December 5, 2021

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Apple wins EU tax case, Burberry job losses, UK inflation ticks up

Apple has won its appeal against a 2016 European Union ruling that found Ireland had given the company €13bn in illegal tax benefits. Photo: Kathy Willens/AP
Apple has won its appeal against a 2016 European Union ruling that found Ireland had given the company €13bn in illegal tax benefits. Photo: Kathy Willens/AP

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Apple (APPL) on Wednesday won its appeal against a 2016 European Union ruling that found Ireland had provided €13bn (£11.7bn, $14.7bn) in illegal tax benefits to the technology giant.

In a significant blow to the landmark ruling by EU competition commissioner Margrethe Vestager, the EU’s General Court said that the European Commission was wrong to declare that two rulings by Irish tax authorities constituted illegal state aid.

In 2016, the commission found that the rulings, issued by Irish tax authorities in 1997 and 2007, had “substantially and artificially lowered the tax paid by Apple in Ireland since 1991.”

But the General Court said on Wednesday that the commission “incorrectly concluded” that Irish tax authorities had granted Apple an unfair advantage by not allocating the intellectual property rights of its products to two Irish subsidiaries.

The 2016 finding was a signal moment for Vestager, who has staked her reputation on a series of increasingly aggressive competition rulings.

Burberry (BRBY.L) is set to slash around 500 jobs worldwide, as its sales almost halved in the wake of store closures and weaker consumer demand because of the coronavirus pandemic.

Chief executive officer Marco Gobetti announced plans for “structural savings” in its first-quarter trading update on Wednesday. The job losses are understood to likely result in around 150 UK job losses, affecting office-based staff.

The fashion retailer saw its comparable sales fall 45% to £257m ($324m) in its first quarter ending 27 June. The decline was steepest in the Europe, Middle East, India and Africa (EMEIA) regions, down 75%, and it blamed declining tourist numbers. This was followed by the Americas, where sales slid 70%, but it said trends had “improved significantly” in June.

In the Asia Pacific region it declined only 10%, but saw double-digit growth in mainland China. In June, China sales exceeded the pre-pandemic level of 30%, according to the company, with a “repatriation” of sales as customers bought at home rather than abroad.

Rising prices for games, toys, and hobbies unexpectedly pushed the UK inflation rate higher to 0.6% in June, as businesses across the UK emerged from the country’s sweeping coronavirus lockdown.

The year-on-year growth in prices, up from 0.5% in May, came in spite of falling food prices, according to the Office for National Statistics (ONS).

The coronavirus pandemic is widely expected to lead to a deep slowdown in the UK economy, and growth in consumer prices had been expected to slow further in the short term as a result.

Analysts had forecast that the rate of inflation would fall to 0.4% in the month.

“The inflation rate has increased for the first time this year, but remains low by historical standards,” said Jonathan Athow, an ONS statistician, who noted that seasonal price patterns had been disrupted by the pandemic.

Electrical retailer Dixons Carphone (DC.L) has blamed the COVID-19 pandemic for halving annual profits.

Dixons Carphone said on Wednesday it made an adjusted pre-tax profit of £166m ($209m) in the 53 weeks to 3 May, compared to an adjusted profit of £339m in the prior year. This year’s profit was £44m below guidance given by the company in January.

On a non-adjusted basis, Dixons Carphone lost £140m in the year, an improvement on last year’s loss of £259m.

The retailer has been in the midst of a turnaround plan and blamed the COVID-19 pandemic squarely for the poor performance.

“The first ten months of the year was a story of delivering on our promises and accelerating the transformation of Dixons Carphone,” chief executive Alex Baldock said in a statement.

“With COVID-19, our immediate priorities abruptly changed to keeping everyone safe, helping our customers and securing our future.”

Online fashion retailer Asos (ASC.L) has said it will pay back government furlough money after revealing a rise in sales during lockdown.

Asos said in a trading update on Wednesday that sales rose 10% to £1bn ($1.3bn) in the four months to 30 June. A minor slump in the UK and US was offset by strong sales growth in the EU and the rest of the world.

Sales margins fell by 70 basis points as shoppers stuck at home bought less expensive items. However, the number of active customers rose by 16% to 23 million.

The strong performance means it is in a position to pay back wages paid to staff under the government’s job retention scheme.

Around 1,000 Asos employees were placed on the scheme for the month of April, Yahoo Finance UK understands. Asos is understood to be handing back around £1.8m to the Treasury.

European stocks climbed on Wednesday as investors accessed positive results from initial trials of an experimental coronavirus vaccine produced by biotechnology firm Moderna (MRNA).

The potential vaccine, developed by researchers at the US National Institute of Allergy and Infectious Diseases, provoked a promising immune response and appeared safe in 45 healthy volunteers in an early-stage study.

The pan-European STOXX 600 index (^STOXX) rose by around 1.2%, while London’s FTSE 100 (^FTSE) climbed by almost 1%.

Germany’s DAX (^GDAXI) was up by around 1.2%, while France’s CAC 40 (^FCHI) climbed by almost 1.6%.

The data from the Moderna trial built on earlier promising, but incomplete, results the company had released in May. A late-stage trial of the vaccine candidate is set to begin on 27 July.

What to expect in the US

Futures were pointing to a higher open for US stocks on Wednesday.

S&P 500 futures (ES=F) rose by around 0.8%, while Dow Jones Industrial Average futures (YM=F) climbed by around 1%. Nasdaq futures (NQ=F), meanwhile, were up by around 0.5%.

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