(Alliance News) - The following is a summary of top news stories Friday.
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COMPANIES
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The heir and de facto leader of Samsung received a presidential pardon, the latest example of South Korea's long tradition of freeing business leaders convicted of corruption on economic grounds. Billionaire Lee Jae-yong, who was convicted of bribery and embezzlement in January last year, will be "reinstated" to give him a chance to "contribute to overcoming the economic crisis" of the country, Justice Minister Han Dong-hoon said. Lee – the 278th-richest person in the world, according to Forbes, with a net worth of USD7.9 billion – was released on parole in August 2021, after serving 18 months in jail, just over half of his original sentence. Friday's pardon will allow him to fully return to work by lifting a post-prison employment restriction that had been set for five years.
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Recruit Holdings said it started its financial year strongly, with the human resources company pointing to a "robust" jobs market in the US and Europe. The Tokyo-based firm's revenue climbed 27% to JPY843.18 billion, about USD6.32 billion, from JPY664.71 billion a year earlier. Pretax profit rose 14% on-year to JPY120.06 billion, from JPY105.41 billion. Recruit said "hiring activity remained robust in the US and Europe". In Japan, the economic picture improved slightly, boosting hiring demand. For the full-year, it expects revenue of JPY3.300 trillion, up 15%. Adjusted earnings before interest, tax, depreciation and amortisation are expected to rise 1.6% to JPY520.00 billion.
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HSBC's largest shareholder, Ping An Insurance, will press on with its call for the bank to spin off its Asia operations despite pushback from executives, Bloomberg reported. The restructuring bid highlights HSBC's precarious position as US-China tensions rise, with some observers doubting whether Europe's largest lender can continue to straddle east and west. Chinese insurer Ping An believes it is in need of urgent and radical change, and was not swayed by arguments against the move presented by the bank's leaders last week, Bloomberg said, citing an unnamed source. HSBC has listed 14 reasons against changing its structure, including a lengthy transition period that could last up to five years, as well as loss of direct access to US dollars. Chief Executive Noel Quinn said last week that an "alternative structure" would have a "negative" impact on the bank and would not deliver increased value to shareholders.
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Pfizer said it has "significant defences" against the Zantac litigation, while Haleon revealed it is "not a party" to any claims. Fears about the heartburn treatment have hit the pharma stocks this week. Pfizer said it sold Zantac products between 1998 and 2006. By the time there was a withdrawal of Zantac products from the market in 2019 and 2020, Pfizer had already stopped selling it. Zantac was withdrawn after the US Food & Drug Administration in 2019 warned that the product contained levels of NDMA, a probable human carcinogen - a substance which has been linked to cancer. "Pfizer has significant defences to this litigation and there are significant legal and factual issues that remain to be addressed by the courts," it said. Haleon said it is not aware of any material developments in relation to Zantac since the start of June. The spin-off of Haleon from GSK was completed in mid-July; the consumer healthcare business previously had been run as a joint venture with Pfizer. Haleon said that it is "not primarily liable" for any over-the-counter or prescription claims involving Zantac. Ranitidine, sold under the name Zantac, was offered over-the-counter in the US by French drugmaker Sanofi and was originally manufactured by GSK. In late 2019, Sanofi recalled the over-the-counter treatment in the US and Canada over possible contamination fears. Sanofi said that as of August 1, it was aware of 2,850 personal injury plaintiffs in the US. When factoring in additional Zantac cases that do not include Sanofi, this number rises to 3,450.
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AstraZeneca and Daiichi Sankyo said their drug conjugate Enhertu has been approved for patients in the US with unresectable or metastatic non-small cell lung cancer. Enhertu, whose generic name is trastuzumab deruxtecan, is a specifically engineered HER2-directed antibody drug conjugate and is jointly developed and commercialised by AstraZeneca and Daiichi Sankyo. It can now be used for "adult patients with unresectable or metastatic non-small cell lung cancer whose tumours have activating HER2 (ERBB2) mutations, as detected by a Food & Drug Administration approved test, and who have received a prior systemic therapy," AstraZeneca said. Following US approval, AstraZeneca will pay USD125 million to Daiichi Sankyo as a "milestone" payment, it added.
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Illumina shares tumbled after it released a "disappointing" set of quarterly results and slashed annual guidance. The San Diego, California-based biotech firm said revenue edged up to USD1.16 billion in the three months to July 3 from USD1.13 billion a year before. However the firm swung to a net loss of USD535 million from a profit of USD185 million a year prior, generating a loss per share of USD3.40 compared to a profit of USD1.26. Shares in Illumina fell 22% to USD176.15 in after-hours trading in New York. The firm now expects full year revenue to grow between 4% and 5% year-on-year, its forecast falling sharply from the 14% to 16% range forecast on the release of its first-quarter results. It expects a GAAP diluted loss per share between USD2.93 and USD2.78. This compares with previous guidance for GAAP diluted earnings per share between USD2.33 and USD2.53. The stock was down 15% in pre-market trade on Friday.
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Paddy Power-owner Flutter Entertainment talked up its progress in the lucrative US sports betting market. Flutter said it saw positive momentum in the first half of 2022, driven by recreational player growth. For the six months to June 30, revenue rose 11% to GBP3.39 billion from GBP3.05 billion last year, but Flutter swung to a pretax loss of GBP51 million from a GBP77 million profit. During the half it said it increased recreational customer base by over one million monthly players to 8.7 million, 14% higher than the prior year. Flutter said the rapid expansion of its US business FanDuel was key to this growth, along with good underlying player momentum in the UK&I and Australia. In the US, its sports betting market share accelerated to 51% in the second quarter, driven by FanDuel's "efficient" customer acquisition and strong operational execution. Looking ahead, Flutter expects full-year performance in line with market expectations. "The second half of the year has started well, and we look forward to the start of the football seasons in both the US and Europe," said Chief Executive Officer Peter Jackson.
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MARKETS
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Stock prices were higher in Europe and Wall Street was called higher on Friday, at the end of a significant week for economic data. Reports on Wednesday and Thursday hinted that price inflation in the US may have peaked. On Friday, the broadest reading on the health of the UK economy was better than expected but still showed that output shrank in the second quarter. "The recession is likely to last until Q1 next year, with a peak-to-trough decline in real GDP of 2.3%," Berenberg said in response to the UK gross domestic product report. "The annual growth rate for 2022 would then be 3.0%, which looks high but is driven by the 2.8-percentage-point statistical overhang from 2021 with its post-COVID-19 bounce-back. In 2023, we expect GDP to decline by 1.2%, before growth recovers to 1.7% in 2024."
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CAC 40: up 0.3% at 6,562.94
DAX 40: up 0.4% at 13,750.19
FTSE 100: up 0.6% at 7,508.42
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Hang Seng: closed up 0.5% at 20,175.62
Nikkei 225: closed up 2.6% at 28,546.98
S&P/ASX 200: closed down 0.5% at 7,032.50
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DJIA: called up 0.5%
S&P 500: called up 0.5%
Nasdaq Composite: called up 0.6%
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EUR: down at USD1.0300 (USD1.0328)
GBP: down at USD1.2165 (USD1.2205)
USD: up at JPY133.30 (JPY132.79)
Gold: down at USD1,786.70 per ounce (USD1,789.51)
Oil (Brent): up at USD99.55 a barrel (USD98.87)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Industrial output growth in the eurozone topped expectations in June, according to figures from Eurostat. Industrial production rose 2.4% yearly in June, beating an FXStreet cited forecast of 0.8% growth. In May, output in the single currency area had climbed 1.6% on-year. On a monthly basis, industrial output rose 0.7% in June, having climbed 2.1% in May. Monthly growth topped an FXStreet cited forecast of a lesser 0.2% rise.
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France's annual inflation rate accelerated in July, figures on Friday showed, despite energy price growth slowing. According to Insee, the French price inflation rate raced to 6.1% in July from 5.8% in June. The core inflation rate, which strips out food and energy, grew to 4.3% yearly in July, from 3.7% in June. On a monthly basis, consumer prices in France rose 0.3% in July, after a rise of 0.7% in June. On a harmonised basis, allowing for EU-wide comparison, French annual inflation accelerated to 6.8% in July from 6.5% in June. On a monthly basis, harmonised prices increased 0.3% in July, slowing from 0.9% in June.
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The French unemployment rate ticked up slightly in the three months to the end of June. According to Insee, the nation's unemployment rate inched up to 7.4% in the second quarter from 7.3% in the first. The second quarter jobless figure was slightly worse than market consensus. A year earlier, the unemployment rate was 7.9%. The jobless rate is down from 8.2% in the fourth quarter of 2019, prior to the onset of the pandemic.
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Spain's annual inflation rate shot up in July, though consumer prices declined on a monthly basis for the first time since April. According to INE, Spain's inflation rate accelerated to 11% in July from 10% in June, in line with FXStreet cited consensus. It is the largest annual inflation rate since September 1984, just under 38 years ago, INE added.
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The UK economy shrank marginally in the second quarter of the year from the first, according to the Office for National Statistics, as the country grapples with cost-of-living increases. On an annual basis, UK GDP expanded 2.9% in the second quarter, slowing sharply from 8.7% growth in the first quarter. The latest reading just beat the market forecast, cited by FXStreet, for growth of 2.8%. On a quarterly basis, the UK economy contracted 0.1% in the second quarter following growth of 0.8% in the first quarter. Market consensus had pointed to a 0.2% contraction. In June, the final month of the second quarter, the UK enjoyed an extra bank holiday to mark the Queen's Platinum Jubilee. UK GDP shrank 0.6% in June month-on-month, having expanded 0.4% in May. The print beat the market estimate for a 1.3% decline.
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The UK's global competitiveness could be harmed by too much political interference in the regulation of the City of London, the Bank of England governor said. Tory leadership contenders Liz Truss and Rishi Sunak have both said they want to reform key EU financial regulations, and give politicians more power to intervene in regulators' decisions, in an effort to boost the nation's economy. In an open letter to the Treasury Select Committee, dated July 27, Andrew Bailey said regulatory independence was vital to the nation's "international standing". His comments came in the wake of the government introducing a Financial Services & Markets Bill aimed at revoking retained EU law on financial services.
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An oil and gas body has urged the candidates in the running to become UK prime minister to scrap the windfall tax on profits as soon as possible. In open letters to both candidates, Offshore Energies UK claimed the sector would pay about GBP13.8 billion into the Treasury next year as a result of the windfall tax and corporation taxes. But the body raised concerns about the potential impact the law could have on investor confidence in the industry, urging both Truss and Sunak to scrap it "when possible" and not to extend it beyond the 2025 sunset clause.
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The UN nuclear chief has called for an end to attacks at the Russian-controlled Zaporizhzhia nuclear plant in south-eastern Ukraine. Rafael Grossi warned on Thursday that "very alarming" military activity at Europe's largest nuclear plant could lead to dangerous consequences for the region. Rafael Grossi urged Russia and Ukraine, who blame each other for the attacks at the plant, to immediately allow nuclear experts to assess damage and evaluate safety and security at the sprawling nuclear complex where the situation "has been deteriorating very rapidly". He pointed to shelling and several explosions at Zaporizhzhia last Friday that forced the shutdown of the electrical power transformer and two backup transformers, forcing the shutdown of one nuclear reactor.
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Leading Kremlin figures met with pro-Russian separatists in eastern Ukraine's Donbass to discuss further steps for the region now largely controlled by Russian forces. The meeting took place in the city of Luhansk on Thursday, former Russian president Dmitry Medvedev, who is now vice-chairman of the Russian Security Council, said on Telegram. Russian Interior Minister Vladimir Kolokoltsev, head of the FSB state security service Alexander Bortnikov and residential deputy chief of staff Sergey Kiriyenko were among those who took part in the discussions, Medvedev said. They talked about the reconstruction of destroyed infrastructure and bringing the laws of the Donetsk and Luhansk People's Republics - which were declared as such by pro-Russian separatists - in line with Russian legislation.
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By Tom Waite; thomaslwaite@alliancenews.com
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