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(Alliance News) - The following is a summary of top news stories Tuesday.
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COMPANIES
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Shares in Universal Music Group, the world's biggest label with a lineup of megastars from The Beatles to Taylor Swift, surged 35% on its stock market debut Tuesday, giving the company a valuation exceeding USD50 billion. With shares leaping from EUR18.50 to over EUR24.97, the Santa Monica-based music giant found itself valued at EUR46 billion on Tuesday morning in Amsterdam. That is way above the USD39 billion valuation it was given the night before its listing on Euronext Amsterdam. Universal Music Group, with its catalogue of four million titles, was floated by its owner, the French media conglomerate Vivendi, whose own shares sank by 14% to EUR11.22 in Paris, as it shed a majority stake in its crown jewel. UMG has been a cash cow for Vivendi's media empire, with a turnover of EUR7.4 billion last year, accounting for 46% of the parent company's revenue. Vivendi is keeping a chunk of UMG, but has already sold off a 20% stake to Chinese tech firm Tencent and 10% to US financier Bill Ackman, whose London listing Pershing Square Holding was up 4.6% at 2,715.00 pence on Tuesday.
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Royal Dutch Shell said it is selling its assets in the shale-oil rich Permian Basin of the US to rival ConocoPhillips for USD9.5 billion. Shell plans to use the proceeds from the sale of the property, which produce an average of 175,000 barrels per day, to fund a USD7 billion payout to its shareholders and strengthen its finances, according to a statement. "After reviewing multiple strategies and portfolio options for our Permian assets, this transaction with ConocoPhillips emerged as a very compelling value proposition," the company's upstream director Wael Sawan said. Straddling western Texas and eastern New Mexico, the Permian Basin is rich in shale oil and gas and produces about 40% of the country's crude. The assets sold by Shell's US unit include 225,000 acres of land in Texas with more than 600 miles of oil, gas and water transmission pipes, according to ConocoPhillips.
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National Express and Stagecoach are in talks for a merger, in a deal that would combine two of the UK's largest transport providers. Under the proposed terms, Stagecoach investors would receive 0.36 of a National Express share for each Stagecoach share. It means National Express shareholders would own about 75% of the combined company. Based on Monday's closing prices, the deal represents an 18% premium for Stagecoach shareholders. A deal would bring operational and cost efficiencies, and create more opportunities for growth, the companies said. National Express added that it has identified GBP35 million per year in savings, by combining both companies' depots, sharing technology and cutting administrative costs. Birmingham-based National Express operates local and long-distance bus services in the UK, North America and elsewhere, as well as trains in Germany. Stagecoach, based in Perth, Scotland, operates local buses across the UK and long-distance coach services under the Megabus brand - one of National Express's main competitors in the market, creating a potential regulatory hurdle. National Express has a market capitalisation of around GBP1.47 billion, while Stagecoach is worth about GBP442 million.
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DIY retailer Kingfisher said it delivered a strong performance in the first half of its financial year and saw an improved position in key markets. For the six months to July 31, revenue was GBP7.10 billion, up 20% from GBP5.92 billion last year, and pretax profit was GBP677 million, up 71% from GBP398 million. Kingfisher posted like-for-like sales growth of 23% from a year before, with strong performances in the UK & Ireland, France, Iberia and Romania. Kingfisher declared an interim dividend of 3.80 pence, up from the 2.75p paid last year. In addition, the board announced the return of GBP300 million of surplus capital via a share buyback programme. The programme will commence soon, it said. Kingfisher said it has seen a good start to the second half of the year with resilient demand across all markets. Like-for-like sales to this past Saturday were down 0.6% year-on-year but up 16% from 2019. Looking ahead, Kingfisher expects financial 2022 adjusted pretax profit in the range of GBP910 million to GBP950 million. It posted adjusted pretax profit of GBP786 million in financial 2021, so earnings will be up at least 16%.
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UK catering firm Compass, ahead of the end of its financial year on September 30, said revenue in the fourth quarter is expected to improve to 86% of 2019 revenue, which is slightly ahead of previous guidance of 80% to 85%. For the whole of the 2021 financial year, revenue is expected to be 76% of 2019 levels. Compass said the outperformance was led by its Sports & Leisure unit with improved attendance - particularly outdoor sports - and strong per capital spend. Further, it noted that, since the start of September, the return to Education venues has been strong, with high on-campus spending, while trading in its Business & Industry division was in line with "cautious" expectations. Compass said its underlying operating margin in the fourth quarter is expected to be around the mid-point of the guided range of 5.5% to 6.0%, as it continues to manage mobilisation costs and inflation. For financial 2021, underlying operating margin is expected to be 4.4%. Looking ahead to the start of the new financial year, Compass said most of its sectors are expected to continue performing well. However, it remains cautious about Business & Industry, given continued uncertainty over the pace of office reopening in major markets.
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A new digital bank brand offering cashback and money management features has been launched in the UK by JPMorgan Chase. The Chase brand already provides a range of financial services to more than 60 million households in the US. Among its UK offerings will be a "numberless" debit card made from recycled plastic. The card details are stored behind a secure login on the Chase app, so customers do not put their account details at risk if they lose their physical card. Chase will offer a fee-free current account combining money management features with cashback rewards on everyday debit card spending. Features include small change round-ups on which people can earn 5% interest for 12 months. Customers' spending on debit cards will be rounded up to the nearest GBP1 and the small change will be deposited into a separate account where it will earn interest at 5% for 12 months.
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MARKETS
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Equities were rebounding on Tuesday from the China-induced selling on Monday. European indices were up more than 1%, and Wall Street was called higher. Hong Kong, which took the brunt of the selling on Monday, also rebounded partially.
However, concerns about the unsupportable USD300 billion debt burden of property firm Evergrande remained. "Even though most people don't expect Evergrande to collapse all of a sudden, the silence and a lack of major actions from policymakers is making everyone panic," Ding Shuang at Standard Chartered told AFP. "I expect China to at least offer some verbal support soon to stabilise sentiment."
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CAC 40: up 1.3% at 6,539.09
DAX 40: up 1.4% at 15,341.47
FTSE 100: up 1.1% at 6,980.95
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Hang Seng: closed up 0.5% at 24,221.54
Nikkei 225: down 1.9% at 29,924.75
S&P/ASX 200: closed up 0.4% at 7,273.80
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DJIA: called up 1.0%
S&P 500: called up 0.9%
Nasdaq Composite: called up 0.8%
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EUR: flat at USD1.1737 (USD1.1734)
GBP: firm at USD1.3692 (USD1.3678)
USD: up at JPY109.55 (JPY109.46)
Gold: up at USD1,765.00 per ounce (USD1,764.07)
Oil (Brent): up at USD74.92 a barrel (USD74.58)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The OECD warned of an "uneven" global economic recovery as it lowered its 2021 growth forecasts for the world and the US while raising the outlook for Europe. The world economy has bounced back this year on the back of stimulus measures, Covid vaccines and the resumption of many economic activities, the Organisation for Economic Co-operation & Development said. Global gross domestic product has surpassed its pre-pandemic level following last year's recession. Global output is now expected to expand by 5.7% this year, down 0.1 percentage point from the organisation's previous forecast in May. But the outlook for 2022 has slightly improved, with 4.5% growth now expected, up by 0.1 point. The OECD lowered its growth outlook for the US, from 6.9% to 6.0% this year. The US Congressional Budget Office has forecast 6.7% growth for the world's top economy. The OECD's eurozone forecast, however, was raised by one point to 5.3%, though the outlook varied within the single-currency bloc, with higher growth now expected in France, Italy and Spain while Germany was not performing as well. The growth prospects of Argentina, Brazil, Mexico, South Africa, South Korea and Turkey have also improved, while those of Australia, the UK, Japan and Russia were lowered. The forecast for China remained unchanged at 8.5%.
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Canadians returned Liberal Prime Minister Justin Trudeau to power in hotly contested elections against a rookie conservative leader, but he failed to gain an absolute majority, according to preliminary results Tuesday. Trudeau called the snap polls last month, hoping to parlay a smooth Covid-19 vaccine rollout – among the best in the world – into a new mandate to steer the nation's pandemic exit and pass his agenda without opposition support. But after a bumpy five weeks of campaigning, he appeared set for a repeat of the close 2019 general election, which resulted in the one-time golden boy of Canadian politics clinging to power yet weakened after losing his majority in parliament. "You are sending us back to work with a clear mandate to get Canada through this pandemic into the brighter days ahead," Trudeau said, flanked by his wife Sophie Gregoire and their children on stage at a victory gala. The Liberals had won or were leading in 158 seats, far short of the 170 needed for a majority, while the opposition Conservatives were heading for 119, according to preliminary results from Elections Canada, with the new parliament set to look little different to the outgoing one.
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The UK government borrowed more than expected in August, figures from the Office for National Statistics showed. UK public sector net borrowing, excluding public sector banks, was estimated to have been GBP20.5 billion in August, higher than economist forecasts of GBP14.2 billion. The ONS said the latest figure was the second-highest August borrowing since monthly records began in 1993, but GBP5.5 billion less than in August 2020. During the course of the pandemic, UK government borrowing has been hitting record levels, with vast amounts being spent on measures such as furlough payments.
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UK energy companies and the government agreed the energy price cap must "remain in place" during crunch talks to find a solution to record gas costs. UK Business Secretary Kwasi Kwarteng held a crisis meeting with the industry before announcing to the Commons that ministers would not be bailing out energy firms and that the energy price cap would be "staying". In a joint statement issued late on Monday evening, Kwarteng and Ofgem Chief Executive Jonathan Brearley confirmed they had taken a unified position over the price ceiling continuing. "Central to any next steps is our clear and agreed position that the energy price cap will remain in place," they said. It comes as the Daily Telegraph reported that some companies present at the meeting – attended by the likes of Scottish Power, Octopus, E.ON and EDF – called for the cap to be scrapped amid fears more firms could collapse, with four having already gone bust.
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The US announced Monday it will lift Covid travel bans on all air passengers in November if they are fully vaccinated and undergo testing and contact tracing. Jeffrey Zients, coronavirus response coordinator for President Joe Biden, told reporters the new "consistent approach" would take effect "early November." The easing of travel restrictions, imposed by Donald Trump 18 months ago, marks a significant shift by Biden and answers a major demand from European allies at a time of strained diplomatic relations. Numerous safeguards will remain in place to suppress the spread of the virus, which has already killed more than 670,000 Americans and is resurgent after what many had hoped was a lasting dip earlier this year.
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UK Prime Minister Boris Johnson has blamed his lack of a post-Brexit trade deal with the US on President Biden having "a lot of fish to fry" as he heads to the White House with the hope of restarting the stalled negotiations. The UK prime minister suggested the free trade agreement touted by Leave supporters as a major prize of leaving the EU was not high on the president's list of priorities. Johnson was expected to push to get talks going on Tuesday when he makes his first visit to the White House since Biden succeeded Donald Trump.
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Russian President Vladimir Putin has extended an embargo on foods from the EU and the US until December 2022, in response to several countries' sanctions on Russia, according to a decree published on Monday. The import ban on dairy products, meat, fruit and vegetables, introduced in August 2014, came in response to the punitive measures imposed by the West in the wake of the Ukraine conflict. According to the decree, Russia has to protect its national interests. Putin had repeatedly stated that the embargo would also help to improve self-sufficiency - for example in the dairy industry - and lessen the country's dependence on imported goods.
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Australia's cancellation of a French submarine contract will complicate and delay negotiations on an Australia-EU free trade deal, a European trade official said. Australia's decision to end the USD66 billion deal was "kind of an attack against European interests", said Bernd Lange, a German lawmaker and the chairman of the European Parliament's Committee on International Trade. "It is more complicated," Lange told Australian Broadcasting Corp of the negotiations following the French snub. "The question of trust is now occurring and some members could ask for more safety nets and more safeguards in such an agreement, so I guess the dialogue and the negotiation will take more time," he added. Lange said the deal would not be signed before French elections are held in May next year.
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By Tom Waite; thomaslwaite@alliancenews.com
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