(Alliance News) - The following is a summary of top news stories Thursday.
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COMPANIES
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Shell said it expects to book an impairment reversal of up to USD4.5 billion on an improving commodity price outlook. The London-based oil major expects to book impairment reversals in a range of USD3.5 billion to USD4.5 billion, due to changes in its commodity price outlook. It expects a Brent price of USD80 per share in 2023, before USD70 in 2024 and 2025. Since the start of 2022, Brent prices have risen 30% to stand around USD101.27 on Thursday morning. "In the second quarter 2022, Shell has revised its mid and long-term oil and gas commodity prices reflecting the current macroeconomic environment as well as updated energy market demand and supply fundamentals. This resulted in a review of Shell's Upstream and Integrated Gas previously impaired assets," the company explained. Shell also said it expects its indicative refining margin to improve to USD28.04 a barrel in the second quarter, from USD10.23 in the first. This will hand a boost between USD800 million and USD1.20 billion to its Products division, a provider of lubricants, in the second quarter.
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French oil and gas firm TotalEnergies said it had pulled out of a Russian oil project. Russian oil firm Zarubezhneft will take over its remaining 20% stake in the Kharyaga project in the Arctic pending approval by Russian authorities. No information about the financial terms of the transaction were provided. TotalEnergies had already ceded a 20% stake in the project and the role of operator to Zarubezhneft. The Russian firm said on its website the Kharyaga oil project has produced more than 20 million tonnes of oil since starting operations in 1999 and had generated more than USD4 billion in revenue for the Russian government. Following Russia's invasion of Ukraine, TotalEnergies announced it would reduce its activity in Russia and booked a USD4.1 billion impairment charge on one of its key gas projects in the country.
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Owner of the 7-Eleven brand Seven & I Holdings upgraded guidance, as revenue and profit surged in its first quarter. For the three months ended May 31, the Tokyo-headquartered retail group said revenue from operations rose 57% year-on-year to JPY2.447 trillion, about USD147 billion, from JPY1.555 trillion. This was as total sales for the period grew to JPY3.840 trillion from JPY2.871 trillion. Gross margin improved as gross profit in fuel increased, despite a drop in the gross profit on merchandise, Seven & I said. Net profit attributable to owners of the parent rose 51% year-on-year to JPY65.04 billion, as operating profit rose 32% year-on-year to JPY102.37 billion. Net profit per share rose to JPY73.65 from JPY48.72.
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Samsung Electronics expects operating profit in the second quarter to rise 11%, the South Korean tech giant said in a statement Thursday, despite ongoing global supply chain woes. The world's biggest smartphone maker forecast 2022 second-quarter operating profit of about KRW14 trillion, around USD10.7 billion, up from KRW12.57 trillion in the same quarter last year. It expects consolidated sales in the quarter to be in the region of KRW77 trillion, increased from KRW63.67 trillion a year before.
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Legal & General Group said it is performing in line with expectations with "minimal" exposure to inflationary pressures. Citing a "good start" to 2022, "our year-to-date operating performance is in line with expectations, with cash and capital generation running slightly ahead of our five-year ambition and return on equity at about 20%," said Chief Executive Officer Nigel Wilson. Legal & General Retirement Institutional has transacted GBP4.5 billion of global pension risk transfer business in the half-year, up from GBP3.1 billion a year before. Legal & General Capital remains on track to achieve its 2025 ambition of operating profit of GBP600 million to GBP700 million and fee-generating third party capital of GBP25 billion to GBP30 billion. Wilson added that the firm is barely impacted by inflation.
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Ladbrokes and Coral owner Entain nudged annual guidance lower, as customer spending is hit by inflation and macro-economic woes. Entain reported that wider group net gaming revenue rose 18% in the first half of 2022 and was up 8% in the second quarter alone. It added that underlying performance remains "strong", with "record levels of activity" in its second quarter, up 60% from pre-Covid levels in 2019. However, online NGR was down 7% in both the first half and second quarter. "A weaker macro-economic environment is reducing customers' rate of spend, moderating overall online growth versus our previous expectations," Entain cautioned.
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MARKETS
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Stocks were on the rise on Thursday despite a number of headwinds facing traders, such as recession risks after a hawkish set of minutes from the Federal Reserve on Wednesday showed the central bank is willing to carry out another hefty interest rate hike to rein in inflation.
In the UK, focus was on politics following news that UK Prime Minister Boris Johnson will resign as Conservative party leader after a wave of ministerial resignations dealt a fatal blow to his authority. The news pushed the pound back above the USD1.20 handle. "Markets were already fully expecting him to go, but news of an imminent resignation, and the avoidance of a likely messy and potentially ugly removal from office, has given the pound a modest leg up," said Matthew Ryan, head of market strategy at Ebury.
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CAC 40: up 1.6% at 6,003.96
DAX 40: up 1.6% at 12,790.84
FTSE 100: up 1.1% at 7,185.32
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Hang Seng: closed up 0.3% at 21,643.58
Nikkei 225: closed up 1.5% at 26,490.53
S&P/ASX 200: closed up 0.8% at 6,648.00
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DJIA: called up 0.3%
S&P 500: called up 0.3%
Nasdaq Composite: called up 0.3%
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EUR: up at USD1.0209 (USD1.0192)
GBP: up at USD1.2011 (USD1.1917)
USD: up at JPY136.01 (JPY135.56)
GOLD: up at USD1,743.80 per ounce (USD1,738.77)
OIL (Brent): up at USD101.49 a barrel (USD99.67)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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UK Prime Minister Boris Johnson is quitting as Tory leader after ministers and MPs made clear his position was untenable. He will remain as prime minister until a successor is in place, expected to be by the time of the Conservative Party conference in October. A No 10 source said Johnson spoke to Sir Graham Brady, chairman of the Conservative 1922 Committee, to inform him of his decision. "The prime minister has spoken to Graham Brady and agreed to stand down in time for a new leader to be in place by the conference in October," a No 10 source said. Johnson will make a statement to the country later today confirming the decision. The resignation comes after the prime minister haemorrhaged support among his ministers and MPs. More than 50 MPs have resigned from government or party roles since Tuesday night, when the mass exodus was triggered by the resignations of Rishi Sunak and Sajid Javid from the Cabinet.
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Soaring energy prices and inflation threaten to tip the UK into recession while government debt levels could more than treble unless taxes are hiked, the UK fiscal watchdog has warned. The Office for Budget Responsibility said the UK government has already spent as much this year, 1.25% of GDP, to help households cope with the cost-of-living crisis as it did supporting the economy through the financial crisis. In its fiscal risks and sustainability report, the OBR predicts that debt could rise to over 100% of GDP by 2052-53 and reach 267% of GDP in 50 years if upward pressures on health, pensions and social care spending, and the loss of motoring taxes, are factored in. But it warned that debt could jump by nearly 320% in 50 years' time, with future shocks taken into account and without fiscal policy being tightened.
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US Federal Reserve policymakers reaffirmed their commitment to combating elevated levels of inflation even at the risk of damaging economic growth, according to the central bank's meeting minutes on Wednesday. At its most recent meeting in June, the Fed enacted a 75 basis points interest rate hike, taking the federal funds rate to a range of 1.5% to 1.75%. It was the first hike of that magnitude since November 1994. Notably, FOMC members highlighted that "inflation pressures had yet to show signs of abating," which meant rising prices could be "more persistent than they had previously anticipated," As such, rate-setters at the Fed said the July meeting would likely see another substantially sharp move in interest rates. "Participants judged that an increase of 50 or 75 basis points would likely be appropriate at the next meeting," according to the minutes.
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Industrial production in Germany expanded at a slower pace than expected monthly in May, figures showed. Industrial output rose 0.2% monthly in May, falling short of April's 1.3% rise and the 0.4% FXStreet cited consensus estimate. On an annual basis, industrial output fell 1.5% in May, easing from April's 2.5% fall. The annual figure topped FXStreet cited forecasts of a chunkier 3.3% decline.
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Japan swung to a trade deficit in June, provisional figures from the Ministry of Finance showed. For the first 20 days of June, exports jumped 16% year-on-year to JPY5.410 trillion from JPY4.648 trillion. The country's imports surged 47% to JPY6.443 trillion from JPY4.376 trillion. Japan swung to a trade deficit of JPY1.033 trillion from a surplus of JPY271.68 billion a year before.
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Swiss unemployment remained stable in June, figures showed. According to the State Secretariat for Economic Affairs, the Swiss unemployment rate remained at 2.2% in June, unchanged from May. This was on a seasonally adjusted basis. On an unadjusted basis, the unemployment rate fell to 2.0% in June from 2.1% in May. Compared to the same month last year, the number of unemployed people fell by 39,310, or 30%. The number of people fell by 5,493 from May 2022.
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UK house price growth accelerated in June, defying expectations that the market will cool as consumers face pressure from rampant inflation, figures on Thursday showed. According to Halifax, UK house prices rose 13% yearly in June, the strongest growth since late 2004, accelerating from an 11% rise in May. Monthly, prices rose 1.8%, hitting GBP294,845, another record high. House prices have now risen for 12 months on-the-bounce, Halifax noted. In May, house prices had risen 1.2%. "The UK housing market defied any expectations of a slowdown, with average property prices up 1.8% in June, the biggest monthly rise since early 2007. This means house prices have now risen every month over the last year, and are up by 6.8% or GBP18,849 in cash terms so far in 2022," Halifax Managing Director Russell Galley commented.
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By Lucy Heming; lucyheming@alliancenews.com
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