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FTSE 100 Live: IMF slashes UK forecast, stocks rally

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 (Evening Standard)
(Evening Standard)

The IMF’s world economic outlook and earnings updates from more major US companies will provide the main focus for investors today.

US markets experienced a mixed session yesterday as the World Bank cut its 2022 growth estimate to 3.2% but figures from China revealed a better-than-expected first quarter GDP figure. The IMF is due to publish updated forecasts in Washington later.

Oil prices, meanwhile, are close to their highest levels in almost a month after production disruption at Libya’s biggest oil field added to ongoing supply issues.

FTSE 100 Live Tuesday

  • IMF updates economic outlook

  • FTSE 100 lower, oil stocks rally

  • US earnings season continues

FTSE turns higher as stocks rally

16:14 , Oscar Williams-Grut

The FTSE 100 has turned positive in afternoon trade as stocks rally on the other side of the Atlantic.

London’s bluechip index is up 5 points with around 20 minutes of the trading day left, having spent much of the session underwater.

Momentum is being helped by trading in the US, where Wall Street’s three main indexes are sitting on gains of more than 1%.

The more domestically focused FTSE 250 is still down 130 points on the day.

That’s all from us on the blog today, join us again tomorrow.

IMF: Russia’s war in Ukraine could lead to new world economic order

14:58 , Bradley Gerrard

Russia’s war in Ukraine risks permanently fracturing the interconnected global economy and consigning to history the rules that have governed cross-border relations for the past 70 years, the International Montary Fund (IMF) has said.

In its World Economic Outlook, in which it downgraded global growth to 3.6% for 2022 from its 4.4% prediction in January, the body said there was a very real chance of a new world economic order emerging from the conflict.

The scale of the potential changes it foresees would mean greater regionalisation of the global economy, with huge effort required to redraw supply chains.

“The war has also increased the risk of a more permanent fragmentation of the world economy into geopolitical blocks with distinct technology standards, cross-border payment systems, and reserve currencies,” it said.

“Such a tectonic shift would entail high adjustment costs and long-run efficiency losses as supply chains and production networks are reconfigured.

“It also represents a major challenge to the rules-based framework that has governed international and economic relations for the last 70 years.”

The IMF added that Russia’s war in Ukraine meant its predictions for global growth and inflation were “well-beyond the usual range” of uncertainty.

“Growth could slow significantly more while inflation could turn out higher than expected if, for instance, sanctions aimed at ending the war extend to an even broader volume of Russian energy and other exports,” it added.

IMF slashes UK growth forecasts as inflation batters economy

14:18 , Bradley Gerrard

The International Monetary Fund (IMF) slashed its growth forecasts for Britain today as it warned inflation will hit spending and investment.

In its latest quarterly report on the world’s economy, the IMF cut its forecast for UK GDP growth this year by one percentage point to 3.7%.

“Consumption is projected to be weaker than expected as inflation erodes real disposable income, while tighter financial conditions are expected to cool investment,” the organisation said.

The IMF cut its forecast for global growth from 4.4% to 3.6%, saying conditions have “worsened significantly” since its last update in January.

The downgrade came a day after the World Bank slashed its global growth forecast as rising interest rates, soaring inflation, continued Covid-19 infections and war in Ukraine drag on global growth. The World Bank downgraded its forecast from 4.1% to 3.2%.

14:17 , Bradley Gerrard

US healthcare giant Johnson & Johnson has seen its shares fall more than 3% in pre-market trading after it cut its full-year sales and earnings guidance.

The company beat first-quarter profit expectations as adjusted net earnings hit $7.12 billion (£5.48 billion) but its sales of $23.4 billion were below market expectations.

The firm said given the supply surplus and demand uncertainty for Covid-19 vaccinations, it was suspending its guidance on this part of the business.

Johnson & Johnson now believes its reported sales for 2022 will be between $94.8-$95.8 billion, down from the $95.9-$96.9 billion range it predicted in January.

Furthermore, earnings per share guidance has dropped to $10.15-$10.35 from $10.4-$10.6 in January.

Mikaela Franceschina, senior analyst at Third Bridge, said Johnson & Johnson had been a “strong and stable performer”, as evidenced by their 13.6% full-year sales growth in 2021.

“Although their medical devices unit continues to suffer from Covid-19 headwinds, we can expect the market to recover throughout 2022,” she said.

“With the company’s plan to spin off their consumer health business, addition of new partnerships and robust pipeline, the company should continue to see success despite any potential setbacks with competitive pressures and supply chain constraints.”

Franceschina added that a key part of Johnson & Johnson’s business was its immunology drugs, such as Stelara (antibody medication that helps treat Crohn’s disease and psoriatic arthritis) and Tremfya (which helps treat psoriasis).

13:48 , Bradley Gerrard

Amazon has agreed to an independent racial equity audit following pressure from shareholders.

The New York pension fund filed a shareholder resolution last year asking for an audit, and while the proposal was only supported by 44 per cent of Amazon shareholders, the pressure on the company has been maintained.

The audit will analyse whether there are any disparate racial impacts on Amazon’s US hourly employees resulting from its policies and practices. Airbnb was the first company to do a racial audit in 2016.

New York State Common Retirement Fund and its ComptrollerThomas DiNapoli, which had pressed Amazon to conduct a racial audit, said they looked forward to learning more about Amazon’s plan for a review. But they said they “remain concerned that the company has provided few details and has made no assurances that the audit will be independent.”

Funky Pigeon suspends orders as it investigates cyber attack

13:45 , Bradley Gerrard

Online card seller Funky Pigeon has revealed it has been hacked and halted all customer orders.

The WH Smith-owned company said no customer payment data, such as bank account or credit card details, had been at risk, but that it was still assessing whether personal data, such as names, addresses and email addresses, had been accessed.

The Bristol-based business said it identified a cyber security incident on Thursday 14 April that had affected its systems, prompting it to temporarily suspend orders.

WH Smith said the incident would not have an impact on its finances, with half-year results due on 27 April.

Boots aiming to rid plastic fibre wet wipes from its shelves this year

13:19 , Bradley Gerrard

High street retailer Boots will remove all wet wipes that contain plastic fibres from its shelves by the end of the year, totalling more than 800 million annually.

The UK’s biggest pharmacy chain will replace the wipes with plant based biodegradable alternatives, following a trial that included Boots reformulating its own brand wipe ranges and making efforts to reduce plastic and become “a more sustainable retailer”.

Boots has written to its suppliers across the UK and the Republic of Ireland asking them to remove all wet wipes that contain plastic fibres by year end.

In the UK alone , 11 billion wet wipes are sold each year. Boots is one of the biggest sellers of wet wipes in the UK with over 140 different lines stocked across skincare, beauty, baby, tissue and health care categories. It is one of the leading sellers of beauty face wipes, representing up to 15% of all face wipes sold across the UK.

A large proportion of the 11 billion wet wipes used in the UK every year still contain some form of plastic and evidence suggests they are the cause of over nine in ten of the blockages in UK sewers.

GlaxoSmithKline and AstraZeneca secure US drug approval boost

13:00 , Bradley Gerrard

GlaxoSmithKline and AstraZeneca have secured victories with the US regulator in relation to treatments that could become blockbuster drugs for the firms.

Glaxo’s Daprodustat, which is used for the treatment of anaemia in chronic kidney disease patient, has been approved by the Food and Drug Administration (FDA) in the US after its successful phase III clinical trial.

This triumph for the drug, which is already available in Japan, comes after the European Medicines Agency approved it last month.

Daprodustat sits within Glaxo’s new and speciality drug division, whose nearly £10 billion in sales in 2021 made it the best performing part of its pharmaceuticals business last year.

At the same time, AstraZeneca’s Enhertu, which it has developed with Japan’s Daiichi Sankyo, has been granted ‘Priority Review’ status following a successful clinical trial.

Enhertu is used as a treatment for adults with unresectable or metastatic non-small cell lung cancer, whose tumours have a HER2 mutation and who have received a prior but unsuccessful therapy.

According to AstraZeneca’s latest results, Enhertu registered sales of $214 million in 2021 but if this latest development leads to full approval, the firm will hope it can reach the much-vaunted ‘blockbuster’ status - $1 billion in annual sales.

Apollo Global ready to back Elon Musk’s Twitter takeover

12:34 , Bradley Gerrard

One of Wall Street’s biggest private equity houses is prepared to help Elon Musk take Twitter private.

Apollo Global Management is interested in providing debt or equity to support a takeover bid of the social media giant, according to reports by Bloomberg and the Wall Street Journal.

Twitter shares closed up 7.6% in New York yesterday amid speculation that the deal may yet get done.

Musk surprised the world last week with a bid to take Twitter private with an offer of $54.20 per share.

To thwart the takeover, Twitter has adopted a defence strategy known as the “poison pill,” in which it issues more shares to prevent an individual shareholder from building a larger position in the company.

Soho-based cyber security firm SEON raises £72m from Silicon Valley fund

12:04 , Bradley Gerrard

London-based fraud prevention business that works with businesses like Revolut and airline KLM has raised $94 million (£72 million) from a Silicon Valley investor.

The series B funding round for Soho-based SEON was led by Silicon Valley-based venture capital business IVP, which has also backed the $52 billion cybersecurity company Crowdstrike and cyber risk modelling business Cyence.

Michael Miao, a partner at IVP who joined the board of SEON, said the company was “making a remarkable dent in fraud prevention by making it easy for every business to adopt its data-driven solution.”

SEON uses machine learning to build a picture of a customer’s digital footprint using their email address, phone number and IP address and spot potential fraudulent or fake accounts.

The company counts fintech business Revolut and airliner KLM among its customers. It has used its technology to review over 1 billion customer transactions and estimates that it has prevented over €50 million in fraudulent transactions.

Criminals stole over £750 million through fraud in the first half of 2021, according to a study by UK finance.

Energy bosses fear rising customer debt amid rocketing bills

11:59 , Bradley Gerrard

Energy bosses have urged the government to act immediately to help reduce the scale of rapidly rising levels of fuel poverty.

Rising energy prices are exacerbating already stretched household budgets, but with another increase to the energy price cap in the autumn, energy firms are warning of large number of customers falling into arrears.

Speaking to the Business, Energy and Industrial Strategy select committee today, Michael Lewis, chief executive of E.ON, said he expected rising energy costs to have a “severe impact on customers’ ability to pay”.

He added that he expected to see “a significantly larger number of people moving into fuel poverty”, with debt rising as a result.

E.ON expects the debts of customers to increase by 50 per cent, or £800 million, up from £1.6 billion now.

Chris O’Shea, the boss of British Gas-owner Centrica, said it had seen a rise of 125,000 in debt in the past year, adding that this meant 715,000 people owed the company money, a figure he expected to continue to rise.

Research from industry specialist Cornwall Insight has predicted another hike of almost £500 to the average annual bill in October when the price cap rises, pushing the average bill above an estimated £2,450.

SThree’s Fahy exits board on shareholder pressure

11:25 , Bradley Gerrard

The chair of SThree’s audit committee has stepped down amid shareholder concerns over her involvement with failed outsourcer Interserve.

Anne Fahy announced on Tuesday that she had resigned from SThree’s board with immediate effect and would not be seeking re-election at tomorrow’s Annual General Meeting.

Sources close to the company said that shareholders had raised concerns about Fahy’s role as chair of Interserve’s audit committee from 2013 until its collapse six years later.

Such were the financial issues at the company that the Financial Reporting Council handed out fines of more than £700,000 to Interserve’s auditor Grant Thornton and one of its partners.

Fahy had previously faced a revolt from SThree shareholders in 2019, but retained her position.

Broker upgrade lifts BP and Shell, FTSE 100 lower

10:22 , Graeme Evans

Commodity-focused stocks propped up London’s top flight index today as investors clung to hopes that China’s economy can survive its ongoing Covid disruption.

Yesterday’s better-than-expected first quarter GDP figure of 4.8% and speculation of further support from China’s central bank offset fears over the impact of lockdown-driven factory shutdowns in Shanghai and elsewhere.

Anglo American and Glencore were among the mining stocks more than 1% higher, while BP and Shell rose 5.95p to 405.4p and 40.5p to 2232.5p respectively as supply disruptions in Libya contributed to Brent crude remaining near $112 a barrel.

The oil giants were further helped by the “overweight” recommendation of JP Morgan as the City bank raised its price targets on BP to 500p and Shell to 2850p.

The oil sector gains were a big factor in the FTSE 100 index staying close to its opening mark at 7591.18, a decline of 25.20 points.

ITV shares were among those under pressure, down 2.2p to 75p after analysts at Berenberg hit the broadcaster with a “sell“ recommendation and 64p price target.

Pearson shares also dipped 1% after the education publisher announced that its decade-long online learning partnership with Arizona State University will come to an end next year. Pearson said there was no change to its financial guidance but shares still weakened 8.6p to 763.4p.

The FTSE 250 index dropped 127.31 to 20,994.30, with food travel business SSP the biggest faller after losing 6% or 13.9p to 230.7p.

The company, whose brands include Upper Crust and Camden Food Co, was hit by Deutsche Bank removing its “buy” recommendation and lowering its price target to 265p.

The move formed part of a wider review of the European catering sector, whose recovery from Covid has been hampered by rising energy, food costs and wages.

Oil price fears hit Wizz shares

09:15 , Graeme Evans

Wizz Air shares have fallen sharply as worries over fuel costs offset optimism on an expected recovery in summer bookings.

HSBC today downgraded Wizz to “reduce” with a price target of 2500p as it said the low-cost carrier’s fuel hedging policy put it at a strategic disadvantage relative to rival Ryanair.

Airline analyst Andrew Lobbenberg expects Wizz’s share price to be volatile in response to developments on the Ukraine war and oil price, adding that consensus estimates for the 2023 financial year look “far too high”.

Wizz shares have been on a strong run in recent sessions but fell back 3% or 107p to 3009p in the FTSE 250 index. Peel Hunt analysts are more optimistic about prospects, however, with the City broker today keeping its price target at 4700p.

Peel Hunt said: “Wizz Air offers substantial fleet and capacity growth that should support a further reduction in unit costs. Demand is recovering and the oil price is cyclical, with history indicating it is unlikely to remain above $100 a barrel indefinitely.”

Miners 2% higher, Pearson falls 3% after contract blow

08:36 , Graeme Evans

The FTSE 100 index was 19.85 points lower at 7596, with commodity-focused stocks propping up the top flight after gains of 2% for miners Antofagasta, Glencore and Anglo American and rises of 1% for BP and Shell.

Pearson posted the biggest fall in the FTSE 100, declining 3% or 18.4p to 753.6p, after the education publisher announced that its decade old online learning partnership with Arizona State University will end next year.

Pearson said the profit impact of the contract termination will be modest in 2022 and 2023 and that there was no change to its financial guidance for this year.

The IMF’s latest economic forecasts are due at 2pm today, while updates this week from Netflix, Tesla, Johnson & Johnson and Procter & Gamble will test market confidence.

Richard Hunter, head of markets at Interactive Investor, said: “The limited number of releases so far has yet to establish a meaningful trend, with the banks reporting slightly disappointing earnings and a cautiously negative outlook.

“On the other hand, the airlines have so far beaten expectations with stronger forward guidance indicating that travel demand is well on the way to recovery for the imminent summer season.”

The FTSE 250 index was 181 points lower at 20,940, with travel-focused stocks including Wizz Air and TUI losing some of their gains from before the weekend.

Catering downgrade hits SSP shares

08:19 , Graeme Evans

Shares in food travel business SSP, whose brands include Upper Crust and Camden Food Co, are under pressure after being downgraded by a City bank.

The FTSE 250-listed stock fell 5% or 12.6p to 232p as Deutsche Bank removed its “buy” recommendation and lowered its price target from 333p to 265p.

The downgrade formed part of a wider review of the European catering sector, whose recovery from Covid has been hampered by rising energy, food costs and wages.

Deutsche Bank’s note said: “Our economists now believe that the only way to lower inflation will be through aggressive interest rate hikes in the second half of 2022 and 2023, which we believe could trigger a recession at the end of 2023 or early 2024.”

FTSE 100 flat, Brent crude at $113 a barrel

07:46 , Graeme Evans

Economic worries will hang over markets today after the World Bank cut its growth forecast for this year and China’s latest data release painted a mixed picture.

Against a backdrop of continuing Covid lockdowns, Beijing reported March retail sales below expectations but first quarter GDP ahead of hopes at 4.8%.

The World Bank added to Wall Street jitters by lowering its 2022 growth forecast from 4.1% to 3.2% after the Ukraine war heightened commodity price pressures.

Oil prices, meanwhile, show no signs of easing after Brent crude futures pushed up to their highest levels in almost a month at $113 a barrel after disruption at production facilities in Libya.

US markets closed in negative territory last night while the FTSE 100 index is forecast to open unchanged at 7,616. Frankfurt’s DAX is seen opening 73 points lower at 14,090, according to CMC Markets.

As well as the economic outlook, attention will be on the US earnings season as Johnson & Johnson is due to report before the opening bell and Netflix and IBM after the market closes.

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