Micron shares drop after China bars its chips, as US tech clash escalates – business live

Shares in Meta are down 1% in pre-market US trading, after the company was hit by a record fine for EU privacy violations.

Meta has been hit with a record fine by regulators for mishandling user information.

Meta, the parent of Facebook, has been fined a record €1.2bn (£1.05bn) by Ireland’s Data Protection Commission following an inquiry.

This beats the previous record of €746m levied on Amazon by Luxembourg in 2021.

Metaa must also suspend any future transfer of personal data to the US within five months.

The DPC ruled that Facebook had violated its rules requiring platforms to ensure data transfers from Europe to the US have appropriate safeguards in place.

In today’s ruling, it says:

While Meta Ireland effected those transfers on the basis of the updated Standard Contractual Clauses (“SCCs”) that were adopted by the European Commission in 2021 in conjunction with additional supplementary measures that were implemented by Meta Ireland, the DPC found that these arrangements did not address the risks to the fundamental rights and freedoms of data subjects that were identified by the CJEU in its judgment.

The ruling relates to a legal challenge brought by an Austrian privacy campaigner, Max Schrems, over concerns resulting from the Edward Snowden revelations that European users’ data is not sufficiently protected from US intelligence agencies when it is transferred across the Atlantic.

My colleague Dan Milmo explained the background to the case here:

China’s commerce minister, Wang Wentao, has declared that the country will continue to welcome US-funded firms.

Speaking after Beijing barred Micron from selling memory chips to key domestic industries. Wang insisted that China was open to foreign firms.

He told a seminar in Shanghai that:

“China’s economy is recovering and improving, and the market potential continues to be released, which will provide more development opportunities for enterprises from all over the world, including U.S. companies.”

Back in the chip sector, shares in other US chipmakers are also under pressures,

Qualcomm and Broadcom are both down around 0.75% in pre-market trading.

The average price tag on a home reached a record high in May, as activity picked up across the housing market.

The average asking price jumped by £6,647 or 1.8% month-on-month, new data from Rightmove shows, lifting the average asking price for a home coming to market to £372,894.

This is the largest monthly increase for 2023 so far, and above the 1% increase typically seen during May.

Rightmove reports that sellers were cautious earlier this year, following the fallout from the mini-Budget. But with buyer demand 3% higher than in 2019, asking prices are moving higher.

This doesn’t mean that houses are selling for record levels, though. Official data shows that house prices in February were £5,000 below the recent peak in November 2022, while Nationwide reports that prices rose in April after seven months of declines.

Higher mortgage rates, following 12 interest rate increases in a row, mean borrowing to buy a new home is rather more expensive than in 2021.

Tim Bannister, Rightmove’s Director of Property Science, says:

“This month’s strong jump in new seller asking prices looks like a belated reaction and a sign of increasing confidence from sellers, as we’d usually see such a big monthly increase earlier in the spring season. One reason for this increased confidence may be that the gloomy start-of-the-year predictions for the market are looking increasingly unlikely.

What is much more likely is that the market will continue to transition to a more normal activity level this year following the exceptional activity of the pandemic years. Steadying mortgage rates and a generally more positive outlook for the economy are also contributing to more seller confidence, though there are likely to be more twists and turns to come.

The market is still very price-sensitive and it is important that new sellers do not damage their prospects of a sale by overpricing initially and reducing later, with agents reporting that it’s the realistically-priced new instructions that are selling best.”

Rightmove reports that demand is being driven by the first-time-buyer and second-stepper sectors, while houses at the top of the market are taking longer to sell:

European stock markets have made a mixed start to trading, as investors digest China’s ruling that products made by US memory chip giant Micron Technology are a national security risk.

The UK’s FTSE 100 has gained 0.3% or 22 points to 7,779 points, but France’s CAC and Germanys DAX are both down around 0.1%, with the US debt ceiling deadline also on traders’ minds.

Saxo’s strategy team told clients this morning:

After a cyber-security review, China’s Cyberspace Administration of China ordered that Chinese companies dealing with critical information stop buying chips from US-based Micron Technology.

The review said that Micron’s chips posed “relatively serious cybersecurity problems” that could “seriously danger the supply chain of China’s critical information infrastructure.” The move was widely viewed as a retaliation against recent US limitations on exporting high-end chips and chip-manufacturing equipment to China.

A US Commerce Department spokesperson said the move has “no basis in fact”. Mainland China and Hong Kong revenue exposure is around 15% of total revenue for Micron Technology.

China’s ban on Micron products in critical national infrastructure is a possible escalation of Trade War rhetoric, says Neil Wilson of Markets.com.

He adds:

Biden says ties with China to improve “very shortly”...not sure if he is reading the same script as everyone else?

Shares in Micron have dropped over 6% in pre-market US trading, after China ruled its products posed “serious network security risks”.

That follows the 5% drop in Frankfurt trading this morning (see earlier post), in the light of China banning operators of key infrastructure from buying Micron chips.

The price of wheat has dropped to the lowest level in over two years, which may bring some relief to struggling households worldwide.

Chicago wheat futures fell below $6 a bushel, the lowest since April 2021. They were pushed down by expectations of ample global supplies after the deal to ship Ukrainian grains was extended last week.

One Singapore-based grains trader told Reuters:

“Global wheat market seems to be well-supplied even though there are some worries around the U.S. winter crop.”

The most-active wheat contract on the Chicago Board of Trade dipped over 1% this morning to $5.98 a bushel, the lowest since April 2021.

Last week, the Ukraine Black Sea grain deal was extended for two more months, easing concerns over world supplies.

Worries about the ongoing US debt ceiling talks have also weighed on the agricultural markets, on fears that the US could default if the limit is not raised soon.

US president Joe Biden and House Republican speaker Kevin McCarthy are expected to discuss the issue later today, after holding a “productive” phone call on the continued impasse over the debt ceiling on Sunday.

2h ago17.33 AEST

Ryanair predicts strong summer after profit jump

Mark Sweney

Ryanair has bounced back to a near-record €1.4bn (£1.2bn) profit last year and expects to better that in 2023, fuelled by a summer boom in which the low-cost airline will carry a record number of passengers.

Europe’s largest airline swung back to profit in the year to the end of March after reporting a €355m loss in the previous year. The company, led by the chief executive, Michael O’Leary, said it was cautiously optimistic that it will increase profits again this year, which could result in it topping the record €1.45bn Ryanair made in 2018.

“To date, summer 2023 demand is robust and peak summer 2023 fares are trending ahead of last year,” O’Leary said, adding:

“First-quarter fares, which benefited from a strong Easter in April – and a very weak previous year comparable due to Russia’s invasion of Ukraine – will be significantly higher than the first quarter of 2022-23.”

The airline, which earlier this month spent $40bn (£32bn) on 300 new aircraft from Boeing in a bet it can continue to outperform European rivals, carried a record 168 million passengers last year.

More here:

Shares in Micron, listed in Frankfurt, have dropped by over 5% in “thin early morning deals”, Reuters reports, as traders respond to Beijing banning its chips from use in key domestic industries.

In the UK, the government has cut the taxpayer’s stake in NatWest bank, which it bought in the financial crisis.

NatWest has agreed to buy around 469m shares from HM Treasury at a price of 268.4p per share – the price at which they closed on Friday night.

This will cost £1.3bn, and reduce government’s stake in NatWest to 38.69% from around 41% today.

NatWest’s CEO, Alison Rose says the deal “demonstrates positive progress” on the bank’s strategic priorities and the path to privatisation.

Rose adds:

NatWest Group’s robust balance sheet and capital generation allow us to continue lending responsibly and supporting the customers and communities we serve whilst delivering sustainable returns to our shareholders, including the government.”

At its peak in 2009, the UK government owned 84% of NatWest – which was previously called Royal Bank of Scotland before a post-crash rebrand.

Victoria Scholar, head of investment at interactive investor, explains:

Last month the government announced a two-year extension to its trading plan. The Treasury is aiming to return NatWest to private ownership by 2025-2026 while attempting to ‘achieve the best value for the taxpayer’.

In April, the government’s shareholding stood at 42%, down from a peak of 84%, falling further again this week.

Shares in NatWest have struggled this year, caught up in the banking sector turmoil with the collapse of SVB and the rescue deal for Credit Suisse. However, with shares up almost 15% year-on-year to Friday’s close, the government clearly decided that now is a good moment to sell some shares.

Jefferies analysts expected limited impact on Micron, though.

They argue that its major customers in China are consumer electronics firms such as smartphone and computer manufacturers, not infrastructure suppliers.

In a research note, Jefferies say:

“Since Micron’s DRAM and NAND products are much less in servers, we believe most of its revenue in China is not generated from telcos and the government.

Therefore, the ultimate impact on Micron will be quite limited.”

It generated $5.2bn of revenue from China including $1.7bn from Hong Kong last year, about 16% of its total revenue, according to Jefferies.

The announcement that Micron had failed China’s security review helped to boost shares in some local chipmaking-related firms on Monday

State media reported that domestic players could benefit from the move.

Shares in Ingenic Semiconductor,a fabless semiconductor company based in Beijing, are up 2.5% in late trading, while Shenzhen Kaifa, which designs, tests and manufacturers semiconductors, are 2% higher.

Some of Micron’s major rivals also saw their shares gain. SK Hynix are up 0.8%, although Samsung Electronics dipped back after an early rally.

Shares in Chinese chip-related stocks had also jumped in April when Beijing launched the probe into Micron.

Bernstein analysts said in a note that:

“As China’s domestic memory suppliers are not competitive in technologies and capacity, China would need to resort to Samsung, SK Hynix, Kioxia, Western Digital or other foreign suppliers as the alternative to Micron.

Beijing’s move against Micron brings fresh uncertainty to the other US chipmakers that sell to China, the world’s biggest market for semiconductors.

Holden Triplett, founder of Trenchcoat Advisors and a former FBI counterintelligence official in Beijing, says (via Bloomberg):

“No one should understand this decision by CAC as anything but retaliation for the US’s export controls on semiconductors.

“No foreign business operating in China should be deceived by this subterfuge. These are political actions pure and simple, and any business could be the next one to be made an example of.”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Tensions between Washington and Beijing are rising after China announced that products made by US chipmaker Micron Technology have failed to pass a cybersecurity review.

China’s government told users of sensitive computer equipment they must stop buying products from Micron, the biggest US memory chipmaker.

Micron, China says, had failed a network security review announced last month, meaning operators of key infrastructure are now barred from buying from the company.

Announcing the move, the Cyberspace Administration of China (CAC) said:

The review found that Micron’s products have serious network security risks, which pose significant security risks to China’s critical information infrastructure supply chain, affecting China’s national security.

The decision could include sectors ranging from telecoms to transport and finance, according to China’s broad definition of critical information infrastructure.

Micron, which is headquartered in Boise, Idaho, makes products including DRAM chips, flash memory, and solid state hard drives. through its Crucial, Ballistix Gaming and SpecTek brands.

The move escalates the ongoing US-China row over technology and security. Last November, the Biden administration banned approvals of new telecommunications equipment from China’s Huawei Technologies and ZTE, saying they posed “an unacceptable risk” to U.S. national security.

A spokesperson from the US Commerce Department has criticised China’s move, saying:

“We firmly oppose restrictions that have no basis in fact,”

“This action, along with recent raids and targeting of other American firms, is inconsistent with [China’s] assertions that it is opening its markets and committed to a transparent regulatory framework.”

Shares in some rival chipmakers rose on the news (more on that shortly…).

The Micron ban came as G7 leaders, who met in Hiroshima last weekend, announced they want to de-risk from China, rather than decouple.

Joe Biden explained:

“That means taking steps to diversify our supply chains.”

Rishi Sunak went further, saying China poses the biggest challenge to global security and prosperity of our age.

The UK PM warned that China has the “means and intent to reshape the world order”, and that G7 leaders had shown “unity and resolve” in confronting the problems posed by Beijing.

The agenda

• 10am BST: Eurozone construction output for March

• 2pm BST: Bank of Israel interest rate decision

• 3pm BST: Eurozone consumer confidence flash estimate for May