Credit Suisse plummets, Entain knocked in bid for Australian firm, FTSE falls despite easing of England restrictions
Here are some of the top business, market, and economic stories you should be watching today in the UK, Europe, and around the world.
Shares in Credit Suisse (CSGN.SW) nosedived more than 13% on Monday, to their lowest level since last December, after it warned it may face a loss due to the company exiting positions related to a hedge fund client.
The Swiss bank said that while it was too early to quantify the exact size of the loss, “it could be highly significant and material to our first quarter results.”
Reports have suggested that the hedge fund client is Archegos Capital Management, a multibillion-dollar family office run by New York hedge fund tycoon Bill Hwang. Nomura Holdings (8604.T) also warned of a “significant” potential loss from an unnamed US client overnight, sinking 10% on the back of the news.
Banks that worked with Archegos and lent it money to buy shares were last week forced to scramble to offload Archegos’ investments after a handful of risky bets made by the hedge fund went bad. The rush to exit these positions hit public shares prices and now banks are left with huge losses.
“It looks certain the unwinding was caused by a massive margin call on Archegos Capital, the family fund run by Tiger ‘cub’ Bill Hwang,” Neil Wilson, chief market analyst at Markets.com, said.
“Bubbles everywhere are a sign of dysfunction and stress, but a fund blowing up is not itself a systemic risk, more of questionable internal risk management.
“A massive fire sale of some individual stocks last week had traders talking about who’d taken the hit as shares in ViacomCBS (VIAC) and Discovery (DISCA) plunged 27% on Friday alongside some big Chinese tech stocks.”
Entain knocked in bid for Australian firm
Australian gambling firm Tabcorp Holdings (TAH.AX) has rejected offers for its wagering and media division, after Ladbrokes owner Entain (ENT.L) said it was among those bidding for the company.
Entain, which also owns Coral, Foxy Bingo and Party Poker, said last month that it was in “early stage” discussions with the group, however, in an announcement to the Australian Stock Exchange, Tabcorp valued its wagering and media business at A $3bn (£1.66bn, $2.29bn), and said the proposals fell short of expectations.
It came as the company reported a 2% rise in operating profit to £530m last year, compared to the year before, with 89% of earnings before interest, tax, depreciation and amortisation (EBITDA) coming from its online presence.
Online net gaming revenue was £2.7bn over the period, with three-quarters of the betting business now operating online.
Entain added that it was committed to returning to dividends “once the uncertainty caused by COVID-19 subsides”.
READ MORE: Ladbrokes owner’s stock plunges as MGM drops bid
“It is a great testament to the quality of our people and the strength of our business model that the group’s growth continued during 2020, despite the COVID-19-related sporting cancellations and retail closures that were necessary at times during the year,” Barry Gibson, non-executive chairman, said:
“We have long talked about the importance of having a truly diversified business model and of not being overly reliant on any one product, brand, territory, or channel, and it was this approach that mitigated the impacts of the pandemic on our business so effectively.”
Watch: Outdoor sports and socialising resume as England’s lockdown eases
Stock markets in Europe had a mixed start to the week, with London’s benchmark index underperforming against its continental peers despite the UK economy starting to reopen under Boris Johnson’s roadmap out of lockdown.
People in England are now able to meet in groups of six from any number of households from Monday for the first time in months, ending the “stay at home” messaging.
This is in an outdoor space only, including parks and private gardens, with the UK government requesting that people stay local, and maintain social distancing. Limits on the number of people who can meet outside in England will not be raised until step three in May.
It comes as hospitalisations and COVID-19 related deaths continue to fall in Britain in the face of a successful vaccination programme. Some 30 million people have now received their first dose of the coronavirus vaccine in the UK, according to the latest government data.
However, the saga around the COVID vaccination programme in the European Union (EU) looks set to continue this week, with the bloc again threatening to block AstraZeneca ((AZN).L) from sending vaccines outside of the area until it meets its promised targets.
“An easing of restrictions in England failed to act as a catalyst for the FTSE 100 on Monday with the index trading modestly lower,” said AJ Bell investment director Russ Mould.
“There may be some nervousness in the markets off the back of crisis-hit hedge fund Archegos Capital and its fire sale of Chinese technology and US media stocks after being hit by margin calls.”
He adds: “A third wave of Covid-19 in Europe and the emergence of new strains of the disease is threatening to deflate the optimistic mood which had built up off the back of vaccine success.”
Watch: What UK government COVID-19 support is available?