Business

By Aimee Donnellan and Natalie Grover

LONDON (Reuters) – AstraZeneca may not stay in the vaccine business in the long run, its CEO told Reuters on Tuesday, showing how quickly fortunes have changed for the drugmaker that produced one of the first COVID-19 shots but has since lost out to rivals. Production delays, probes by regulators following rare cases of severe side effects, and concerns about its relatively short shelf life compared with other shots have stymied adoption of the company’s COVID-19 vaccine.

Now, in the third year of the pandemic amid a global vaccine supply glut, its use has diminished in much of the developed world as countries have inoculated large numbers of people and prefer Pfizer and Moderna’s mRNA vaccines as boosters.

AstraZeneca’s COVID vaccine has still not won U.S. approval.

The London-listed company is building on its portfolio of antibody therapies, including for COVID-19, the respiratory virus RSV and other viruses, Soriot said in a Reuters Newsmaker interview on Tuesday.

But on the future of its COVID vaccines business, he said: “I can’t be sure we will be there or not.”

He also said he wasn’t sure if AstraZeneca would broaden its roster of vaccines for other infections either, adding that the company was looking into it.

Investors have speculated about the future of the vaccine business given slowing sales of the COVID shot as initial sales contracts have been fulfilled, stiff competition from mRNA vaccines and its relatively little expertise in the field.

The company created a separate division for vaccines and antibody therapies late last year.

Still, Soriot said he did not regret the company’s work with Oxford University to develop a COVID vaccine, given they had delivered billions of doses and saved an estimated 6 million lives across the globe.

The inoculation was AstraZeneca’s second best-selling product in 2021 with sales of $3.9 billion.

AstraZeneca is also looking for bolt-on acquisitions, including small and mid-sized companies specialising in oncology and cardiovascular treatments, Soriot added.

“We always look for external opportunities,” he said.

KEEP ON DOING THIS JOB

The CEO has presided over a quadrupling of AstraZeneca’s share price in his decade at the helm.

“I can keep doing this job for many years,” he said.

The 63-year old was once seen as a natural successor to outgoing Chairman Leif Johansson.

But in July, Soriot quashed speculation he was planning to retire any time soon, saying he expected to work with the company’s newly announced chairman-designate Michel Demare for many years to come.

Soriot was tasked with turning around a troubled AstraZeneca – hit by a string of key patent losses and a spate of clinical trial failures – in October 2012, following a stint at pharma peer Roche.

With the Frenchman at the helm, the fortunes of the Anglo-Swedish drugmaker changed dramatically.

He sharpened focus on speciality medicines and the lucrative field of oncology, made acquisitions to refill the company’s medicine cabinet, fended off a hostile takeover from U.S. pharma giant Pfizer, and invested heavily in R&D to improve the company’s lacklustre drug development success rate.

However, he warned on Tuesday that fewer new medicines would be developed going forward due to U.S. drug price laws passed last week.

Asked about inflationary pressures, Soriot said: “We are going to have to become more innovative and productive. We can’t expect our selling prices to go up.”

Sales in China, which account for close to a fifth of the company’s total annual revenue, have dipped in recent quarters due to lower drug prices and as COVID lockdown measures kept some patients from being diagnosed and seeking cancer care.

On Tuesday, Soriot said sales were picking up in the third quarter in the world’s second-largest market for pharmaceuticals – and he expected the country to play a more significant role in the global market over the next decade.

(Reporting by Aimee Donnellan and Natalie Grover; Editing by Mark Potter and Jan Harvey)

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By Lucia Mutikani

WASHINGTON (Reuters) -Sales of new U.S. single-family homes plunged to a 6-1/2-year low in July as persistently high mortgage rates and house prices further eroded affordability.

The housing market has been the sector hardest hit by the aggressive interest rate increases delivered by the Federal Reserve to tame inflation. The report from the Commerce Department on Tuesday added to a stream of weak housing data.

New home sales tumbled 12.6% to a seasonally adjusted annual rate of 511,000 units last month, the lowest level since January 2016. June’s sales pace was revised down to 585,000 units from the previously reported 590,000 units.

Sales rose in the Northeast, but dove in the West and the Midwest as well as the densely populated South.

Economists polled by Reuters had forecast that new home sales, which account for a fraction of U.S. home sales, would decrease to a rate of 575,000 units.

Sales dropped 29.6% on a year-on-year basis in July. They peaked at a rate of 993,000 units in January 2021, which was the highest level since the end of 2006.

Data last week showed single-family housing starts, which account for the biggest share of homebuilding, tumbled to a two-year low in July, while home resales fell to levels last seen in May 2020. The National Association of Home Builders/Wells Fargo Housing Market sentiment index fell below the break-even level of 50 in August for the first time since May 2020.

The Fed has hiked its policy rate by 225 basis points since March to slow the economy and, in turn, curb inflation.

Fed Chair Jerome Powell’s address on Friday at the annual Jackson Hole global central banking conference in Wyoming could signal how much further the U.S. central bank needs to tighten monetary policy.

Mortgage rates, which move in tandem with U.S. Treasury yields, have soared even higher than the Fed’s benchmark overnight interest rate. The 30-year fixed-rate mortgage is averaging 5.13%, up from 3.22% at the start of the year, according to data from mortgage finance agency Freddie Mac.

Despite slowing demand, house price growth remains strong. The median new house price in July was $439,400, an 8.2% jump from a year ago. There were 464,000 new homes on the market at the end of last month, up from 450,000 units in June.

Houses under construction made up roughly 67.2% of the inventory, with homes yet to be built accounting for about 23.1%. At July’s sales pace it would take 10.9 months to clear the supply of houses on the market, up from 9.2 months in June.

(Reporting by Lucia MutikaniEditing by Chizu Nomiyama and Paul Simao)

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By Jonathan Cable

LONDON (Reuters) – The global economy is increasingly at risk of sliding into recession, surveys showed on Tuesday, as consumers faced with generation-high inflation rein in spending while central banks are tightening policy aggressively just when support is needed.

And supply chains yet to recover from the coronavirus pandemic have been further damaged by Russia’s invasion of Ukraine and China’s strict COVID-19 lockdowns, hurting the manufacturing industry.

A myriad of purchasing managers’ surveys published on Tuesday from Asia to Europe to the United States showed business activity contracting and pointed to little hope of a turnaround anytime soon.

“Put simply, it’s the extremely high rates of inflation that is resulting in households having to pay more for the goods and services they have to buy which means they have less to spend on other items,” said Paul Dales at Capital.

“That’s a reduction in economic output so that’s what’s driving the recession. Higher interest rates are playing a small part but really it’s the higher inflation.”

U.S. private-sector business activity contracted for a second straight month in August and is at its weakest in 18 months, with particular softness registered in the services sector.

There is a 45% chance of a U.S. recession within a year and 50% within two years, according to economists in a Reuters poll on Monday who did however largely say it would be short and shallow. [ECILT/US]

It was a similar story in the euro zone where the cost of living crisis meant customers kept their hands in their pockets and business activity across the bloc contracted for a second month.

The gloomy data pinned the euro to a 20-year low against the dollar, with surging gas prices adding to misery dragging Europe towards recession.

In Britain, outside the European Union, private sector growth slowed to a crawl as factory output fell and the larger services sector eked out only a modest expansion, indicating a recession was coming there.

Japan’s factory growth slowed to a 19-month low this month as output and new order declines deepened while Australia’s composite Purchasing Managers’ Index fell below the 50 mark separating growth from contraction.

FEELING THE PINCH

Inflation has reached multi-decade highs in many parts of the world, forcing central banks to tighten monetary policy as their mandate is to maintain price stability.

The Federal Reserve has lifted its benchmark overnight interest rate by 2.25 percentage points this year as it tries to curb decades-high inflation and is expected to raise it again next month, a Reuters poll found on Monday. [ECILT/US]

Yet despite that aggressive policy inflation was likely to stay above the Fed’s target beyond this year and next.

Last month the Bank of Canada surprised markets with a larger than expected 100 basis point increase to its key interest rate and said more hikes would be needed.

The European Central Bank, which struggled to get any meaningful inflation for years but is now facing it well above target, kicked off its rate hiking cycle in July, raising interest rates more than expected and a Reuters poll forecasts it will continue on its tightening path. [ECILT/EU]

Britain’s Bank of England was one of the first amongst its peers to raise borrowing costs and is widely expected to continue doing so, even though it has warned the country faces a long recession as energy bills are expected to push consumer price inflation above 13% in October. [ECILT/GB]

Central banking heavyweights, including Fed Chair Jerome Powell, meet this week for their annual symposium in Jackson Hole, Wyoming, and may shed light on how big future rate hikes might be and how strong their economies are.

“Following the signs of an end to rate hikes among the central banks which led the tightening, investors may anticipate that the Fed, ECB, and BoE may end their rate hikes in the first half of 2023,” said Richard Flynn at Charles Schwab.

“This year’s Symposium may provide an early indication of when the turn from hikes to cuts may occur.”

(Reporting by Jonathan Cable; Editing by Nick Macfie)

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By Aimee Donnellan and Natalie Grover

LONDON (Reuters) -AstraZeneca’s Chief Executive Pascal Soriot warned on Tuesday new U.S. legislation capping drug prices would reduce the ability of companies to recoup their investment on developing new drugs and hurt innovation.

In a Reuters Newsmaker interview, he said the British drugmaker’s top-selling cancer therapy Tagrisso as well as its potential blockbuster Enhertu would likely be negatively affected by the new law in the coming years.

Last week, a landmark law that included provisions to tackle the rising cost of medicines was passed in the United States, in a rare legislative defeat for the powerful pharmaceutical industry that set a precedent for curbing drug prices in the world’s most lucrative market for medicines.

The act will for the first time allow the federal Medicare health plan for the elderly and disabled to negotiate prices on up to 20 drugs a year. It also sets limits on drug price increases for Medicare and caps out-of-pocket costs for those enrolled in the programme.

The price negotiation portion of the legislation, which will kick off from 2026, poses a significant challenge, Soriot said.

He said it was unclear how such negotiations would play out, and that it appeared to be structured as less of a negotiation and more of an “imposition of price.”

With the current system of patent protection, pharmaceutical companies are able to recoup their investment in developing a drug drugs over nine to 11 years. With this new law, the potential to recoup that investment is curtailed, he said.

(Reporting by Aimee Donnellan and Natalie GroverEditing by Mark Potter)

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TOKYO (Reuters) -Shares of Japan’s Hino Motors, Toyota Motor Corp’s truck and bus unit, slumped more than 6% on Tuesday, after a data-falsification scandal widened to small trucks.

Hino President Satoshi Ogiso said on Monday that during a transport ministry investigation additional misconduct regarding emissions was found that affects more than 76,000 vehicles.

The scandal, which came to light in March, was previously not believed to have impacted the smaller trucks, which have been sold since 2019. The automaker has said it will suspend shipments of small trucks.

The automaker said even though the engine for the small trucks was supposed to be tested at least two times at each measurement point, it was only tested once at each site.

Ogiso said the misconduct was due to lack of understanding of regulations and not intentional.

Shares of Hino dropped 6.2% to 590 yen ($4.29) on Tuesday.

Toyota shares fell 1.8% while the key Nikkei index was down 1.1%.

The data falsification scandal at Hino has now affected all sizes of trucks, bringing the total number of vehicles involved in the scandal to more than 640,000.

The latest small truck shipment stoppage means Hino will be pausing shipment of 60% of its vehicles it makes domestically.

A company-commissioned panel said in a report this month that Hino had falsified emissions data on some engines going back to at least 2003, or more than a decade earlier than previously indicated.

($1 = 137.3800 yen)

(Reporting by Satoshi Sugiyama; Editing by Tom Hogue and Himani Sarkar)

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TOKYO (Reuters) – Japan’s factory activity growth slowed to a 19-month low in August as output and new order declines deepened, amid growing pressure from persistent rises in raw material and energy costs and weakening global demand.

Activity in the services sector contracted for the first time in five months, as a fall in new business raised worries about lacklustre demand at home.

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) fell to a seasonally adjusted 51.0 in August from a 52.1 final in July, marking the slowest expansion since January last year. The 50-mark separates contraction from expansion.

The headline figure was pulled down in the second consecutive month of declines in output and overall new orders. New orders shrank at the fastest rate in nearly two years.

Optimism about conditions for the year ahead underpinned the slightly positive headline figure, the survey showed. Producers only became slightly less optimistic about conditions ahead compared to the previous month.

“August data signalled the second-weakest reading in the composite index so far this year, though the rate of deterioration was only mild,” said Usamah Bhatti, economist at S&P Global Market Intelligence, which compiles the survey.

“Of concern was the amount of new business received by private sector firms, which reduced for the first time in six months and pointed to further weaknesses to come.”

The au Jibun Bank Flash Services PMI Index slipped to a seasonally adjusted 49.2 in August from July’s final of 50.3, contracting for the first time since March.

The au Jibun Bank Flash Japan Composite PMI, which is calculated by using both manufacturing and services, saw a marked decline to 48.9 from July’s 50.2 final.

(Reporting by Daniel Leussink; Editing by Sam Holmes)

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By Rozanna Latiff

KUALA LUMPUR (Reuters) – Former Malaysian prime minister Najib Razak arrived at the country’s top court on Tuesday for the final leg of his appeal to set aside his corruption conviction and 12-year jail sentence over a case linked to the 1MDB financial scandal.

The Federal Court could potentially deliver its verdict on Tuesday or set a new date for its decision. Malaysian prosecutors wrapped up their arguments on Friday, while Najib’s lawyers declined to present their submissions, citing insufficient time to prepare.

Najib arrived just ahead of court proceedings scheduled to start at 9:30 am (0130 GMT). He waved to reporters but did not make any comment.

About a hundred supporters had gathered outside the court, with some shouting “Allahu Akbar” and “Justice for Najib.”

Najib, 69, was found guilty in July 2020 of criminal breach of trust, abuse of power, and money laundering for illegally receiving about $10 million from SRC International, a former unit of state fund 1Malaysia Development Berhad (1MDB).

Najib, who pleaded not guilty, was sentenced to 12 years’ jail and a 210 million ringgit ($46.84 million) fine.

Prosecutors have said some $4.5 billion was stolen from 1MDB – co-founded by Najib as premier in 2009 – in a wide-ranging scandal that has implicated officials and financial institutions around the world.

Najib, who faces several trials over the allegations, has consistently denied wrongdoing.

The ex-premier replaced his legal team just three weeks before his final appeal at the Federal Court began last week.

Najib has said that his right to a fair trial was at risk, after the court rejected multiple requests to postpone the appeal to allow his new legal team to fully prepare.

His previous lawyers had submitted a written petition ahead of the hearings.

In his submissions, Najib listed 94 reasons why he should be acquitted, including that lower courts had erred in some of their findings.

Prosecutors have said Najib was aware that the funds received in his account were proceeds from “an unlawful activity,” and had exercised his position as prime minister, finance minister and advisor to SRC International to obtain the funds.

($1 = 4.4830 ringgit)

(Reporting by Rozanna Latiff; additional reporting by Zahra Matarani; Editing by Kim Coghill)

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WASHINGTON (Reuters) – A bipartisan group of U.S. lawmakers on Monday released a revised version of a bill aimed at making it easier for news organizations to negotiate collectively with platforms like Google and Facebook.

The Journalism Competition and Preservation Act “removes legal obstacles to news organizations’ ability to negotiate collectively and secure fair terms from gatekeeper platforms that regularly access news content without paying for its value,” according to a news release from the lawmakers.

The group includes Democratic Senator Amy Klobuchar and Republican Senator John Kennedy, both members of the Judiciary Committee, and House Judiciary Committee members David Cicilline, a Democrat, and Ken Buck, a Republican.

A previous version of the bill, introduced in March 2021, was opposed by two technology industry trade groups that Meta Platforms’ Facebook, and Alphabet’s Google belong to – the Computer & Communications Industry Association and NetChoice.

The updated bill would cover news publishers with fewer than 1,500 full-time employees and non-network news broadcasters. It would allow them to work together to win better deals from Facebook, Google and other large platforms, according to the news release.

The 2021 legislation would have applied to any print, broadcast or digital news organization with a dedicated editorial staff that published at least on a weekly basis.

(Reporting by Eric Beech; Editing by Chris Reese)

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By Stephanie Kelly

(Reuters) – Oil prices edged up on Tuesday, after Saudi Arabia warned that OPEC could cut output to correct a recent drop in oil futures.

Brent crude futures rose 32 cents to $96.80 a barrel by 0004 GMT, after a choppy session on Monday when they dropped by more than $4 before paring losses to trade near flat.

U.S. West Texas Intermediate crude futures rose 37 cents to $90.73 a barrel by 0004 GMT.

The benchmarks are down about 12% and 8% this month, respectively.

The Organization of the Petroleum Exporting Countries stands ready to reduce production to correct the recent oil price fall driven by poor futures market liquidity and macro-economic fears, which has ignored extremely tight physical crude supply, OPEC’s leader Saudi Arabia said on Monday.

Saudi state news agency SPA cited Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman as telling Bloomberg that OPEC+ has the means and flexibility to deal with challenges.

Meanwhile, Europe faces fresh disruption to energy supplies due to damage to a pipeline system bringing oil from Kazakhstan through Russia, adding to concerns over a plunge in gas supplies.

Limiting price gains, Iran accused the United States on Monday of procrastinating in efforts to revive Tehran’s 2015 nuclear deal – a charge denied by Washington, which said a deal was closer than two weeks ago because of apparent Iranian flexibility.

In U.S. supply, market participants awaited industry data due out at 4:30 p.m. ET on Tuesday. U.S. crude oil and gasoline stockpiles likely dropped last week, while distillate inventories edged up, a preliminary Reuters poll showed on Monday. [EIA/S]

(Reporting by Stephanie Kelly; Editing by Himani Sarkar)

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By Rae Wee

SINGAPORE (Reuters) – The dollar held firm on Tuesday on safe haven flows, while the euro languished around a two-decade low as investors braced for a hard winter in Europe as it grapples with energy supply and broader economic growth concerns.

The euro touched its lowest since late 2002 at $0.9926 overnight and was last barely higher at $0.9939.

Russia will halt natural gas supplies to Europe via the Nord Stream pipe for three days at the end of the month, the latest reminder of the precarious state of the continent’s energy supply.

Heatwaves in the continent have already put a strain on energy supplies and worries are growing that any disruption during winter months could be devastating for business activity.

“Given the current mood, there’s obviously concerns as to whether that’s going to be three days or whether it’s going to be three years,” said Ray Attrill, head of FX strategy at National Australia Bank (NAB).

“Is it really just going to be a three day maintenance or is this just another example of weaponisation of gas supply into Europe?”

The pound was also dragged to a new 2.5-year low overnight, and hobbled near that level at $1.1758 in early Asia trade. The Japanese yen steadied at 137.30 per dollar after touching a one-month low of 137.70.

The Australian and New Zealand dollars were relatively steady, which NAB’s Attrill attributed to market’s attention being drawn to the weakness of Europe’s outlook.

Chief on investors’ minds for Tuesday will be flash manufacturing PMI readings out in the eurozone and Britain later in the day, which will provide further clarity on the growth trajectory for the respective economies.

Investors are also waiting on minutes of the European Central Bank’s (ECB) last policy meeting on Thursday that are likely to sound hawkish even as the continent faces downturn in growth.

The Aussie was last up 0.15% to $0.6689, while the kiwi gained 0.18% to $0.6183. [AUD/]

Elsewhere in Asia, the dollar hit 6.8711 against the offshore yuan, close to a nearly two-year high of 6.8752 hit on Monday.

Against a basket of currencies, in which the euro is the most heavily weighted, the U.S. dollar index stood firm at 108.9, attempting to breach a two-decade high of 109.29 hit in July.

Another reason investors have sought shelter in dollars is the growing risk of a hawkish message from the Federal Reserve’s Jackson Hole symposium, flagged by several officials last week.

“Bonds sold off, led by the front-end,” said analysts at ANZ. “That’s possibly in anticipation that Chair (Jerome)Powell’s speech on Friday is likely to reiterate hawkish messaging.”

Yields on the benchmark 10-year Treasury note have risen about 4 basis points for the week and stood at 3.0201%. Yields on the two-year Treasury note were up around 5 bps to 3.3140% as investors remained on inflation and Fed watch mode.

(Reporting by Rae Wee; Editing by Shri Navaratnam)

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