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The following is a summary of top news stories Tuesday.
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COMPANIES
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Stellantis said it has suspended production in Russia, as a result of the war in Ukraine. The Amsterdam-based automotive manufacturer, the product of a merger of Fiat-Chrysler and PSA, has suspended manufacturing operations in its Kaluga factory in Russia, citing ‘the rapid daily increase in cross sanctions and logistical difficulties’. The production halt is to ensure compliance with sanctions and the safety of its employees, Stellantis said. This follows an announcement in late March that it would potentially have to close the plant, located southwest of Moscow, following a shortage of component parts.
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Blockchain.com, a Miami-based cryptocurrency firm recently valued at $14 billion, is interviewing investment banks for an initial public offering, Bloomberg reported. Blockchain.com allows users to buy and store digital tokens such as bitcoin. It competes with Coinbase Global, which listed on Nasdaq in New York back in April of last year. An IPO for Blockchain.com could take place as soon as this year, Bloomberg said, citing ‘people familiar with the matter’. It may not happen until next year, though, and the company's plans may change, they said. A representative for the company declined to comment, Bloomberg said.
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Education publisher Pearson kept its financial guidance intact, despite saying a key contract with Arizona State University will end next year. Pearson said its Online Program Management partnership with ASU will end in June 2023. The UK company gave no reason for the termination of the 10-year collaboration, which saw Pearson help the university expand is online learning services. ‘The profit impact of the contract termination will be modest in 2022 and 2023 and will be offset thereafter through eliminating related costs and re-directing investment across our strategic growth opportunities,’ the company said. Pearson stressed its financial guidance for the current financial year remains unchanged, as does its medium-term outlook.
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Bank of America on Monday posted an increase in net interest income in the first quarter of 2022 but earnings dipped. Total revenue for the first quarter of 2022 rose 1.8% to $23.23 billion from $22.82 billion a year before. Driving the result was a 13% jump in net interest income to $11.57 billion from $10.20 billion year-on-year, more than offsetting a 7.6% decline in non-interest income to $11.66 billion from $12.62 billion. ‘Net interest income increased by $1.4 billion versus the year-ago quarter supported by strong loan and deposit growth. Going forward, and with the forward curve expectation of rising interest rates, we anticipate realizing more of the benefit of our deposit franchise,’ said Chief Financial Officer Alastair Borthwick. Despite this increase in revenue, net income declined 12% to $7.07 billion from $8.05 billion. CFO Borthwick described the first quarter results as strong ‘despite challenging markets and volatility’. BofA took a $30 million provision for credit losses, compared to a release of $1.86 billion a year before. The provision was ‘driven primarily by asset quality improvement, offset by a reserve build related to Russian exposure and loan growth’.
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Twitter on Friday introduced a plan to limit billionaire entrepreneur Elon Musk's potential stake in the company after he made a $43 billion non-binding bid to buy the whole company. Responding to Musk's bid, Twitter's board adopted a limited duration shareholder rights plan called a ‘poison pill’ that makes it difficult for Musk to increase his stake beyond 15%. The billionaire founder of Tesla already owns a more-than 9% stake in Twitter. ‘The board adopted the rights plan following an unsolicited, non-binding proposal to acquire Twitter,’ the social-media company said in a statement.
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MARKETS
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European markets reopened after a four-day holiday weekend with net selling. Caution reigned as the US earnings season gets into full swing this week and ahead of the French presidential run-off vote on Sunday.
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CAC 40: down 1.0% at 6,521.26
DAX 40: down 0.9% at 14,031.96
FTSE 100: down 0.5% at 7,576.46
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Hang Seng: closed down 2.3% at 21,027.76
Nikkei 225: closed up 0.7% at 26,985.09
S&P/ASX 200: closed up 0.6% at 7,565.20
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DJIA: closed down 39.54 points, or 0.1%, at 34,411.69
S&P 500: closed marginally lower, down 0.90 of a point at 4,391.69
Nasdaq Composite: closed down 0.1% at 13,332.36
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EUR: firm at $1.0807 ($1.0797)
GBP: down at $1.3031 ($1.3060)
USD: up at JP¥128.31 (JP¥125.91)
GOLD: up at $1,979.10 per ounce ($1,964.54)
OIL (Brent): up at $110.88 a barrel ($107.52)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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A group of 143 countries representing 86% of the global economy is expected to hear from the International Monetary Fund on Tuesday that economic growth is likely to slow down in their countries in the near future. The IMF is due to release its latest world economic outlook at 1300 GMT on Tuesday, and director Kristalina Georgieva had already warned that the news is likely to be downbeat. The Russian invasion of Ukraine, which has resulted in disruption of exports from both commodity-rich countries, coupled with the Western sanctions piled on Russia in response, both play a role in the expected slowdown. Already in January, the IMF had lowered its global economic forecast for 2022 by half a percentage point, to 4.4%. The new forecast will come during the IMF's spring meeting in Washington, which will see a global gathering of finance ministers and central bankers. High-ranking Ukrainian officials including Prime Minister Denys Shmygal also are expected.
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China's economic growth accelerated in the first quarter of the year to 4.8%, official data showed, but the government warned of ‘significant challenges’ ahead while massive Covid-19 lockdowns started to bite. The world's second-biggest economy had lost steam in the latter half of last year with a property slump and regulatory crackdowns, pulling down growth. But it exceeded expectations in the first three months of 2022, growing 4.8% on-year, the National Bureau of Statistics said, with Lunar New Year spending and factory production cajoling growth. The weeks ahead, however, appear treacherous for the economy with Beijing's unrelenting zero-Covid approach to outbreaks clogging supply chains and locking down tens of millions of people including in the economic dynamos of Shanghai and Shenzhen as well as the northeastern grain basket of Jilin. Virus restrictions in March have already gouged at retail sales, as consumers shied away from shopping, and drove up unemployment.
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China reported seven new deaths from Covid-19 in Shanghai, raising the official toll after hundreds of thousands of cases in the metropolis during a weeks-long lockdown. City authorities revealed the first virus deaths, bringing the total official toll to just 10, despite the scale of the outbreak. Beijing insists its zero-Covid policy of hard lockdowns, mass testing and lengthy quarantines has averted fatalities and the public health crises that have engulfed much of the rest of the world. But some have cast doubt on official figures in a nation whose vast elderly population has a low vaccination rate. Shanghai health officials noted Sunday that less than two-thirds of residents over 60 had received two Covid jabs and less than 40% had received a booster.
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A US federal judge in Florida has voided the national mask mandate covering airplanes and other public transportation as exceeding the authority of US health officials. The decision on Monday by US District Judge Kathryn Kimball Mizelle, in Tampa, also said the Centres for Disease Control and Prevention improperly failed to justify its decision and did not follow proper rulemaking. The CDC recently extended the mask mandate, which was set to expire on April 18, until May 3 to allow more time to study the BA.2 Omicron subvariant of the coronavirus that is now responsible for the vast majority of cases in the US. The mask requirement for travellers was the target of months of lobbying from the airlines, which sought to kill it.
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Australia's central bank said recent accelerations in inflation have pushed forward the timeline for its first interest rate hike since 2010, according to meeting minutes released on Tuesday. The Reserve Bank of Australia also noted wage growth has ‘picked up’. ‘These developments have brought forward the likely timing of the first increase in interest rates,’ the minutes from the most recent meeting showed. There is an increased conviction in global markets that the RBA will enact its first interest rate hike since 2010 at some point this year. Earlier in April, the RBA kept its cash rate target at 0.1%, as expected.
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St Louis Federal Reserve President James Bullard said a 75 basis point US interest rate hike should not be ruled out, Bloomberg reported. Bullard, in a virtual conference held by the Council on Foreign Relations think tank, said the Fed would need to move decisively as it eyes lifting interest rates to around 3.5% this year. Bullard noted a hike of more than 50 basis points at a single policy meeting is not his ‘base case at this point’, however. ‘I wouldn't rule it out, but it is not my base case here,’ he explained. The next meeting of the policy-making Federal Open Market Committee is on May 4.
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Japan industrial production in February grew on both a monthly and annual basis, reversing trends seen the month prior, figures from the Ministry of Economy, Trade & Industry showed. Industrial production rose 2.0% in February on a monthly basis, exceeding FXStreet-cited market expectations of 0.1% growth. Industrial production had fallen by 1.3% in January from December. On an annual basis, industrial production rose 0.5% year-on-year in February, reversing the 0.9% annual decline seen in January. This was also ahead of market estimates of 0.2% growth.
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Russia on Tuesday called on Ukrainian forces to ‘immediately’ lay down arms and issued a new ultimatum for the defenders of the besieged port city of Mariupol to give up their resistance. The Russian defence ministry's warning came after Ukrainian President Volodymyr Zelensky announced late on Monday the start of a new offensive by Moscow, focused on the east of the former Soviet state. The statement made no direct mention of a new ground offensive in eastern Ukraine.
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UK Prime Minister Boris Johnson is on Tuesday expected to make a ‘full-throated apology’ to members of Parliament after he was fined by police for attending a birthday bash in breach of Covid rules. But is it reported he will stop short of addressing allegations he instigated a separate lockdown leaving do, as he attempts to convince politicians there are bigger issues to focus on than the 'partygate' saga. It is thought he will focus on the crisis in Ukraine, along with the UK government's controversial new policy on sending ‘illegal’ migrants to Rwanda. Last week the PM was fined by the Metropolitan Police for attending a birthday bash thrown in his honour in the Cabinet room in June 2020, while coronavirus restrictions were in place. He was then accused over the weekend of not only attending a leaving party for his former communications chief Lee Cain on November 13 2020, but instigating the do. Downing Street declined to comment on the claims.
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