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The following is a summary of top news stories Friday.
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COMPANIES
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Apple said it successfully navigated a ‘challenging operating environment’ during its third-quarter, posting record revenue on bumper iPhone sales. Revenue in the third quarter ended June 25 climbed 1.9% year-on-year to $82.96 billion from $81.43 billion. Sales topped a CNN cited forecast of $82.8 billion. Profit declined, however, operating expenses increased. Pretax profit fell 5.3% to $23.07 billion from $24.37 billion a year earlier. iPhone sales alone rose 2.8% to $40.67 billion, offsetting some weakness in Mac, iPad and accessories sales.
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Amazon.com reported consensus-topping second-quarter revenue, though the e-commerce firm swung to a loss and forecast its third-quarter bottom line figure to weaken year-on-year. Amazon said net sales in the second quarter of 2022 climbed 7.2% to $121.23 billion from $113.08 billion a year earlier, beat CNN cited consensus of $119.0 billion. However, it swung to a pretax loss of $2.65 billion from a $8.63 billion profit a year earlier. Looking ahead, Amazon expects third-quarter net sales between $125.0 billion and $130.0 billion, so growth of 13% to 17% year-on-year. Profit could be wiped out, however. It forecasts third-quarter operating income between breakeven and $3.5 billion, down from $4.9 billion a year prior.
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Intel posted quarterly results ‘below its standards’ and was forced to lower its annual outlook. In the three months to June 30, the Santa Clara, California-based CPU and semiconductor manufacturer recorded a net loss of $454 million, swinging wildly from a $5.06 billion profit seen the year before. Net revenue dropped 22% to $15.32 billion from $19.63 billion. For 2022, revenue is expected between $65 billion to $68 billion, with EPS at $2.57. The new outlook is below the $76 billion guided for in the first quarter.
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Sony trimmed its annual net profit forecast, partly due to acquisition expenses, including the purchase of game studio Bungie. The PlayStation manufacturer now predicts net profit for financial 2023 will total JP¥800 billion, about $6 billion, down from the JP¥830 billion previously forecast. Sony said the predicted increase in acquisition expenses was ‘mainly due to the acquisition of Bungie Inc being completed earlier than the assumed timing’. Sony announced in February it was buying the creator of hits like ‘Halo’ and ‘Destiny’ weeks after its US rival Microsoft unveiled a landmark pact to acquire ‘Call of Duty’ maker Activision Blizzard. Sony reported first-quarter net income of JP¥218.20 billion, up 3.0% from JP¥211.83 billion a year before, as revenue rose 2.4% to JP¥2.311 trillion from JP¥2.256 trillion.
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Thousands of BT and Openreach workers are to strike on Friday in a dispute over pay. The Communication Workers Union said it will be the first national telecoms strike in the UK since 1987 and the biggest ever among call centre workers. Another strike will be held on Monday after union members voted in favour of industrial action in protest at a £1,500 pay rise.
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AstraZeneca said it delivered a strong first-half boosted by demand for its cancer treatments. For the six months to June 30, revenue jumped to $22.16 billion from $15.54 billion last year with growth coming from all disease areas, including Covid-19 medicines, and from the addition of Alexion Pharmaceuticals. AstraZeneca declared a $0.93 interim dividend, which it said reflects its intention to increase its payout to $2.90 per share for 2022. It had paid out a total of $2.87 for 2021. Astra raised its full-year revenue guidance, saying it expects it to rise by a percentage in the low twenties rather than the high teens forecast previously. Separately, Astra said it has promoted Non-Executive Director Michel Demare to chair-designate, set to replace Leif Johansson at the annual general meeting in April 2023. Demare joined the AstraZeneca board in September 2019.
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Daiichi Sankyo reported a drop in first-quarter profit despite a rise in revenue. The Japanese pharmaceutical company posted profit of JP¥18.85 billion, around $141.9 million, in the quarter ended June 30. This represented a sharp drop from the JP¥35.22 billion achieved the previous year. Basic earnings per share fell 46% to JP¥9.84 from JP¥18.38 while revenue climbed 6.2% to JP¥280.32 billion from JP¥264.07 billion the previous year. Daiichi said revenue increased due to the growth of global mainstay products such as its breast cancer drug Enhertu and Lixiana, a medicine to help prevent blood clots. It also cited the positive effect from foreign exchange for the rise.
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International Consolidated Airlines swung to profit in the second quarter of 2022, citing strong demand for premium leisure travel and a continued recovery of business travel from the Covid-19 pandemic. The British Airways owner climbed to a €73 million pretax profit in the three months to June 30 from a whopping €1.12 billion loss a year before. IAG remained in loss for the half-year, though this narrowed to €843 million from €2.34 billion. IAG said it will fly 80% of 2019 - meaning pre-pandemic - passenger capacity in the third quarter and 85% in the fourth. It said this was down five percentage points from previous guidance and was due to ‘challenges at Heathrow’ airport in London. Still, IAG said its full-year capacity will be 78% of 2019's and North America will be close to full 2019 capacity by year-end.
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French-Dutch airline Air France-KLM said it flew back into profit in the second quarter for the first time since the coronavirus pandemic, but its performance was hampered by a global shortage of airport staff. The carrier said it booked net profit of €324 million euros in the period from April to June from a loss of €1.5 billion in the corresponding period a year earlier.
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Carmaker Renault said its decision to quit the Russian market pushed it deep into the red in the first half of 2022, but it was confident that new models would help steer it around. Renault said in a statement that it booked net losses of €1.6 billion euros from January to June, compared with profit of €368 million for the same period a year earlier. By contrast, underlying or operating profit, jumped by 160% to €939 million. First-half revenues were more or less stable, inching forward by 0.3% to €21.1 billion.
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Net income declined year-on-year at Zurich-based reinsurer Swiss Re in the first six months of the year. Swiss Re reported first half net income of $157 million compared with $1.0 billion the prior year. The company said the decline was driven mainly by significantly lower investment results as well as first-quarter reserves for the Ukraine war. Swiss Re returned to profitability in the second quarter of 2022, with a net income of $405 million. Net premiums earned and fee income increased 1.9% to $21.2 billion in the first six months of 2022 from $20.8 billion, last year.
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Profit increased year-on-year at BNP Paribas in the second quarter of 2022. The French lender reported that its second-quarter net income attributable to equity holders grew 9.1% to €3.18 billion from last year's €2.91 billion. Adjusted net income was €3.26 billion, a nearly 20% increase from the prior year. Pre-tax income rose 7.4% to €4.50 billion and group operating income was €4.27 billion, up 12.7%. Revenue was €12.78 billion, a growth of 8.5% from last year's €11.78 billion.
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UK state-backed lender NatWest said it delivered a strong performance in the first half of 2022 against a beneficial backdrop of rising interest rates. For the six months to June 30, total income was £6.22 billion, up from £5.14 billion last year. Operating pretax profit was £2.62 billion, up from £2.32 billion. Turning to returns, NatWest proposed an interim dividend of 3.5 pence per share, up 17% from last year and a special dividend with share consolidation of £1.75 billion, or 16.8 pence per share. Taken together these will deliver 20.3p of dividends per share, it said. It also noted it has completed the £750 million share buyback programme launched in February.
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Standard Chartered said it delivered a strong set of results for the first half of the year, as the emerging markets focused lender launched a substantial share buyback. For the six months to June 30, operating income rose 8% to $8.22 billion from $7.63 billion last year, and pretax profit was $2.77 billion, up 8% from $2.56 billion. Turning to returns, StanChart proposed an interim dividend of $119 million, equivalent to 4.0 US cents per share. StanChart also announced a $500 million share buyback to start ‘imminently’ and plans to return more than $5 billion to shareholders over the next three years. During the recent half, it completed a $750 million buyback. Chief Executive Officer Bill Winters said: ‘China is deploying strong policy stimulus that should help kick-start the economy so boosting domestic and regional activity. We are well equipped to navigate this complex macroeconomic picture with the solid risk-management foundations that the group has built over time and the resilience of our diversified business model. Against this backdrop, we remain confident in the delivery of the financial and strategic targets laid out back in February, to deliver at least a 10% [return on tangible equity] by 2024, if not earlier.’
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Barclays provided further details on the £500 million share buyback that it announced with its interim results on Thursday. It said the new programme will begin either when the £1.00 billion buyback started in May completes, or on October 3, whichever is earlier, and complete it by January 28 next year. Barclays has appointed Citigroup to run the new buyback.
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Mizuho Financial Group reported a sharp drop in first quarter profit. The Tokyo-based financial services company posted profit of JP¥159.29 billion, around $1.20 billion, in the quarter ended June 30. This represented a 36% decline from JP¥250.54 billion year-on-year. Earnings per share dropped to JP¥62.85 from JP¥98.81. Mizuho said an increase in Credit-related costs and a lack of special factors such as tax effects resulted in the year-on-year decrease. Looking forward, the firm now expects profit of JP¥540.0 billion and EPS of JP¥212.99 in the year ending March 31, 2023.
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Glencore reported a mixed production performance in the first half of the year, dominated by the sale of Ernest Henry Mining, disposal of the zinc business, and continued geotechnical constraints at Katanga. The Baar, Switzerland-based commodity trader and miner said these factors were offset by improved cobalt, nickel and ferrochrome output levels and the additional contribution from the Cerrejon coal mine joint venture in Colombia. Last year, Glencore acquired two-thirds of the Cerrejon joint venture from BHP and Anglo American for $588 million. The group stuck to its full-year production guidance, with the exception of copper. In the first half, copper production dropped by 15% to 510,200 tonnes from 598,000 tonnes in the prior year.
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Profit at Italian energy firm Eni increased in the second quarter compared to the same quarter of the previous year. The company's bottom line came in at €3.81 billion, or €1.07 per share. This compares with €247 million, or €0.06 per share, in last year's second quarter. Excluding items, Eni reported adjusted earnings of €3.80 billion or €1.07 per share for the period. The company's revenue for the quarter rose 93.7% to €31.55 billion from €16.29 billion last year.
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MARKETS
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Stock markets were mostly higher on Friday, as deteriorating economies have caused expectations for interest rate hikes to be scaled back. After the US was shown to have fallen into a technical recession - with two consecutive quarters of contraction - figures on Friday showed the eurozone's annual growth slowed, though quarter-on-quarter it improved.
This may not last. ‘From here on, we expect [eurozone] GDP to continue a downward trend as the services reopening rebound moderates, global demand softens and purchasing power squeezes persist. We expect that to result in a mild recession starting in the second half of the year,’ said ING.
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CAC 40: up 1.4% at 6,428.18
DAX 40: up 0.9% at 13,397.81
FTSE 100: up 0.7% at 7,396.59
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Hang Seng: closed down 2.3% at 20,156.51
Nikkei 225: closed down 0.1% at 27,801.64
S&P/ASX 200: closed up 0.8% at 6,945.20
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DJIA: called up 0.2%
S&P 500: called up 0.7%
Nasdaq Composite: called up 1.2%
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EUR: up at $1.0218 ($1.0163)
GBP: firm at $1.2165 ($1.2129)
USD: down at JP¥133.10 (JP¥134.45)
GOLD: up at $1,763.00 per ounce ($1,755.39)
OIL (Brent): up at $109.03 a barrel ($107.47)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Eurozone inflation rose to another record high in July, according to flash estimates from Eurostat. On an annual basis, the eurozone consumer price index rose by 8.9% in July, picking up pace from a 8.6% increase in June. The print was higher than the market forecast, cited by FXStreet, of 8.6%. The inflation rate remains well above the European Central Bank's target of 2% inflation over the medium term.
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Economic growth in the 19-member EU bloc slowed in the second quarter, according to a preliminary flash estimate published by Eurostat. On an annual basis, gross domestic product expanded by 4.0% in the second quarter, slowing from growth of 5.4% in the first quarter. The latest reading was higher than the 3.4% consensus estimate. Meanwhile, quarter-on-quarter growth improved to 0.7% from 0.5%.
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German growth stagnated in the second quarter of the year, official data showed, as analysts warned that a recession could be round the corner amid a looming energy crisis. Europe's largest economy grew zero percent due to ‘difficult’ global economic conditions, the federal statistics agency Destatis said. The continuing impact of the ‘Covid-19 pandemic, interruptions in supply chains and the war in Ukraine, are clearly reflected in the short-term economic development,’ Destatis said. Growth in the first quarter was revised upwards to 0.8% from an initial estimate of 0.2%. Separate figures showed that the German unemployment jobless rate climbed by 0.1 percentage points to 5.4% in July, the second consecutive monthly increase.
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Inflation in Spain in July reached its highest level in 38 years, fuelled by runaway food and energy prices, official data showed. Consumer prices rose by 10.8% on an annual basis this month, up from 10.2% in June and the fastest rate since September 1984, the national statistics institute INE said in a statement.
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The Italian economy grew more than estimated on both a quarterly and annual basis in the second quarter, figures from national statistics office Istat showed. On a quarterly basis, Italy gross domestic product rose by 1.0% after the 0.1% increase in the previous quarter and topped forecasts of a 0.3% rise, as cited by FXStreet. Italy's economy grew by 4.6% year-on-year in the second quarter after growing by 6.2% in the first quarter and beating estimates of a 3.7% jump.
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UK mortgage approvals declined in June, according to figures from the Bank of England on Friday, against a backdrop of rising UK interest rates. The number of mortgage approvals for house purchases in the UK fell to 63,726 in June from 65,681 in May. The print was lower than the market forecast, cited by FXStreet, of 65,000. The latest reading comes ahead of the Bank of England's August policy meeting next Thursday.
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The government of Ireland has agreed ‘bold’ and ‘ambitious’ targets to limit emissions in key sectors of the economy, the Green Party leader said. Eamon Ryan said it was a ‘hugely significant and important day’. An agreement was reached on Thursday on how to reduce greenhouse gas emissions in key sectors of the Irish economy after reaching a compromise rate of 25% for agriculture. A reduction rate of 75% was set for the electricity sector and a 50% reduction for the transport sector. Speaking at Government Buildings on Thursday evening, Ryan said: ‘We have to be ambitious. We have to be bold. We have to take the action now. We cannot delay and that's what this government has committed to.’
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US President Joe Biden and his Chinese counterpart Xi Jinping agreed to schedule their first in-person summit during a sometimes tense phone call Thursday where Xi warned the US not to ‘play with fire’ in Taiwan. Although this was their fifth phone or video call since Biden took office a year and a half ago, the summit would be their first in-person meeting as leaders. No detail was given on the timing or location. Both sides described the call, which lasted two hours and 17 minutes, as a robust exchange on the many disputes between the world's two biggest economic powers.
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US Treasury Secretary Janet Yellen said Thursday it will be possible to bring down high inflation without triggering a big increase in joblessness. ‘There is a path to bring down inflation while maintaining a strong labour market,’ Yellen told reporters, while acknowledging there are ‘numerous risks’ to the economic outlook.
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US politicians have passed a $280 billion package to boost the semiconductor industry and scientific research in a bid to create more high-tech jobs in the US and help it better compete with international rivals like China. The House approved the bill by a solid margin of 243-187, sending the measure to President Biden to be signed into law and providing the White House with a major domestic policy victory. About two dozen Republicans voted for the legislation. ‘My plea is put politics aside. Get it done,’ Biden said before the vote, adding it would give the US ‘the ability not only to compete with China for the future, but to lead the world and win the economic competition of the 21st century’.
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