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(Alliance News) - The following is a summary of top news stories Thursday.
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COMPANIES
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HSBC Holdings said it is exiting the retail and small business banking market in the US, in line with its strategy to refocus on corporate and investment banking in Asia. The London-headquartered, Asia-focused lender intends to "focus on the banking and wealth management needs of globally connected affluent and high net worth clients," it said in a statement. Of its 148 US branches, 90 are to be sold, including to Citizens Bank and Cathay General Bancorp. The bank plans to turn about 20 locations into international centres dedicated to high net worth individuals, and gradually wind down the remaining 35 to 40 branches. "They are good businesses, but we lacked the scale to compete," said Chief Executive Noel Quinn. HSBC had announced earlier this year that it intended to restructure its US retail and small business operations. In France, according to Les Echos, HSBC is preparing to pay more than EUR1 billion to the American fund Cerberus to sell all of its retail banking activities, a network of 230 bank branches and 4,000 employees. The stock was up 0.1% in London on Thursday.
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Aviva promised a "substantial return of capital to shareholders" after its receives the GBP7.5 billion in proceeds this year from the sale of eight businesses. In a trading update, Aviva also reported "very good progress" in the first quarter of 2021, with record quarterly net flows to its Savings & Retirement arm. Net flows in Savings & Retirement were up 31% year-on-year to GBP2.98 billion. Sales grew 23% to GBP6.17 billion. In Aviva's Life unit, the insurer reported core present value of new business premiums of GBP8.3 billion, steady on a year ago. There were lower volumes of Annuities & Equity Release in a subdued market compared to a "strong start" in 2020, with sales down 52% at GBP1.05 billion. Core General Insurance gross written premiums rose 4% annually to GBP2.0 billion in the first quarter of 2021. Aviva also has made progress in its debt reduction plans, Chief Executive Amanda Blanc highlighted.
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United Utilities reported a decline in sales and underlying profit in the 2021 financial year, and guided for lower revenue in financial 2022. Revenue fell 2.8% in the year ended March 31, to GBP1.81 billion from GBP1.86 billion. This reflects customer bill reductions that came in as part of the 2020-2025 regulatory period, United Utilities said. Demand for water was stable, with changing consumption patterns between different groups offsetting each other. Pretax profit jumped 82% to GBP551.0 million from GBP303.2 million. That was attributed to a GBP210 million reduction in the reported net finance expense including fair value movements. Underlying pretax profit fell 14% to GBP460.0 million from 534.8GBP million. The company will pay a final dividend per share of 28.83p, bringing the total for the year to 43.24p. That's up 1.5% from 42.60p for financial 2020, in line with the company's policy.
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Specialty chemicals firm Johnson Matthey posted mixed results for the year to March 31. Revenue rose 7.5% to GBP15.67 billion from GBP14.58 billion, though pretax profit dropped 22% to GBP238 million from GBP305 million. Major impairment and restructuring costs amounted to GBP171 million, rising 22%. "Following a challenging first half, we recovered strongly in the second half helped by a strong recovery in our end markets and higher precious metal prices," CEO Robert MacLeod said. Looking ahead, Johnson Matthey said that should precious metals remain at their "current high level", the company will see a net benefit of GBP120 million for the current financial year. It also said capital expenditure will amount to up to GBP600 million, and it expects a GBP25 million profit hit due to foreign exchange movements. "In 2021-22, assuming our end-markets remain robust, we expect low to mid-teens growth in underlying operating performance at constant precious metal prices and constant currency," the company added.
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GlaxoSmithKline and Sanofi said they have started enrolment in a phase three study of their Covid-19 vaccine candidate. The global study will recruit more than 35,000 volunteers from several countries, including the US, Asia, Africa and Latin America. The primary endpoint is the prevention of symptomatic Covid-19 in "SARS-CoV-2 naive adults", with secondary endpoints of preventing severe and asymptomatic infection. The phase three study follows interim phase two results which showed that the adjuvanted recombinant Covid-19 vaccine candidate achieved high rates of neutralising antibody responses in all adult age groups. In a two-stage approach, the phase three study will at first investigate the efficacy of a vaccine formulation targeting the original D.614 virus before then evaluating a second formulation targeting the B.1.351, or South Africa, variant.
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Novartis said it and Molecular Partners have started the global Empathy clinical trial for Covid-19 treatment ensovibep. The phase two and three study will explore the use of novel DARPin therapeutic candidate ensovibep for the treatment of Covid-19, recruiting infected patients and aiming to prevent worsening symptoms and hospitalisation. Novartis will be conducting the clinical trial programme and Moelcular Partners sponsor. If initial results are "convincing", this would pave the way for Novartis to seek expedited approval via the US Food & Drug Administration's Emergency Use Authorization programme.
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A groundbreaking union recognition deal in the UK has been announced by ride-hailing firm Uber Technologies, with predictions that it is the first step to a "fairer working life" for millions of people. Under the collective bargaining agreement, the GMB will represent drivers across the UK, saying they will have the right to choose if, when and where they drive. The agreement follows changes made earlier this year guaranteeing drivers at least the national living wage, holiday pay and a pension plan. Earlier this year the Supreme Court in the UK dismissed Uber's appeal against a landmark employment tribunal ruling that its drivers should be classed as workers with access to the minimum wage and paid holidays. Under the agreement, the GMB said it will work with Uber on a number of issues, including pay, pensions, discretionary benefits, and safety.
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Investors rejected the responses of US oil giants to climate change Wednesday, installing activist board members at Exxon Mobil and directing Chevron to deepen emissions cuts. The dual decisions at the two biggest US oil giants' annual meetings are clear evidence that addressing climate change has moved from being an environmentalist cause to one championed by mainstream investors. At ExxonMobil, two board nominees from activist group Engine No. 1 won enough votes to secure board seats. Shareholders also backed a proposal requiring a report on the oil giant's lobbying activities on climate change. At Chevron, a majority of investors approved an activist proposal calling on the company to reduce "scope 3" emissions, which encompass energy products. Earlier in the day, a Dutch court ordered oil giant Royal Dutch Shell to slash its greenhouse gas emissions by a net of 45% by the end of 2030 following a challenge launched by environmental group Friends of the Earth.
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MARKETS
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Stock markets were mostly lower on Thursday ahead of some key economic indicators from the US. These include a second gross domestic product estimate, the latest jobless claims figures, and a personal consumption expenditure price reading, all at 1230 GMT. The third contains the preferred inflation measure for the US Federal Reserve. "The expectation (and for some, hopes) that 2021 would prove to be as volatile as its predecessor have proven to be sorely-misplaced, and instead we have a market that, even by pre-Covid standards, is quite dull," commented Chris Beauchamp, chief market analyst at IG. "The concerns of this year, namely modest rises in overall inflation (post-Covid spikes notwithstanding) and the frenetic debate over when central banks might or might not choose to nudge interest rates up by a smidgen, seem paltry by comparison to last year."
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CAC 40: up 0.4% at 6,415.14
DAX 30: down 0.4% at 15,392.22
FTSE 100: marginally lower, down 3.02 points at 7,023.91
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Hang Seng: closed down 0.2% at 29,113.20
Nikkei 225: closed down 0.3% at 28,549.01
S&P/ASX 200: closed marginally higher, up 2.40 points at 7,094.90
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DJIA: called down 0.1%
S&P 500: called down 0.2%
Nasdaq Composite: called down 0.5%
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EUR: down at USD1.2188 (USD1.2214)
GBP: soft at USD1.4119 (USD1.4125)
USD: up at JPY109.18 (JPY109.01)
Gold: down at USD1,895.86 per ounce (USD1,904.70)
Oil (Brent): soft at USD68.24 a barrel (USD68.64)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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US President Joe Biden ordered US intelligence agencies to report to him in the next three months on whether the Covid-19 virus first emerged in China from an animal source or from a laboratory accident. Agencies should "redouble their efforts to collect and analyze information that could bring us closer to a definitive conclusion, and to report back to me in 90 days," Biden said in a statement released by the White House. According to Biden, agencies are currently split over the two possible sources for the virus that swept the planet over the past year, killing more than 3.4 million people – a figure experts say is undoubtedly an underestimate. Biden's order signals an escalation in mounting controversy over how the virus first emerged – through animal contact at a market in Wuhan, China, or through release of the coronavirus from a highly secure research laboratory in the same city.
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Trade officials from the US and China have held "candid, pragmatic" talks, China's commerce ministry said, their first discussions under the Biden era as Washington scrutinises whether Beijing is holding up its end of a trade pact. A bruising trade war under former president Donald Trump saw punitive tariffs lumped on a range of goods sold between the world's two biggest economies. The two countries signed a so-called "phase one" agreement in January 2020, in which Beijing pledged to increase its purchases of American products and services by at least USD200 billion over 2020 and 2021. But top US trade negotiator Katherine Tai has said she is analysing whether the terms of that pact have been met by China, with some experts saying Beijing is falling up to 40% short on its agreement to buy US goods.
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Consumer confidence is on the rise in Germany, survey data from GfK showed, as Europe's largest economy begins to re-emerge from the latest Covid-19 wave. GfK's consumer confidence index forecast for June is negative 7.0 points in June, improved from a revised negative 8.6 points for May. However, consensus cited by FXStreet tipped the figure to improve to negative 5.2 points. For May, GfK's economic expectations indicator surged 34 points monthly to a score of 41.1. Its the highest level since 42.8 points back in March 2018.
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Service firms in the UK are more optimistic about recruiting staff, making profits and making investments, a new study suggests. The Confederation of British Industry said its research indicated that optimism across the service sector improved significantly in the past three months. Firms in business and professional services, and consumer services saw a big improvement, according to a survey of almost 170 companies. Employment showed signs of "significant" improvement, with consumer services experiencing the strongest growth since the end of 2015, said the CBI.
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More than five million people in Australia's second-biggest city of Melbourne were ordered into a snap week-long lockdown Thursday, as officials blamed a sluggish vaccine rollout and hotel quarantine failures for another virus outbreak. Stay-at-home orders will apply to Melbourne and surrounding Victoria state from midnight for seven days, acting state Premier James Merlino told residents, as the cluster doubled to 26 cases. "In the last day, we've seen more evidence we're dealing with a highly infectious strain of the virus, a variant of concern, which is running faster than we have ever recorded," Merlino said. The variant detected is known as B1617 – which has spread widely in India. The "circuit-breaker" is designed to allow contact tracers to get on top of cases, with residents permitted to leave home only for essential reasons including getting vaccinated.
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By Tom Waite; thomaslwaite@alliancenews.com
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