Wall Street slumps again, Unilever and Royal Mail cut jobs, borrowing figures
Investors have been braced for more volatility after the Ukraine crisis and fears of imminent US interest rate rises triggered a global sell-off.
Wall Street’s tumultuous session yesterday saw the Nasdaq slump 5% before rallying back into positive territory. That fightback has enabled the FTSE 100 index to trade higher, having fallen 2.6% on Monday, but US futures are pointing to a weak start later.
The impact of inflationary pressures is revealed in today’s latest public sector borrowing figures, with the total of £16.8 billion the fourth-highest since monthly records began in 1993 but down on £24.4 billion a year earlier.
FTSE 100 Live Tuesday
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FTSE 100 recovers after Monday’s sell-off
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Unilever to cut 1500 jobs
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Royal Mail cuts 700 jobs
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Public sector borrowing shows improvement
FTSE ends higher as rout resumes on Wall Street
18:35 , Oscar Williams-Grut
The FTSE 100 has closed up 1% — roughly where it was lunchtime on Monday — despite more carnage on Wall Street.
The Nasdaq is down 2% at typing time while the S&P 500 is 1.3% lower. Investors are once again dumping tech left, right and centre. It remains to be seen whether Wall Street bounces before the close again, as it did on Monday.
That’s all from us on the blog today. Join us again tomorrow.
Tech’s Reality Bites moment
15:56 , Oscar Williams-Grut
Bill Blain, chief strategist at Shard Capital and a City veteran, has written a good piece for us today about the current global tech sell-off.
Here’s a sample:
The Nasdaq has given up all its gains since June 2021. The Dow and S&P 500 haven’t declined quite so dramatically, but if squint your eyes tightly enough and draw some random chartist lines, it looks as if both have been range bound over the last quarter. These “facts” maybe tell us two things.
First, tech stocks have declined more because they were overvalued relative to everything else, and the stock market has found its top. Has it passed it? And, has it further to fall? That depends on how the market’s voting mechanism reacts to sentiment as determined by relative value, monetary tightening, and news flow.
Second, with further rises in bond yields widely expected across the market, the underlying tone looks fractious.
You can read the full piece here.
Wall Street slump takes the wind out of Europe’s sails
15:32 , Oscar Williams-Grut
Another heavy sell-off on Wall Street is knocking confidence on this side of the Atlantic.
The Nasdaq is off 2% in New York after an hour’s trade and the S&P 500 is down 1.7%.
The FTSE 100 is still positive but has lost a lot of its earlier gains. The bluechip index is up 0.4%, but was up around 0.8% at lunchtime.
Cake Box director buys shares
15:00 , Oscar Williams-Grut
What to do when shares in your company slide? Splash out on buying more in a show of faith in the stock.
Dr Jaswir Singh, chief operating officer of crisis-hit eggless cake maker Cake Box, snapped up £35,000-worth of shares in the company.
His move followed Monday’s share slump when the business lost a fifth of its value after admitting accounting “irregularities” that had first been revealed by a blogger.
Dr Singh paid 250p and 246.9p for his new shares yesterday, which is already looking an astute move with the stock recovering to top 290p in early trading on Tuesday.
The business was set up in east London in 2008 by founders who followed a strict lacto vegetarian diet.
Their USP was egg-free celebration cakes so people could serve birthday treats and not have concerns for people with egg allergies.
They now have 180 mainly-franchised stores across the country.
The shares were listed at 137.5p in 2018 and hit their height to date of 428p in November 2021.
The price slipped to as low as 232p in trading on Monday.
The shares fell on news of “some transcription errors” admitted by the firm between its 2021 full year results announcement published on 30 June 2021 and the 2021 annual report and accounts.
Errors included a “phantom £2m” entry into the cashflow statement, varying tax amounts and a number of restated sales numbers.
The sweet-treat business insisted the errors should have no impact on reported profits but it has appointed accountants BDO “to assist with implementing improved internal audit practices”.
Tech stocks’ Reality Bites moment has arrived, says Bill Blain
14:54 , Simon English
This time last year, it was reported 90% of 627 market professionals polled agreed the stock market was a bubble set to pop.
Unsurprisingly, a year later, an increasing number of market big dogs are calling the current correction as the curtain-raiser to a more chaotic market collapse.
The Nasdaq has given up all its gains since June 2021. The Dow and S&P 500 haven’t declined quite so dramatically, but if squint your eyes tightly enough and draw some random chartist lines, it looks as if both have been range bound over the last quarter. These “facts” maybe tell us two things.
read more here
Walkers goes green
14:15 , Oscar Williams-Grut
Walkers crisps will be soon be served in recycled bags.
Owner Pepsi will trial green packaging on a new range of crisps later this year.
The new bags will be made from recycled crisp packets, biscuit wrappings, shopping bags and other plastics.
They will also be partly renewable, using by-products of plants such as used cooking oil or waste from paper pulp.
It plans to offer all its savoury snacks – including Doritos, Quavers, Wotsits, Snack a Jacks and Pipers – in similarly green and recyclable bags by 2030.
Wall Street set to open lower
13:57 , Oscar Williams-Grut
It’s looking like another rough open for markets in the US when trading begins in New York in about half an hour.
Futures are pointing to a 2% slump for the Nasdaq at the open, while the S&P 500 is called to drop 1.5% at the open. Stocks sold-off sharply on Monday – with the Nasdaq down as much as 4% at one point – but miraculously turned around in afternoon trade. Wall Street’s three key indexes all closed marginally higher.
It’s a busy day for earnings today in the US, with major players including Microsoft, Johnson & Johnson, American Express and Verizon reporting.
Here in the UK, the FTSE 100 is holding up despite the futures action. The index is up about 0.8%.
13:10 , Oscar Williams-Grut
One of Britain’s most high-profile backers of tech has told investors to keep the faith despite a sell-off in the sector.
Baillie Gifford’s US Growth Trust today told shareholders to be brave and keep invested despite volatile markes.
Management wrote in its half-year report: “Investing in innovation and entrepreneurship is hard. Bravery is necessary from both entrepreneurs and investors. Uncertainty and volatility must be embraced. Opening your mind to possibility is essential.”
Scottish asset manager Baillie Gifford is one of Britain’s most prominent tech investors. Its FTSE 250-listed US Growth Trust manages £1 billion on behalf of clients. Top ten holdings include Netflix, Amazon and Tesla.
Read the full story.
Marston’s shrugs off Omicron
12:56 , Oscar Williams-Grut
The chief executive of Marston’s expects Brits to flock back to the pub now that Plan B restrictions have been scrapped.
Andrew Andrea told the Standard: “We know there is demand to go to the pub. We’re just starting to see numbers move in the right direction. You just sense confidence coming back.”
Figures published this morning revealed the impact of Omicron restrictions on the pub group’s business. Sales were down 3.9% on pre-pandemic levels in the 16 weeks to 12 January, with December restrictions derailing otherwise good momentum.
Andrea called Plan B “an eight week blip” and said performance over Christmas was “probably slightly better than I thought it would be”.
Read the full story.
Arm sale set to collapse
12:35 , Oscar Williams-Grut
Nvida is quietly preparing to abandon its purchase of Arm from SoftBank after making little to no progress in winning approval for the $40 billion chip deal, according to people familiar with the matter.
Nvidia has told partners that it doesn’t expect the transaction to close, according to one person, who asked not to be identified because the discussions are private.
SoftBank, meanwhile, is stepping up preparations for an Arm initial public offering as an alternative to the Nvidia takeover, another person said.
Read the full story.
Another setback for Credit Suisse
12:13 , Oscar Williams-Grut
Credit Suisse, the Swiss bank reeling from the sudden departure of chairman Antonio Horta-Osorio, issued a profit warning today related to legal costs.
It will barely break even for the fourth quarter after setting aside 500 million Swiss francs (£400 million).
The bank said: “These litigation provisions have been incurred in respect of a number of cases where the Group has more proactively pursued settlements and primarily relate to legacy litigation matters from our investment banking business.”
Read the full story.
Rio’s (finally) going underground
11:45 , Simon Freeman
Rio Tinto has struck a deal with Mongolia’s government to finally clear the way for underground operations to begin at the Oyu Tolgoi copper project.
The FTSE 100 miner expects to start quarrying below the Gobi desert within days, with full production due to begin next year.
Rio and its subsidiary Turquoise Hill have agreed to write off £1.8 billion loaned to the government to fund its share of development costs.
In return, Ulan Bator will allow Rio to import electricity from China until 2030.
When fully operational Oyu Tolgoi will be the world’s fourth largest copper mine, producing almost 500,000 tonnes of the metal – a vital component in EV batteries and wind farms – annually.
The agreement is the first big win for new CEO Jakob Stausholm, who took over from Jean-Sébastien Jacques in the fallout from the Juukan Gorge scandal.
Stausholm is now “hopeful” that diplomacy can repair relations in Serbia, where the future of Rio’s £1.8 billion Jadar lithium mine hangs in the balance.
New blow to Amigo
11:41 , Oscar Williams-Grut
The blows keep coming for beleaguered lender Amigo.
Its shares dropped another 20% this to fall to as low at 2.5p on news that chief financial officer Mike Corcoran has resigned after just 14 months.
On Monday the shares slumped 40% after it warned that the business will collapse if a new scheme to pay back customers and restart lending is not approved.
It plans a rights issue which will leave existing shareholders with less than 5% of the share capital.
It needs to raise £97m to compensate customers.
Amigo was forced to act after the High Court ruled against its previous plans to compensate victims of its high-cost guarantor loans.
The lender’s drawn-out dispute is over loans which had interest rates customers would never have been able to pay back.
Amigo said it “will be able to announce the appointment of a replacement chief financial officer, in the near future”.
Skill workers shortages in factories worst since 1973
11:39 , Oscar Williams-Grut
The shortage of skilled labourers in Britain’s factories is the worst it has been since 1973.
The Confederation of British Industry said its latest survey of manufacturers found the highest proportion reporting labour as a limiting factor in almost half a century.
Rain Newton-Smith, CBI Chief Economist, said manufacturers were “looking to invest more in training and retraining as labour shortages continue to bite.”
Inflation is also hitting factories, with costs rising at their fastest rate since 1980. Energy costs have soared in recent months, forcing some factories to down tools at peak times.
Newton-Smith said: “Against the backdrop of rising energy prices, which are adding to inflationary pressures, short-term action is needed from the UK government to find urgent solutions for firms that are struggling. Longer term, energy market reforms are required to build resilience against future energy price shocks and create markets for renewable technologies, assisting net zero ambitions.”
Despite pressure, production continued to grow in January, the CBI said. But growth slowed and business optimism dipped.
Marston’s shrugs off Omicron impact
11:32 , Oscar Williams-Grut
The chief executive of Marston’s expects Brits to flock back to the pub now that Plan B restrictions have been scrapped.
Andrew Andrea told the Standard: “We know there is demand to go to the pub. We’re just starting to see numbers move in the right direction. You just sense confidence coming back.”
It came as figures revealed the impact of Omicron restrictions on the pub group’s business. Sales were down 3.9% on pre-pandemic levels in the 16 weeks to 12 January, with December restrictions derailing what was otherwise good momentum.
Andrea called Plan B “an eight week blip” and said performance over Christmas was “probably slightly better than I thought it would be”.
Marstons owns 1500 pubs across the UK, mostly in suburban locations.
Shares improved 1p, or 1.3%, to 79.15p.
Chancellor gets wiggle room on tax rises
11:22 , Simon English
THE government borrowed nearly £17 billion in December to support the economy as Omicron hit – less than expected suggesting UK finances are in better shape than feared.
However, higher inflation sent interest rate payments to £8.1 billion, up from £5.4 billion the same month a year ago.
A chunk of those payments go to the Bank of England, since it holds about a third of government debt.
Economists say the figures give Chancellor Rishi Sunak room to ease the costs of energy bills and perhaps delay rises in tax.
Read more here
Royal Mail to sack 700 despite service issues
11:18 , Simon English
Royal Mail staff are regarded as among the heroes of the pandemic but some of their jobs are still at risk.
The privatised business said today it will axe around 700 management jobs as part of cost-cutting plans. The move will save around £40 million a year, the company claims, but will cost £70 million upfront.
The news came as the company revealed that staff absences peaked at 15,000 in early January due to the spread of the Omicron coronavirus variant.
read more here
Respite for investors as FTSE 100 rises
10:38 , Graeme Evans
An uneasy calm descended over European markets today as investors braced for the next potential storm in what’s shaping up to be a volatile 2022.
Results from Microsoft, Apple and Tesla along with the outcome of tomorrow’s Federal Reserve meeting mean today’s resilient session may offer only brief respite after Monday’s downward spiral for tech and other growth-focused stocks.
Tensions between Ukraine and Russia, inflation and interest rate pressures and the withdrawal of stimulus measures were among factors behind the flight from risk, with the tech-led Nasdaq down 5% at one point.
The Wall Street index recovered into positive territory by the time of Monday’s closing bell, meaning the FTSE 100 index was today able to trade 1% or 76.01 points higher at 7374.13 after yesterday’s 2.6% decline.
The broad based rally included a recovery of 3.5% for Baillie Gifford’s Scottish Mortgage Investment Trust and a gain of 4% for Rolls-Royce.
Russian gold miner Polymetal International fell 7% on Monday but was up 4% or 45.5p to 1177.5p and Ferrexpo, which mines iron pellets in Ukraine, rebounded 2% or 4.6p to 238.6p.
NatWest shares were the pick of the banking sector as UBS analyst Jason Napier gave the lender a “buy” recommendation and said the City’s profits estimate for 2023 is 14% too low amid rising interest rates. Shares rose 7.2p to 237.1p and Lloyds Banking Group improved 1.3p to 50.57p.
The FTSE 250 index gained 304.11 points to 21,757.98, with Cineworld 6% higher and cyber security firm Darktrace up 3% or 9.8p to 371.8p after falling 15% yesterday.
Among AIM stocks, Novacyt shares dived 18% as the diagnostics firm forecast a 70% plunge in revenues to £95 million for 2021 and said that revenues from Covid-19 testing contracts could reduce 50% this year.
Shares were above 1,000p this time last year but now stand at 195p, with today’s 43.9p decline despite the promise of new products later in 2022.
Video games label tinyBuild has been another of AIM’s pandemic winners to lose momentum, although that downward trend reversed today after revealing a second half performance ahead of expectations. On the day it released its Not for Broadcast game, shares rose 2% or 4p to 185p.
Unilever slashes jobs
09:56 , Oscar Williams-Grut
Unilever is swinging the axe as part of a sweeping restructure, as under-fire CEO Alan Jope seeks to repair relations with the City and fend off attention from an activist investor.
The consumer goods giant today announced plans to cut 1,500 jobs around the world as it simplifies its corporate structure. A spokesperson declined to give details of where the job cuts may fall around the world.
15% of senior management roles will be axed and 5% of junior managers will be asked to leave. Unilever employs around 149,000 people around the world, including 6,000 in the UK and Ireland.
Read the full story.
Market recovery or calm before the storm?
09:03 , Graeme Evans
This week’s results from tech giants Microsoft, Apple and Tesla and Wednesday’s Federal Reserve meeting mean today’s improved session may yet represent the calm before the storm.
But UBS Global Wealth Management’s chief investment officer Mark Haefele believes the overall fundamentals remain positive.
He said today: “In addition to economic data that is likely to improve in the next two months, indicators on supply chains are exhibiting gradual improvement.
“And while inflation is high, underlying details are falling on a month-over-month basis, which should lead to a moderation of inflation later in the year.”
FTSE 100 steadies, Baillie Gifford fund remains upbeat
08:33 , Graeme Evans
The FTSE 100 index is 0.4% higher, up 27.5 points to 7324.65.
Royal Mail shares have risen 2.5% and stocks at the forefront of yesterday’s sell-off have recouped some of their losses, with betting firm Flutter Entertainment among those 2% stronger.
The FTSE 250 index has improved 0.7% or 154.96 points to 21,607.46, led by leisure chain Cineworld after a 5% recovery.
Baillie Gifford US Growth Trust also rebounded 2% on the day it published results for the six months to the end of November.
The £1.1 billion fund said in its outlook statement: “The path for companies driving structural change may not be straight; some paths will weave and wend and turn out to be dead ends. Other paths will branch new opportunities and take us in directions we might not be able to imagine currently.
“But our rucksack is laden with optimism, patience and excitement. In a world of asymmetric returns, we believe it is better to venture, than not venture at all.”
Inflation adds to pressure on public finances
08:16 , Graeme Evans
Government borrowing is pointing in the right direction after December’s figure fell to £16.8 billion from £24.4 billion the year before.
But with the debt to GDP ratio sitting at 96%, the highest level since the 1960s, the Chancellor remains in a tight spot after the pandemic ravaged the public finances.
High levels of employment have boosted tax revenues, but this is being offset by rising interest payments from the cost of government bonds tied to the retail prices index (RPI).
Laith Khalaf, head of investment analysis at AJ Bell, said: “With price rises still coming down the track, inflation is going to continue to bump up the coupons paid by the government to holders of RPI linked bonds, so this won’t be a flash in the pan.
“To add considerable fuel to the fire, interest rates are rising, which means the government will have to pay more interest on the £875 billion of gilts held with the Bank of England.
“And if that were not enough, gilt yields have shot up, to over 1% on the 10 year bond, which means the government will also be paying more for freshly issued debt than before the pandemic.”
FTSE 100 steadies after Monday’s 2.6% slide
07:38 , Graeme Evans
The FTSE 100 index yesterday endured its biggest one-day fall since the discovery of the Omicron variant in November, sliding 2.6% or almost 200 points to 7297. High growth tech stocks took a hammering, with cyber security firm Darktrace down 15% in the FTSE 250.
The Nasdaq 100 lost almost 5% at one point on Monday but a turnaround just before the closing bell meant the tech-laden index eventually finished 0.6% higher.
Futures markets are pointing to a fresh fall of 1% when Wall Street reopens, although last night’s rebound should at least mean the FTSE 100 opens higher. CMC Markets is predicting a rise of 60 points to 7357.
Rising tensions on the Ukraine border accelerated the flight from risk yesterday, while investors were also focused on the outcome of this week’s US Federal Reserve meeting. Inflationary pressures mean the Fed is tomorrow likely to signal the start of interest rate rises from March, with the focus on accompanying comments from chairman Jerome Powell.
CMC’s Michael Hewson said: “Up until Friday markets in Europe had largely shrugged off the underperformance that had characterised US markets so far this year, with concerns over weak company guidance and the Federal Reserve’s likely rate rise path only part of the wider story.
“Yesterday’s declines in European markets had more to do with events on the Ukraine/Russia border than with any other factors that have dominated sentiment over the past two weeks.”
Wall Street slumps again, Unilever and Royal Mail cut jobs, borrowing figures
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