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(Alliance News) - The following is a summary of top news stories Monday.
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COMPANIES
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Haleon, the consumer healthcare product arm of GSK, started trading on Monday, becoming effectively by far the biggest new listing in London in 2022. Haleon went straight into the FTSE 100 index, where GSK also remains. As a result, the lowest ranked FTSE 100 stock based on closing prices on Monday will be demoted to the FTSE 250 to make room for Haleon, index provider FTSE Russell previously said. A consolidation of GSK shares will be implemented on Monday, after the market close. The ratio for the consolidation depends on "fluctuations in the volume and price of the GSK shares" on Monday. Haleon shares also will trade in New York as American depository receipts. Haleon provides consumer healthcare products in five categories: Oral Health, Pain Relief, VMS, Respiratory Health, Digestive Health and Other. GSK is a pure biopharmaceutical firm, focused on vaccines and specialty medicines. Both stocks were trading lower in London on Monday. GSK has a market cap of about GBP70 billion and Haleon GPB30 billion.
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Australia & New Zealand Banking reported a solid performance for the third quarter of its financial year, with growth in revenue and a rise in the group's net interest margin. The Melbourne-based lender also announced that it will acquire Suncorp Bank from Suncorp Group for AUD4.9 billion, around USD3.33 billion. In order to fund the acquisition, ANZ will conduct an accelerated renounceable entitlement offer to raise around AUD3.5 billion in shares. Under the offer, shareholders will be entitled to subscribe for one new share for every 15 existing shares held, at a price of AUD18.90 per share. Around 187 million shares are expected to be issued under the entitlement offer. The acquisition of Suncorp Bank is expected to include AUD47 billion of home loans with a strong risk profile, AUD45 billion in deposits and AUD11 billion in commercial loans, ANZ said. For the three months ended June 30, ANZ said revenue rose 5% year-on-year, driven be strong lending and margin momentum. All businesses reported growth over the period, with Markets revenue up 7% at AUD435 million despite conditions remaining volatile.
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Fiat, Chrysler and Peugeot carmaker Stellantis has signed a heads of agreement with Chinese car maker Dongfeng Motor relating to the 99.2 million shares in Stellantis held by Donfeng, which are worth EUR1.19 billion. As a result of the agreement, Dongfeng may submit an offer to sell all or a portion its Stellantis shares, which represent a 3.2% stake. Stellantis will have the right but not the obligation to accept an offer and buy the shares at the average closing price per share on Euronext Milan for five trading day period prior to the offer.
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Virgin Media O2, a joint venture of Spain's Telefonica and the US's Liberty Global, has submitted an indicative offer to buy UK broadband provider TalkTalk, Sky News reported. The talks are at an early stage and are non-exclusive, Sky said, citing "City sources". The offer values TalkTalk at GBP3 billion, it said. TalkTalk was a FTSE 250 listing in London until being taken private early last year in a GBP1.11 billion takeover by Toscafund Asset Management and Penta Capital. The prospect of a stronger rival in the UK broadband market sent the shares of BT tumbling on Friday, closing down 8.1%.
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US coffee house chain Starbucks is seeking buyers for its UK operations, amid rising costs and increased competition, the Sunday Times reported. The newspaper said it is "understood" that Seattle-based Starbucks has asked adviser Houlihan Lokey to canvas interest in the UK business, which has 1,000 coffee shops - 300 operated by the company and the rest run by franchisees. Starbucks said that while it hasn't initiated a formal sales process, it continues to "evaluate strategic options", according to the Times.
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Boeing is anticipating high demand globally for new jets through 2031, but has cut its 20-year industry-wide forecast in its latest market outlook. Some 19,575 new passenger and cargo planes are expected to be delivered by airline manufacturers to customers between 2022 and 2031, Boeing said in an annual market forecast released before the Farnborough International Airshow in England is due to begin Monday. The estimates are higher than the 10-year projections from 2021, even though those figures had factored in 710 planes for Russian airlines. Boeing has however lowered its demand projection for new aircraft in its 20-year forecast to 2041, unlike its European rival Airbus. Boeing now predicts global demand of 41,170 aircraft over the next two decades, compared to a projection of 43,610 a year ago - this marks a drop even with the planes for Russia taken into account.
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Tesla chief Elon Musk asked a Delaware court on Friday to reject a bid by Twitter to put its USD44 billion lawsuit on trial in September, instead asking to push it back until next year. In a court document cited by US media, Musk's lawyers accuse Twitter's board of directors of wanting to expedite the case. Twitter on Tuesday sued Musk for breaching the contract he signed to buy the tech firm, calling his exit strategy "a model of hypocrisy". The social media company wants to hold the trial in September so as not to prolong the period of uncertainty currently threatening the company. But Musk asked that the trial not start before February 13, citing the complexities involved.
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Business media and events group Euromoney Institutional Investor accepted a takeover tilt from a consortium of Luxembourg-based private equity firm Astorg Asset Management and London-based private equity firm Epiris. The offer from Becketts Bidco values Euromoney at GBP1.61 billion on a fully diluted basis and GBP1.66 billion on on an enterprise value basis. Becketts will pay 1,461 pence per Euromoney share, a 10% premium to its 1,328.00 close price on Friday. The bid is a 34% premium to Euromoney's last "undisturbed" stock price of GBP10.94 on June 17, the final trading day before Euromoney confirmed the takeover approach on June 20. "The board believes the offer represents value for shareholders and reflects the attractions of Euromoney's business model and performance," Chair Leslie Van de Walle commented. In addition, Euromoney said it now expects annual results to top board expectations. Revenue in the nine months to June 30 surged 30% to GBP304.3 million, it said. Euromoney's financial year ends in September.
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Direct Line Insurance cautioned on "heightened volatility across the UK motor insurance market", adding another warning from London-listed insurers. "We have seen claims inflation in motor in the first half of 2022 spike above the levels assumed in our pricing. As a result, we are revising our combined operating ratio target range for 2022 to 96% to 98%," Chief Executive Officer Penny James commented. Direct Line had previously targeted a combined operating ratio range of 93% to 95%. A ratio below 100% indicates an insurer is making underwriting profit. A ratio of 98% would be only barely profitable. James said Direct Line has already undertaken measures to increase prices and "restore margins". It expects its 2023 combined operating ratio to improve to around 95% and reiterated its medium-term target range of 93% to 95%.
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Deliveroo lowered annual gross transaction value growth guidance, as the UK-based takeaway delivery firm has been hit by tumbling consumer confidence and pandemic tailwinds unwind. Total GTV climbed just 2% at constant currency in the second quarter of 2022, slowing markedly from 12% growth in the first quarter. For the whole of the first half, it grew 7%. GTV had more than doubled in the first half of 2021. For the full year, it expects GTV growth in the range of 4% to 12%, its guidance cut from a previous range of 15% to 25%. Deliveroo affirmed margins guidance, however. It expects an adjusted earnings before interest, tax, depreciation and amortisation margin between minus 1.5% and minus 1.8% for 2022, improved from 2.0% in 2021.
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MARKETS
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Stock markets were trading higher and the dollar was lower amid rising risk appetite as the new week gets underway. The key market events ahead are interest rate decisions by the European Central Bank and Bank of Japan, both on Thursday. The ECB has flagged a 25 basis point rate hike, its first since 2011. The BoJ has shown no inclination to tighten its ultra-loose monetary policy. Thursday and Friday also will bring a raft of flash purchasing managers' index readings. US earnings season also continues this week, with Bank of America and Goldman Sachs reporting on Monday.
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CAC 40: up 1.4% at 6,122.24
DAX 40: up 1.4% at 13,039.56
FTSE 100: up 1.2% at 7,245.02
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Hang Seng: closed up 2.7% at 20,846.18
Nikkei 225: Tokyo market closed for holiday
S&P/ASX 200: closed up 1.2% at 6,687.10
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DJIA: called up 0.9%
S&P 500: called up 1.0%
Nasdaq Composite: called up 1.2%
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EUR: up at USD1.0138 (USD1.0074)
GBP: up at USD1.1957 (USD1.1853)
USD: down at JPY138.24 (JPY138.56)
GOLD: up at USD1,719.67 per ounce (USD 1,704.08)
OIL (Brent): up at USD103.35 a barrel USD101.57)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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China's banking regulator has urged lenders to extend more credit to real estate developers, as a growing number of homebuyers withhold mortgage payments on unfinished housing projects across 50 cities. Furious at postponed deliveries of pre-sold homes, unclear delivery times and halted construction, homebuyers were last week reported to have halted payments for already sold units in at least 100 residential projects, according to data from industry groups and analysts. The boycott has worsened fears of financial contagion in the country's troubled real estate sector, which is estimated to account for 18-30% of GDP and is a key driver of growth in the world's second-largest economy.
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Italy's trade deficit narrowed on a monthly basis in May, data from national statistics office Istat showed. Italy posted a trade deficit of EUR12 million in May, slimmed from a deficit of EUR3.6 billion in April, but swinging from a surplus of EUR5.6 billion in the same month of the previous year. The figure for May 2022 topped an FXStreet cited forecast of a EUR2.53 billion trade deficit. In May 2022, exports and imports grew 29% and 49% year-on-year, respectively. Monthly, exports rose 4.8% and imports were 0.3% higher, both on a seasonally adjusted basis.
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President Joe Biden on Saturday assured Arab leaders the US would remain fully engaged in the Middle East, as he wrapped up his first tour of the region since taking office. "We will not walk away and leave a vacuum to be filled by China, Russia or Iran," Biden said during a summit in Jeddah, on the Red Sea coast of Saudi Arabia.The summit, the final stop of Biden's Middle East tour, brought together the six members of the Gulf Cooperation Council as well as Egypt, Jordan and Iraq. Biden had been looking to use the trip to discuss volatile oil prices and outline his vision for Washington's role in the region. On Friday he met Saudi King Salman and Crown Prince Mohammed bin Salman, the kingdom's de facto ruler who US intelligence agencies assess "approved" the 2018 operation that killed journalist Jamal Khashoggi. After a fist-bump with Prince Mohammed, Biden said he raised the Khashoggi case and warned against future attacks on dissidents. In their joint statement, the leaders "recognized ongoing efforts of OPEC+ towards stabilizing the global oil market," and welcomed the recent announcement by the Organization of Petroleum Exporting Countries to "increase supply over the course of July and August."
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The EU will discuss tightening sanctions against Russia on Monday, as Moscow is accused of using the continent's largest nuclear power plant to store weapons and launch missiles on the surrounding regions of southern Ukraine. The situation at the captured Zaporizhzhia nuclear plant is "extremely tense", Ukraine's atomic energy agency chief Petro Kotin said, adding that the Russians had installed missile launchers and used the facility to shell the Dnipro region. Describing "a deluge of fire", regional governor Valentyn Reznichenko on Saturday said Grad missiles had pounded residential areas. With the conflict grinding on and increasingly spilling out into global energy and food crises, the EU's foreign ministers are considering banning gold purchases from Russia, which would align with sanctions already imposed by G7 partners. More Russian figures could also be placed on the EU's blacklist.
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The International Monetary Fund's UK head has warned Conservative Party rivals against promising tax cuts as part of their leadership bids. Amid soaring inflation, Mark Flanagan said debt-financed tax cuts at the current time "would be a mistake". Speaking to BBC News, the IMF's top official said, if anything, the tax ratio needed to be lifted. Flanagan added: "At some point you have to decide, do we want to invest in the climate transition? Do we want invest in digitalisation? Do we want to invest in skills for the public. "Well, if you do you need the resources to do it. And the way to realise those resources is to lift the tax ratio a little bit." Flanagan said that tax cuts may even boost inflation by strengthening consumer spending.
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House prices in the UK hit a sixth straight record high in July, a house price index compiled by Rightmove showed, but the property portal expects prices to cooling off for the rest of 2022. Average house prices increased to GBP369,968 in July, up 0.4% or GBP1,354 on the previous month. "A continuing desire to move and low numbers of homes for sale are driving further price growth even at a time when personal finances are becoming increasingly stretched," Rightmove explained. It noted buyer demand continues to exceed historically normal levels and is now 26% higher than at the same time in 2019, but is down 7% on June 2021.
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By Tom Waite; thomaslwaite@alliancenews.com
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