TOP NEWS SUMMARY: Eurozone inflation soars and factories cool

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

Alliance News 1 July, 2022 | 10:06AM
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(Alliance News) - The following is a summary of top news stories Friday.

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COMPANIES

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Facebook parent Meta Platforms is preparing for "fierce" headwinds, according to an internal memo seen by Reuters on Thursday. "I have to underscore that we are in serious times here and the headwinds are fierce. We need to execute flawlessly in an environment of slower growth, where teams should not expect vast influxes of new engineers and budgets," Chief Product Officer Chris Cox wrote in the memo. The company must "operate leaner, meaner, better executing teams," he wrote.

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Micron Technology reported revenue for third quarter ended June rose 14% to USD8.64 billion from USD7.42 billion a year before. Micron is an Idaho, US-based computer memory and storage product producer. Net income grew 51% to USD2.63 billion from USD1.74 billion, and diluted earnings per share rose 54% to USD2.34 from USD1.52. "Micron delivered record revenue in the fiscal third quarter driven by our team's excellent execution across technology, products and manufacturing," said Micron Chief Executive Sanjay Mehrotra. "Recently, the industry demand environment has weakened, and we are taking action to moderate our supply growth in fiscal 2023." For fourth quarter, firm expects revenue around USD7.2 billion and diluted earnings per share of USD1.52. Mehrotra added: "We are confident about the long-term secular demand for memory and storage and are well positioned to deliver strong cross-cycle financial performance."

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Oxford BioMedica said it has signed a new three year agreement with AstraZeneca, which will facilitate potential future manufacturing opportunities for the FTSE 100-listed drugmaker's Covid-19 vaccine. The Oxford, England-based gene and cell therapy company said that the agreement is an extension of the original 18-month supply & development agreement signed back in September 2020 between the two companies. Oxford BioMedica added that the manufacture of Covid-19 vaccines at its Oxbox facility is expected to complete in the last quarter of 2022. In accordance with the terms of the original agreement and inclusive of revenue for batches already manufactured in the first half, Oxford Biomedica expects to recognise revenue of GBP30 million from AstraZeneca in the current financial year. Under the new agreement, manufacturing of vaccines at Oxford Biomedica's manufacturing facility will be available to AstraZeneca on an as-needed basis beyond 2022.

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German multinational conglomerate Siemens announced on Thursday that a special write-off will result in a EUR2.8 billion hit to third-quarter earnings after taxes. The write-off is as a result of the fall in the share price of Siemens Energy, in which Siemens holds a 35% stake. In view of the closing price of the share on Thursday evening, the market value of the participation was "significantly below the book value," the company said in justification. Since the turn of the year, Siemens Energy's shares have lost almost 38% in value.

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Ofcom has said it may extend the time and frequency allowed for advertising breaks on UK television as part of a review of broadcasting rules. The regulator said it would consider changing current advertising regulations amid market development including the increasing influence of online streaming services. UK broadcasters are facing growing competition from streaming giants such as Netflix, Amazon Prime Video and Disney+ in terms of viewing figures and programme commissions. In a report looking at the re-licensing of ITV and Channel 5, Ofcom said the expanded choice of entertainment was "generally positive" for audiences but "put pressure on broadcasters, squeezing revenues, and made it harder for them to maintain their current offer". Current regulations mean public broadcasting channels are limited to an average of seven minutes of advertising per hour across the day, while private channels are allowed nine minutes for advertising and an extra three for teleshopping.

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Staff at telecoms giant BT Group have voted to strike, union bosses announced Thursday, joining workers in various UK sectors protesting over pay as decades-high inflation erodes wages. Dave Ward, general secretary at the Communication Workers Union, said BT now faces its first national strike since the company's privatisation in the 1980s after a ballot in favour of walking out. It comes after strike action in recent days by tens of thousands of rail workers in addition to stoppages held by senior criminal lawyers. Elsewhere, the aviation and postal sectors face stoppages, while teachers and workers in the state-run National Health Service mull action. Union leaders insist strikes are necessary as wages have failed to keep pace with UK inflation, which has soared to a 40-year high and is on course to rise beyond 10%.

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MARKETS

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The second half started as the first six months of 2022 ended - with losses across Europe. But as Friday morning progressed, stocks reversed to post modest gains, though Wall Street futures were still pointed lower. The first half of 2022 saw investors dogged by worries of soaring inflation, rising interest rates and recession risks. "Our view is still that inflation will recede from recent multi-decade highs in the US and Europe as annual comparisons become more favorable and rate rises cool activity. However, it will take time for inflation to return to the levels targeted by central banks," said UBS.

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CAC 40: up 0.5% at 5,949.74

DAX 40: up 0.4% at 12,830.27

FTSE 100: up 0.3% at 7,189.32

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Nikkei 225: closed down 1.7% at 25,935.62

S&P/ASX 200: closed down 0.4% at 6,539.90

Financial markets in Hong Kong closed for holiday.

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DJIA: called down 0.3%

S&P 500: called down 0.2%

Nasdaq Composite: called down 0.3%

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EUR: firm at USD1.0466 (USD1.0456)

GBP: down at USD1.2089 (USD1.2157)

USD: down at JPY135.52 (JPY135.89)

GOLD: down at USD1,795.16 per ounce (USD1,807.91)

OIL (Brent): down at USD111.25 a barrel (USD114.74)

(currency and commodities changes since previous London equities close)

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ECONOMICS AND GENERAL

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Consumer inflation in the eurozone is expected to tick higher in June, data from the statistical office of the EU showed, piling further pressure on the European Central Bank to rein in spiralling prices. Euro area annual inflation is expected to be 8.6% in June 2022, up from 8.1% in May, according to a flash estimate from Eurostat. Market consensus, according to FXStreet, had seen inflation at 8.3%. "Looking at the main components of euro area inflation, energy is expected to have the highest annual rate in June, 41.9%, compared with 39.1% in May, followed by food, alcohol & tobacco, at 8.9%, compared with 7.5% in May, non-energy industrial goods, 4.3%, compared with 4.2% in May, and services, 3.4%, compared with 3.5% in May." Core inflation - which strips out energy - is expected to slow slightly on an annual basis, dropping to 3.7% from 3.8%, while market consensus had seen it picking up 3.9%. Speaking on Wednesday, European Central Bank President Christine Lagarde said finding the right monetary policy response to tackle soaring inflation is an "art".

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The manufacturing sector in the eurozone had a rough month in June, data from S&P Global showed, as firms faced slowing demand and a drop in new orders. The S&P Global eurozone manufacturing purchasing managers' index fell to 52.1 in June from 54.6 in May, which represents a 22-month low. Any reading over the no-change mark of 50.0 indicates growth, signalling that June's rate of expansion slowed significantly compared to May. "Evidence of worsening conditions for goods producers was seen across many of the sub indices of the latest PMI survey as total new business intakes and export orders both declined, while business confidence slid to a 25-month low," S&P Global said. In Europe's largest economy, the BME Germany manufacturing PMI slumped to 52.0 in June from 54.8 in May. Turning to France, the S&P Global manufacturing PMI fell to 51.4 in June from 54.6 in May, sinking to its lowest level in 18 months. Finally, in Spain, the manufacturing PMI sank to a 17-month low in June, hitting a level of 52.6, down from 53.8 in May.

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UK manufacturing sector activity fell to a two-year low in June as inflationary pressures remained elevated, according to S&P Global. The S&P Global-CIPS UK manufacturing purchasing managers' index fell to 52.8 in June from 54.6 in May and was revised down from an initial estimate of 53.4. It was the lowest reading in two years. S&P said the slowdown in the UK manufacturing sector continued at the end of the second quarter, as June saw output growth grind to a near-standstill pace and new orders contract for the first time in 17 months. In addition, S&P said inflationary pressures remained elevated due to raw material shortages, stretched supply chains, higher prices for commodities, electronics, energy, oil, paper, plastics and timber. Higher costs were passed on, in part, to clients in the form of increased selling prices, it noted.

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China's manufacturing sector returned to expansion in June, with the easing of Covid restrictions leading to a sharp expansion of output, and the stabilisation of supply chains, data from Caixin and S&P Global showed. The Caixin general manufacturing purchasing managers' index rose to 51.7 points in June from 48.1 points in May, signalling the first improvement in the sector in four months, as well as the strongest rate of increase since May 2021. Companies noted the first expansion of output since February, as a result of the return to more normal operations, as well as the reopening of production lines as Covid restrictions were relaxed. Also returning to growth were new orders, albeit at a more modest rate due to subdued demand conditions and the lingering effect of the pandemic.

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President Xi Jinping hailed China's rule over Hong Kong on Friday as he led 25th anniversary celebrations of the city's handover from Britain, insisting that democracy was flourishing despite a years-long political crackdown that has silenced dissent. At a tightly choreographed ceremony, which included the inauguration of Hong Kong's new government, Xi showcased the Chinese Communist Party's hold after unleashing a sweeping crackdown against the city's democracy supporters. Since Beijing imposed a national security law on Hong Kong in 2020, opposition has been quashed and most leading democracy figures have fled the country, been disqualified from office or jailed. But during his speech, Xi said Beijing had always acted "for the good of Hong Kong". "After reuniting with the motherland, Hong Kong's people became the masters of their own city," he said. "Hong Kong's true democracy started from here."

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Japan's manufacturing sector remained in expansion territory in June, however growth slowed as rising costs and continued material shortages led to lagging growth in production, figures from Jibun Bank and S&P Global showed. The au Jibun Bank Japan manufacturing purchasing managers' index dipped to 52.7 points in June from 53.3 points in May, indicating the 17th consecutive month the sector remained at expansion levels, but the pace of expansion was the joint-softest since September 2021. Any PMI score above 50 indicates expansion. Companies attributed the slowing growth to a near-stagnation of new orders, caused by a slowdown in demand from rising prices and weaker client confidence amid sustained material shortages and delivery delays. This also led to the slowest rate of production growth in four months, as material shortages weighed on output volumes.

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Confidence among Japan's largest manufacturers sagged for a second quarter on rising costs and supply constraints, though the service sector was boosted by economic reopening, a key survey showed. The Bank of Japan's closely watched Tankan survey showed confidence among large manufacturers at plus nine, below expectations of 12 and sharply lower than the 14 in the March survey. A positive figure means more manufacturers see business conditions as favourable than those that consider them unfavourable. The survey reaches about 10,000 firms and is considered to be the broadest indicator of how Japan Inc is faring. Corporate Japan has faced several problems as the Ukraine war pushes up oil prices amid general inflation that has boosted raw material prices.

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French President Emmanuel Macron will hold talks Friday in Paris with Australia's new Prime Minister Anthony Albanese, seeking to repair ties badly damaged by the ditching of a submarine contract. Macron and Albanese will have lunch at the Elysee Palace from 1100 GMT, the French presidency said, with talks focusing on "restoring confidence" and issues including stability in the Pacific and climate change. It will be the first formal meeting between the Australian and French leaders since former Australian prime minister Scott Morrison ripped up in September last year a contract with France to build a dozen diesel-powered submarines. It will also be the first face-to-face meeting between Albanese and Macron after telephone talks on May 26. Albanese, who defeated the conservative Morrison in May elections, has made a priority of restoring Australia's international image, particularly in the fight against climate change.

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By Lucy Heming; lucyheming@alliancenews.com

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