(Alliance News) - The following is a summary of top news stories Wednesday.
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COMPANIES
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The EU's second-highest court overwhelmingly upheld the EU's record fine against Google over its Android operating system for mobile phones, reducing it only slightly for technical reasons. In a statement, the EU's General court said it "largely confirms the commission's decision that Google imposed unlawful restrictions on manufacturers of Android mobile devices" in order to benefit its search engine. The court, however, said the fine for the arm of Alphabet should be slightly reduced to EUR4.13 billion, instead of the EUR4.30 billion decided by the commission in 2018.
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South Korea has fined Alphabet's Google and Meta Platforms more than USD71 million collectively for gathering users' personal information without consent for tailored ads, regulators said Wednesday, the country's highest-ever data protection fines. Investigations into the two US tech giants found they had been "collecting and analysing" data on their users, and monitoring their use of websites and applications, the Personal Information Protection Commission said. The data was used to "infer the users' interests or used for customised online advertisements", it said, adding that neither Google nor Meta had clearly informed South Korean users of this practice or obtained their consent in advance. As a result, Google was fined KRW69.2 billion, about USD49.7 million, and Meta KRW30.8 billion, about USD22.1 million.
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Uber paid the US state of New Jersey USD100 million in back taxes and fines for labelling nearly 300,000 of its drivers as self-employed and withholding required benefits, officials said. The ride-sharing giant, however, insisted that its drivers were indeed independent contractors and said it only paid a fraction of the USD1 billion initially demanded by the northeastern state. The payment stems from a government audit of Uber's operations in New Jersey between 2014 and 2018, which concluded that the company had improperly classified its drivers as independent workers.
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Twitter whistleblower Peiter Zatko told the US Congress that the platform ignored his security concerns, with his testimony coming as company shareholders greenlit Elon Musk's USD44 billion takeover deal. The shareholder decision clears the way for the contract to close, even as billionaire Musk tries to exit it. Twitter has sued him to force it through, but analysts said testimony by Zatko, the social network's former security chief, will put more pressure on the company as it heads to court next month. "I'm here today because Twitter leadership is misleading the public, lawmakers, regulators and even its own board of directors," Zatko told the hearing.
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Zara-owner Inditex reported strong sales in the first half of financial 2022, and enjoyed further growth to start the second half as the retailer's Autumn/Winter season was "very well received". In the six months to July 31, net profit rose to EUR1.80 billion from EUR1.27 billion. Operating income increased to EUR2.43 billion from EUR1.69 billion. Net sales improved 25% to EUR14.85 billion from EUR11.94 billion. Zara sales were up 29% to EUR10.93 billion from EUR8.49 billion. Inditex noted its traffic and store sales increased "markedly". It also noted it expects online sales to be more than 30% of total sales by 2024.
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Germany's Economic Stabilization Fund has sold its last remaining stock in Lufthansa for EUR1.07 billion, the country's finance agency said in Frankfurt. The sale of just under 10% of Lufthansa's shares to international investors in a block placement has earned the German government a significant profit on the EUR306 million it spent buying the stock in June 2020 as the airline faced bankruptcy due to the coronavirus pandemic. "The company is again in private hands," said Finance Agency Managing Director Jutta Donges, adding that Lufthansa's financial stabilization had been successfully completed.
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Starbucks unveiled its new "financial roadmap", as the US-based coffee chain targets double-digit revenue growth over the next three years. Speaking at its investor day in Seattle, Interim Chief Executive Howard Schultz said the firm is positioning itself for "the next chapter of growth". From financial 2023 to 2025, Starbucks expects comparable store sales growth between 7% and 9%, annually - which is up from 4% to 5% previously. Globally, Starbucks expects to approach 45,000 stores by the end of 2025, and is "well on track" to reach approximately 55,000 stores by 2030. Starbucks also announced it plans, between dividends and share buybacks, to return about USD20 billion to its shareholders in the next three years.
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Miner Rio Tinto said it has agreed to form a joint venture to develop the Western Range iron ore project in the Pilbara, Western Australia. Rio will own 54% of the venture and China Baowu Steel Group 46%, and the two will invest USD2 billion to develop the mine. Construction is expected to begin in early 2023 with first production anticipated in 2025. Rio and Baowu have also agreed to enter into an iron ore sales agreement at market prices covering a total of up to 126.5 million tonnes of iron ore over 13 years. "This volume represents Baowu's 46% interest in the anticipated 275 million tonnes of production from Western Range through the joint venture," Rio said.
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UK home furnishings retailer Dunelm said total sales in the financial year to July 2 were up at GBP1.58 billion from GBP1.34 billion the year before, and pretax profit increased to GBP212.8 million from GBP157.8 million. Dunelm raised its ordinary dividend by 14% to 40 pence from 35p, but reduced its special payout to 37p from 65p. The gross margin for the year slipped to 51.2% from 51.6% the year before, and Dunelm expects to achieve a margin of around 50% in its recently commenced financial year. Sales have been "robust" in the first ten weeks of its 2023 financial year, it added, and it is on track to deliver full-year results in line with analyst expectations.
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UK housebuilder Redrow said revenue in the financial year to July 3 rose 10% to GBP2.14 billion from GBP1.94 billion the year prior. However, pretax profit fell 22% to GBP246 million from GBP314 million after booking exceptional fire safety costs of GBP164 million. Excluding these costs, underlying pretax profit rose 31% to GBP410 million. Redrow's final dividend was lifted to 22.0p, up 19% from 18.5p the year before. This took its total payout for the year to 32.0p, up 31%. The homebuilder said its order book has placed it in an "excellent" starting position for the 2023 financial year, but added: "Given rising inflation and higher interest rates it is not surprising the buoyant housing market has moderated recently and demand has returned to historically average levels." In the first ten weeks of the new financial year, demand has moderated to historic levels.
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MARKETS
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European and Asian stock markets were trading lower on Wednesday in response to a tumble on Wall Street on Tuesday. New York stock indices dropped by 4% to 5% after the core rate of US consumer price inflation showed no signs of cooling. However, US index futures were pointing to an attempt to claw back some ground on Wednesday. Despite a huge European fine being upheld by a court, Alphabet shares were up 0.8% in the New York pre-market, having closed down 5.9% on Tuesday. Starbucks was up 2.7% in the pre-market, after losing 1.4% on Tuesday.
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CAC 40: marginally lower, down 1.88 points at 6,243.81
DAX 40: down 0.2% at 13,163.06
FTSE 100: down 0.7% at 7,336.58
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Hang Seng: closed down 2.5% at 18,847.10
Nikkei 225: closed down 2.8% at 27,818.62
S&P/ASX 200: closed down 2.6% at 6,828.60
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DJIA: called up 0.5%
S&P 500: called up 0.6%
Nasdaq Composite: called up 0.7%
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EUR: unchanged at USD0.9991 (USD0.9992)
GBP: firm at USD1.1536 (USD1.1524)
USD: up at JPY143.31 (JPY144.23)
Gold: down at USD1,704.07 per ounce (USD1,704.90)
Oil (Brent): down at USD92.68 a barrel (USD93.12)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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European Commission President Ursula von der Leyen announced a legislative proposal to impose windfall levies on energy companies in a speech at the European Parliament in Strasbourg. The levies could make more than EUR140 billion available for EU member states to support households and businesses struggling under the soaring energy prices, she said. "In these times, profits must be shared and channelled to those who need it most," von der Leyen said. The measures are to apply to non-gas electricity producers as well as fossil fuel companies that have been profiting disproportionately from the high prices in recent months. The levies, which still have to be approved by EU capitals, are part of a set of measures to tackle high energy prices on a European level.
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The European Commission is not set to present a proposal for a gas price cap, despite demands by countries such as Belgium. "While a gas price cap on Russian pipeline imports could further address the current manipulation of supplies and prices, more work is needed to assess the possible adverse impacts on some member states," EU Energy Commissioner Kadri Simson stressed in the European Parliament on Tuesday. "And we are also deepening our analysis on how a horizontal cap on all gas imported in Europe could work and its implications," Simson said.
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Industrial production in the eurozone dropped in July, data from the statistical office of the EU showed. Versus the previous month, seasonally adjusted industrial production fell by 2.3% in the euro area and by 1.6% in the EU in July. Market consensus, according to FXStreet, had forecasted a slimmer 1.0% drop in the euro area. July's reading reverses the growth seen in June. In June, industrial production increased by 1.1% in the euro area and by 1.0% in the EU. Market forecasts had predicted a 0.4% rise. Annually, industrial production decreased by 2.4% in the euro area and by 0.8% in the EU.
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The Kremlin has hailed the significance of Russian President Vladimir Putin's planned meeting with Chinese leader Xi Jinping this week amid tensions with the West. Putin's foreign affairs adviser Yuri Ushakov said the two leaders are scheduled to meet on Thursday in Samarkand, Uzbekistan, on the sidelines of a summit of a security pact dominated by Moscow and Beijing. "The meeting has a special significance in view of the current international situation," Ushakov told reporters, saying Mr Putin and Xi will discuss the international situation, along with regional issues and bilateral cooperation. China has pointedly refused to criticise Russia's action in Ukraine and denounced Western sanctions against Moscow.
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US consumer price growth was faster-than-expected last month, data showed on Tuesday, but still reflected a slowdown from recent highs. The annual inflation rate for August was 8.3%, topping expectations, according to FXStreet, of 8.1%, but still easing off July's rate of 8.5%. Month-on-month growth of 0.1% followed a flat reading for July, and was above forecasts for a 0.1% decline. Likely to worry the Federal Reserve was August's core inflation rate, which excludes energy and food. It ticked up to 6.3% on an annual basis from 5.9% in July. The rate had been expected to pick up more modestly to 6.1%. Month-on-month, core consumer price growth was 0.6%, quickening from July's 0.3% hike.
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The annual UK inflation rate, in a surprise, eased back into single-digits in August, the Office for National Statistics said. The consumer price index rose 9.9% year-on-year in August, unexpectedly slowing from 10.1% in July. Consensus, according to FXStreet, was for the rate reading to tick up to 10.2%. July's figure had been the highest since current records began in 1997 and at a level, according to models, not seen since 1982. Inflation remains far higher than the Bank of England's 2% target. A fall in the price of motor fuels made the largest downward contribution, while rising food prices were the largest upward contributor. Month-on-month, inflation eased to 0.5% from 0.6%. Core CPI - which excludes energy, food, alcohol and tobacco - edged up as forecast, to 6.3% from 6.2%.
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Separately, the ONS said UK input producer prices rose 21% in the year to August, easing from 23% in July. Output prices rose by 16%, again easing from 17% in July. "Crude oil and petroleum products provided the largest downward contributions to the change in the annual rates of input and output inflation, respectively," the ONS said.
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Industrial production growth in Japan was unable to match market expectations for July, data from the Ministry of Economy, Trade & Industry showed. Industrial production increased 0.8% in July from June, which is slower than the 1.0% growth expected from the market - according to consensus from FXStreet - and sharply lower than the 8.9% growth seen in June. Annually, industrial production dropped 2.0%, a steeper decline than the 1.8% forecast. In June, industrial production fell 3.1%. Production capacity slipped 0.1% from the previous month in July, while it fell 1.3% annually.
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By Tom Waite; thomaslwaite@alliancenews.com
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