(Alliance News) - The following is a summary of top news stories Wednesday.
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COMPANIES
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Microsoft's USD69 billion deal to buy video game powerhouse Activision Blizzard is expected to win out with regulators despite vows in Europe and the US to rein in tech titans. Analysts interviewed by AFP after the merger plan was announced on Tuesday said the deal would certainly be scrutinized, but likely less intensely than would an acquisition by Amazon.com, Google-parent Alphabet, or Facebook-parent Meta Platforms. "From a regulatory perspective, Microsoft is not under the same level of scrutiny as other tech stalwarts," said Wedbush analyst Dan Ives. Regulators might even see value in Microsoft challenging video game industry heavyweight Tencent, which is based in China, analysts contended.
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ASML Holdings doubled its annual dividend after reporting an overall stronger performance for 2021, with growth in sales leading to a double-digit rise in profit. For the three months ended December 31, the Veldhoven, Netherlands-based semiconductor materials firm reported net income of EUR1.77 billion, up 31% from EUR1.35 billion in the same period a year before. Diluted earnings per share increased 35% to EUR4.39 from EUR3.23 on total net sales that grew 17% year-on-year to EUR4.99 billion from EUR4.25 billion. ASML declared a total dividend of EUR5.50 per share for 2021, doubled from EUR2.75 the year before. Looking ahead, the company expects net sales for the first quarter of 2022 to be between EUR3.3 billion and EUR3.5 billion, reflecting a 20% to 25% drop from EUR4.4 billion in the first quarter of 2021.
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British luxury fashion retailer Burberry reported third-quarter sales growth and said it sees a softer-than-anticipated currency headwind for the full year. Retail revenue amounted to GBP723 million in the 13 weeks to December 25, up 5% from GBP688 million a year prior. Full-price comparable store sales rose 15% year-on-year, with all comparable store sales up 7%. On two years prior, being before the impact of the pandemic, full-price comparable store sales were up 26% but all comparable store sales down 3%. Looking ahead, Burberry expects full-year adjusted operating profit to grow in the region of 35% at constant exchange rates. In addition, the currency headwind is now expected to be GBP79 million on revenue, down from around GBP100 million, and GBP27 million on adjusted operating profit, down from GBP40 million.
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Compagnie Financiere Richemont lifted sales in the third quarter by over one-third as the Swiss luxury goods firm registered strong performance across all regions and business areas. Sales surged 35% to EUR5.66 billion for the third quarter ended December 31 from EUR4.19 billion in the prior year, driven by double-digit increases in all regions, channels and business areas, thanks to a relatively supportive economic environment. Broken down by region, the Americas led growth in sales, up by 55% for the quarter at constant currencies, followed by Europe, and Middle East & Africa, where sales grew by 42% and 30% respectively. Japan and Asia Pacific saw sales increase by 22% and 18%, respectively, with China consolidating at a high level of 7%.
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Pearson said it made "great progress" in the fourth quarter, leading to a better-than-expected full-year outturn. Full-year sales were up 8% and the UK-based education publisher expects adjusted operating profit of GBP385 million, up 33% on the year before and ahead of consensus at GBP375 million. "Led by a strong management team, we are repositioning the business, driving digital innovation and an increased focus on the consumer through the launch of Pearson+. We are well placed to build on this momentum in the year ahead and look to the future with confidence," said Chief Executive Andy Bird.
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Miner BHP released some uninspiring production figures, with everything from maintenance issues to Covid-induced labour shortages to wet weather hurting output in its first half of its financial year. In the six months to December 31, copper production fell 12% year-on-year to 742,000 tonnes while the metal's average realised price rose 30% to USD4.31 per pound. The fall in production was due to maintenance at Olympic Dam in Australia. Iron ore production rose 0.8% to 129.4 million tonnes. The average price booked in the half was USD113.54 per wet metric tonne, up 9% to a year prior but down 28% compared to the six months ended June 30, 2021. Looking ahead, BHP left its financial 2022 production guidance unchanged for iron ore, energy coal and nickel. But BHP lowered its metallurgical coal guidance to between 38 and 41 million tonnes from 39 to 44 million. The miner also said its copper production outlook is trending towards low end of its guidance range, which is set between 1.6 and 1.8 million tonnes.
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Antofagasta reported a mostly weaker production performance for 2021, with all segments except for gold showing a decline due to either lower grades or throughput. For the year, the Chilean miner said copper production reached 721,500 tonnes, in line with company guidance of 710,000 to 740,000 tonnes, but down 1.7% from 733,900 tonnes in 2020, as a result of lower grades and throughput at Los Pelambres.
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Smith & Nephew said it acquired Engage Surgical for up to USD135 million to enter the fast-growing partial knee market in the US and drive its robotics strategy. The Watford, England-based medical equipment maker said the price of the acquisition was contingent on sales performance and will be financed from existing cash and debt facilities. Orlando, Florida-based medical equipment manufacturer Engage Surgical is the owner of the Engage Surgical Partial Knee System, it said.
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MARKETS
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Wall Street was pointed for a slightly positive open on Wednesday, having fallen badly on Tuesday upon reopening from a three-day weekend. The tech-heavy Nasdaq Composite lost 2.6% on Tuesday as equity markets price in sooner and more aggressive central bank tightening. As inflation readings continued to come in hot, US Treasury yields widened. Analysts are expecting a first interest rate hike in the UK next month, followed by a hike in US rates in March.
"As investors continue to crank up expectations that the Federal Reserve will raise interest rates at a very aggressive pace in 2022, US Treasuries have sold-off, sending yields sharply higher across the curve. The yield on the benchmark 10-year Treasury note jumped to 1.84% at the close of London trading yesterday, its highest level in two years and an advance of around 12 basis points in just one trading session," noted Matthew Ryan, senior market analyst at currency risk advisory firm Ebury Partners.
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CAC 40: up 0.5% at 7,171.90
DAX 40: up 0.1% at 15,785.42
FTSE 100: up 0.1% at 7,572.31
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Hang Seng: closed up 0.1% at 24,127.85
Nikkei 225: closed down 2.8% at 27,467.23
S&P/ASX 200: closed down 1.0% at 7,332.50
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DJIA: called up 0.1%
S&P 500: called up 0.2%
Nasdaq Composite: called up 0.3%
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EUR: firm at USD1.1341 (USD1.1335)
GBP: up at USD1.3613 (USD1.3583)
USD: soft at JPY114.53 (JPY114.61)
Gold: up at USD1,817.30 per ounce (USD1,812.88)
Oil (Brent): up at USD88.55 a barrel (USD87.22)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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German inflation was confirmed accelerating to 5.3% in December on an annual basis. This marked an uptick from November's inflation rate of 5.2%. On a harmonised basis, calculated for comparative purposes across the EU, prices grew 5.7% year-on-year, confirming the initial figure. December's statistics mean the average annual inflation rate in Germany throughout 2021 was 3.1%, the highest since 1993's 4.5%. In 2020, this had been just 0.5%.
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UK inflation soared to a near 30-year high in December, putting all eyes now on the Bank of England's meeting at the start of next month. The consumer price index rose 5.4% year-on-year in December, accelerating from 5.1% in November. This topped market forecasts of 5.2%. "This is the highest CPI 12-month inflation rate in the National Statistic data series, which began in January 1997, and it was last higher in the historical modelled data series in March 1992, when it stood at 7.1%," the Office for National Statistics said. Marc Kimsey, an equity trader at Frederick & Oliver, said a February rate increase by the BoE now is "inevitable".
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UK house prices grew 10% on a year earlier in November, data from the Office for National Statistics showed. While picking up from October's 9.8% growth, November's increase was slower than the stamp duty holiday-driven peak of 13% in June. The average UK house price was GBP271,000 in November, being GBP25,000 higher than a year before and just below the record level of GBP272,000 notched in September, at the end of which the stamp duty holiday was halted.
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Construction output in the eurozone remained in growth in November for the third month in a row, albeit at a slower pace, data from Eurostat showed. Construction industry production rose 1.3% year-on-year in the eurozone in November, slowing from a 3.4% rise in October. Month-on-month however, construction output in the eurozone rose 0.2%, also decelerating from 0.7% growth in October.
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UK Prime Minister Boris Johnson is set to face an increasingly angry chorus of his own MPs amid reports the 54 letters which would launch a no confidence vote in the PM could be received on Wednesday. Reports on Tuesday night suggested MPs furious at Johnson's handling of the partygate scandal engulfing Westminster had been angered further by Johnson's insistence that nobody had told him a party at Downing Street would break rules he himself had set. And that especially those in the 2019 intake, many of whom have slim majorities after votes were "lent" to them during the last election, were preparing to submit their letters to the chair of the 1922 Committee of backbench members of Parliament, Graham Brady. An expected announcement that Plan B measures to stem the spread of coronavirus will be lifted next week is likely to please some backbenchers.
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Germany has registered more than 100,000 new Covid-19 infections in the past 24 hours, according to data released by the country's public health agency on Wednesday. Europe's biggest economy recorded 112,323 coronavirus cases over the last 24 hours and 239 fatalities, the Robert Koch Institute said. The weekly incidence rate reached 584.4 new infections per 100,000 people over seven days, the agency added. Germany has further tightened curbs to cut contamination, limiting access to bars and restaurants to people who have received their booster jabs or who are tested on top of being fully vaccinated or recovered. Germany's record rise in coronavirus cases comes as Omicron has become the dominant variant, accounting for more than 70% of new infections.
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Chinese city Xi'an has partially resumed public transport, according to official announcements, after millions were confined to their homes for weeks because of a coronavirus outbreak. The easing of transport rules – including the resumption of some inter-city train routes – comes just before the Lunar New Year holiday later this month, traditionally a period of mass travel. Chinese officials have pursued a strict "zero-Covid" approach to containing the virus, with tight border restrictions and targeted lockdowns, a strategy that has come under pressure as multiple clusters have flared across the country ahead of next month's Winter Olympics. Some 13 million Xi'an residents were placed in lockdown in mid-December as cases spiked, but the historic city reported no new local cases on Wednesday for the first time in weeks.
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US Secretary of State Antony Blinken landed in Kyiv on Wednesday for crisis talks with Ukraine's leaders, as diplomatic efforts to dissuade Russia from attacking its pro-Western neighbour falter. After talks last week failed to ease fears, the White House warned Tuesday that Russia was ready to attack Ukraine at "any point". It was a marked intensification of its threat assessment ahead of a meeting between Blinken and Russian Foreign Minister Sergei Lavrov expected in Geneva on Friday. Hoping to show robust support ahead of the talks, the top US diplomat is making a one-day visit to Kyiv in a show of support for Ukraine. He was greeted by Ukrainian officials on an icy moonlit tarmac and will later meet President Volodymyr Zelensky. Blinken heads Thursday to Berlin for four-way talks with Britain, France and Germany to seek Western unity.
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By Tom Waite; thomaslwaite@alliancenews.com
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