TOP NEWS SUMMARY: US Fed may begin tapering as soon as next month

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

Alliance News 14 October, 2021 | 10:36AM
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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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Legal & General set out targets for its primary alternative asset business, Legal & General Capital. Ahead of a capital markets day focused on LGC, L&G highlighted a goal for the business of generating up to GBP600 million in profit from alternative assets by 2025. LGC said the event will take a look into the business and outline its goals for the future. Key ambitions include growing its alternative asset portfolio to around GBP5 billion by 2025 and generating returns on the portfolio of around 10% to 12%, with operating profit of GBP500 million to GBP600 million from alternatives by 2025. LGC as a whole is targeting operating profit of GBP600 million to GBP700 million by 2025.

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QinetiQ reported a solid first quarter, but warned its full-year margin will be at the lower end of guidance. The defence technology firm said its half-year performance was in line with market consensus forecasts, with "excellent" order intake of GBP700 million, up 25% year-on-year. For the full-year, QinetiQ expects mid-single-digit organic revenue growth at around 5% but warned its underlying operating profit margin will be at the lower end of its 11% to 12% expected range. "This expectation includes short-term effects of the customer's mission shifting from Afghanistan and Covid-related delivery and supply chain challenges in the US," the firm said. QinetiQ also cautioned that it is experiencing supply issues on a "large complex programme", which it didn't name, that could result in the need for a one-off write down. It is working to cap the risk at below GBP15 million.

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Homewares retailer Dunelm reported a jump in first quarter sales and backed full-year consensus figures. Total sales in the first quarter ended September 24 rose 8.3% year-on-year to GBP388.8 million, and this was up 48% on two years ago. Gross margin dipped by around 10 basis points due to sale timing, and it still expects a full-year margin up to 75 basis points lower than the year before. While noting supply chain issues, the home furnishings retailer said sales growth in the first quarter was "encouraging" and backed "recently increased" analyst consensus forecasts for its full-year pretax profit outturn. Dunelm placed current consensus at GBP179 million. Pretax profit in financial 2021, which ended June 26, was GBP157.8 million, up from GBP109.1 million in financial 2020.

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SoftBank Group has invested USD400 million in Vuori, the activewear brand said on Wednesday, as part of a fundraising which values it at USD4 billion. The "Southern California-inspired" brand received the investment from SoftBank's Vision Fund 2. Vuori noted it is one of the largest investments in a private apparel company. "With its strong consumer engagement, sustainability focus, and sheer growth, we believe Vuori is a leading brand in the attractive activewear market," said Nagraj Kashyap, a managing partner at SoftBank Investment Advisers. "We are delighted to partner with Joe and the Vuori team as they introduce new products to consumers and expand globally."

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CNH Industrial on Wednesday said it will temporarily shutdown some of its European plants as the manufacturing firm grapples with component shortages. CNH said it will close "several" of its agricultural, commercial vehicle and powertrain manufacturing facilities in Europe. The move is in response to "ongoing disruptions to the procurement environment and shortages of core components, especially semiconductors".

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Mitsui said it has sold of part of its stake in Tokyo-based healthcare firm PHC Holdings following its listing. The company said this is "to bring the increased enterprise value to fruition" after initially investing in PHC in 2017. MItsui additionally confirmed that it is mulling the acquisition of a stake in Goyo Foods Industry.

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Senior sources at German auto giant Volkswagen late Wednesday dismissed reports that up to 30,000 jobs could be at risk if it could not cut costs in its transition to electric models. Earlier Wednesday, a company source had said the company's Chief Executive Herbert Diess had given the warning at a recent supervisory board meeting. The business daily Handelsblatt reported that CEO Herbert Diess had "expressed his concern" for VW's future at a board meeting on September 24 and had complained that, compared with rivals, VW's costs were too high. "The restructuring of Volkswagen could put one in every four jobs at risk" at the core VW brand and the "abolition of 30,000 jobs" was possible, the newspaper wrote, citing internal discussions.

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Apple is looking into the health benefits of its AirPods wireless earphone devices, the Wall Street Journal reported on Wednesday. The iPhone maker is probing how the wireless product could be used to enhance hearing, measuring body temperature or even monitoring a user's posture, the WSJ reported, citing people familiar with the matter as well as documents the newspaper has seen. The move would signal a further foray into wellness for Apple, as its smart watch range offers health features.

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A chapter in Italian aviation history will close on Thursday night when the final flight of long-struggling airline Alitalia lands in Rome. The flight from Sardinia is scheduled to touch down at the capital's Rome-Fiumicino airport at 11:10 pm local time, an airline spokesperson told dpa. The airline will then cease to exist after 74 years. Alitalia was founded in 1947 and for decades the brand was associated with Italy's post-War economic boom. New state airline Italia Trasporto Aereo takes off on Friday.

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MARKETS

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Equity markets were rallying globally on Thursday, with Wall Street pointed to a higher open as well, following a mixed day in New York on Wednesday. Market focus remained on indications of strengthening price inflation and what that means for monetary policy in the US and elsewhere. Singapore's central bank tightened policy for the first time in three years on Thursday.

The report of higher US inflation in September, issued on Wednesday, "has all but cemented market expectations that the [Federal Open Market Committee] will start tapering asset purchases before the end of the year – aligned with the broad agreement that tapering is likely to begin sometime in the period between mid-November and mid-December, reflected in the September FOMC minutes released yesterday," commented Siobhan Redford of RMB Markets Research.

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CAC 40: up 0.7% at 6,645.68

DAX 40: up 0.8% at 15,367.10

FTSE 100: up 0.7% at 7,188.31

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Hang Seng: Hong Kong market closed for public holiday

Nikkei 225: closed up 1.5% at 28,550.93

S&P/ASX 200: closed up 0.5% at 7,311.70

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DJIA: called up 0.6%

S&P 500: called up 0.7%

Nasdaq Composite: called up 0.9%

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EUR: up at USD1.1618 (USD1.1575)

GBP: up at USD1.3715 (USD1.3565)

USD: flat at JPY113.40 (JPY113.35)

Gold: up at USD1,796.41 per ounce (USD1,792.11)

Oil (Brent): up at USD84.04 a barrel (USD83.11)

(currency and commodities changes since previous London equities close)

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ECONOMICS AND GENERAL

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The US Federal Reserve could begin reducing the pace of its USD120 billion monthly asset purchase programme by as soon as mid-November, minutes from the September meeting showed on Wednesday. At present, the Fed is currently buying at least USD80 billion in Treasury securities and USD40 billion in mortgage-backed securities. The minutes indicated the Fed probably would start by cutting USD10 billion a month in Treasury securities and USD5 billion a month in MBS. Further, the minutes said "several" participants were in favour of proceeding with a more rapid moderation of purchases. Policymakers noted if a decision to begin tapering purchases occurred at the next meeting, the process of tapering could commence with the monthly purchase calendars beginning in either mid-November or mid-December.

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Finance ministers from the Group of 20 economies pledged to keep economic stimulus policies in place to ensure a recovery from the Covid-19 pandemic. Amid ongoing risks, "We will continue to sustain the recovery, avoiding any premature withdrawal of support measures," the official communique said. While the global recovery has been solid, the statement notes that it has been "highly divergent" among countries. "We reaffirm our resolve to use all available tools for as long as required to address the adverse consequences of Covid-19, in particular on those most impacted."

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Singapore's central bank tightened monetary policy for the first time in three years, the latest country to act against inflation as coronavirus-hit economies reopen amid continuing supply chain bottlenecks. The move by the Monetary Authority of Singapore came as the economy grew 6.5% year-on-year in the third quarter, according to preliminary estimates, extending the city-state's recovery from its worst-ever recession last year due to the pandemic. Singapore conducts monetary policy through the exchange rate in which the local dollar is managed against a basket of the currencies of its major trading partners. MAS said it will "raise slightly" the slope of the Singapore dollar's exchange policy band from zero percent, which would allow for a modest appreciation of the unit.

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Consumer price inflation in China slowed unexpectedly in September, statistics from the National Bureau of Statistics of China showed, due to a steeper decline in the cost of food. The country's annual inflation rate was at its lowest level since March, edging down to 0.7% in September from 0.8% a month earlier and missing market estimates of 0.9%. Beijing has set a CPI growth target for 2021 of around 3%, compared with 3.5% last year. The consumer price index reading reflected a sharp drop in the cost of food, with pork prices falling faster than they did in August. Food prices declined by 5.2% in September from a year before, the slide in prices picking up pace from a 4.1% decline in August.

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China's factory inflation hit its highest level in a quarter of a century on surging commodity costs last month, with Thursday's figures fanning concerns that higher prices could filter through supply chains and into the global economy. The reopening from lockdowns around the world has ramped up demand for energy just as stockpiles are low, made worse by China's drive to meet environmental goals by slashing emissions targets. The producer price index, which measures the cost of goods at the factory gate, rose by 10.7% annually, the National Bureau of Statistics said, marking the biggest jump in its data going back to October 1996. The index had already hit a 13-year high in August, reflecting a surge in commodity prices – and piling pressure on businesses. Many factories have been forced to halt operations because of power outages caused by emissions reduction targets, the surging price of coal and supply shortages.

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Japan's industrial production declined in August, data from the Ministry of Economy Trade & Industry showed. The fall marks the second straight month of contraction in industrial output. Industrial production dropped 3.6% month-over-month in August, compared with the flash figure of a 3.2% fall and after a 1.5% decline a month earlier. The motor vehicle industry contributed significantly to the decrease, down 15% after a 3.3% drop in July.

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Australia's unemployment was little changed in September from a near 13-year low the month before, figures from the Australian Bureau of Statistics showed, amid extended Covid-19 lockdowns across the country, only recently lifted. The seasonally adjusted unemployment rate was at 4.6% in September, up slightly from 4.5% in August but below market consensus of 4.8%.

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Germany's leading economic institutes sharply cut their growth predictions for this year, but predicted strong recovery in 2022, in forecasts that cited the effects of the pandemic and supply chain bottlenecks. The German economy is now predicted to grow at a rate of 2.4% this year, down from the spring forecast of 3.7%. But growth in 2022 is expected to top 4.8%, up from the earlier prediction of 3.9%. The German economy was continuing to feel the effects of the pandemic, with complete normalization of what the institutes termed "contact-intensive activities" unlikely over the short term, they said. The institutes are predicting a rise in consumer prices by 3% over the year as a whole, with a lower rise of 2.5% in 2022.

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Spain's consumer price inflation rate picked up further in September, data from the National Statistics Institute confirmed. The monthly inflation rate was 0.8% in September, ticking up from 0.5% in August and matching a preliminary estimate. This was pushed up by cost of housing, mainly driven by electricity prices. Spain's annual inflation accelerated to 4.0% from 3.3% in August, again matching the initial reading.

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Brussels is reportedly "preparing for the worst" as it awaits the UK's response to a series of steps it proposed to cut trade red tape across the Irish Sea. The EU Commission has laid out measures to slash 80% of regulatory checks and dramatically cut customs processes on the movement of goods, especially food and farming produce, between Britain and the island of Ireland. The UK government welcomed the announcement on Wednesday night, signalling that it wanted "intensive talks" to follow the EU's proposals, designed to tackle disruption caused by the Northern Ireland protocol. But the EU is now reportedly "preparing for the worst" from the UK in response to its proposals and fear UK Prime Minister Boris Johnson will reject the plan, according to The Guardian and The Independent newspapers. "The EU have now published their proposals in response to those in our Command Paper," a UK government spokesperson said. "We are studying the detail and will of course look at them seriously and constructively. "The next step should be intensive talks on both our sets of proposals, rapidly conducted, to determine whether there is common ground to find a solution."

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By Tom Waite; thomaslwaite@alliancenews.com

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