TOP NEWS SUMMARY: New UK government cuts taxes, axes banker bonus cap – Morningstar

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(Alliance News) – The following is a summary of top news stories Friday.
US securities officials fined Boeing USD200 million over the aviation giant’s misleading assurances about the safety of the 737 MAX airplane following two deadly crashes. Boeing agreed to the penalty to settle charges it “negligently violated the anti-fraud provisions” of US securities laws, the Securities & Exchange Commission said in a statement, saying the company and its leader “put profits over people”. Boeing’s former chief executive, Dennis Muilenburg, also agreed to pay USD1 million to settle the same charges in a civil case.The settlement is the latest hit to Boeing over the MAX following the Lion Air Crash in Indonesia in October 2018 and the Ethiopian Airlines crash in Ethiopia in March 2019, which together claimed nearly 350 lives. One month after the first crash, a Boeing press release approved by Muilenburg “selectively highlighted certain facts,” implying that pilot error and poor aircraft maintenance contributed to the crash.
Smiths Group hailed its fastest top-line growth “in nearly a decade” and said it is managing cost inflation. The UK engineering firm said revenue in the financial year that ended July 31 rose 6.8% to GBP2.57 billion from GBP2.41 billion. Organic revenue rose 3.8%, Smiths said, rising at the fastest pace in nearly 10 years. Pretax profit fell 57% to GBP103 million from GBP240 million. During the year, the company sold its Smiths Medical unit to medical technology company ICU Medical. The deal valued the unit’s equity at USD2.7 billion. Including the contribution from the unit, down as a discontinued operation, annual profit soared to GBP1.04 billion from GBP285 million. Smiths lifted its annual payout by 5.0% to 39.6 pence per share from 37.7p. “We delivered growth ahead of expectations, our fastest organic growth in nearly a decade. Along with accelerating growth, we further strengthened our company through increased investments in innovation, commercialisation and supply chain,” Chief Executive Paul Keel said. “All of this gives us confidence for continued progress in FY2023. Despite an uncertain macro environment, we expect to deliver 4.0-4.5% organic revenue growth with moderate margin improvement.” In the year just gone, the operating profit improved to 16.3% from 15.5%.
AstraZeneca said its Ultomiris drug has been approved in the EU to treat myasthenia gravis, a condition which causes muscle weakness. The backing follows a “positive opinion” it received from the European Medicines Agency’s Committee for Medicinal Products for Human Use. In a trial, the drug was found to be “superior” to a placebo. “We’re proud to offer a new treatment option that provides more convenience in dosing and has shown clinical benefit in a broader range of patients, including those who remain symptomatic despite their initial standard of care treatment,” said Marc Dunoyer, chief executive of Astra unit Alexion.
Investec said it expects a first-half profit rise, helped by rising interest rates. The Anglo-South African financial services firm expects to report pretax adjusted operating profit between GBP372.6 million and GBP406.2 million in the six months to September 30. At best, this would be a rise of roughly a quarter year-on-year from GBP325.7 million. Though it noted macro-economic uncertainty, Investec added that profit was boosted by “positive effects from rising global interest rates”. In its Wealth & Investment business, funds under management fell by 2.7% annually to GBP61.7 billion in the five months to August 31. Investec put this down to “market volatility”.
———- Group said it will conduct a formal review of its strategic options, as the London-based sofa seller grapples with tumbling demand amid cost-of-living pressures. Since it floated last year, macroeconomic conditions worsened. Discretionary consumer spend has taken a hit, and supply chain worries have intensified. explained that “costs must be reduced further”, and it will conduct a headcount review. The wider strategic review will mull its balance sheet options, which include debt finance, strategic investment or even a sale of the company. PricewaterhouseCoopers will lead the strategic review and formal sale process. noted that it has not received any takeover approaches yet, but has had “strategic” talks with some parties. also withdrew annual guidance, amid “deterioration of trade”. On Thursday, the Financial Times reported that plans to more than a third of its workforce.
Stock markets were lower and the dollar was on the rise at the end of a week dominated by central bank interest rate hikes, led by the US Federal Reserve. The pound fell below USD1.12, setting a fresh 37-year low, and got no relief from the fiscal measures confirmed on Friday by the new UK government. Business groups, however, applauded the tax cuts. “The chancellor’s announcements should help to shore up consumer demand going into what will be a challenging winter for households and businesses alike,” said Helen Dickinson, chief executive of the British Retail Consortium.
CAC 40: down 0.8% at 5,873.36
DAX 40: down 1.0% at 12,410.96
FTSE 100: down 1.7% at 7,040.42
Hang Seng: closed down 1.2% at 17,933.27
S&P/ASX 200: closed down 1.9% at 6,574.70
Tokyo closed for Autumn Equinox Day holiday.
DJIA: called down 0.8%
S&P 500: called down 0.9%
Nasdaq Composite: called down 1.1%
EUR: down at USD0.9763 (USD0.9827)
GBP: down at USD1.1192 (USD1.1257)
USD: up at 142.91 (JPY142.17)
GOLD: down at USD1,662.18 per ounce (USD1,669.31)
OIL (Brent): down at USD88.82 a barrel (USD90.24)
(currency and commodities changes since previous London equities close)
The UK chancellor announced a “permanent” cut to stamp duty and a reversal of tax hikes as part of plans to usher in a growth-focused “new era” for the country. Planning reforms to boost infrastructure progress were among the other measures announced by Kwasi Kwarteng, who also put a figure on how much energy bill protection measures are expected to cost. In a what was called a ‘fiscal event’, Kwarteng said the government’s focus will be on lowering tax and responsible management of public finances. He confirmed that a 1.25 percentage point national insurance hike, announced by the previous Conservative government, has been cancelled. A hike in corporation tax, which would have taken the levy to 25% next year, has also been reversed. It will remain at 19%. A cap on bankers’ bonuses also will be scrapped, he confirmed.
The UK private sector fell further into decline in September. The flash composite purchasing managers’ index fell to 48.4 points in September, from August’s final figure of 49.6. “Though modest, the rate of contraction was the quickest seen since January 2021, with businesses often commenting on the negative impacts of high costs and a weaker economic outlook on client spending and output,” S&P Global said. The flash services PMI fell to a 20-month low of 49.2 points in September from 50.9 in August. The flash manufacturing PMI hit a two-month high but remained in negative territory. The flash PMI rose to 48.5 in September, from 47.3 in August.
UK consumer confidence has fallen to another new low amid deep concerns about personal finances over the coming year, figures show. GfK’s long-running consumer confidence index fell five points in September to minus 49, the worst score since records began in 1974. The latest record low is the fourth out of the last five months, with confidence in personal finances over the coming year down nine points to minus 40 and confidence in the economy over the next 12 months down eight points to minus 68.
The eurozone’s private sector fell deeper into negative territory in September. Excluding Covid-19 lockdowns, the pace of September’s downturn was the worst for nearly 10 years, S&P Global said. The latest composite flash PMI fell to 48.2 points in September from August’s final score of 48.9. The PMI fell further below the neutral 50 mark. The eurozone services sector declined again in September. The preliminary PMI declined to 48.9 points from 49.8 in the final August reading. The manufacturing score slid to 48.5 points from 49.6.
In Germany, September’s flash composite PMI fell to 45.9 points from 46.9 in August. It was a 28-month low. The services PMI for Germany similarly fell to its lowest level since May 2020, sliding to 45.4 points from 47.7. The flash manufacturing PMI hit a 27-month low of 48.3 points, down from 49.1 in August.
The German economy will lose almost EUR60 billion, USD59 billion, over the course of this year as a result of having to pay more for its energy than previously, Economy Minister Robert Habeck said in Berlin. The figure could rise to almost EUR100 billion next year, largely as a result of buying natural gas from non-Russian sources, he told a congress on climate organized by the Federation of German Industries. The figure was equivalent to 2% of gross domestic product, Habeck said. “This money is lacking everywhere, in the various sectors, in the core, in the German economy. That is the macroeconomic situation,” Habeck said, attributing the crisis to the loss of energy that had previously been seen as secure.
The French private sector bucked the downward trend in PMI results. France’s flash composite PMI rose to 51.2 in September, from 50.4 in August, suggesting growth quickened. The French services PMI hit a two-month high of 53.0 points, up from 51.2 in August. “According to surveyed firms in the service sector, the sole driver of the latest expansion, greater intakes of new business supported growth,” S&P Global noted. The flash manufacturing PMI fell to 47.8 points in September from 50.6 in August. The French manufacturing figure was a 28-month low.
Spain’s economy grew at a faster pace than expected in the second quarter, staving off a recession in the process. According to INE, Spain’s economy advanced 1.5% quarter-on-quarter in the three months to June 30. It followed a 0.2% decline in the first quarter of 2022. Second quarter growth topped FXStreet-cited forecasts of a 1.1% climb. On an annual basis, Spain’s gross domestic product rose 6.8% in the second quarter of 2022, quickening from a 6.7% climb in the first.
Referendums on Russia’s annexation began on Friday in Ukrainian territory controlled by Moscow, Russian news agencies reported, in what Kyiv and the West have denounced as a “sham” vote. Voting began at 0500 GMT on Friday and was due to end Tuesday in four regions controlled entirely or in part by Russian troops – Donetsk and Lugansk in the east and Kherson and Zaporizhzhia in the south.
The Kremlin has denied a report it was calling up 1 million reservists to bolster its flagging progress in Ukraine, a day after a partial mobilization order sparked fears and protests across Russia. Russian President Vladimir Putin decreed the mobilization of 300,000 reservists on Wednesday in order to garner more soldiers for the military’s faltering campaign in Ukraine. The Novaya Gazeta newspaper, which has been discontinued in Russia, reported that Putin gave Russia’s Defence Ministry the go-ahead to mobilize up to 1 million reservists. Kremlin spokesman Dmitry Peskov on Thursday called that a lie, in comments reported by Russian news agencies.
Australia’s private sector growth quickened in September, according to a preliminary reading. The latest S&P Global flash Australia composite purchasing managers’ index rose to 50.8 points in September, from August’s final reading of 50.2. Any figure above 50 suggests the sector is in growth. The composite data is calculated using a weighted average of the services and manufacturing readings. The flash services PMI rose to 50.4 in September from 50.2 in August. The flash manufacturing PMI edged up to 53.9 from 53.8.
Fraught relations between Australia and China will be repaired only gradually, Canberra’s top diplomat warned, after a rare meeting with her Chinese counterpart. Australian Foreign Minister Penny Wong described her New York sitdown with State Councillor Wang Yi as “constructive” but cautioned against talk of a quick normalisation of ties. “I think it is a long road in which many steps will have to be taken by both parties to a more stable relationship,” she said. China is Australia’s largest trading partner, but relations have atrophied in the last five years, amid disputes over Chinese overseas influence operations and China’s crackdowns in Xinjiang, Tibet and Hong Kong.
The top US and Chinese diplomats meet Friday in New York as soaring tensions show signs of easing, but Beijing issued a new warning against support for Taiwan. Secretary of State Antony Blinken and Chinese Foreign Minister Wang Yi are set to meet on the sidelines of the annual United Nations summit, their first encounter since extensive talks in July in Bali where both sides appeared optimistic for more stability. One month later, House Speaker Nancy Pelosi visited Taiwan, infuriating Beijing which staged exercises seen as a trial run for an invasion of the self-governing democracy. President Joe Biden in an interview aired Sunday said he was ready to intervene militarily if China uses force, once again deviating from decades of US ambiguity.
The US and India will co-develop drones, according to a senior Pentagon official, as Washington seeks closer ties with Delhi as a way of countering China. India will build these aircraft and export them to other countries in its region, this official said. Delhi wants to diversify its weaponry, which is mainly Russian-made, and also to develop its own defense industry. “And we want to support India on both fronts and are doing so,” Eli Ratner, assistant secretary of defense for Indo-Pacific security affairs, told a group of reporters and defense experts.
It is possible to bring down record-high inflation in the US while maintaining a healthy labour market, US Treasury Secretary Janet Yellen remarked. “I believe there is a path through this that can succeed in bringing down inflation while also maintaining…a strong labour market,” she said, a day after the Federal Reserve hiked interest rates by 75 basis points for the third straight time. “And I very much hope that the Fed will be able to succeed in doing that.”
By Tom Waite;
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