TOP NEWS SUMMARY: Firms face new EU rules on ESG, US rules on nicotine

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

Alliance News 22 June, 2022 | 10:06AM
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(Alliance News) - The following is a summary of top news stories Wednesday.

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COMPANIES

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Negotiators agreed to new EU rules requiring large companies to disclose their impact on human rights and the environment to consumers from 2024, the European Council announced. A formal confirmation of the agreement is still required from both the European Parliament and the European Council. The rules will only apply to EU firms with more than 250 employees and a turnover higher than EUR40 million, the parliament said. Non-EU companies operating in the bloc with an annual turnover of EUR150 million or more will also be subject to the new rules. Companies meeting the criteria will be required to report on their environmental impact as well as human rights, social and ethical standards. The information will then be verified and certified by an independent body.

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US President Joe Biden's administration announced it would develop a new policy requiring cigarette producers to reduce nicotine to non-addictive levels – a move that would deal a powerful blow to the tobacco industry. If successful in its aims, the new US standard could save millions of lives by the end of the century, and shape a future where cigarettes are no longer responsible for addiction and debilitating disease. The initiative requires the Food and Drug Administration to develop and then publish a rule, which will likely be contested by industry.

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Toyota Motor said it expects global production in July to be 800,000 units, with around 250,000 units in Japan and 550,000 units overseas. Toyota revised this down by 50,000 units from the number expected at the start of 2022. The Japanese auto maker will suspend operations at some plants in Japan during the month due to Covid-19. The production forecast for the full-year remains unchanged at 9.7 million units. Company noted this may change due to a shortage of semiconductors and the spread of Covid-19.

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The UK government will continue to sell down its stake in lender NatWest, extending the trading plan unveiled last July for another year, the Treasury said. The trading plan now will terminate no later than August 11, 2023. It will continue to be managed by Morgan Stanley. Since the plan was established, the UK Treasury has sold 703.5 million shares for GBP1.6 billion, it said. This implies an average sale price per share of around 227p, well below the 502p paid to bail out NatWest, then Royal Bank of Scotland, in 2008. The stock was up 2.0% to 225.80p on Wednesday. It is up 12% over the past 12 months. The Treasury currently owns 5.09 billion NatWest shares, representing a 48.5% stake. When it set out the trading plan last July, the UK state had a 54.7% stake.

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Housebuilder Berkeley said pretax profit for the financial year ended April 30 rose 6.4% to GBP551.5 million from GBP518.1 million, with revenue rising 6.6% to GBP2.35 billion from GBP2.20 billion. Berkeley added it has seen a "stable" start to the new financial year, with enquiries, visitor numbers and reservations in line with the end of the 2022 financial year.

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JD Sports Fashion reported a jump in annual revenue and profit, though performance is set to stagnate in the year ahead due to a number of headwinds facing consumers, it said. Revenue for the 52 weeks to January 29 rose 39% to GBP8.56 billion from GBP6.17 billion the year before, with pretax profit doubling to GBP654.7 million from GBP324.0 million. The athleisurewear retailer will pay a dividend of 0.35p for the year, up from 0.29p the year prior. Trading in the new financial year has been reassuring so far, the company said, with like-for-like sales after four months 5% above a year ago. JD Sports said headline profit before tax and exceptional items for the 2023 financial year is expected to be in line with the record GBP947.2 million just achieved. On its hunt for a chief executive, JD Sports said a number of "high calibre candidates" are at different stages of consideration. The search for a new non-executive chair is also progressing "at pace".

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UK retailer Frasers has increased its stake in German fashion house Hugo Boss. The Sports Direct-owner now holds 3.4 million shares of common stock, representing 4.9% of Hugo Boss's share capital, and 18.3 million shares of common stock via the sale of put options, representing a further 26% stake. "This investment reflects Frasers Group's belief in the Hugo Boss brand, strategy and management team. Frasers Group continues to intend to be a supportive stakeholder and create value in the interests of both Frasers Group's and Hugo Boss' shareholders," said Frasers.

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Merck & Co said its Lynparza drug, developed alongside AstraZeneca, improved survival rates for some sufferers of prostate cancer. Results from a phase three probe showed Lynparza, in tandem with abiraterone plus prednisone "significantly" improved progression-free survival, compared to users of just abiraterone plus prednisone. The latter treatment is the standard of care for sufferers of metastatic castration-resistant prostate cancer. Metastatic cancer is a form of the disease which spreads to distant parts of the body. Castration-resistant prostate cancer is a form of the disease which continues to spread even when the level of testosterone in the body is reduced.

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Moderna and the UK government announced a deal for the US biotech firm to build a cutting-edge centre to develop and produce mRNA vaccines for respiratory diseases, including Covid. The company and the health ministry said in a joint statement that work could start on the manufacturing and research and development centre as early as this year. The first UK-developed mRNA vaccine is scheduled to be produced in 2025. No financial details or location for the centre were given but ministers said the deal would give patients on the state-run National Health Service access to "next generation" vaccines and treatments. It would also ensure "consistent home-made supply" and allow increased production in the event of any future health crisis, allowing the hub to be a global base for clinical trials.

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Novartis said it will "vigorously defend" its patent rights after being struck a legal blow concerning its multiple sclerosis drug Gilenya. The US Court of Appeals for the Federal Circuit reversed an earlier decision issued in January. The court now finds the pharmaceutical firm's patent claims as invalid. Shenzhen, China-based firm HEC Pharma had filed for a petition for a rehearing with the court. "Novartis intends to vigorously defend the validity of the patent and is considering all available options, including current plans to seek review of this decision by the full CAFC, a process which may take several months," Novartis explained. The patent blow means a cheaper generic version of the drug can be produced. Gilenya was its third-highest selling drug in 2021.

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The US Supreme Court declined an appeal from Bayer-owned Monsanto that aimed to challenge thousands of lawsuits claiming its weedkiller Roundup causes cancer – a potentially costly ruling. The high court did not explain its decision not to take the case, which left intact a USD25 million ruling in favour of a California man who alleged he developed cancer after using the chemical for years. The decision marks a major blow to the German conglomerate's legal fight against some 31,000 Roundup-related cases. "Bayer respectfully disagrees with the Supreme Court's decision," the company said in a statement.

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MARKETS

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After a positive start to the week, stock markets were falling globally on Wednesday, with new inflation data from the UK and up-coming appearances by US Federal Reserve Chair Jerome Powell on Capital Hill refocusing attention on the need to tighten monetary policy. Powell will testify before the Senate Banking Committee on Wednesday and the House Financial Services Committee on Thursday, after the Fed last week hiked US interest rates by three quarters of a percentage point. Meanwhile, Brent oil fell below USD110 a barrel. "Crude oil prices fell as the market gravitated towards demand fears in the face of increasing evidence of the need to contain global inflation," commented SP Angel Energy.

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CAC 40: down 1.7% at 5,865.19

DAX 40: down 2.1% at 13,012.79

FTSE 100: down 1.4% at 7,048.78

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Hang Seng: closed down 2.6% at 21,008.34

Nikkei 225: closed down 0.4% at 26,149.55

S&P/ASX 200: closed down 0.2% at 6,508.50

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DJIA: called down 1.4%

S&P 500: called down 1.6%

Nasdaq Composite: called down 1.8%

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EUR: down at USD1.0515 (USD1.0568)

GBP: down at USD1.2225 (USD1.2276)

USD: firm at JPY136.23 (JPY136.18)

Gold: down at USD1,825.72 per ounce (USD1,839.99)

Oil (Brent): down at USD109.96 a barrel (USD114.71)

(currency and commodities changes since previous London equities close)

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ECONOMICS AND GENERAL

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US President Joe Biden will ask Congress on Wednesday to suspend the federal gas tax for three months as skyrocketing prices cause widespread anger among Americans just months before crucial mid-term elections. The White House wants to discontinue the tax of 18 cents per gallon until September and will call on US states, which also tax at the pump, to do the same to "provide direct relief to American consumers who have been hit with Putin's price hike," a senior administration official said. The official noted that prices had gone up almost USD2 a gallon since Russian President Vladimir Putin began building up forces on the Ukrainian border earlier this year. Federal taxes on gas and diesel help fund the Highway Trust Fund, which maintains roads and supports public transport, but Biden will call on Congress to ensure the fund does not suffer from the lost revenue.

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The UK inflation rate edged up in May to a fresh 40-year high. Annual consumer price inflation hit 9.1%, ticking up from 9.0% in April. This was in line with market consensus, according to FXStreet. It was the highest 12-month inflation rate in the National Statistic series, which began in January 1997, the Office for National Statistics said. Indicative modelled consumer price index inflation estimates suggest that it would last have been higher around 1982, ONS said. Month-on-month, prices rose 0.7%, far slower than the 2.5% notched for April. Turning to factory prices, producer input prices rose by 22% in the year to May, accelerating from 21% in April to hit the highest rate since records began in 1985. Output prices rose 16%, again accelerating from April's rise of 15%.

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Talks on a trade deal between the UK and six Gulf nations that could boost the UK economy by up to GBP1.6 billion a year will kick off on Wednesday with a meeting in Saudi Arabia. UK Trade Secretary Anne-Marie Trevelyan will meet representatives of the Gulf Co-operation Council in Riyadh to begin negotiations on a deal with the bloc. Trade between the UK and the GCC – which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE – is already worth GBP33 billion, making it the UK's seventh largest trading partner, and the bloc's demand for international goods and services is expected to increase 35% in the next 13 years. The UK is expected to pursue cuts to tariffs on British exports to the Gulf, particularly in the food and drink sector. UK food and drink exports to GCC countries were worth GBP625 million in 2021. The government will also seek to improve access for hi-tech industries including green technology to help the GCC transition away from reliance on fossil fuels.

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The US promised enforcement as a landmark ban took effect on most imports from Xinjiang, the Chinese region where rights groups say the Uyghur people are being forced into slave labour. The Uyghur Forced Labor Prevention Act, which will be felt especially in the textile industry, took effect six months after it was signed into law by President Biden following bipartisan support in Congress. "We are rallying our allies and partners to make global supply chains free from the use of forced labour," Secretary of State Antony Blinken said in a statement.

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Biden said he plans to talk with his Chinese counterpart Xi Jinping as he considers lifting some tariffs imposed on Beijing in a bid to ease US inflation. "I plan on having a conversation with President Xi. We haven't set a time yet," Biden told reporters. Over the weekend, Biden said a call could be "soon." The last talks between the two leaders was on March 18, when Biden warned Xi against assisting Russia in its invasion of Ukraine. The tariffs imposed under former president Donald Trump imposed 25% duties on billions of dollars worth of Chinese imports. The penalties were aimed at punishing what the US says are China's unfair trade practices and protecting US manufacturers.

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US senators unveiled a bill Tuesday addressing the epidemic of gun violence plaguing the country as they locked down a narrow set of reforms that were nevertheless hailed as the first significant firearms controls in a generation. The cross-party group, which had been working for weeks on the wording of the legislation, voiced confidence that it would have enough support to pass the Senate, and it could be signed into law by Biden as soon as next week. The limited proposals don't go as far as reforms called for by Biden, such as an all-out ban on assault rifles. But Chris Murphy, the senator leading negotiations for Democrats, hailed the bill as the "most significant piece of anti-gun violence legislation in nearly 30 years."

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By Tom Waite; thomaslwaite@alliancenews.com

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