News updates from May 29: ConocoPhillips agrees to buy Marathon Oil; Anglo American rejects BHP request to extend takeover talks

A global bond sell-off on Wednesday prompted stocks to retreat as lukewarm sales of US Treasuries weakened investor sentiment and investors worried anew about the impact of interest rates remaining higher for longer.

Treasury yields broadly rose to their highest levels in a month following the seven-year auction, building on a sell-off that had started on Tuesday in the wake of weak two- and five-year auctions. The benchmark 10-year Treasury yield rose to a peak of 4.64 per cent, its highest level since early May. Bond yields rise as prices fall.

The weak mood helped stocks close near their lows for the session, giving the S&P 500 one of its worst days this month, down 0.7 per cent. The Nasdaq Composite ended off 0.6 per cent, having notched a new record high the day before.

Shares in workplace software company Salesforce sank 15 per cent in after- market trading on Wednesday on sales and earnings guidance that missed forecasts.

Marc Benioff’s Salesforce said it anticipated second-quarter earnings per share of between $1.31 and $1.33 a share, well below a consensus estimate of $1.47 a share. Revenue for the second quarter is forecast to be between $9.20bn and $9.25bn, below analysts’ expectations for $9.37bn.

The company also lowered its expectations for subscription sales growth for the full year to “slightly below” 10 per cent, compared with the 10 per cent it forecast in February. 

Despite the weaker guidance, chief executive Benioff said the company was “at the beginning of a massive opportunity” as businesses start rolling out artificial intelligence tools. 

US Supreme Court Justice Samuel Alito has refused to step away from cases involving Donald Trump and the 2021 attack on the US Capitol after reports of controversial flags flown at his properties had spurred calls for his recusal.

In a letter to US senators who had called for his withdrawal, Alito on Wednesday said the incidents did “not meet the conditions for recusal” and that he was “duty-bound to reject” their request. 

The contention stems from media reports showing an upside-down American flag flying at Alito’s home in Virginia days after Trump supporters stormed the Capitol on January 6 2021 in a bid to stop the certification of Joe Biden’s win. The upside-down flag was a symbol used by Trump supporters who claimed the 2020 presidential election had been stolen.

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A global bond sell-off intensified on Wednesday following the latest in a string of US Treasury auctions to receive lukewarm demand from investors.

Treasury yields broadly rose to their highest levels in a month following an auction of new seven-year Treasury notes, which was met with tepid interest from buyers. The sell-off in US government debt had started the day before in the wake of weak two- and five-year auctions.

The benchmark 10-year Treasury yield rose to a peak of 4.64 per cent, its highest level since early May. 

Meanwhile, Wall Street stocks traded lower on the day. The S&P 500 fell 0.6 per cent as all sectors weakened, and energy stocks were the worst performer. The tech-heavy Nasdaq Composite fell 0.4 per cent.

An auction for $44bn of new seven-year Treasury notes on Wednesday was met with tepid demand, the third weak US government bond auction in two days.

Primary dealers — big Wall Street banks that are required to buy any supply not absorbed by other investors at auction — bought 17 per cent of the offering, compared with an average of 15.6 per cent, according to BMO Capital Markets. Seven-year yields rose to a peak of 4.65 per cent following the auction, the highest level since early May.

Soft demand for two- and five-year notes on Tuesday helped drive yields across maturities higher this week. Auction sizes have increased in recent months, though May’s auctions were in line with those in April. 

US stock moves to note include Chewy, Abercrombie & Fitch and some in the airline industry.

• Shares of retailer Abercrombie & Fitch jumped 20 per cent in afternoon trading on Wednesday after the clothing retailer beat expectations and lifted its sales outlook as the company continues to benefit from strong demand for its products. 

• Pet retailer Chewy surged 28.7 per cent after it beat revenue and profit expectations in its first quarter. It also announced a plan to buy back up to $500mn in stock.

• A group of airline stocks fell lower on Wednesday after American Airlines cut its quarterly profit outlook and announced its chief commercial officer would depart the company. American Airlines fell more than 14 per cent, while Jet Blue, Southwest and Delta Air Lines declined 4.6 per cent, 4.7 per cent and 1.4 per cent, respectively. 

ExxonMobil easily rebuffed an attempted shareholder revolt against its board of directors sparked by the supermajor’s decision to sue two climate-focused investors.

Investors in the biggest US oil company voted overwhelmingly on Wednesday to re-elect all 12 members of the company’s board despite a campaign against two directors — chief executive Darren Woods and lead independent director Jay Hooley — in protest over its lawsuit against activists.

Shareholders voted 95 per cent in favour of the company’s slate of directors, down marginally from 96 per cent last year. The lowest support for an individual director was 87 per cent, versus 91 per cent last year, according to a preliminary tally of votes at the company’s annual meeting.

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Global stocks declined on Wednesday against a backdrop of rising bond yields and a strengthening dollar.

Europe’s Stoxx 600 closed 1.1 per cent lower, France’s Cac 40 lost 1.5 per cent and Germany’s Dax lost 1.1 per cent. London’s FTSE ended the day down 0.9 per cent. 

Wall Street stocks were also lower in late-morning trading in New York. The benchmark S&P 500 lost 0.6 per cent, with 452 companies in negative territory. The tech-heavy Nasdaq Composite slipped 0.5 per cent. 

Yields on benchmark 10-year US Treasuries rose 0.07 percentage points to a four-week high of 4.61 per cent. Yields rise as prices fall. 

The US dollar index, a measure of the dollar’s strength against a basket of six peer currencies, rose 0.4 per cent.

The Cleveland Federal Reserve has appointed Goldman Sachs’s former head of global lending, Beth Hammack, to replace departing president and chief executive Loretta Mester later this year. 

Hammack, who will have a vote on the Federal Open Market Committee when she joins in August, left Goldman three months ago after a 30-year career at the bank. 

The Cleveland Fed said she had worked closely with US policymakers as chair of the Treasury Borrowing Advisory Committee and as a member of the Financial Research Advisory Committee and the Treasury Market Practices Group. 

Hammack holds a BA in quantitative economics and history from Stanford University, and spent time on Goldman’s interest rate products desk.

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US stocks slipped early in the session as slowly rising bond yields weighed on risk appetite ahead of key inflation data due out later this week.

Wall Street’s S&P 500 lost 0.8 per cent, with 452 stocks in negative territory and real estate and financials the worst-performing sectors. The tech-dominated Nasdaq Composite fell 0.7 per cent.

US Treasury yields jumped on Tuesday after strong consumer confidence data and weak bond auctions. Yields continued to inch higher on Wednesday as traders looked ahead Friday’s release of April’s personal consumption expenditures index data, the Federal Reserve’s most closely watched gauge.

Dar Al-Handasah, known as Sidara, said it had made an improved and “final” offer for John Wood Group, after the Aberdeen-based engineering and consulting company rejected three previous offers as undervaluing it.

Sidara said it had submitted a fourth proposal for a cash deal to take over Wood for 230p a share, up from 220p a share last week. Sidara said its latest proposal represented a 52 per cent premium to the closing price on April 29, the eve of its initial approach.

Dubai-based Sidara, which has until June 5 under UK takeover rules to make a firm offer, said its bid for Wood could not progress “unless the board of Wood engages with Sidara and an extension to the deadline is granted”.

Investors turned to energy stocks on Wednesday as rising government bond yields weighed on demand for other equities.

Europe’s region-wide Stoxx 600 was down 1 per cent in early afternoon trading. Among its 20 constituent sectors, only energy rallied on the day, up 0.3 per cent. 

Bond yields rose on both sides of the Atlantic on Tuesday, reflecting falling prices, following poorly received Treasury auctions in the US.

The resulting “global trend of risk-off” in equity and bond markets has left companies tied to in-demand commodities as the “only safe havens”, JPMorgan analysts said in a note to clients. 

Haiti’s transitional government has picked Garry Conille, a UN official, as the country’s prime minister ahead of an international mission to quell gang violence.

Conille, who briefly served as prime minister in 2011-12 and currently works for Unicef as regional director for Latin America and the Caribbean, said on X on Wednesday that “he was very honoured” to take on the role.

The beleaguered Caribbean nation is awaiting the arrival of a Kenyan-led multinational force to tackle the gangs that are roiling the capital, and which led to the collapse of Ariel Henry’s government in April.

A transitional presidential council, which has some executive powers, has governed since then, but is yet to appoint a cabinet and an electoral commission required for elections by the end of 2025.

German inflation picked up more than forecast to a four-month high due to an acceleration of services prices, adding to signs that rapid wage growth is keeping price pressures elevated.

The increase in German inflation from 2.4 per cent last month to 2.8 per cent in May was driven in part by a sharp fall in energy prices last year and discounted public transport tickets introduced a year ago. Economists polled by Reuters had forecast a smaller rise in German inflation to 2.7 per cent.

The federal statistics office said German services prices rose 3.9 per cent in the year to May, compared with 3.4 per cent in April. That offset a slowdown in goods inflation to 1 per cent.

Cruise operator Viking missed expectations for profits in its first quarter but beat those for revenue, signalling a mixed picture for investors in the second-largest initial public offering of the year. 

Viking said it lost $1.21 a share in the three months to March, against a loss of 47 cents expected by analysts. Revenue rose 14.2 per cent to $718.2mn, largely driven by an expansion of the company’s fleet over the previous year. Analysts had expected revenue of $594.6mn.

The cruise line said it expected most of its revenue and profits to come in the second and third quarters, the primary season for its river cruises.

Shares were down 1.7 per cent in pre-market trading in New York.

Dick’s Sporting Goods raised its full-year outlook after a forecast-beating quarter in which demand for its sporting goods and attire remained strong even as consumers reduce spending on other discretionary items.

The sports retailer said it now expects comparable sales growth to be between 2 and 3 per cent, up from previous forecasts of 1 to 2 per cent. Earnings per diluted share is expected to be between $13.35 to $13.75, up from $12.85 and $13.25 previously.

Dick’s Sporting Goods said comparable sales growth in the three months that ended May 4 rose 5.3 per cent, surpassing analysts’ expectations for 2.4 per cent, due to growth in transactions and consumers’ spending more during each visit.

Dick’s Sporting Goods shares were up 6.7 per cent in pre-market trading in New York on Wednesday.

The Evening Standard has announced plans to shutter its daily print newspaper and replace it with a weekly edition as the London free sheet struggles with losses and changes to commuter habits.

Russia-born media tycoon Evgeny Lebedev’s outlet said in a memo to staff that it planned to consult on the launch of a new weekly newspaper that would “replace the daily publication”.

It said shorter commuting weeks and widespread WiFi on routes made “evolution a prerequisite of viability”, adding that “the substantial losses accruing from the current operations are not sustainable”.

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Junior doctors in England will go on strike for five days in the run-up to the UK general election, after failing to reach an agreement with the government to secure a better pay offer.

The British Medical Association, the main doctors’ union, said on Wednesday that junior doctors would walk out from June 27 to July 2, in a significant escalation of the battle for a 35 per cent pay rise.

The announcement comes a week after UK Prime Minister Rishi Sunak announced a July 4 election.

Robert Laurenson and Vivek Trivedi, co-chairs of the BMA junior doctors’ committee, said the doctors had “made clear to the government that we would strike unless discussions ended in a credible pay offer”.

Salesforce: The cloud-based software company is expected to continue to benefit from strong demand for its products. Earnings are forecast to have increased to $1.44 a share in the first quarter compared with 20 cents a share a year ago, according to analysts polled by LSEG.

Other companies: Viking Holdings, Dick’s Sporting Goods, Chewy and Abercrombie & Fitch will report earnings before the bell. HP will release results after the market closes.

Fedspeak: New York Fed president John Williams will participate in a roundtable discussion with local leaders to hear about business conditions and municipal and community services in Watertown, New York. Atlanta Fed president Raphael Bostic will participate in a moderated conversation regarding the economic outlook and leadership at a conference held by the American Economic Association in Atlanta.

Fed Beige Book: The Federal Reserve will release its report on the current economic conditions of its 12 central bank districts.

Biden: US President Joe Biden will campaign with vice-president Kamala Harris in Philadelphia, as the duo try to stir up support in the swing state of Pennsylvania ahead of the presidential election in November.

Anglo American has rejected BHP’s request to extend takeover talks, putting the Australian mining group’s pursuit of a £39bn mega-merger on the brink of collapse.

The FTSE 100 company said that it would not agree to extend the 5pm deadline on Wednesday, by which BHP must make a firm offer or walk away, after rejecting three takeover proposals and engaging in a week of talks over a controversial deal structure.

The London-listed company said BHP had not addressed its “fundamental concerns” about the structure of the proposed transaction, meaning “there is no basis for a further extension” to allow more talks.

Anglo agreed last week to engage with BHP and extend the original deadline by a week.

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Belgian and French police have raided offices in the European parliament on suspicion that a member of staff is working for Russia.

Police searched a home in Brussels, as well as the unnamed employee’s office in the European parliament in both Brussels and Strasbourg, in connection with Russian interference ahead of EU elections next week.

“The searches are part of a case of interference, passive corruption and membership of a criminal organisation and relates to indications of Russian interference, whereby members of the European parliament were approached and paid to promote Russian propaganda via the Voice of Europe news website,” the Belgium prosecutor’s office said on Wednesday.

Sterling hit a 21-month high against the euro as conviction grows that the European Central Bank will cut interest rates sooner than its UK counterpart. 

The pound rose 0.2 per cent against the euro on Wednesday to £0.849, its highest level since August 2022.  

The moves come as investors have been pushing back the expected timeline for UK interest rate cuts, with the BoE now expected to deliver its first cut by November. 

The ECB is expected to start cutting rates next month, with two or three cuts priced by the end of the year. 

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The Singapore Airlines flight that encountered severe turbulence and resulted in the death of one passenger last week dropped 54 metres in less than five seconds, according to a preliminary investigation using the aircraft’s black box flight recorder. 

The “rapid” changes in gravitational force while in the air “likely caused the injuries to the crew and passengers”, according to a chronology of events compiled by the investigations body of Singapore’s Ministry of Transport, National Transportation Safety Board (NTSB), Federal Aviation Administration (FAA) and Boeing, and published on Wednesday.

Flight SQ321 left London on Monday last week and was diverted to Bangkok after experiencing sudden extreme turbulence while flying over Myanmar.

One British passenger died and dozens were hurt including some suffering severe spinal and brain injuries. 

German wages rose 6.4 per cent in the first quarter, giving workers in Europe’s largest economy their biggest real-terms pay rise after inflation since records began in 2008.

The federal statistical agency said on Wednesday that the 3.8 per cent annual increase in real German wages in the first quarter was the fourth such rise in a row — following six consecutive quarters of declines. 

The acceleration in German wages above the slowing pace of inflation will increase household purchasing power and is expected to lift consumer spending this year.

The figures are unlikely to stop the European Central Bank from starting to cut interest rates at their meeting next week. But it may raise concerns about rising labour costs keeping price pressures high, which could slow the pace of further rate cuts.

European stocks slipped early on Wednesday against a backdrop of rising government bond yields.

The region-wide Stoxx 600 lost 0.2 per cent in early trading, with every sector except energy in negative territory. France’s Cac 40 fell 0.3 per cent and Germany’s Dax fell 0.2 per cent. London’s FTSE 100 lost 0.06 per cent.

Traders are betting that the European Central Bank will lower its benchmark deposit rate when policymakers meet next week. 

Yields on US and European bonds have climbed over the past fortnight, however, reflecting concerns that rates may need to stay on hold for longer to quash inflation. Yields rise as prices fall.

Shares in International Distribution Services rose on Wednesday after the group’s board recommended a £5.2bn takeover deal for Czech billionaire Daniel Křetínský’s to buy the Royal Mail owner.

IDS’s shares rose 2.8 per cent in early trading after Křetínský’s EP Group agreed to pay 370 pence a share for London-listed IDS including debt. The deal values the group at £5.2bn.

The takeover talks have been beset by postal strikes and the burden of having to deliver letters at a set price across the country.

Under the terms of the transaction, EP Group promised to preserve service levels and maintain the company’s UK headquarters.

PwC China has been shunned by more high-profile clients in the country as the Big Four accounting firm braces for penalties related to its audit of distressed property developer Evergrande.

China Merchants Bank, a top retail lender, said it planned to change its accounting firm from Deloitte to EY for its 2024 onshore and offshore audit, according to an exchange filing on Monday. The appointment of Deloitte was a reversal of the bank’s decision last September to hire PwC China.

Also this week, China Railway Group, a major government-owned construction conglomerate, changed its 2024 auditor and internal control auditors to Deloitte from PwC, according to another filing.

The two are the latest to ditch PwC in recent months, as companies take into consideration its uncertain future in China, with a leadership change and potential penalties being imposed by the authorities.

BHP has called for a second extension in talks to acquire rival Anglo American, upping pressure on the UK-listed company’s board to engage with its proposal.

BHP faces a deadline of 5pm on Wednesday to make a formal bid for Anglo, which has rejected three all-share bids, the last valuing the company at £39bn.

The two companies have engaged for a week over the structure of a potential deal which requires the spin off of two South African assets. BHP detailed a number of measures on Wednesday it said would provide substantial risk protection for Anglo investors.

In a statement on Wednesday morning, BHP said “a further extension of the deadline is required to allow for further engagement on its proposal”.

Czech billionaire Daniel Křetínský has reached an agreement to buy the owner of Royal Mail in a deal valuing the former postal monopoly at £5.2bn.

International Distribution Services said on Wednesday that it would recommend an offer from Křetínský’s EP Group, which valued it at 370 pence a share.

As well as the former UK postal monopoly, IDS owns the fast-growing Netherlands-based parcels business GLS.

It is the latest dealmaking move by Křetínský, a lawyer-turned-energy tycoon who has stakes in supermarket chain J Sainsbury and London football club West Ham United.

“The IDS board believes that the offer from EP is fair and reasonable given that there are uncertainties ahead and allows investors to realise value at a significant premium,” said Keith Williams, chair of IDS.

Equities in Hong Kong led losses in Asia on Wednesday as Chinese tech and property companies declined.

The Hang Seng Tech index shed 2.3 per cent and the Hang Seng Mainland Properties index lost 1.7 per cent.

Hong Kong-listed Link Reit, Asia’s largest real estate investment trust, rose 1.4 per cent after reporting quarterly earnings. The stock has still significantly underperformed the broader Hang Seng index for the year to date.

In currency markets, the Philippines peso led losses as it slid 0.7 per cent against the dollar while the Vietnamese dong held steady after the country’s May inflation figure came in slightly lower than forecast by Bloomberg.

Events: BHP faces a 5pm deadline to make a formal bid for its smaller rival Anglo American. The cut-off to secure the £39bn takeover was extended by a week last Wednesday. South Africa and Madagascar hold parliamentary elections.

Economic indicators: Investors will be scanning Germany’s preliminary May inflation rate data for signs of easing prices. Harmonised consumer prices in Europe’s largest economy ticked up unexpectedly in the year to April, to 2.4 per cent, while core inflation slowed to 3 per cent from 3.3 per cent. German and French consumer confidence figures are published.

Corporate updates: UK retailers JD Sports Fashion and Pets at Home publish full-year results, while London-based Impax Asset Management releases half-year results.

Hong Kong equities fell on Wednesday, dragged lower by a decline in mainland Chinese technology companies listed in the city.

The Hang Seng index dropped 1.2 per cent in early trading while the Hang Seng Tech index shed 1.4 per cent.

Despite the decline in Chinese tech names, the mainland’s CSI 300 index rose 0.5 per cent, driven by a rally in companies in the renewable energy and solar sectors.

In currency markets, the Australian dollar rose 0.1 per cent against its US counterpart following stronger than expected inflation data that reduced the likelihood of the Reserve Bank of Australia cutting rates this year.

Australia has suffered a setback in its fight against inflation after April’s consumer price index data rose more than expected.

The latest CPI reading came in at 3.6 per cent, above the 3.4 per cent forecast by economists. March’s CPI reading was 3.5 per cent. Rising prices for rent, alcohol and transport drove the increase.

The Reserve Bank of Australia has all but ruled out a cut in interest rates this year, with some economists now predicting the central bank may raise rates in the face of stubborn inflation.

The Australian budget, released this month, included relief measures for energy and rent that could potentially add to inflation.

The IMF has upgraded its forecast for China’s economic growth this year but warned that Beijing needed to “scale back” industrial policies that could affect trading partners and increase efforts to lift domestic demand.

Concluding their regular assessment of the health of China’s economy, IMF staff said they were upgrading their forecast for GDP growth in 2024 from 4.6 per cent to 5 per cent. The multilateral lender also increased its forecast for 2025 from 4.1 per cent to 4.5 per cent.

The change was driven by stronger first-quarter growth and recent policy initiatives, the IMF said, as Beijing increases stimulus efforts to aid an economy still struggling with the effects of a deep property slump.

Events: BHP faces a deadline to make a bid for its rival miner Anglo American. The Citi Pan-Asia conference in Singapore begins.

Economic indicators: Australia releases consumer price index data for April. Vietnam publishes its May CPI along with data on industrial production and trade.

Corporate updates: Hong Kong’s Link Reit, the largest real estate investment trust in Asia, reports earnings amid an ongoing property downturn in the city. Chinese liquor giant Kweichow Moutai and Cosco Shipping hold their annual meetings.

Venezuela has revoked its invitation to election observers from the EU ahead of a much-anticipated presidential vote in July.

“They are not worthy people to come to this country . . . while they maintain sanctions,” the head of Venezuela’s national electoral council said on Tuesday evening.

The EU and US expanded sanctions on the country in 2017 amid a government crackdown on dissent. President Nicolás Maduro in 2018 won re-election in a vote regarded by international observers as fraudulent.

Maduro is seeking another six-year term in July, despite overseeing an economic crisis that has seen millions flee the country since he assumed power in 2013.

The leading opposition candidate is banned from running.

American Airlines on Tuesday said investors would earn less per share this quarter, while announcing the departure of its chief commercial officer.

The company now expects to earn between $1 and $1.15 per share in the second quarter, down from a range of $1.15 to $1.45. Shares fell 8 per cent in extended trade on Tuesday.

American said its flying capacity would remain the same as the second quarter of 2023, after previously saying it would grow between 7 and 9 per cent.

The carrier also said chief commercial officer Vasu Raja will leave the company in June. Chief strategy officer Stephen Johnson will take over “effective immediately”.

The White House does not support putting sanctions on the International Criminal Court after its prosecutor sought arrest warrants for Israeli Prime Minister Benjamin Netanyahu and defence minister Yoav Gallant.

“We don’t believe that sanctions against the ICC is the right approach,” National Security Council spokesperson John Kirby said on Tuesday.

US secretary of state Antony Blinken signalled last week that the White House was willing to work with Congress after Republicans called for a censure of the court. A vote on the matter is expected in the House.

Kirby reiterated the White House’s position that it does not support the court’s move.

US stocks closed higher on Tuesday, starting the holiday-shortened week on the front foot.

The Nasdaq Composite ended 0.6 per cent higher to finish above 17,000 points for the first time. Every so-called Magnificent Seven tech group except Tesla finished higher. Nvidia surged 7.1 per cent to close at a record high.

The S&P 500 rose less than 0.1 per cent as strong gains for energy and technology stocks outweighed broad declines elsewhere.

Oil prices rose, with US benchmark West Texas Intermediate rising 2.7 per cent to $79.83 a barrel, its biggest one-day rise since March.

The US-built floating pier created to deliver aid to Gaza will take at least a week to be repaired after it was damaged by a storm and rough seas, forcing a suspension of its delivery operations.

The $320mn pier will be removed from its location on the coast of Gaza over the next couple of days and sent to the Israeli city of Ashdod for the US military to repair it, Pentagon spokesperson Sabrina Singh told reporters on Tuesday.

The damage is a significant setback for the US’s seaborne endeavour, which started sending humanitarian aid to the enclave on May 17.