(Alliance News) - The following is a summary of top news stories Monday.
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COMPANIES
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Jack Dorsey's Square unveiled a record USD29 billion deal to snap up Australia's fast-growing buy-now, pay-later firm Afterpay, in a major bet on the burgeoning sector, sending Afterpay's share price up 19% on Monday. The Australian fintech was founded six years ago and allows consumers to buy everything from laptops to flights in staggered payments without interest. "Square and Afterpay have a shared purpose," Dorsey – who made his billions through Twitter Inc – said announcing the deal on Sunday. "We built our business to make the financial system more fair, accessible and inclusive." Afterpay makes money by taking a commission from retailers and charging fees to late-paying customers.
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Meggitt has accepted a GBP6.3 billion takeover offer from Parker-Hannifin. Parker will pay 800 pence per share in cash for UK defence contractor, a 71% premium to Meggitt's closing price of 469.10p in London on Friday. Shares in Meggitt jumped 57% to 737.00p in London on Monday morning, valuing the company at GBP5.85 billion. Cleveland, Ohio-based Parker makes engineered products for the aerospace, automotive and manufacturing industries. Meggitt, based in Coventry, provides aerospace and defence components. A US takeover of a UK company in a sensitive industry threatens to be controversial. Meggitt and Parker-Hannifin have agreed to offer legally binding commitments to the UK government as part of the deal. Those include ensuring that a majority of board members are UK nationals and maintaining Meggitt's UK head office and divisions under the name "Parker-Meggitt". They also plan on maintaining headcount levels in the UK, as well as research and development spending.
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SSE agreed to divest its entire stake in gas distribution operator Scotia Gas Networks for GBP1.23 billion. The power utility will sell its 33.3% stake to a consortium comprising existing Scotia Gas shareholder Ontario Teachers' Pension Plan Board and Brookfield Super-Core Infrastructure Partners. Scotia Gas includes Scotland Gas Networks and Southern Gas Networks, two of the eight regulated gas distribution networks in England, Wales and Scotland, in addition to SGN Natural Gas, which provides gas to customers in the west of Northern Ireland as well as other non-regulated ancillary businesses. SSE initially acquired a 50% equity share in Scotia Gas in 2005 for a total of GBP505 million, before selling a 16.7% stake to a wholly owned subsidiary of the Abu Dhabi Investment Authority in 2016. The consortium also has agreed to acquire the 16.7% stake in SGN owned by ADIA. This deal will conclude SSE's GBP2 billion-plus disposals programme announced in June last year, with total proceeds amounting to over GBP2.7 billion.
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HSBC Holdings reported first half profit more than doubled from a year before, with its Europe and US operations returning to profit and the bank pointed to signs of personal and commercial lending growth. In the six months to June 30, the Asia-focused lender reported pretax profit of USD10.84 billion, leaping from USD4.32 billion a year before. Helping to improve the bank's interim profit was a USD719 million credit release, swung from the mammoth USD6.86 billion provision set aside in the first half of 2020 in preparation for the economic effects of the pandemic to cause loans to not be repaid. Revenue, however, slipped 4.9% to USD25.55 billion in the recent six months from USD26.75 billion a year before. Net interest margin worsened to 1.21% from 1.43%.
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Mitsubishi UFJ Financial Group reported a surge in profit in the first quarter, as the lender saw its credit provision slide sharply lower. In the three months to June 30, the Tokyo-based financial services firm recorded attributable profit of JPY383.08 billion, about USD3.5 billion, up sharply from JPY183.49 billion a year before. Profit surged 66% to JPY460.32 billion from JPY277.75 billion. MUFG set aside JPY34.70 billion for credit provision in the first quarter, sharply lower than JPY106.62 billion a year before. Income, however, dropped 11% year on year in the first quarter to JPY1.504 trillion from JPY1.698 trillion.
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AXA reported a surge in first half income, with the Paris-based insurer benefiting from an improved underwriting performance from its Property & Casualty unit. In the six months to June 30, AXA's net income surged to EUR4.00 billion from EUR1.43 billion. Gross revenue rose 2.8% year on year to EUR53.87 billion from EUR52.39 billion. The insurer's Solvency II ratio improved to 212% from 200%. AXA's Property & Casualty combined ratio improved 8.3 points to 93.3%, aided by the non-repeat of certain Covid claims and higher pricing and portfolio re-underwriting from its AXA XL unit. A combined ratio below 100% indicates underwriting profit.
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Allianz said pending litigation in the US regarding its Structured Alpha Funds may hurt future financial results. The Munich-headquartered financial services and insurance firm noted the Structured Alpha Funds are run by its asset management unit, Allianz Global Investors, and suffered heavy losses during the initial stages of the coronavirus pandemic. The US Department of Justice launched an investigation into the issue last year after investors filed lawsuits. "Allianz is fully cooperating with the Securities & Exchange Commission and the DoJ in the investigations and has immediately started its own review of this matter," it said.
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Eni and Cairn Energy announced a new oil discovery in Upper Miocene sequences offshore Mexico. According to preliminary estimates, the new find, at the Sayulita Exploration Prospect in Block 10 in the mid-deep water of the Cuenca Salina Sureste Basin, may contain between 150,000 and 200,000 barrels of oil equivalent. The Block 10 joint venture is held by Italy's Eni with a 65% stake as operator, Russia's NK Lukoil PAO with a 20% interest and Cairn Energy with a 15% working interest through its wholly owned subsidiary Capricorn Energy Mexico.
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MARKETS
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Merger & acquisition activity and a return of risk appetite among investors were boosting equities markets around the world at the start of August, with Tokyo's key index outperforming with a 1.8% rise. In London, an agreement to sell UK defence firm Meggitt to a larger US peer brought read-across rallies across the aerospace sector. Melrose, owner of GKN, was up 6.2%. "UK stocks have long been considered cheap and this year's M&A spree shows that overseas investors have finally got enough confidence to pounce on opportunities after years of showing little interest in the market," commented Russ Mould, investment director at AJ Bell.
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CAC 40: up 0.9% at 6,672.07
DAX 30: up 0.3% at 15,583.95
FTSE 100: up 1.1% at 7,111.00
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Hang Seng: closed up 1.1% at 26,235.80
Nikkei 225: closed up 1.8% at 27,781.02
S&P/ASX 200: closed up 1.3% at 7,491.40
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DJIA: called up 0.6%
S&P 500: called up 0.6%
Nasdaq Composite: called up 0.6%
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EUR: up at USD1.1886 (USD1.1858)
GBP: up at USD1.3921 (USD1.3898)
USD: down at JPY109.65 (JPY109.74)
GOLD: down at USD1,807.43 per ounce (USD1,821.81)
OIL (Brent): down at USD74.67 a barrel (USD76.29)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The manufacturing sector in the eurozone cooled in July, IHS Markit survey results showed, but the pace of growth remained strong. The final Eurozone manufacturing purchasing managers' index slipped to 62.8 points in July from 63.4 in June, but improved slightly on the 62.6 flash reading. The sector has now recorded successive months of expansion for the first time since July 2020.
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In the eurozone's largest economy, the headline IHS Markit/BME Germany manufacturing PMI edged higher to 65.9 points in July from 65.1 in June. After slowing in May, this marks the second consecutive month of growth, and was the third-highest in any month since the survey began in 1996. In France, the seasonally adjusted manufacturing PMI slipped to 58.0 points in July from 59.0 in June. In Spain, the manufacturing PMI dropped to 59.0 in July from 60.4 in June.
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While still in robust form, the UK manufacturing sector has lost momentum last month due to staff shortages and supply chain issues. IHS Markit/CIPS purchasing mangers' index posted 60.4 in July, down from 63.9 in June and further off May's record high of 65.6. Raw material, staff and skill shortages all put a cap on growth in July. Further jobs were added in July, but the rate of hiring was insufficient to prevent a further increase in backlogs. Average input costs rose at a "near survey-record pace", with over 72% of manufacturers seeing an increase, said IHS Markit. Despite the issues dogging manufacturers in July, the outlook was still rosy with 63% of companies forecasting output to rise over the coming year.
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The Chinese manufacturing sector eked out some growth in July, but saw its weakest improvement for 15 months, as businesses battle with rising input and output prices, survey data from IHS Markit showed. The headline seasonally adjusted purchasing managers' index slipped to 50.3 points in July from 51.3 in June. This left it barely above the neutral 50.0 point mark. Wang Zhe, senior economist at Caixin Insight Group, said the survey result suggested "the recovery of the economy is not yet solid" and facing "downward pressure". On Saturday, survey results from the National Bureau of Statistics showed a similar trend, as the official PMI dropped to 50.4 points in July from June's 50.9.
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The Japanese manufacturing sector continued to expand in July, having seen its strongest improvement since April as output and new orders drove its expansion, data from IHS Markit showed. The headline au Jibun Bank Japan manufacturing purchasing managers' index rose to 53.0 points in July from 52.4 in June. This signalled the joint-strongest improvement in the health of the sector since April, IHS Markit noted, reflecting a sustained recovery from the Covid-19 pandemic.
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US senators on Sunday finalized a historic, trillion-dollar infrastructure proposal that is expected to be approved within days, Democratic Senate leader Chuck Schumer said. If passed by Congress and signed into law, the bill would pump historic levels of federal funding into fixing US roads, bridges and waterways, ensuring broadband internet for all Americans and expanding clean energy programs. A bipartisan group "finished writing the text of the infrastructure bill," Schumer told the Senate, which met for an extended weekend session in Washington. "I believe the Senate can process relevant amendments and pass this bill in a matter of days." The bill, a cornerstone of President Joe Biden's sweeping domestic agenda, is about 2,700 pages long and provides for USD1 trillion in funding. The Democratic leader succeeded in rallying a few elected officials from the opposite camp to work on the proposal. The group released a joint statement saying the goal of the bill was to invest in infrastructure and create jobs without raising taxes.
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By Tom Waite; thomaslwaite@alliancenews.com
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