Lyft underwhelms on adding new riders as Omicron knocks demand

Ride-sharing company Lyft, Uber’s biggest rival in the US, posted a mixed bag of earnings on Wednesday, outperforming on revenue but falling short on adding new riders to the platform.

“The Omicron variant had a significant impact on ride volumes,” said Logan Green, Lyft’s chief executive, speaking to investors. “The rapid surge in infections was correlated with reduced demand for rideshare. However, since the spike in the US has now peaked, we expect demand will begin to recover.”

The service had 18.7mn active riders in the year’s final quarter, less than the 20mn analysts had been expecting, and still almost 3mn short on the comparable pre-pandemic period.

Shares in the San Francisco-based company fell by more than 6 per cent in after-hours trading.

Brighter spots came via other measures. Revenue hit $970mn for the quarter, up 70 per cent on the same period last year, and comfortably ahead of Wall Street’s expectations of around $940mn, according to consensus data from FactSet.

Earnings per active rider — $51.79, an all-time high — were driven by higher fares due to ongoing driver shortages, and a greater number of pick-ups from airports, typically a more lucrative fare.

Quarterly losses narrowed year-on-year — $259mn versus $458mn — but were still greater than the $176mn loss analysts had expected, according to S&P Capital IQ.

Adjusted Ebitda earnings — the company’s preferred measure of its performance — came in at $74.7mn, slightly above estimates.

Overall, Lyft’s full-year revenue showed considerable bounceback from pandemic-hit 2020, increasing 36 per cent to $3.2bn.

Uber reports its results after the closing bell tomorrow.

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Chipotle shares jump as price increases boost sales

Chipotle’s sales grew faster than expected, overcoming an Omicron-fuelled slowdown late in the fourth quarter, as strong take-out demand and higher menu prices bolstered results.

The restaurant chain known for its burrito bowls posted $2bn in revenue for the holiday period, up 22 per cent year on year and above the $1.96bn that analysts expected. Comparable sales were up 15.2 per cent, a slight acceleration from growth in the third quarter.

Chipotle said restaurant sales “began to moderate in the back half of December”, coinciding with an increase in Covid-19 infections linked to the Omicron coronavirus variant. That trend “intensified” through January, the company warned, but first-quarter comparable sales are still forecast to climb by the mid-to-high single digits on a percentage basis. Analysts polled by Refinitiv were looking for a 7.6 per cent increase in the current quarter.

Restaurant chains came under pressure as Covid cases rose across much of the US, exacerbating labour shortages and forcing some stores to limit operating hours. Chipotle has benefited from the popularity of digital ordering, as well as drive-up lanes at a growing number of its locations.

Chipotle’s fourth-quarter profits fell compared with the same period from the year before, weighed down by an increase in food, packaging and labour costs. Net income was $133mn, down from $191mn.

However, adjusted earnings of $5.58 a share were up from $3.48 a year earlier and eclipsed Wall Street’s forecast by 33 cents.

Shares in Chipotle climbed more than 8 per cent in after-hours trading.

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Prospect of tighter policy from central banks weighs on government bonds

Global government debt prices fell on Tuesday, with the benchmark US Treasury yield scaling levels not seen since late 2019, as traders bet on central banks withdrawing pandemic-era monetary stimulus.

The yield on the 10-year US Treasury note, which underpins global borrowing costs and stock market valuations, rose to a high of 1.97 per cent. Tuesday’s move extends an ongoing upward trend, in which the 10-year yield this year has risen by 0.44 percentage points.

Bond yields, which move inversely to prices, also climbed in the eurozone, the UK, Canada and Brazil ahead of what is expected to be another US report showing high inflation on Thursday.

With the Federal Reserve already having signalled its willingness to raise interest rates from historic lows, data on Thursday are forecast to show US consumer prices climbed 7.3 per cent from January 2021, a fresh four-decade high.

A blockbuster employment report for January has reinforced views that the Fed will be aggressive in its tightening of monetary policy. The stronger-than-expected report, which also included upwards revisions to December and November estimates, suggested that the US economy is strong enough to withstand interest rate increases.

Wall Street’s benchmark S&P 500 index, which has lost 5 per cent of its value in 2022, eked out a 0.8 per cent gain on Tuesday, bolstered by bank stocks, which benefit from higher interest rates.

The tech-heavy Nasdaq Composite index, down about 9 per cent this year, added 1.3 per cent.

Read more on the day’s market moves here

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US arrests two and seizes $3.6bn in cryptocurrency from Bitfinex hack

The US Department of Justice has arrested two people and seized more than $3.6bn in cryptocurrency it said was stolen during the 2016 hack of the Bitfinex exchange, in its largest financial seizure to date.

New York-based llya Lichtenstein, 34, and his wife, Heather Morgan, 31, were arrested on Tuesday and accused of conspiring to launder proceeds of 119,754 bitcoin valued at $4.5bn, US prosecutors said in a statement. The cryptocurrency was allegedly stolen when the Hong Kong-based Bitfinex exchange was breached, the prosecutors said.

The justice department’s move comes as US authorities have vowed to crack down on the criminal use of digital tokens and marks one of the most significant actions since the DoJ poured more resources into cryptocurrency enforcement.

“Today’s arrests, and the department’s largest financial seizure ever, show that cryptocurrency is not a safe haven for criminals,” said Lisa Monaco, deputy attorney-general.

Lichtenstein and Morgan have been charged with conspiracy to commit money laundering, which carries a maximum punishment of 20 years in prison, and conspiracy to defraud the US, which has a maximum sentence of five years in prison.

Lichtenstein and Morgan could not immediately be reached for comment.

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Yields on US Treasuries hit highest since 2019 as global bond sell-off deepens

Global government debt prices tumbled on Tuesday, with the benchmark US Treasury yield scaling levels not seen since late 2019, as traders bet on central banks withdrawing pandemic-era monetary stimulus.

The yield on the 10-year US Treasury note, which underpins global borrowing costs and stock market valuations, rose 0.04 percentage points to 1.96 per cent.

Bond yields, which move inversely to prices, also climbed in the eurozone, the UK, Canada and Brazil ahead of what is expected to be another blockbuster US inflation report on Thursday.

With the US Federal Reserve already having signalled its willingness to raise interest rates from historic lows, data on Thursday are expected to show US consumer prices climbed 7.3 per cent in the year to January, a fresh four-decade high.

Wall Street’s S&P 500 share index, which has lost more than 5 per cent of its value so far in 2022, eked out a 0.5 per cent rise as gains for banks that benefit from higher interest rates outweighed falls in tech stocks that are sensitive to monetary policy changes.

The tech-heavy Nasdaq Composite index, down about 10 per cent this year, struggled for direction, edging lower before adding 0.9 per cent.

Shares in drugmaker Pfizer fell 4 per cent after it issued earnings forecasts that underwhelmed bullish analysts. But fitness equipment maker Peloton Interactive jumped by a fifth as its chief executive stepped down following a collapse in market value that attracted activist investors and potential bidders.

Read more on the day’s market moves here

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US Treasury voices concern over risks posed by stablecoins

The US Treasury is sounding the alarm over the risks posed by stablecoins, as officials push for new laws to regulate the fast-growing industry.

Nellie Liang, the Treasury’s under secretary for domestic finance, told a Congressional committee on Tuesday she was concerned about the potential implications of the growth of such digital currencies, which she said posed risks to consumers and the wider economy.

Stablecoins such as Tether and USD Coin offer users the freedom and anonymity of a cryptocurrency, but promise additional stability by pegging their value to an underlying asset such as the US dollar. Government officials are concerned that those who offer such coins will not be able to maintain that value if there is a sudden loss of confidence in one particular asset or in the industry as a whole.

Liang told the House Financial Services Committee: “The offer of a stable value means [stablecoins] have the potential to be used as a means of payment by households, businesses and financial firms. This potential use could create significant benefits for stablecoin users and payments transactions, but it could also pose risks.”

She warned there could be a sudden loss of confidence in a particular stablecoin, causing a run on it; that there could be technical issues which prevent large numbers of consumers using it; and that a single company could come to dominate the payments industry.

The Biden administration has urged members of Congress to put forward legislation to regulate the industry. But Republicans used Tuesday’s hearing to push back against recent policy suggestions made by the President’s Working Group on Financial Markets.

Patrick McHenry, the most senior Republican on the committee, told the hearing: “Washington’s knee-jerk reaction to regulate out of fear will not allow stablecoins to achieve their full potential and the myriad of solutions that they may be able to present.”

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Aluminium hits 13-year high adding to inflationary pressure

Tight supply, strong demand and the crisis in Ukraine have combined to push the price of aluminium to its highest level since the global financial crisis, further fuelling inflationary pressures.

The lightweight metal, which is used in everything from electric vehicles to beer cans, rose as much as 3.3 per cent to a 13-year high of $3,236 a tonne on Tuesday before easing back to $3,187.

Aluminum and other important raw materials, including crude oil, natural gas and nickel, have charged out of the blocks this year as supply has struggled to keep pace with demand as the world emerges from the pandemic.

That has left several key industrial commodities trading in backwardation — a market structure that indicates traders and consumers are prepared to pay large premiums for immediate supply of goods.

Aluminium has risen 13 per cent since the start of the year on the London Metal Exchange and is closing in on its record high of $3,380 a tonne set in 2008. Those gains have also boosted shares in Rio Tinto, which hit a six-month high on Tuesday. The Anglo Australian miner is one of the world’s biggest producers of the metal.

The energy crisis in Europe and power rationing in China combined with strong demand, underpinned by rising sales of electric vehicles, has put the 66mn-tonne-a-year aluminium market on the path to “inventory depletion” by 2023 according to Goldman Sachs.

“We believe aluminium markets are facing a melt-up in prices this year,” Goldman analyst Nicholas Snowdon said, citing already low inventory levels — just 1.5mn tonnes in official warehouses — and supply shortfalls in China and the rest of the world.

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Government bonds drop as traders contemplate central bank direction

Global government bonds remained under pressure on Tuesday, as traders weighed the prospect of central banks tightening monetary policy to slow surging inflation.

The yield on the 10-year US Treasury note, which underpins debt costs worldwide, rose 0.04 percentage points to 1.96 per cent.

The two-year Treasury yield, which closely tracks interest rate expectations, rose 0.03 percentage points to 1.32 per cent. The dollar index, which measures the strength of the greenback against major currencies, rose 0.2 per cent.

Italy’s 10-year bond yield rose 0.07 percentage points to 1.88 per cent, although the equivalent Greek yield declined 0.06 percentage points to 2.31 per cent.

Germany’s 10-year Bund yield, the barometer of wider euro-area borrowing costs that until last month had sat below zero since May 2019, rose 0.04 percentage points to 0.26 per cent.

Meanwhile, the UK’s 10-year gilt yield climbed 0.09 percentage points to 1.68 per cent.

In equity markets, the US’s S&P 500 index traded flat in early New York dealings on Tuesday. The technology-focused Nasdaq Composite wavered between small gains and losses, after disappointing earnings from drugmaker Pfizer and SoftBank dropping its $66bn sale of UK-based chipmaker Arm Holdings.

Europe’s regional Stoxx 600 index traded flat, having fallen in tandem with Wall Street markets this year.

In Asia, Hong Kong’s Hang Seng index fell 1 per cent and the Nikkei 225 in Tokyo closed 0.1 per cent higher.

Brent crude, the oil benchmark, fell 1.8 per cent to $90.97 a barrel but remained near its highest since 2014.

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Macron says Putin gave him assurances over Ukraine

French president Emmanuel Macron said on Tuesday he had obtained assurances from his Russian counterpart Vladimir Putin that there would be no “deterioration or escalation” of the crisis over Ukraine, on whose borders Russia has massed more than 100,000 troops said by the US to be preparing to invade.

Macron was speaking on the plane to Kyiv, where he met Ukrainian president Volodymyr Zelensky, after more than five hours of talks on Monday night with Putin in Moscow.

“For me it was about arranging things to prevent an escalation and open up new avenues . . . and that aim has been fulfilled,” Macron told reporters accompanying him on the plane, while acknowledging that Putin was “determined, pretty sure of himself and making his own arguments”.

After meeting Zelensky, Macron said that Putin had told him “he would not be instigator of an escalation”.

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Harley-Davidson optimistic about outlook after forecast-beating quarter

Harley-Davidson struck an upbeat tone for the year ahead, tipping higher revenues from its motorcycle division than Wall Street expected, following a forecast-beating set of fourth-quarter earnings.

The Milwaukee, Wisconsin-based company forecast revenue growth for its largest segment — motorcycles and related products — of 5 per cent to 10 per cent in 2022, assuming supply chain issues will improve in the second half of the year.

Although that would mark a slowdown from growth of 39 per cent in 2021 to $4.5bn, it is ahead of the 4 per cent growth forecast by analysts in a Refinitiv poll and provides an encouraging sign the company’s multiyear turnround plan is bearing fruit.

In the three months to the end of December 31, total company revenue rose 40 per cent from a year earlier to $1.02bn, soaring past Wall Street estimates for $663.8mn.

The company swung to a $22mn net profit in the final three months of 2021, from a $96mn loss a year earlier. That worked out to earnings of 14 cents a share, well above forecasts for a loss of 38 cents a share.

Investors welcomed the results and pushed Harley-Davidson shares more than 7 per cent higher in pre-market trading on Tuesday.

Revenue from the motorcycle and related products segment, which includes its bikes, parts and general merchandise, jumped 54 per cent in the quarter owing to an increase in wholesale shipments, favourable motorcycle unit mix and higher prices in the US market, the company said.

The company sold 34mn motorcycles in the fourth quarter, up from 33.3mn a year earlier, with an 8 per cent jump in North American sales offsetting declines in international markets.

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UK announces plan to tackle NHS England’s ‘Covid backlog of elective care’

Sajid Javid, UK health secretary, has announced what he called a “bold and radical” plan aimed at tackling NHS England’s “Covid backlog of elective care”.

In a statement to the House of Commons on Tuesday, Javid said that as a result of the NHS focusing on urgent care throughout the pandemic, the number of people waiting for elective, non-urgent care in England had reached 6mn, up from 4.4mn before the pandemic.

Javid said the plan was focused on four main areas that included increasing workforce capacity, improving cancer services and the launch of MyPlannedCare, a website aimed at giving patients greater transparency on wait times.

“The plan sets the ambition of eliminating waits of longer than a year, waits in elective care, by March 2025”, he said. “With this, no one will wait longer than two years by July this year, and the NHS aims to eliminate the waits of over 18 months by April 2023 and over 65 weeks by March 2024.”

On the issue of increasing NHS workforce capacity, Javid said the plan would include the “recruitment and deployment of NHS reservists” and would see the service make “greater use of the independent sector”.

Wes Streeting, Labour’s shadow health secretary, said of the proposal: “There’s no plan to tackle the workforce crisis, no plan to deal with delayed discharges and no hope of eliminating waits of more than a year before the general election in 2024.”

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Johnson signals clearout as UK prime minister moves deputy chief whip

Stuart Andrew, deputy chief whip, has been moved to Michael Gove’s levelling up department as a minister of state in a sign that Boris Johnson wants a big clearout of the whips office.

At the end of last year some Conservative MPs claimed that party discipline, enforced by the whips, had “broken down” and that the UK prime minister was effectively “flying blind” when trying to work out what his MPs were thinking or doing.

The Paterson affair, in which the whips were heavily implicated, was a searing episode in which reluctant Tory MPs were told to vote for the collapsing of House of Commons standards rules, only for the policy to be abandoned.

In December the whips completely miscalculated the scale of a Tory rebellion over Covid-19 restrictions, with almost 100 Tory MPs voting against the government.

Johnson will need a revamped whipping operation — with reliable intelligence gathering capabilities — if he is to contain an uprising by Tory MPs against his leadership.

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Jacob Rees-Mogg becomes minister for Brexit opportunities as Boris Johnson reshuffles team

UK Prime Minister Boris Johnson has begun a mini reshuffle of his ministerial team, moving Jacob Rees-Mogg to the role of minister for Brexit opportunities.

Rees-Mogg was heavily criticised in his previous role of the leader of the House of Commons for his role in the Owen Paterson sleaze scandal

Rees-Mogg admitted he supported collapsing the House of Commons standards rules to try to help Paterson in a corruption scandal. The episode ended in a damaging government retreat the next next day.

However Rees-Mogg has remained loyal to Johnson and that has been repaid; he will retain his position in the cabinet in his new job, seeking out opportunities following Brexit and seeking government efficiency savings.

Johnson has been criticised for failing to be bold enough in deregulating parts of the British economy following Brexit. Rees-Mogg, a passionate Leaver, will now be given the challenge of turning Brexit rhetoric into reality.

The mini-reshuffle, taking place over Tuesday lunchtime, is expected to involve an overhaul of the whips office, as Johnson seeks to restore party discipline after weeks of unrest among MPs.

Mark Spencer, chief whip, will move into the slot vacated by Rees-Mogg and will become Leader of the House of Commons, in charge of parliamentary business. He will also have a seat at the cabinet table.

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Pfizer’s forecast for record sales in 2022 falls short of Wall St expectations

Pfizer reported better than expected fourth-quarter profits on Tuesday, due to strong sales of its Covid-19 vaccine and antiviral pill, and forecast both products would help the company generate record sales in 2022.

The US company said it expected to sell $22bn courses of Paxlovid — a five-day oral treatment that significantly reduces the risk of death and hospitalisation from Covid — and $32bn of its vaccine in 2022. 

But Pfizer’s revenue guidance for 2022 of $98bn to $102bn was slightly below analysts’ bullish expectations for sales growth this year.

Pfizer reported earnings of $1.08 a share for the fourth quarter when adjusted for acquisition-related costs and other significant items, ahead of analyst consensus forecasts of $0.87 a share. Fourth-quarter revenues of $23.8bn were slightly below forecasts of $24.2bn.

The company reported $81.3bn in revenue in 2021, up 95 per cent from the previous year.

Albert Bourla, Pfizer chief executive, said the successful development and launch of the vaccine and antiviral pill had not only made a positive difference to the world but fundamentally changed Pfizer and its culture forever.

“Everywhere I look in the company, I see colleagues who are inspired by what we have achieved to date and filled with determination to be part of the next breakthrough that could change the world for patients in need. As we enter a new year, I look forward to all we will accomplish together,” he said. 

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KKR earnings surge after acquisitions and strong investment gains

Private equity group KKR ended 2021 on a high note, reporting record earnings and growth across the $471bn in assets investment company, buoyed by strong investment gains and acquisitions.

The New York-based private equity group generated fee-related earnings of $606mn in the fourth quarter, a 45 per cent increase from the year before, while distributable earnings – a proxy for the firm’s cash flows – were $1.4bn, or a 158 per cent increase year on year.

Distributable earnings of $1.59 a share exceeded consensus analyst estimates of $1.20 and were propelled by far stronger earnings in the firm’s insurance and capital markets operations.

Among its segments, financial performances at Global Atlantic, the insurer KKR acquired a year ago, and the firm’s capital markets business were particularly strong.

KKR’s broader investment business capped a busy year as it sold investments in semiconductor equipment maker Kokusai Electric and resort Apple Leisure. For the year, the unit invested $39bn and recorded 7 per cent in the value of its private equity portfolio, putting annual gains at 46 per cent.

Assets at KKR closed the year at a record $471bn, rising 87 per cent during 2021, buoyed by its acquisition of Global Atlantic. Excluding acquisitions, assets under management increased 42 per cent for the year as the firm raised new funds across corporate buyout, credit, real estate and infrastructure investment strategies.

KKR told shareholders it would increase its annual dividend 4 per cent to 62 cents in the coming year.

“We have never been more well-positioned as a company. The opportunity ahead is very meaningful, even coming off a great year that we had in 2021,” Robert Lewin, chief financial officer told the Financial Times in an interview.

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EU launches €43bn push for microchip factories as shortages hit manufacturing

The EU announced plans to invest €43bn in a new generation of microchip factories to address a global shortage of the vital components.

The 27-nation bloc wants to increase research and production of higher technology chips, which are used in computers, smartphones and other products.

Ursula von der Leyen, the European Commission president, said the EU was too dependent on overseas suppliers and did not make the most advanced chips. “Chips are at the centre of the global technological race. They are, of course, also the bedrock of our modern economies,” she told reporters.

The Chips Act aims to double the EU’s market share from 10 to 20 per cent by 2030, which requires quadrupling production.

“The pandemic has also painfully exposed the vulnerability of its supply chains,” von der Leyen said, with production lines for cars and other goods hit by shortages.

The EU is also adapting state aid rules to allow big subsidies for cutting edge factories.

Intel is planning a new plant in the EU, which would cost around €20bn.

Its new US factory will benefit from the Biden administration’s $52bn chips plan as governments worldwide try to increase the size of their chips industries.

The EU will have to rely on its member state governments for money, as well as the private sector, along with diverting funds from other programmes.

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Ofgem admits failings in oversight of UK electricity and gas market

Britain’s energy regulator has admitted it should have toughened financial oversight of the country’s electricity and gas retail market much earlier, as it came under fire from MPs for its role in a price crisis that will push up household bills 54 per cent.

Jonathan Brearley, chief executive of Ofgem, told MPs on Tuesday that the regulator had been too focused on increasing competition in the retail energy market to break-up the stranglehold of what was known at the time as a “big six” of British Gas, EDF, Eon, Npower, SSE and ScottishPower.

Brearley said the regulator should have been “more careful” about the financial resilience of small suppliers entering the market over the past decade.

“We accept that had we done that earlier [introduced measures to ensure the financial resilience of new entrants] it would have been better for customers,” Brearley told MPs on the Business, Energy and Industrial Strategy Committee.

Ofgem’s oversight of the market has come in for criticism after 29 energy suppliers went bust last year as wholesale gas and power prices soared.

Consumer groups and suppliers said many of the problems that led to the supplier collapses had been evident for years — and Ofgem had been too slow to respond to warnings that many newer entrants had weak balance sheets, poor or no hedging strategies or were using customer deposits, built up via direct debit payments, to fund ordinary business activities.

Brearley said Ofgem was planning to set out new measures next month to ringfence customer deposits.

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What to watch in the Americas today

Tech: Although Peloton Interactive is expected to swing to a net loss of almost $380mn in its second quarter, investors will be more interested in the fallout from co-founder John Foley’s decision to step down as chief executive. The move comes as the value of the fitness bike maker has tumbled in the wake of an activist investor campaign to clear out its directors. Confronted by Wall Street’s dwindling faith in its future, Peloton on January 20 rushed out preliminary earnings, reporting revenues of $1.14bn that fell in a guidance range of $1.1bn to $1.2bn.

Pharmaceuticals: Pfizer is forecast to report a net profit of $4.95bn in its fourth quarter on revenues of $24.1bn, according to a Refinitiv poll of analysts. The drugmaker’s 2022 outlook and expectations for its Covid-19 vaccine and antiviral pill, particularly given the latest Omicron-led wave is subsiding in several countries, will be of interest to investors.

US companies: Others reporting before Wall Street’s opening bell on Tuesday include private equity firm KKR, Warner Music Group and Harley-Davidson. Ride-sharing company Lyft, restaurant chain Chipotle and XPO Logistics report this afternoon.

Crypto: Stablecoins are in the spotlight in Washington today. Nellie Liang, a senior Treasury official, testifies in front of the House Financial Services Committee about the Biden administration’s proposal to regulate “stablecoins”, a type of cryptocurrency that has its value pegged to a traditional currency such as the dollar.

Trade: The US trade deficit is forecast to have widened to $83bn in December, according to data due to be released this morning by the commerce department, from a deficit of $80.2bn a month earlier. Separately, data from Statistics Canada are expected to show a trade surplus of C$2.50bn in December. That is down from a surplus of C$3.13bn a month earlier, close to June’s 13-year high of C$3.23bn.

Markets: Futures markets implied the S&P 500 share index and the technology-focused Nasdaq 100 would trade flat when they opened.

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Nissan raises profit forecast despite chip shortage

Nissan overcame the impact of chip shortages and raised its net profit forecast for the third time in its current financial year, citing cost reduction efforts and weak yen for the boost in its fortunes.

The Japanese automaker on Tuesday increased its expected net profit to ¥205bn ($1.8bn), from its earlier projection of ¥180bn, for the financial year that ends in March.

The company, which recently unveiled ambitious targets for launching a range of new electric vehicles, said it had improved profitability with a shift of focus away from offering big discounts to capture market share.

Nissan kept its projection of the retail volume for 3.8mn units. Net profit for the October-December quarter was ¥32.7bn, compared with a net loss of ¥37.8bn in the same period a year earlier.

The forecast upgrade came despite disruption to the semiconductor supply chain. The company pointed to robust auto demand in the US that was making it easier for Nissan to lower financial incentives to would-be car buyers.

During the 19 years that Nissan was run by its former chair, Carlos Ghosn, the company focused heavily on gaining market share — a strategy that its current management said had created significant inventory overcapacity that it had needed financial incentives to clear.

“Given the unpredictable environment surrounding us, we are approaching the period ahead of us with cautious optimism,” Ashwani Gupta, chief operating officer, told reporters.

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Peloton to replace boss Foley with Spotify executive McCarthy

Peloton’s co-founder and chief executive is stepping down as the value of the fitness bike maker has tumbled in the wake of an activist investor expanding its campaign to clear out its directors.

Barry McCarthy, the former chief financial officer of Spotify and Netflix, will replace John Foley as chief executive and president and join Peloton’s board, the Wall Street Journal said on Tuesday.

Foley, who has led the company since its foundation a decade ago, will become executive chair, the Journal added on Tuesday.

Blackwells Capital, which has a stake of nearly 5 per cent, sent a 65-page presentation to the company’s board ahead of Tuesday’s earnings announcement.

It argued that Peloton had been “grossly mismanaged”, citing the collapse of shares last year after the stock rode a surge of new orders in the first year of the pandemic.

The analysis followed Blackwells’ critique of Peloton’s governance a fortnight ago when the investor went public with its concerns and accused insiders of enriching themselves by selling more than $700mn of stock since its initial public offering in September 2019 as its market value has plunged.

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Ocado shares fall 12% after warning international expansion will dent profits

Ocado’s shares were heading for their worst one-day percentage drop since September 2016, after the online grocer warned that its international expansion plans would hurt profits next year.

Ocado’s share price fell 12 per cent in early London trading on Tuesday to £12.39, less than half their pandemic peak.

The grocer said investment in five new fulfilment centres and technology held back overall group earnings in 2021.

Group earnings fell from £73mn to £61mn in line with analysts’ expectations, which contributed to a pre-tax loss of £176.9mn, compared with £52.3mn in 2020.

Line chart of Price has fallen sharply over past year showing Ocado shares slump

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France trade deficit in goods jumps 31% to record €84.7bn

France’s trade deficit in goods widened to a record €84.7bn last year, creating what its finance minister Bruno Le Maire called “a black mark” over the economy.

The 31 per cent increase in the deficit came as the country’s economy rebounded from the fallout of the coronavirus pandemic, with annual growth of 7 per cent last year.

Soaring energy prices and resurgent domestic demand boosted the value of French goods imports to 3 per cent above their pre-pandemic levels last year, while the country’s manufacturers lost market share in exports, leaving them 2 per cent below pre-crisis levels, according to French customs.

Goods exports from France’s main EU trading partners were between 3 and 9 per cent above 2019 levels — before the Covid-19 crisis disrupted global trade. “France’s loss of market share, almost uninterrupted since 2010, will continue in 2021,” French customs said.

Le Maire said the figures showed “the industrial weakening over the past 30 years”, adding that the government had addressed the problem by “creating a more favourable tax environment, by lowering production taxes, by training and qualifying employees for new industrial professions”.

In contrast, the country’s trade balance for services improved to a record surplus of €36.2bn, meaning that overall foreign trade still provided a slight boost to the economy last year.

The French central bank said the country’s current account deficit was €25.8bn last year, down from €43.7bn in 2020, but higher than €7.1bn in 2019.

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Brussels aiming to move derivatives clearing from London to EU

Brussels is aiming to propose new measures this year to shift derivatives clearing activity from London to the EU after granting a three-year extension to a temporary permit allowing European firms to use UK clearing houses.

The European Commission is starting a four-week consultation period as it examines ways of incentivising firms to move more clearing business away from the City of London and into EU financial centres.

This will be followed by a European Commission communication on the way forward, and potentially by legislative proposals in the third quarter of the year, an EU official said.

The EU has long wanted to pull clearing of euro-denominated contracts from London, where LCH still handles about 90 per cent of all euro-denominated derivatives, but has made little headway given the scale of the business in London. Clearing houses are central to staving off market instability, sitting between counterparties on deals and preventing defaults from rippling through the financial system.

The commission’s planned measures will pursue the twin goals of building up its domestic capacity in clearing, as well as beefing up EU supervision of the institutions.

The commission today formally adopted the extension of its regulatory “equivalence” decision for UK central counterparties until June 30 2025. The EU official said the latest extension was “clearly the end of the road — there will be no extension after those three years”.

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Government bonds under pressure as central banks expected to tighten policy

Government bond markets remained under pressure on Tuesday, as traders looked ahead to another round of US inflation data and were poised for central banks to tighten monetary policy.

The yield on the 10-year Treasury note, which functions as a benchmark for borrowing costs worldwide, rose 0.04 percentage points to 1.95 per cent as the debt fell in price.

German, Italian and Spanish yields climbed, in anticipation of the European Central Bank following the US Federal Reserve into reducing its purchases of government bonds that have suppressed borrowing costs since coronavirus swept into western nations two years ago.

Equity markets traded cautiously, meanwhile, with the regional Stoxx 600 index opening 0.2 per cent higher. A FTSE index of stocks in Italy, widely seen as one of the eurozone nations most vulnerable to a rise in government borrowing costs, traded flat after losing 1 per cent in the previous session.

Economists expect US inflation data released on Thursday to show that consumer prices rose at an annual pace of 7.3 per cent in January, a four-decade high.

Italy’s 10-year bond yield rose 0.03 percentage points to 1.84 per cent on Tuesday morning, however. Germany’s 10-year Bund yield rose 0.02 percentage points to 0.24 per cent. Until last month, this barometer of wider euro area borrowing costs had sat below zero since May 2019.

Elsewhere in markets, the US dollar index rose 0.3 per cent as rate rise bets climbed ahead of this week’s CPI data.

Futures markets implied the S&P 500 share index and the technology-focused Nasdaq 100 would trade flat when they open in New York.

Brent crude, the oil benchmark, fell 1 per cent to $91.78 a barrel but remained near its highest level since 2014.

Read the full markets briefing here.

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Hong Kong to tighten anti-coronavirus measures after infections reach record high

A Covid-19 testing truck in Hong Kong
A Covid-19 testing truck in Hong Kong © Bloomberg

A record number of new infections has prompted Hong Kong to further tighten its already stringent anti-Covid measures, including a ban on multi-household gatherings at private premises, while public gatherings will be restricted to two people.

Hair salons and religious facilities will be ordered to shut for a fortnight, after gyms, bars and cinemas were shuttered last month. A “vaccine pass” will be introduced this month requiring people to get jabbed to visit malls and restaurants.

“Because of the severity of the local pandemic situation, we hope society will accept that we need to go back to [implementing] the strictest measures,” said Carrie Lam, the city’s leader. The new ban on gatherings will come into effect on Thursday.

Critics and health experts have questioned the sustainability of a zero-Covid approach, which the Chinese territory insisted on maintaining as Hong Kong recorded more than 2,600 new infections over the past fortnight, including a daily record of 625 cases on Tuesday. But Lam said the policy was in “the best interest” of the city.

As pressure increased against the territory’s healthcare system, young and asymptomatic patients will be isolated at a government-run quarantine camp instead of hospitals starting on Tuesday, while close contacts have been permitted to undergo quarantine at home.

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Harassment of Keir Starmer ‘totally unacceptable’, says UK minister

The UK’s technology minister said the harassment of Labour leader Sir Keir Starmer was “totally unacceptable”, as politicians called on the prime minister to apologise for comments made in the House of Commons.

During a heated debate in parliament, UK Prime Minister Boris Johnson claimed that Starmer, when he was previously director of public prosecutions, had failed to prosecute the late sex offender Jimmy Savile.

Starmer had to be bundled into a police car on Monday evening when a crowd, some of whom were screaming “paedophile”, surrounded the Labour leader and the shadow foreign secretary, David Lammy. Two people were arrested.

“It is totally unacceptable,” Chris Philp told Sky News on Tuesday. “There is no way the leader of the opposition or any MP in public life . . should suffer the kind of intimidation and harassment that Keir Starmer suffered.”

“However, I don’t think you can say that was caused by the prime minister’s comments,” he added.

The prime minister clarified that he did not hold Starmer personally responsible for the Crown Prosecution Service’s failure to prosecute Savile, but MPs from across the political spectrum have called on Johnson to apologise.

“The prime minister shouldn’t be looking in the dark corners of the internet for lies to smear his opponent, but standing up for a better public discourse based on facts not fiction,” Rosena Allin-Khan, shadow minister for mental health, told BBC Radio 4’s Today programme.

“If the prime minister is genuinely sorry he should come to parliament and apologise unreservedly for his smears, like many of his own MPs have called for,” she added.

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Just Eat Takeaway to ditch New York listing in effort to simplify its business

A Just Eat Takeaway cycle delivery worker
Just Eat Takeaway has struggled to settle on a home for its shares © Bloomberg

Just Eat Takeaway will leave the New York stock market after less than a year of trading, as the online food delivery group comes under pressure to simplify its business following a series of acquisitions.

The company, which is also listed in Amsterdam and London, on Tuesday said it planned to delist from New York’s Nasdaq stock exchange by the end of the first quarter, as the legal and auditing costs required to trade there outweighed the listing’s benefits.

Just Eat Takeaway, formed through the merger of UK business Just Eat and Dutch company Takeaway.com in 2019, has struggled to settle on a home for its shares. The group initially intended to leave the Amsterdam market, but this was put on hold after it bought US food delivery business Grubhub and joined the Nasdaq exchange last June.

Just Eat Takeaway’s future was again thrown into uncertainty in August, when FTSE Russell decided the group was Dutch and it had to be ejected from London’s top market index.

The group’s US shares have dropped 49 per cent since listing in New York. Following its takeover of Grubhub, Just Eat Takeaway has faced calls to spin off the acquisition from activist investor Cat Rock, who argued it has reduced Just Eat Takeaway’s financial flexibility.

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UK energy group SSE upgrades earnings estimates after gas powers performance

SSE, the UK energy company that has faced break-up calls from hedge fund Elliott Management, has raised its full-year earnings guidance as a strong financial performance from its gas-fired power plants is helping to more than offset a steep drop in output from its wind farms.

The group said on Tuesday that it now expected full-year adjusted earnings per share to be “at least” 90p compared with guidance issued in November of at least 83p per share.

Owners of thermal generation assets such as gas-fired power stations have been benefiting from high prices in recent months because they help balance Britain’s electricity grid during periods of low wind generation.

Weak wind speeds have been a theme across northern Europe this year. Danish energy group Orsted reported last week that strong results from its divisions that operate gas, coal and biomass power plants helped to shield it from a blow to earnings from its offshore wind business.

SSE said electricity output from its renewable energy assets, excluding its specialist pumped storage hydro plants, fell 19 per cent below expectations in the nine months to December 31. Output was 16 per cent lower during the nine months compared with the same period a year earlier.

Output from SSE’s gas and oil-fired assets declined 14 per cent year on year.

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Labour shortages hold back growth at Ocado

Labour shortages have held back growth at Ocado, as the online grocer struggled to find enough staff to keep up with demand.

The company said on Tuesday that sales and profits in its retail business increased last year as shoppers moved online, but the tight labour market, combined with a fire at one of its centres in east London, restricted growth.

While order numbers increased last year, the average order size dropped to pre-pandemic levels. Nevertheless, chief executive Tim Steiner said: “The past year has further reinforced that demand for online grocery is here to stay.”

Investment in five new fulfilment centres and technology held back overall group earnings, which fell from £73mn to £61mn in line with analysts’ expectations and contributed to losses before tax of £176.9mn, compared to £52.3mn in 2020.

However, revenues at Ocado Retail, the joint venture it runs with Marks and Spencer, rose 5 per cent to £2.3bn. Group revenue rose by 7 per cent to £2.5bn.

The online delivery company has invested in infrastructure and warehousing to meet stronger customer demand, as shopping habits have changed during the pandemic. 

The company’s shares rose in January when it unveiled lighter robots for its automated warehouses, which are designed to help it fulfil orders more quickly, compete with rapid delivery start-ups such as Getir and Gorillas and cut staffing costs.

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Tokyo governor urges Japan to speed up Covid-19 jab rate

Yuriko Koike, governor of Tokyo, on Tuesday accused the Japanese government of causing “stress” by dragging its feet on Covid-19 vaccinations as infections surge. 

“We requested the next shot as soon as possible, but the government didn’t quite agree, saying that this has to be done in sync,” Koike told reporters on Tuesday at the Foreign Correspondents’ Club of Japan.

“The Omicron variant is highly transmissible and speed is the key. The difference in perceptions about speed is causing stress for people on the ground,” she added.

Koike’s criticism came just a day after prime minister Fumio Kishida said he expected to achieve the government’s goal of giving 1mn booster shots a day at the earliest date possible in February.

Japan, which today gives nearly 500,000 shots, will bolster workplace vaccination programmes, while encouraging schoolteachers and nursery care nurses to receive the third shots.

The government is “finally” aiming for a massive amount of jabs, but “momentum is slightly off. We are not in time to prevent the current outbreak,” Koike said, adding that oral treatment is still lacking for the time being. 

Japan is currently facing what has become the country’s sixth wave of infections. Cases topped 100,000 on Saturday for the second time, while hundreds of nursery schools are shut down as staff and children are infected.

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Tui expects ‘very high’ summer holiday demand as prices rise more than 20%

© Bloomberg

Tui said on Tuesday that summer bookings this year will be close to pre-crisis levels with “very high” demand for holidays and prices up by more than a fifth.

The Anglo-German holiday company also said it planned to make its first repayment of the more than €4bn in state-backed loans that propped it up during the pandemic.

Hanover-based Tui warned in December that the Omicron coronavirus variant was affecting holiday demand, but said on Tuesday that booking patterns had remained “relatively stable” despite the variant’s spread.

The removal of travel restrictions for vaccinated travellers in the UK had prompted an uptick in bookings in its second-largest market, it added, with summer holiday reservations up 19 per cent compared with the same point in 2019.

“We expect a strong summer 2022. The path out of the pandemic is becoming increasingly clear. Demand for travel is high across all markets,” said Fritz Joussen, chief executive.

Revenues in the three months to the end of December were €2.3bn, five times higher than in the same period in 2020 but still down one-third compared with 2019.

Losses before interest and tax fell to €274mn from €676mn in the same period a year ago, and Tui said that prices for its summer 2022 holidays were up 22 per cent thanks to stronger demand for package holidays and more luxurious hotels.

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BP swings to its highest annual profit in 8 years

BP has posted its highest profit in eight years, driven by resurgent demand for oil and natural gas, as the oil major maintained its dividend and committed to buying back $1.5bn of shares in the first quarter of 2022.

The UK-listed group’s underlying profit on a replacement cost basis for 2021 — the profit measure most closely tracked by analysts — rose to $12.8bn.

Earnings for the last three months of the year rose to $4.1bn from $3.3bn in the third quarter, beating average analyst estimates of $3.9bn. That compares with $100mn in the final three months of 2020.

The profits marked an improved performance from 2020 when BP recorded a $5.7bn loss — its first annual loss in a decade — after coronavirus restrictions destroyed oil demand and BP wrote down the value of billions of dollars’ worth of oil and gas assets.

It should help ease shareholder pressure on chief executive Bernard Looney. The group’s share price fell to a 25-year low in September 2020, days after Looney presented investors with his strategy to overhaul the company by increasing low-carbon investment, while cutting oil and gas production 40 per cent by 2030.

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SoftBank quarterly profit slides 97% after tech stock sell-off and China crackdown

SoftBank said its net profit in the final quarter of 2021 fell 97 per cent year-on-year, after a sell-off in global tech stocks and a regulatory crackdown in China weighed on many of the companies in its Vision Fund’s portfolio.

The Japanese group on Tuesday said it eked out a net profit of ¥29bn ($251mn) for the quarter ending on December 31, down from ¥1.17tn for the same period in the previous year.

The results came a week after chief executive Masayoshi Son’s in-house fixer, Marcelo Claure, left the group after disputes over his pay, marking the latest in a string of high-profile departures that have rekindled worries over the unwieldy giant’s leadership.

The results highlight the growing challenges for SoftBank’s business model — once compared by Son with a goose laying “golden eggs” — at a time when interest rate increases signalled by the US Federal Reserve have spurred investors to dump growth stocks, the likes of which SoftBank’s funds have placed large bets on.

Europe’s used-car platform Auto1 Group and China’s ride-hailing company Didi Global are both trading below their listing price. Alibaba, Son’s most valuable investment, dropped more than 15 per cent during the quarter, while in the US, food delivery group DoorDash lost close to one-third of its value.

The group’s own share price has halved since reaching a record high last March. On Tuesday, SoftBank scrapped its plans to offload UK chip designer Arm to US company Nvidia in a deal worth $66bn that investors hoped would provide a fresh injection of cash.

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BNP Paribas outlines plan to further boost profits after beating 2021 forecasts

BNP Paribas will pay out 60 per cent of its profits in dividends in coming years as the French bank set out a plan to lift its earnings after they jumped by a third last year.

The lender has been beefing up its corporate and investment banking business in particular, as profits rebounded in 2021 due to lower charges linked to the pandemic and as economies recovered.

In a strategy update on Tuesday, BNP said that it aimed to increase net profit annually by 7 per cent between 2022 and 2025. The target came as the bank reported that net income surged 34.3 per cent to €9.5bn last year, surpassing analysts’ expectations. Annual profits were also 16.1 per cent up on 2019.

The bank said it was also targeting revenue growth of more than 3.5 per cent per year, while raising its return on tangible equity — a measure of profitability — to more than 11 per cent by 2025, from 10 per cent last year.

BNP had been expected to raise its dividend payout ratio from its policy of 50 per cent of profits. It had already reached 60 per cent for 2021 thanks to a share buyback plan, and the bank said it would continue to deliver at least 50 per cent payouts in cash.

BNP has been pushing to become the go-to investment bank in Europe, after building out its equities division, including through acquisitions in areas such as prime broking, which serves hedge funds.

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What to watch in Europe today

Ukraine: French president Emmanuel Macron will visit Ukraine’s president Volodymyr Zelensky, a day after a meeting Russian president Vladimir Putin. The trip is the latest in an effort to find a diplomatic solution to rising tensions between Kyiv and Moscow.

BNP Paribas: France’s largest bank publishes full-year results on Tuesday. The bank announced a €900m share buyback plan in October after a surge in equities trading. BNP posted a 32 per cent rise in net income from a year earlier to €2.5bn, beating analysts’ expectations of €2.2bn.

BP: The oil giant releases full-year results. In the third quarter, underlying profit on a replacement cost basis, the measure most closely tracked by analysts, rose to $3.3bn from $2.8bn in the previous quarter. BP said its results were due to higher oil and gas prices and “a stronger gas marketing and trading result”.

Earnings: Online grocer Ocado, lorry maker Iveco and CNH Industrial, a maker of tractors, lorries and construction equipment, release full-year results. Tui, Europe’s biggest holiday company, releases its first-quarter results and house builder Bellway publishes a trading update.

Markets: Futures for the Euro Stoxx 50 were down 0.1 per cent while FTSE 100 futures were up 0.2 per cent following a mixed day for Asia-Pacific equities. Wall Street and European stock markets skidded lower late on Monday after a choppy day of trading. The S&P 500 ended the day down 0.4 per cent, while the tech-heavy Nasdaq Composite fell 0.6 per cent.

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Ex-BofA compliance director sent back to jail in Hong Kong over police assault case

A US corporate lawyer in Hong Kong has been sent back to jail over a conviction for assaulting a plainclothes police officer two years ago, in a case that highlighted political risks for foreigners working in the city.

The Chinese territory’s High Court on Tuesday rejected the appeal of Samuel Bickett, a former compliance director at Bank of America. He will now serve the rest of his four-and-a-half month sentence, having last year spent seven weeks in prison before being granted bail.

In December 2019, during Hong Kong’s pro-democracy protests, Bickett intervened in a scuffle between members of the public and a man with an extendable baton. He had said he was “neutralising” the man as he tried to grab hold of the weapon.

The man, who did not immediately reveal he was an officer, later said he drew his baton as he was initially trying to apprehend a teenager who jumped a turnstile, but the teen had slipped free.

“[Bickett losing his appeal sends] a very worrying signal about the decline of the rule of law in Hong Kong. Many expats will take note,” said Thomas Kellogg, executive director of Georgetown University’s Center for Asian Law.

Bickett told the Financial Times ahead of Tuesday’s hearing that he was “determined to appeal” to the city’s highest court, the Court of Final Appeal, to “test the ability of the rule of law and judicial independence” in the city.

“I would have done everything exactly the same,” he said. “I don’t regret anything.”

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Top Biden scientific adviser quits after staff bullying probe

Eric Lander, former head of the White House Office of Science and Technology Policy
Eric Lander’s appointment to the cabinet was seen as symbolic of Biden’s desire to put science back at the heart of White House policy-making © Al Drago/Bloomberg

One of Joe Biden’s top scientific advisers has resigned after an internal investigation found he had bullied and demeaned his own staff.

Eric Lander resigned as head of the White House Office of Science and Technology Policy hours after Politico revealed that an inquiry had found “credible evidence of disrespectful interactions with staff” by him and other senior officials.

His departure is a blow for the US president, who appointed him as head of the OSTP after entering office last year and elevated his role to the Cabinet. Lander was leading the president’s “Cancer Moonshot”, which Biden set up in 2016 when he was vice president following the death of his son Beau from the disease.

Lander said in his resignation letter: “I am devastated that I caused hurt to past and present colleagues by the way in which I have spoken to them.”

His appointment to the cabinet was seen as symbolic of Biden’s desire to put science back at the heart of White House policy-making, especially when it came to tackling Covid-19.

Lander made his name as a pioneer in genomic research and genetic engineering, and served on the board of the Biden Cancer Initiative, which the president set up after serving in the Obama administration.

But on Monday, Politico revealed that a White House investigation had found he bullied staff. Rachel Wallace, his former general counsel, said Lander had disparaged and humiliated staff in front of their peers, while an unnamed staff member said he had “screamed” at subordinates.

Lander apologised to staff for his behaviour on Friday night, but his position threatened to embarrass the president, who promised on his first day in office that he would fire anyone in his administration who disrespected their colleagues, “no ifs, ands or buts”.

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China’s WuXi Biologics shares suspended after inclusion on US list prompts 32% drop

Shares in pharmaceutical company WuXi Biologics were suspended on Tuesday after plummeting by as much as 32 per cent, their biggest ever single-day decline.

Washington on Monday added WuXi and 32 other Chinese entities to a list curbing its ability to access US technology.

US companies face greater restrictions in exporting goods to groups on the list, and are required to conduct more stringent due diligence checks in their dealings with them.

The commerce department adds groups to the list if it cannot verify the end use of goods exported to them. WuXi’s shares fell to as little as HK$59.20 (US$7.59) following the announcement.

The addition of 33 Chinese companies to the so-called “unverified list” comes as the US steps up its scrutiny of Chinese groups amid worsening trade relations between the two countries.

In December, the US added eight Chinese companies to its investment blacklist and 11 biopharmaceutical organisations to its “entity list”, which bans US companies from exporting banned technology originating in America to them.

“WuXi Biologics has been importing certain hardware controllers for bioreactors and certain hollow-fibre filters that are subject to US export controls but have received [US] approval for the last 10 years,” WuXi said on Monday, adding that it did not expect its inclusion on the list to affect its business operations.

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What to watch in Asia today

India: A high court in the state of Karnataka will hear two petitions arguing that Muslim women should be allowed to wear headscarves in class.

Philippines election: The country’s official campaign period of the presidential race is set to kick off amid questions over whether frontrunner Ferdinand “Bongbong” Marcos Jr, the son of the late dictator, will be disqualified.

Earnings: Japanese companies SoftBank and Nissan Motor report earnings. The Financial Times reported on Tuesday morning that SoftBank’s proposed $66bn sale of chip group Arm to Nvidia had collapsed.

Markets: Chinese equities rose on Monday, led by gains for energy companies, as stock markets resumed trading after the lunar new year break. Stocks elsewhere in the region fell. US and European stock markets skidded lower late on Monday after a choppy day of trading, as investors weighed countervailing forces of resurgent economies and central banks’ next steps to fight inflation. On Tuesday morning, Australian, Japanese and South Korean stocks rose.

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Olympics round-up: China’s Gu to compete for big air gold as Peng controversy simmers

Shaolin Sandor Liu, left, falls next to Ren Ziwei after crossing the finish line in the 1,000m short track speed skating final
Shaolin Sandor Liu, left, falls next to Ren Ziwei after crossing the finish line in the 1,000m short track speed skating final © Anne-Christine Poujoulat/AFP via Getty Images

China clinched gold in the 1,000m short track speed skating event after Hungary’s Shaolin Sandor Liu, who edged over the line first, was disqualified for a lane violation. He and China’s Ren Ziwei bumped into each other over the final stretch.

Slovenia won gold in the first ever mixed team ski jumping competition at the Olympics.

On Tuesday, Eileen Gu, the American-born Chinese skier, will compete for a gold medal in the final of the women’s big air skiing while Julia Tabitz of Germany leads the field in the women’s luge singles after there were several crashes in the early rounds.

The Peng Shuai controversy continued after it was revealed that Thomas Bach, the International Olympics Committee president, had met Peng for dinner on Saturday. The IOC, which had implied on Sunday that the meeting had not yet been held, did not mention Peng’s sexual assault allegations, which she again denied in an interview with L’Equipe. 

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WTA seeks Peng Shuai investigation despite tennis star’s claims

Spectators wear T-shirts in support of Chinese tennis player Peng Shuai at the recent Australian Open in Melbourne
Spectators wear T-shirts in support of Chinese tennis player Peng Shuai at the recent Australian Open in Melbourne © Tertius Pickard/AP

The Women’s Tennis Association says a formal investigation into Peng Shuai is needed despite the Chinese tennis star denying she made claims of sexual assault against former member of China’s highest-ranking political body.

The WTA’s latest statement in support of Peng, a three-time Olympian, comes as China’s biggest #MeToo controversy casts a shadow on Beijing’s hosting of the Winter Olympics.

In November, the 36-year-old athlete alleged that she had an on-off relationship with Zhang Gaoli, a former Chinese vice-premier 40 years her senior who oversaw preparations for the winter games.

According to a social media post, which was deleted within minutes, the relationship with Zhang included at least one non-consensual sexual encounter.

But in an interview published on Monday she told French sports newspaper L’Equipe that she had “never said anyone had sexually assaulted me in any way”.

The “interview does not alleviate any of our concerns about her initial post”, said Steve Simon, WTA chair and chief executive.

“To reiterate our view, Peng took a bold step in publicly coming forth with the accusation that she was sexually assaulted by a senior Chinese government leader,” Simon added.

“As we would do with any of our players globally, we have called for a formal investigation into the allegations by the appropriate authorities and an opportunity for the WTA to meet with Peng — privately — to discuss her situation.”

The International Olympic Committee has faced criticism from human rights groups of collaborating with Chinese authorities following a series of statements as well as calls and meetings held with Peng by Thomas Bach, IOC president, in the wake of her November claims.

L’Equipe said questions to Peng were vetted and a representative from China’s Olympic committee was present during the interview.

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Macquarie reports ‘record quarter’ helped by energy crisis

Macquarie chief executive Shemara Wikramanayake
Macquarie chief executive Shemara Wikramanayake said “extreme” volatility in the energy market had led to increased trading income © Al Drago/Bloomberg

Australia’s Macquarie Group has reported a “record” third quarter, boosted by increased client hedging and trading in the company’s gas and power business in response to “unusually challenging market conditions”.

The financial services giant also saw “exceptionally strong investment realisation” in infrastructure, business services and technology through the Macquarie Capital division.

Growth continued in the company’s Australian banking division, where its mortgage book grew by 8 per cent. Macquarie is one of the fastest-growing mortgage lenders in Australia, targeting the less risky portion of the market with low loan-to-value ratios.

Macquarie’s asset management business hit assets under management of $A750.1bn (US$534bn), up 2 per cent on the previous quarter. The update did not give detailed financial results.

Chief executive Shemara Wikramanayake said “extreme” volatility in the energy market over the three months to December 21 had led to increased trading income, as electricity and gas clients moved to hedge.

She cited the gas crisis in Europe, which saw prices rocket in the second half of 2021, which had increased market activity. She also said extreme weather events had contributed to activity.

“We continue to maintain a cautious stance, with a conservative approach to capital, funding and liquidity that positions us well to respond to the current environment,” Wikramanayake said in a statement to the Australian Securities Exchange.

“More broadly, we remain well positioned over the medium term, based on our deep expertise in major markets, a diversified and adaptable mix of strong businesses, an ongoing programme to identify cost-saving initiatives and efficiency, a strong and conservative balance sheet and a proven risk management framework and culture.”

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SoftBank’s $66bn sale of chip group Arm to Nvidia collapses

SoftBank’s $66bn sale of UK-based chip business Arm to Nvidia collapsed on Monday after regulators in the US, UK and EU raised serious concerns about its effects on competition in the global semiconductor industry, according to three people with direct knowledge of the transaction.

The deal, the largest ever in the chip sector, would have given California-based Nvidia control of a company that makes the technology at the heart of most of the world’s mobile devices. A handful of big tech companies that rely on Arm’s chip designs, including Qualcomm and Microsoft, had objected to the purchase.

SoftBank will receive a break-up fee of up to $1.25bn and is seeking to unload Arm through an initial public offering before the end of the year, according to one of the people.

Read more on this story here

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US and Japan reach deal to roll back Trump-era steel tariffs

A worker checks steel coils at a factory in Tokyo
A worker checks steel coils at a factory in Tokyo © Issei Kato/Reuters

The US has reached an agreement to ease tariffs on Japanese steel as President Joe Biden presses to relax trade tensions with American allies.

The US will suspend its 25 per cent levy on steel imports of up to 1.25mn tonnes a year beginning April 1, according to its agreement with Japan announced on Monday.

A 10 per cent tariff on aluminium will remain in place.

The administration of Donald Trump first imposed tariffs on a range of countries in 2018 on the grounds that cheap foreign metal imports posed a threat to national security.

In a statement, the US and Japan agreed to co-operate on tackling overcapacity in the global steel market as a result of subsidies in non-market economies, as well as on the carbon intensity of the steel and aluminium sectors.

Biden administration officials have previously accused China of dumping steel produced by its state-subsidised industry into global markets.

Katherine Tai, the US trade representative, said the agreement would help Washington and Tokyo “work together . . . to combat China’s anti-competitive, non-market trade actions in the steel sector, while helping us reach President Biden’s ambitious climate agenda”.

Japan will begin to put in place its own antidumping tariffs within six months, the statement said, and would confer with Washington on “potential domestic measures to address non-market excess capacity”.

Read more on the agreement here

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Peter Thiel to leave Facebook owner Meta’s board

Billionaire Peter Thiel will not seek re-election to the board of Facebook’s owner Meta later this year, the social media group said on Monday.

Thiel, a tech investor who is Silicon Valley’s most prominent supporter of former president Donald Trump, took the decision in order to focus on “political endeavours” and “avoid that being a distraction for Facebook”, said a person familiar with his thinking.

Thiel intends to focus his support on Republicans aligned with Trump’s agenda, such as Blake Masters and JD Vance, who are seeking election to the Senate in the November 2022 midterm elections, the person said. He notified Facebook of the decision on Monday.

“It has been a privilege to work with one of the great entrepreneurs of our time. Mark Zuckerberg’s intelligence, energy, and conscientiousness are tremendous,” Thiel said in the statement. “His talents will serve Meta well as he leads the company into a new era.”

Thiel, 54, was the first outside investor in Facebook, and has sat on the board since 2005. His various venture capital funds have made more than $1bn from selling its shares.

But Thiel’s presence on Facebook’s board has long been considered controversial by some because of his political affiliations — especially as the social media company has been criticised over how it handles political speech and misinformation. Republicans have accused it of censoring conservative voices, while Democrats argue it does not adequately police content.

Read more on Thiel’s plans here

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US stocks finish lower after choppy day of trading

A woman uses a Peloton exercise bike
Shares in Peloton, the maker of exercise bikes, rose more than 20% on Monday, © Ezra Shaw/Getty Images

US stocks skidded lower late on Monday after a choppy day of trading, as investors weighed countervailing forces of resurgent economies and central banks’ next steps to fight inflation.

The S&P 500 ended the day down 0.4 per cent, while the tech-heavy Nasdaq Composite fell 0.6 per cent. Both indexes lurched lower in the final hour of trading after swinging repeatedly between gains and losses earlier in the day.

The two gauges made gains last week but remain significantly lower for the year, with investors adjusting expectations for the Federal Reserve’s impending end of its pandemic-era monetary support.

Investors are grappling with a conflict between improving economic trends and the potential effects of higher interest rates on borrowing costs and company valuations.

The technology sector, where valuations swelled during almost two years of ultra-low borrowing costs and coronavirus lockdowns boosting stay-at-home businesses, has been especially volatile.

Shares in Peloton rose more than 20 per cent on Monday, following news that Amazon and Nike were evaluating bids for the at-home fitness group.

The Nasdaq has dropped 10 per cent so far in 2022, while the S&P, which is broader based but still dominated by big tech shares, is down more than 5 per cent.

Read more on the day’s market moves here

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Hasbro warns of supply chain disruptions for the rest of 2022

Hasbro said lead times for shipping its toys and games from China had tripled and that it expected similar challenges and supply chain disruptions to persist in its current fiscal year.

The US toymaker managed to navigate supply chain issues in the fourth quarter of 2021 because of strong demand for its toys during the holiday season, although its inventory levels were lower than it anticipated.

Deborah Thomas, chief financial officer, told analysts during an earnings call on Monday that shipping lead times from China had tripled on average. The company is also battling higher transport and product costs.

“These higher capitalised costs are expected to have a negative impact on gross margin in the first quarter, prior to price increases taking effect,” Thomas said.

Hasbro said it expected price increases, scheduled for the second quarter, to help absorb some of the higher costs of production, but it still anticipated obstacles with freight and input costs to persist in 2022.

Thomas said the third quarter would be challenging because the company did not have any big hits scheduled to boost revenue during that period, unlike last year when its Netflix film My Little Pony: A New Generation was released.

Along with its other gaming and entertainment products, the film helped boost overall revenue even though sales from the consumer products segment, Hasbro’s largest segment, declined 3 per cent from the previous quarter because port congestion led to missed orders.

Richard Stoddart, Hasbro’s interim chief executive, said on Monday the company was still optimistic revenue would grow at a low single-digit rate in fiscal 2022.

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