two rate hikes in 2023 and seven expecting one as soon as next year, according to updated quarterly economic projections released after the discussions closed. Looking ahead, the Fed expects US GDP growth of 7.0% in 2021, up from its 6.5% prediction in March, with 2022's target unchanged at 3.3%, while GDP growth in 2023 is now tipped at 2.4%, up from 2.2% in March.

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Switzerland's central bank upped both its inflation and gross domestic product forecast, and added that it is ready to "intervene" on currency markets amid a "highly valued" Swiss franc. The Swiss National Bank left its policy rate at minus 0.75%. The key interest rate has been in negative territory since 2015. The SNB said it is still ready to "intervene in the foreign exchange market as necessary, while taking the overall currency situation into consideration". The central bank upped its inflation forecast for this year and 2022, noting higher prices for oil products and tourism services, as well as supply chain bottlenecks. SNB's inflation forecast for 2021 now stands at 0.4%, and for both 2022 and 2023, it is 0.6%. In March, its 2021 forecast was 0.2%, 2022 at 0.4% and 2023 at 0.5%.

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Eurozone consumer price inflation was confirmed at 2.0% annually in May, accelerating from 1.6% in April. Core inflation edged up to 1.0% from 0.7%. Prices rose by 0.3% on a monthly basis in May.

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Covid-19 cases are "rising exponentially" across England driven by younger and mostly unvaccinated age groups, according to scientists tracking the epidemic. A study commissioned by the UK government found that infections have increased 50% between May 3 and June 7, coinciding with the rise of the Delta coronavirus variant which was first detected in India and is now dominant in the UK. Data from nearly 110,000 swab tests carried out across England between May 20 and June 7 suggests Covid-19 cases are doubling every 11 days, with the highest prevalence in the North West and 1 in 670 people infected. The data comes as MPs approved the extension of coronavirus restrictions in England until July 19.

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Vaccines could play a role in opening up international travel for British holidaymakers, under plans being considered by the UK government. Officials are looking at proposals that could allow Britons who have had both coronavirus vaccine doses to avoid having to quarantine when returning from countries on the amber list, according to a report in the Daily Telegraph. A government spokeswoman confirmed that work has begun to "consider the role of vaccinations" for inbound travel following the continued success of the jab's rollout. This could mean the return of holidays to popular summer hotspots such as Spain, Portugal, France and Italy, which are all currently on the UK's amber list. People arriving from the limited number of holiday destinations on the green list are not required to self-isolate, while amber arrivals must quarantine at home for 10 days.

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Japan plans to lift Tokyo's virus emergency on June 20, a month before the Olympics, the government announced as reports said only 10,000 spectators would be allowed at Games events. Tokyo and several other parts of the country have been under a virus emergency since April 25, with the measure forcing the early closure of bars and restaurants and banning them from selling alcohol. It is due to expire on June 20, and the minister overseeing Japan's coronavirus response said the government would seek to move Tokyo and nine other regions to looser restrictions.

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Russian President Vladimir Putin said Wednesday that Moscow and Washington agreed for their ambassadors to return, after talks in Geneva with US counterpart Joe Biden. "They will return to their place of work. When exactly is a purely technical question," Putin told reporters after a summit in Geneva. Diplomatic relations between Moscow and Washington had all but broken down since Biden took office. After Biden likened Putin to a "killer", Russia in March took the rare step of recalling its ambassador Anatoly Antonov and said the US envoy John Sullivan to Moscow likewise should return to Washington. Putin said Wednesday that his first face-to-face meeting with his US counterpart Biden was constructive and the two sides agreed to discuss cybersecurity.

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By Tom Waite; thomaslwaite@alliancenews.com

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