News updates from July 4: Hizbollah hits Israel with barrage of rockets, Britons head to the polls

A number of European Central Bank policymakers expressed reservations over its decision to start cutting interest rates in June because inflation and wages were heading in the wrong direction, according to the official account of last month’s meeting published on Thursday. 

At the press conference after the decision, ECB president Christine Lagarde said only one of the 26 council members had opposed it.

However, the ECB said on Thursday that “some members” of the council had argued “there was a case for keeping interest rates unchanged” given that “wage growth had surprised to the upside and inflation seemed to be stickier, mainly on account of services inflation”. 

But it added “a willingness to support [the] proposal was expressed, notwithstanding the reservations put forward”.

France’s Cac 40 advanced 0.8 per cent in trading on Thursday as Morgan Stanley said French equities, which have slipped since snap elections were called in early June, were likely to benefit from a “relief” rally following the second round of voting this weekend. 

“We believe the two key remaining French election scenarios — no majority and [Rassemblement National] absolute majority — would both ultimately be followed by a recovery in French and wider-European equities indices,” the bank’s analyst said in a note to clients.

Meanwhile, London’s large-cap FTSE 100 rose 1 per cent, with 83 of its constituent stocks in positive territory. The mid-cap FTSE 250 rose 0.1 per cent. Sterling strengthened 0.1 per cent against the dollar to $1.2751 while benchmark 10-year gilt yields rose 0.02 percentage points to 4.19 per cent. Yields move inversely to prices.

Ukrainian forces have withdrawn from parts of a long-fought-over eastern city, highlighting the challenge facing Kyiv’s troops as Russia intensifies its offensive and US military aid is slow to arrive.

Russia’s army has been focused on the hilltop city of Chasiv Yar since capturing Avdiivka, an industrial city further south, in February. Moscow has deployed tens of thousands of troops around Chasiv Yar in Ukraine’s eastern Donetsk region, which Russian President Vladimir Putin has claimed to have annexed along with three other regions that are only under his army’s partial control.

Officials ordered the retreat from part of Chasiv Yar “because it threatened the lives and health of our servicemen and the positions of our defenders were destroyed”, said Ukrainian military spokesperson Nazar Voloshyn on Thursday.

Hizbollah said it had fired more than 200 rockets at northern Israel in retaliation for an Israeli air strike that killed one of its senior commanders, as tensions between the two sides escalated sharply on Thursday.

The barrage came after Israel on Wednesday killed Mohammad Naameh Nasser, who led one of Hizbollah’s three regional divisions in southern Lebanon.

Hizbollah said its rockets had targeted several military bases in Israel and followed an initial salvo of rockets with heavy warheads into northern Israel and the occupied Golan Heights in the immediate aftermath of Nasser’s killing.

The Israeli military said on Thursday that “numerous projectiles” had been launched at Israel and that it was responding with strikes in Lebanon.

German factory orders fell more than forecast in May, extending the decline in demand for manufacturers to five consecutive months and undermining hopes of an imminent rebound in output.

The 1.6 per cent fall in industrial orders in Europe’s largest economy from the previous month would have been larger if excluding major orders worth more than €50mn, according to data released by the federal statistics agency on Thursday. Economists polled by Reuters had forecast a 0.5 per cent increase. 

“For now, we would still describe the orders data as weak. At the same time, the backlog of orders remains very high, which suggests that the overall situation in German industry is more nuanced than some of the data suggest,” Greg Fuzesi, an economist at US bank JPMorgan, said in a note to clients. 

Big share price moves in Europe today include German tyremaker Continental, London-listed medical device maker Smith & Nephew and German fashion brand Hugo Boss: 

• Continental: Shares in the German tyremaker surged 9.7 per cent in early trading, leading gains on the region-wide Stoxx 600 index, after reports suggested that comments made by Continental following its pre-close call on Wednesday indicated its auto unit performed better than expected in the second quarter. 
  

  

• Smith & Nephew: Shares in the UK medical device maker advanced 6.8 per cent on Thursday after a Swedish activist investor took a 5 per cent stake in the company. 

• Hugo Boss: Shares in the German fashion brand slipped 2.4 per cent in early trading after analysts at Deutsche Bank predicted a tough second quarter for the business amid weakened consumer sentiment. 

European stocks rose early on Thursday and sterling held steady against the dollar as Britain headed to the polls, with the Labour party expected to win its first general election since 2005.

The region-wide Stoxx Europe 600 rose 0.5 per cent, boosted by banks and real estate stocks. Germany’s Dax rose 0.3 per cent and France’s Cac 40 gained 0.6 per cent. 

London’s FTSE 100 added 0.6 per cent while the mid-cap FTSE 250 rose 0.1 per cent. Sterling was flat against the dollar at $1.2742. Benchmark 10-year gilt yields rose 0.02 percentage points to 4.19 per cent as the price of the debt fell. 

Activist investor Cevian Capital has taken a 5 per cent stake in Smith & Nephew, the UK-listed medical devices manufacturer.

Sweden’s Cevian has previously taken stakes in businesses including UBS, Vodafone and Aviva in an effort to turn those companies around. Smith & Nephew shares have fallen almost 18 per cent in the past year, with tighter restrictions on procurement practices in China hitting the business.

Smith & Nephew said it has “an open dialogue with our shareholders and will continue to engage with Cevian, as we do with all of our shareholders. These conversations are private and we do not comment publicly.”

Roche has halted a trial of its lung cancer treatment after the drug failed, the pharmaceutical company said on Thursday.

The Swiss biotech said the combination of tiragolumab and Tecentriq and chemotherapy was not as efficient as the treatment currently used in clinical care.

In a statement, the Basel-based group said patients and investigators in the trial will be unblinded and the study halted.

“These results are disappointing as it was our hope that this combination might yield improved outcomes for people living with . . . lung cancer,” said Levi Garraway, chief medical officer and head of global product development at Roche.

Polls have opened in the UK after six weeks of intense campaigning by the country’s leading parties.

Labour is set for a landslide win, according to the FT’s aggregation of national voting intention polls, which shows Sir Keir Starmer’s party winning 447 seats to the Conservatives’ 98. The Liberal Democrats are predicted to win 68 seats, while the Scottish National party is forecast to take 19.

Polling stations will be open from 7am to 10pm. For the first time in a UK general election, voters are required to bring proof of ID in order to cast their ballot. 

Asian equities exposed to artificial intelligence demand rose on Thursday, with Japan’s benchmark index hitting a 35-year high.

Japan’s Topix rose 0.9 per cent to beat a record set in 1989. Semiconductor manufacturer Rorze and robot maker Keyence contributed the most to the index’s rise.

Taiwan’s Taiex advanced 1.6 per cent as its largest constituent, Taiwan Semiconductor Manufacturing Company, gained 2.7 per cent.

South Korea’s largest listed company, Samsung Electronics, climbed 3.1 per cent ahead of its quarterly earnings announcement on Friday amid optimism around AI driving demand for its memory chips.

Hong Kong’s market was flat, while mainland China’s CSI 300 index declined.

UK general election: Parliamentary elections in England, Scotland, Wales and Northern Ireland will see voters head to the polls on Thursday. Labour is forecasted to oust the incumbent Conservatives in a landslide victory. See the FT’s poll tracker here. 

China EV tariffs: EU levies on Chinese battery electric vehicle imports will come into force

Japan’s benchmark Topix index hit an all-time high on Thursday, surpassing levels last set during the country’s 1980s bubble-era.

The index gained 0.6 per cent to rise past 2,890 points. Its previous record was 2,881 points, hit on the final day of trading in 1989.

In February, the Nikkei 225 broke a new all-time high after 34 years. The Nikkei index features more exporter-oriented companies and is less representative of Japan’s overall market.

Japanese equities have joined a bull run in US markets as investors bet on corporate governance reform and the country’s high-end manufacturers benefitting from artificial intelligence demand.

South Korean equities hit 30-month highs on Thursday, leading gains among major Asian bourses in early trading.

The country’s benchmark Kospi rose 0.6 per cent, moving past a 2,800-point threshold last reached in January of 2022. The won rose 0.4 per cent against the US dollar to Won1,381.67.

Samsung Electronics, the index’s largest constituent, climbed 2.6 per cent ahead of its quarterly earnings release on Friday. Analysts forecast strong profit growth on increased demand for memory chips to support artificial intelligence wave.

Taiwan’s benchmark Taiex gained 1.6 per cent as shares of Taiwan Semiconductor Manufacturing Co, its largest constituent, gained 2.7 per cent.

Shares of Australian natural gas giant Santos gained 5 per cent on Thursday after the company was reported to be a potential takeover target for Middle Eastern buyers. 

Santos declined to comment on a Bloomberg report that Saudi Aramco and Abu Dhabi National Oil Company are separately studying possible bids for the company.

The South Australian oil and gas developer ended talks with local rival Woodside earlier this year and said a month ago that it was “open to all opportunities” to increase the value of its business. It has been linked with a sale, break up or asset sell down as its share price has come under pressure. 

The Australian government has signed a deal with Amazon to build three secure data centres for the country’s defence and intelligence services. 

The decade-long deal will cost at least A$2bn ($1.3bn) and further tie Australia to the US, its main security partner.

Richard Marles, Australia’s defence minister, said that the Amazon Web Services deal would increase “interoperability” with the US.

“It will ensure we have a far more resilient, capable, lethal, modern and potent defence force in the future,” Marles said.

Events: Shanghai hosts the World Artificial Intelligence Conference. Thailand’s minister of foreign affairs visits the Philippines. China’s President Xi Jinping is scheduled to begin a state visit to Tajikistan after the Shanghai Cooperation Organisation summit concludes in Kazakhstan.

Economic data: Australia publishes May trade figures.

EU tariffs: Provisional tariffs on Chinese electric vehicles are due to take effect.

Corporate updates: BYD opens a factory in Thailand where it plans to produce 150,000 vehicles a year. Indian conglomerate Larsen & Toubro holds its annual meeting.

US stocks finished at record highs for the second day in a row in a shortened trading session ahead of the July 4 public holiday.

The S&P 500 closed 0.5 per cent higher on Wednesday, with the utilities and materials sectors finishing as the benchmark index’s top performers. The Nasdaq Composite gained 0.9 per cent.

Treasuries rallied as economic data from earlier in the morning pointed to a cooling US labour market, raising hopes for interest rate cuts this year. Minutes from the Federal Reserve’s most recent policy-setting meeting were set to be released later this afternoon and may provide further insight in the central bank’s thinking.

The releases come ahead of the important non-farm payrolls report on Friday.

The yield on the 10-year bond slipped 0.09 percentage points to 4.35 per cent. The two-year note’s yield fell 0.06 percentage points to 4.69 per cent.

A US federal court has postponed the implementation of a rule crafted by the Federal Trade Commission that bans virtually all non-compete agreements in the country, in a narrow ruling that only applies to plaintiffs in the case, including the US Chamber of Commerce.

A Texas district court judge on Wednesday blocked the rule and postponed its “effective date” of September 4, on the basis that the antitrust regulator “lacks substantive rulemaking authority with respect to unfair methods of competition”.

The move only applies to the US Chamber of Commerce; Business Roundtable, a large American business group; a tax services company; as well as a Texas-based chamber of commerce and trade association. The rule is set to go into effect for all other parties as scheduled.

An FTC spokesperson said: “The FTC stands by our clear authority, supported by statute and precedent, to issue this rule. We will keep fighting to free hardworking Americans from unlawful noncompetes, which reduce innovation, inhibit economic growth, trap workers, and undermine Americans’ economic liberty.”

A conservative-backed lawsuit challenging three New York City employee pension funds over their decision to sell billions of dollars in fossil fuel investments has been thrown out by a state court judge.

The ruling, which was made public on Wednesday, held that the city employees who sued, and the advocacy group that backed them, could not challenge the divestment decision because they had not suffered any direct harm.

The case, filed in 2022, is part of a flurry of litigation about socially conscious investing.

While liberal lawyers have sought to force pension funds to take action to stop climate change, the New York case was one of the first to try to stop or reverse such actions. It has been closely watched, in part because it was brought by a legal team headed by Eugene Scalia, a leading conservative attorney and son of late US Supreme Court justice Antonin Scalia.

Read more here

Federal Reserve officials reiterated that further evidence of slowing inflation was needed before it could start cutting interest rates and appeared more attentive to the downside risks of a cooling labour market.

Minutes from the June meeting of US central bank’s rate-setting committee, which were published on Wednesday, showed policymakers judged “price pressures were diminishing” across the economy.

However, the minutes also showed “several” participants said that with the labour market normalising, “a further weakening of demand may now generate a larger unemployment response than in the recent past when lower demand for labour was felt relatively more through fewer job openings”.

The minutes also showed “several” participants observed that if inflation were to remain elevated or accelerate, the target range for the federal funds rate — which was kept at a 23-year high in June — “might need to be raised”.