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TOP NEWS SUMMARY: eurozone growth hit; Powell won't rule out recession

Thu, 23rd Jun 2022 10:57

(Alliance News) - The following is a summary of top news stories Thursday.

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COMPANIES

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Sexual harassment and assault are commonplace in Australia's multi-billion-dollar mining sector, a year-long inquiry reported, citing harrowing testimony from women workers of stalking, grooming and abuse. The report documented widespread abuses against fly-in, fly-out staff, whose work requires them to stay for weeks at remote outback mining sites in Western Australia. The inquiry heard from the Western Mine Workers Alliance, which reported that more than a fifth of its women members had been asked for sexual favours linked to their working conditions or career advancement. Miners Rio Tinto, Fortescue Metals and BHP fronted the inquiry, and all confirmed they had fired workers over inappropriate behaviour. But the inquiry also found that "people were more likely to be moved on to another site than punished".

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Air Liquide and Siemens Energy announced the creation of a joint venture for the large-scale production of renewable hydrogen electrolysers in Europe. Production is expected to begin in the second half of 2023 and ramp-up to an annual production capacity of three gigawatts by 2025. Paris-based industrial gases company Air Liquide will take a 25% stake in the joint venture, with Munich-based Siemens Energy picking up the remaining 75% stake. The multi-gigawatt joint venture will be headquartered in Berlin and produce electrolysis modules.

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Novartis will invest USD250 million over five years into the fight against neglected tropical diseases and the elimination of malaria. The Basel, Switzerland-based pharmaceutical company explained this investment came as part of its renewed commitment to the Kigali Declaration which aims to deliver the targets set out by the World Health Organisation on neglected tropical diseases.

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Novartis said the US Food & Drug Administration approved its Tafinlar and Mekinist combination for the treatment of adults and children over six with unresectable or metastatic solid tumours that possess the BRAF V600E mutation. Novartis said this combination was the first and only BRAF/MEK inhibitor to be approved with a tumour-agnostic indication for solid tumours carrying the BRAF V600E mutation, and the only BRAF/MEK inhibitor approved for use in paediatric patients.

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Cheniere Energy said two of its subsidiaries have each entered into long-term liquefied natural gas, sale & purchase agreements with Chevron. At plateau, Chevron will purchase a combined 2.0 million tonnes per annum of LNG from Cheniere subsidiaries, subject to certain conditions. Under the first SPA, Chevron has agreed to purchase approximately 1.0 mtpa of LNG from Sabine Pass Liquefaction on a free on board basis. Deliveries under the SPA will begin in 2026, reach the full 1.0 mtpa during 2027 and continue until mid-2042.

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MARKETS

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European stock markets failed to pick up on a positive lead from Asia on Thursday, after the US's top central banker on Wednesday refused to rule out a recession striking the world's largest economy. Meanwhile, European survey data indicated sharply slowing growth in June, and Norges Bank joined the global move toward tightening monetary policy with a 50-basis-point hike in interest rates in Norway to 1.25%. It said it expects another rate hike to 1.50% in August and for the key rate to be around 3% by next summer.

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CAC 40: down 0.6% at 5,883.60

DAX 40: down 1.1% at 13,002.54

FTSE 100: down 0.2% at 7,076.03

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Hang Seng: closed up 1.3% at 21,273.87

Nikkei 225: closed up 0.1% at 26,171.25

S&P/ASX 200: closed up 0.3% at 6,528.40

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DJIA: called down 0.2%

S&P 500: called marginally higher, up 1.00 point

Nasdaq Composite: called up 0.4%

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EUR: down at USD1.0506 (USD1.0592)

GBP: down at USD1.2211 (USD1.2303)

USD: down at JPY135.40 (JPY135.89)

Gold: down at USD1,832.80 per ounce (USD1,841.20)

Oil (Brent): down at USD109.24 a barrel (USD111.14)

(currency and commodities changes since previous London equities close)

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ECONOMICS AND GENERAL

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Growth in the eurozone hit a 16-month low in June, according to a preliminary purchasing managers' index reading from S&P Global. The composite output index fell to 51.9 points in June from 54.8 the previous month. Any reading over the neutral level of 50 indicates growth. Manufacturing PMI hit a 22-month low and service sector growth cooled, easing most notably in consumer-facing services. The manufacturing PMI slipped to 52.0 in June from 54.6 in May. The services PMI fell to 52.8 from 56.1, marking a five-month low. "Eurozone economic growth is showing signs of faltering as the tailwind of pent-up demand from the pandemic is already fading, having been offset by the cost of living shock and slumping business and consumer confidence," said Chris Williamson, chief business economist at S&P Global Market Intelligence.

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The German flash composite output index fell to 51.3 points in June from 53.7 the previous month, the reading's fourth consecutive fall and the lowest since the fourth wave of Covid in December. The services PMI fell to 52.4 from 55.0 and the manufacturing score to 52.0 from 54.8. German businesses also reported their lowest confidence levels in over two years in June. The low expectations were mainly driven by the manufacturing sector in which sentiment turned increasingly negative over concerns around falling demand, high inflation and continued supply disruption.

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The French economy also saw a marked slowdown in growth at the end of the second quarter, with private sector business output rising at the slowest rate since the disruption caused by the Omicron wave in January. The headline flash composite output index fell to 52.8 points in June from 57.0, representing a five-month low. The slowdown was driven by weakening trends in both services and manufacturing as a result of declining demand, supply issues and growing uncertainty. The services reading fell to 54.4 from 58.3, while manufacturing declined to 51.0 from 54.6.

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In the UK, private sector growth in June remained at the 15-month low seen in May. The June flash UK composite output index was unchanged from the 53.1-point reading in May, posting just above the neutral 50 value for the sixteenth consecutive month and much weaker than the 58.3 average seen in the first quarter of the year. The manufacturing PMI hit a 23-month low, falling to 53.4 points from 54.6, while the services PMI remained at 53.4 points. A sustained recovery in events and other areas of face-to-face consumer spending helped to boost business activity in the service economy.

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UK government borrowing came in higher than expected in May, according to figures from the Office for National Statistics, and it is paying much more interest on that debt. UK public sector net borrowing, excluding banks, amounted to GBP14 billion in May, down from GBP21.9 billion in April. However, the figure was higher than market expectations of GBP12 billion. The ONS said the latest figure was GBP4.0 billion less than in May 2021, but GBP8.5 billion more than in May 2019, meaning before the virus pandemic. It was also the third-highest May borrowing since monthly records began in 1993. The ONS said rising inflation sent interest payments on UK government debt up to GBP7.6 billion in May from GBP4.5 billion a year earlier, due to higher payouts on inflation-linked gilts. It is the third highest debt interest payment in any month and the highest seen in any May since records began in 1993.

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Train services were disrupted across Britain again on Thursday as thousands of railway workers staged their second strike of the week. Members of the Rail, Maritime & Transport union at Network Rail and 13 train operators walked out after talks failed to resolve a bitter row over pay, jobs and conditions. Just one in five trains are running on Thursday and these are mostly restricted to main lines, with around half of the network closed. Services started later than normal at 7.30am local time and will shut down early at 6.30pm. The UK government announced plans to change the law to enable businesses to supply skilled agency workers to plug staffing gaps during industrial action.

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Gas is now "a scarce commodity in Germany", Economy Minister Robert Habeck said after declaring the "alarm level" of the country's gas emergency plan due to an ongoing dispute with Russia. "Even though gas supplies can currently still be procured on the market and are still being stored, the situation is serious and winter will come," he said. "It is the failures of the last decade that have now led us into these difficulties," the minister said, referring to the previous government's failure to recognize the necessity of reducing Germany's energy dependence on Russia.

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Chinese President Xi Jinping appealed for peace in Ukraine while taking indirect aim at the West during comments made at the opening of the BRICS Business Forum. He said the war in Ukraine, which was initiated by Moscow in late February, has once again raised an "alarm for humanity". Xi did not criticize fellow BRICS member Russia. Xi also did not mention the West and NATO by name. But he said that states would be in trouble "if they put blind faith in their strength, expand military alliances and seek their own security at the expense of others." "History has shown that hegemony, group politics and confrontations between blocs bring neither peace nor stability, but war and conflict," Xi said to the forum via video link.

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EU leaders gather in Brussels on Thursday to discuss calls to formally grant war-torn Ukraine "candidate status" to join the bloc, as Russian forces slowly advance in the eastern Donbas region despite fierce resistance from Kyiv's military. Ukrainian President Volodymyr Zelensky said he had been conducting a "telephone marathon" on his country's behalf in the run-up to the meeting, making his country's case to 11 European leaders on Wednesday alone. "We are preparing for the historic decision of the European Council. There are only a few hours remaining before it," he said in his daily address. But while the European Commission-backed candidacy is widely expected to be approved, some members have been lukewarm about Ukraine's status, and any accession process is likely to take years if not decades.

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Record floods were expected in parts of southern China as heavy rains pushed water levels in the Pearl River delta to their highest in almost a century. Hundreds of thousands of people have been evacuated from the worst-hit parts of the region, which includes Guangdong province, a manufacturing and logistics hub that is home to China's tech capital Shenzhen. China's ministry of water resources on Wednesday placed its highest flood alert on the Pearl River basin, saying water levels at one location "surpassed historical records" and that the provincial capital Guangzhou would be impacted.

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Economic activity in Japan registered its best performance in seven months, survey data showed, as border restrictions were relaxed. The au Jibun Ban-S&P Global flash composite output index rose to 53.2 in June from 52.3 in May. "The rise was the fourth in as many months and the sharpest recorded since last November amid the strongest expansion in the services sector since October 2013, with firms relating the increase to the return of international visitors," said Usamah Bhatti, economist at S&P Global Market Intelligence. This was driven by the services business activity index, which rose to 54.2 from 52.6. The manufacturing PMI eased to 52.7 from 53.3.

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Australia's private sector growth slowed in June as supply constraints and inflationary pressures persisted. The S&P Global flash composite PMI eased to 52.6 from 52.9, a five-month low. Behind this was a five-month low for the service sector, with a PMI score of 52.6 against May's 53.2. "Despite the lessening of Covid-19 disruption and easing of travel restrictions, recent hikes in interest rates and persistent inflationary pressures weighed negatively upon output, according to firms," said S&P Global. The manufacturing PMI meanwhile edged up to 55.8 from 55.7.

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The US economy remains strong but a series of aggressive rate hikes meant to cool soaring inflation could eventually trigger a recession, Federal Reserve Chair Jerome Powell cautioned on Wednesday. Powell, whose testimony before senators was closely watched by investors and analysts, also said the world's largest economy faces an "uncertain" global environment and could see further inflation "surprises." The Fed chair again stressed that the US central bank understands the hardship caused by rising prices and is committed to bringing down inflation, which has reached a 40-year high. But when peppered with questions about the prospect of a recession, Powell admitted it could not be ruled out. "It's not our intended outcome at all, but it's certainly a possibility," he told the Senate Banking Committee.

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US President Joe Biden pitched a temporary fuel tax break to help US drivers face the highest inflation in four decades, but critics called it attempted window dressing by an unpopular US president ahead of difficult midterm elections. Biden is asking Congress to suspend the federal fuel tax for three months as price increases – in large part spurred by fallout from President Vladimir Putin's invasion of Ukraine and subsequent Western sanctions on Russia – drive general inflation. It seems unlikely so far that Congress will give the green light.

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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2022 Alliance News Limited. All Rights Reserved.

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