(Alliance News) - The following is a summary of top news stories Monday.
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COMPANIES
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Rolls-Royce Holdings said its Rolls-Royce North America unit has been selected by the US Air Force to provide the power plant for the Boeing B-52 Stratofortress. The agreement was signed under the Commercial Engine Replacement Program and is worth a potential USD2.6 billion. The single award contract provides for 608 military derivative commercial engines, plus spare engines, associated support equipment and commercial engineering data, to include sustainment activities, to be used on the B-52H bomber fleet, the US Air Force said on Friday. The Pentagon made the announcement after a multi-year competition, which saw Rolls-Royce beat out US rivals General Electric and Pratt & Whitney for the lucrative contract. The Rolls-Royce F130 engine will replace the TF33-PW-103, which has powered the B-52 since the 1960s, and is projected to no longer be supportable beyond 2030. The B-52 original equipment manufacturer, Boeing, is responsible for integrating the engines onto the aircraft.
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Prudential said it expects to raise HKD18.5 billion, about USD2.37 billion, from its Hong Kong share offering. The London-based insurer and asset manager last Monday announced it is planning to issue shares worth 5% of its share capital. The money will be used to redeem USD2.25 billion high-coupon bonds, which Prudential said will improve its financial flexibility to invest in Asia and Africa following the sale of the US business this year. At the same time, it said it wanted to widen its Asian shareholder base. The new shares will be priced at HKD143.80 each, equivalent to GBP13.52. That price was first reported by Bloomberg News on Friday last week. Earlier last week, Prudential had said the shares would be sold for a maximum of HKD172 each.
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United Utilities said trading in the six months to September 30 is in line with company's expectations. The water company said revenue for the first half is expected to be higher than the first half of last year, mainly reflecting higher consumption, only partially offset by regulatory revenue reduction. The company explained household consumption remains high, as many customers continue to work from home, and consumption from businesses has started to return to pre-Covid levels as restrictions are lifted. United Utilities said the net increase in revenue in the first half of the year is expected to be around 4%. It posted interim revenue of GBP894.4 million last year. In addition, United Utilities said underlying operating profit for the first half is expected to be higher than last year. This largely reflects higher revenue and targeted efficiencies, partly offset by higher underlying operating costs, largely as a result of inflationary increases in core costs, it noted.
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Hikma Pharmaceuticals said it has agreed to acquire Carlsbad, California-based Custopharm from Water Street Healthcare Partners for USD375 million, with a further USD50 million upon achieving commercial milestones. Custopharm is a generic sterile injectables company with a differentiated product portfolio and R&D pipeline, Hikma said. It currently markets its products in the US through its commercial arm Leucadia Pharmaceuticals. Hikma said the acquisition complements its own injectable product portfolio and pipeline, adding 13 approved products and additional pipeline products. Further, Hikma expects the acquisition to generate annual revenue "in excess of" USD80 million and for the acquisition to be accretive to Hikma's Injectables operating margin. The deal also enhances its research & development capabilities, Hikma added.
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Swedish electric car maker Polestar is nearing a deal to go public with an enterprise value of USD20 billion, including debt, Reuters reported. The premium electric car brand, owned by China's Geely Automobile Holdings and Volvo, is aiming to go public via special purpose acquisition company Gores Guggenheim, the news agency said, citing "people familiar with the matter". An announcement could be made as soon as Monday, Reuters said.
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UniCredit and the Italian government are closer to securing a deal which will see the Milan-based company acquire Banca Monte dei Paschi di Siena, Bloomberg reported on Friday, citing people familiar with the matter. A preliminary agreement could even be struck by the end of 2021, Bloomberg noted. It is a deal which could cost the Italian government more than EUR10 billion. A deal with lender UniCredit will not be finalised until the conclusion of an election for a parliamentary seat in Siena, the Tuscan city where Monte dei Paschi is based. The elections are in early-October. UniCredit confirmed last month it was in exclusive discussions to buy parts of Monte dei Paschi. In 2017, MPS was bailed out by the Italian government, which is now the majority shareholder.
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Huawei executive Meng Wanzhou returned to China on Saturday shortly after two Canadians released from prison in China also arrived in Calgary, ending a bitter diplomatic row that has poisoned ties for three years. Meng and the two Canadians – former diplomat Michael Kovrig and businessman Michael Spavor – were detained in a bitter spat critics have called "hostage diplomacy". Meng, the 49-year-old daughter of Ren Zhengfei, the billionaire founder of Chinese telecoms giant Huawei, was granted release in a Vancouver court hearing after three years of house arrest in Canada while fighting extradition to the US. This came hours after US prosecutors announced an agreement under which fraud charges against her are to be suspended and eventually dropped.
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MARKETS
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Stock prices were starting the new week positive, as traders continued to digest somewhat hawkish policy announcements by the US and UK central banks last week and to monitor the stability of indebted Chinese property developer Evergrande. An exceptionally close German election on Sunday added more uncertainty into the market mix.
"It is very hard to predict how protracted the negotiations will be in terms of forming the next administration with the media rife with speculation that Merkel could still be chancellor heading into next year," commented Rabobank. "This, though, is a prospect that has arguably been well understood for some time given the well telegraphed prospect of a three-party coalition prior to the election. Nevertheless, the close run nature of the result between the SPD and CDU/CSU (there being only 10 seats between them) likely adds to the case for German politics remaining in limbo for a considerable period given this leaves neither party with the clearest of mandates."
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CAC 40: up 0.7% at 6,682.08
DAX 40: up 0.9% at 15,676.97
FTSE 100: up 0.4% at 7,078.92
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Hang Seng: closed up 0.1% at 24,208.78
Nikkei 225: closed marginally lower, down 8.75 points at 30,240.06
S&P/ASX 200: closed up 0.6% at 7,384.20
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DJIA: called up 0.5%
S&P 500: called up 0.3%
Nasdaq Composite: called up 0.1%
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EUR: down at USD1.1694 (USD1.1710)
GBP: up at USD1.3700 (USD1.3670)
USD: up at JPY110.92 (JPY110.73)
GOLD: down at USD1,750.85 per ounce (USD1,751.33)
OIL (Brent): up at USD79.20 a barrel (USD77.86)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Four German political parties were positioning themselves to enter coalition talks on Monday, just hours after a final vote count showed a narrow victory for the centre-left Social Democrats (SPD) over the country's conservative alliance. The SPD captured 25.7%, its best result in years, while the conservative CDU/CSU bloc of the outgoing chancellor, Angela Merkel, fell to a record low of 24.1% after her four consecutive terms in office. Both main candidates to be the next German chancellor, Olaf Scholz of the SPD and Armin Laschet of the Christian Democrats (CDU), say they want to form the next government. Scholz has a better chance of doing so, but the German constitution does provide for the party with the second-largest vote share to head a government.
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Eurozone money supply growth accelerated in August, figures from the European Central Bank showed. Annual M3 money supply growth ticked up to 7.9% in August from 7.6% in July. The figure topped expectations of a 7.8% hike, according to consensus cited by FXStreet. M1 money supply, comprising of currency in circulation and overnight deposits, increased 11% yearly in August, largely unchanged from July's growth rate. According to the ECB, adjusted loans to households grew by 4.2% in August, unchanged from July.
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Spain's annual producer price growth accelerated again in August. According to INE, producer prices jumped 18% year-on-year in August, with growth quickening after a 16% hike in July. It is the eighth month in-a-row that Spain's producer prices have shown an annual increase.
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UK Prime Minister Boris Johnson is said to be considering whether to call in soldiers to deliver fuel to petrol stations as pumps ran dry after days of panic buying. Emergency measures were triggered on Sunday evening, with Business Secretary Kwasi Kwarteng choosing to suspend competition laws for the fuel industry to allow suppliers to target filling stations running low. Multiple reports suggested that Johnson on Monday will mull whether to follow that by taking the drastic step of sending in the Army to drive oil tankers as "frenzied buying" added to fuel supply issues caused by a lack of HGV drivers. Transport Secretary Grant Shapps has refused to rule out requesting military assistance after queues for the pumps continued across the country on the weekend. Shapps has already backed down over his reluctance to import foreign labour to solve the HGV driver shortage by creating 5,000 three-month visas to bring in extra hauliers to address delivery pressures.
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US House Speaker Nancy Pelosi expressed confidence a massive infrastructure bill will pass this week but acknowledged it might not get a Monday vote as planned, with fellow Democrats warning critical work remains to meet the party's deadlines. Democrats have been scrambling to hammer out a landmark plan to upgrade the nation's roads and bridges, but are also under immense pressure to finalize a USD3.5 trillion public investment package and fund the government to avert a looming shutdown – all by September 30. The week is among the most critical of President Joe Biden's tenure, with opposition Republicans digging in against his Build Back Better program that would invest in climate change policy, lower childcare and education costs for working families and create millions of jobs.
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The EU and US will this week embark on a tricky effort to deepen ties on tech regulation, but with France resisting the project in the wake of a row with Washington over a submarine deal.
High-level talks will begin in the US city of Pittsburgh on Wednesday, despite efforts by Paris to delay the meeting in retaliation for a pact between the US, Australia and Britain – dubbed AUKUS – that saw Canberra scrap a multi-billion-dollar submarine order from France. The EU-US Trade and Tech Council was set up after a summit in June to look at issues including trying to attune their strategies on regulating internet giants and defend democratic values. The council came at the request of the Europeans, who are seeking concrete signs of increased transatlantic cooperation after years of tension under former president Donald Trump, especially over trade.
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Vaccinated Sydney residents will finally emerge from a lengthy Covid lockdown by mid-October, Australian officials said Monday, outlining a "blueprint for freedom" as case numbers fell in the city. Stay-at-home orders are set to be lifted in Sydney and surrounding New South Wales when the double-dose vaccination rate hits 70%, with state premier Gladys Berejiklian saying "quite confidently" that was now expected to occur on October 11. Shuttered pubs, restaurants and shops will be allowed to reopen to the vaccinated, while friends and families living across Australia's biggest city will be able to reunite for the first time in more than three months. "It is just this week and next week that we have to hang in there for," Berejiklian said.
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By Tom Waite; thomaslwaite@alliancenews.com
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