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FTSE 100 Live: S&P enters correction, Russia-Ukraine chills markets, tech slumps, bitcoin sinks

·17-min read
 (ESI)
(ESI)

The London market has fallen sharply amid more selling of tech stocks as investors eye this week’s earnings from Apple, Tesla and Microsoft.

Fears that the Federal Reserve may use Wednesday’s meeting to signal higher interest rates added to jitters around growth stock valuations.

Investors are also watching developments in Ukraine after the US told relatives of embassy staff to leave the country amid fears of an invasion by Russia.

FTSE 100 Live Monday

  • S&P enters correction as global sell-off gathers pace

  • Bitcoin sinks further

  • Vodafone shares rise on consolidation talk

  • De La Rue issues profits warning

  • Rate rise fears hit FTSE 100 & 250

Lindsell disembarks Pearson

16:49 , Simon Freeman

One of education publisher Pearson’s biggest shareholders announced it has cut its stake in the business in half, helping to send shares down more than 8%.

Investment firm Lindsell Train previously owned just under 10% of the company but said it reduced its stake to 4.86% on Friday.

The value of the shares sold based on the closing price at the end of last week was worth £242.1 million.

The sale came just two days after Pearson announced results ahead of expectations with sales up 8% and adjusted operating profits rising by a third.

Bosses said they are benefiting from a rise in companies attempting to engage staff with extra training and learning opportunities.

‘Little but red'

16:41 , Oscar Williams-Grut

The FTSE 100 is now down 2.4% at the close — but actually faring better than some others on the continent.

The CAC 40 in Paris is down a whopping 3.7%, while the DAX in Frankfurt is 3.5% lower.

In New York, the Nasdaq is 3.1% lower, the S&P 500 is down 2.6% and the Dow is 2.1% lower.

The historic sell-off comes ahead of the Fed’s latest policy announcement later this week, with widespread expectations that policymakers will fire the starting gun on global interest rate hikes. It’s also a busy week for earnings, with a fifth of S&P 500 giants reporting on earnings.

George Saravelos at Deutsche Bank says: “The market is still scrambling to understand why equities are selling-off so sharply. As we have been writing since the start of the year, perhaps the simplest answer is the best: blame the Fed.”

Danni Hewson at AJ Bell says: “Anyone thinking that investors were going to play it cool today, tread water until after Fed policymakers drop their pearls later this week, well they’ve been in for a bit of a rude awakening.

“January 2022 is not about to go quietly; since close on the January 3rd US indices have been left bruised and battered. The Nasdaq down a whopping 15%, the S&P 500 more than 10%, even the Dow Jones is more than 8% down on that first trading day of the new year.”

Hewson’s latest update is titled: “Markets see little but red.”

S&P 500 enters correction

15:05 , Oscar Williams-Grut

Stock markets have opened in New York - and it isn’t pretty.

The sell-off on Wall Street shows no signs of abating and all major markets are sharply lower. The tech-heavy Nasdaq is down 2.1% at typing time and the Dow, America’s most storied index, is off 1.7%.

The S&P 500, which is these days a better reflection of the modern economy, is down 2.2%. That means it’s in correction territory - down over 10% since its recent high reached in January.

The sea of red is washing up on our shores: the FTSE 100 is now down 2.2% as the sell-off we saw earlier in the day gathers pace. There’s still another hour and a half left of trading time today. Hold on to your hats...

Bitcoin caught up in tech sell-off

14:45 , Oscar Williams-Grut

Bitcoin has fallen to less than half a peak reached just two months ago as a steep, global sell-off in tech-linked assets gathers pace.

The world’s biggest cryptocurrency sunk another 7% on Monday to reach $33,205. It hit an all-time high above $68,000 in early November.

The swift price reversal comes amid a global tech sell-off.

Marcus Sotiriou, analyst at GlobalBlock, says: “A major factor contributing to Bitcoin’s fall over the past couple of months has been due to weakness in equity markets, as Bitcoin’s correlation with the US stock market has risen dramatically.

“Therefore, Bitcoin could drop much further if the stock market continues to decline.”

The Nasdaq, a global barometer for tech, briefly entered bear market territory last week and sunk 1.8% at the open in New York on Monday.

Tech has fallen out of favour as investors prepare for interest rates to rise around the world, ending the era of ultra-cheap money that has helped fuel the growth of tech.

JPMorgan analysts wrote last week: “The weakness in tech-related equity segments favored by retail investors coupled with the weakness in crypto markets are pointing to some signs of waning risk appetite among retail investors, though they could also be indicative of tech-related position unwinds by institutional investors.”

The near-consistent fall has investors wondering: how low could bitcoin fall?

Read the full story.

Russia / Ukraine tensions chill markets

14:38 , Simon Freeman

Members of Ukraine’s Territorial Defense Forces train in a city park in Kyiv (AP)
Members of Ukraine’s Territorial Defense Forces train in a city park in Kyiv (AP)

Natural gas futures have rocketed by 20% on the ICE Intercontinental Exchange as tensions escalate on the Russia - Ukraine border.

The UK wholesale contract was at almost 230p per therm, up from 75ppt in the past six months.

Goldman Sachs expects further rises if Russia squeezes gas flows to Europe in response to a threatened toughening of sanctions.

It said that Europe has enough gas stored up to get through winter but if temperatures were to drop, storage could fall below the record lows seen in 2018 making “electricity blackouts likely.”

The mounting fears of a President Putin launching a fresh military invasion have also unsettled investors in the FTSE 100’s crop of stocks exposed to the region.

Steel miner and manufacturer Evraz, which has key operations in both countries, was down 7.5% on the FTSE 100.

Anglo-Russian gold miner Polymetal has slumped 6.5%, while Petropavlovsk fell 7.6% on the FTSE 250.

Ferrexpo, which produces iron ore pellets, was also down 6.4%.

Mum’s the word at THG

13:19 , Simon Freeman

 (Handout)
(Handout)

Shares in THG have slumped by more than 17% to a fresh record low.

The stock market’s new favourite whipping boy is taking the brunt of the risk-off tech sell-off, but last week’s miss on profit forecasts hasn’t eased the slide.

Shares in the nutrition, beauty and e-commerce platform are trading at 123.6p, off 46% so far this year.

THG founder Matt Moulding has previously attempted to blame short sellers and shadowy hedge funds for his company’s precipitous collapse.

Now his mum is apparently getting involved.

The Sunday Times’s Oliver Shah told readers Ms Moulding emailed him last week to ask “why writers were not more appreciative of her son’s ‘outstanding’ achievements.”

“You must lead very dreary lives in your dead-end jobs,” she declared.

The FTSE 100’s other tech stocks are also on the slide with Tesla-backer Scottish Mortgage Investment Trust off 7%, ‘Netflix of education’ Pearson down 6.9%, and online bookie Entain down 6.85% .

‘The economic damage from Omicron has been limited'

12:28 , Oscar Williams-Grut

Here’s what Thomas Pugh, economist at RSM UK, has to say on those PMI numbers: “The tick-down in the IHS/Markit Composite PMI suggests the economic damage from Omicron has been limited. Indeed, the PMI suggests growth probably stabilised in January after falling in December. We expect most of the output lost in December to be made up in February as the number of people self-isolating drops, workers return to offices and consumers get back to socialising in person.

“As the Monetary Policy Committee (MPC) has made it clear that it is more focused on the threat from inflation than the risks to economic growth, we don’t expect the MPC to pay much attention to evidence around the weakness in the economy in December and January. As a result, it seems likely that the MPC will raise interest rates from 0.25% to 0.5% at its next meeting on 3 February.”

Omicron hits shops and restaurants

12:10 , Oscar Williams-Grut

As expected, Omicron has hit customer-facing businesses like bars and shops that have seen people stay away.

IHS Markit’s flash estimate for PMIs in January -- a rough, but closely watched, private sector indicator of economic growth -- has come in at 53.4, an 11-month low. Anything above 50 signals economic growth, while below means contraction.

Chris Williamson, Chief Business Economist at IHS Markit, says: “A resilient rate of economic growth in the UK during January masks wide variations across different sectors.

“Consumer facing businesses have been hit hard by Omicron and manufactures have reported a further worrying weakening of order book growth, but other business sectors have remained encouragingly robust.

“Looking ahead, while the Omicron wave meant the hospitality sector has sunk into a third steep downturn, these restrictions are now easing, meaning this downturn should be brief. Many business and financial services companies have meanwhile been far less affected by Omicron, and saw business growth accelerate at the start of the year.

“Business confidence in the outlook also picked up, driving sustained solid jobs growth. With inflationary pressures remaining elevated at near-record levels, this all adds to the likelihood of the Bank of England hiking interest rates again at its upcoming meeting.”

KKR buys a Raleigh bike

11:45 , Oscar Williams-Grut

Raleigh bike-owner Accell is the latest big business to fall into private equity hands.

The Amsterdam-listed firm – Europe’s biggest manufacturer of electric bikes – is being taken over by buyout specialists KKR.

The €58 a share offer is 26% higher than Accell’s Friday’s closing price and values the business at €1.56billion (£1.3billion).

As well as Nottingham-based Raleigh which employs 150 workers, Accell owns brands such as Sparta, Batavus, Lapierre, Haibike and Wonira.

It said no jobs or brands would be affected by the takeover.

“All existing rights and benefits of employees will be respected and the group’s business will be maintained in their current form under the new ownership,” it said.

Chopper-maker Raleigh has been around for 130 years although its last British-made bike rolled off the assembly line in 2002.

Break-up talks boosts Unilever

11:30 , Oscar Williams-Grut

The City is alight with speculation that embattled Unilever could face break-up pressure after a high-profile activist investor signaled the beginning of a campaign at the Dove soap to Ben & Jerry’s ice-cream maker.

The consumer goods group shot to the top of the FTSE 100, erasing almost all of last week’s losses, after it emerged that US activist investor Nelson Peltz had taken an undisclosed position.

The Financial Times first reported that Peltz’s Trian Partners had targeted the consumer goods giant.

The 79-year-old billionaire’s place on the share register excited investors given his track record at similar businesses. The New Yorker recently ended a four-year campaign at Gillette and Pampers owner Procter & Gamble that saw shares improve by 85%. Barclays said the City was weighing up whether “Unilever might become the next P&G”.

Read the full story.

Telecoms sector surges but tech selling continues

10:36 , Graeme Evans

Deal chatter fired up the telecoms sector today as speculation mounted that Vodafone has been working on a potential swoop for UK mobile phone operator Three.

Shares rose 5% to their highest level since the summer at 123.94p after Bloomberg's report that Vodafone held talks with Three owner CK Hutchison, the Hong Kong-based group controlled by billionaire Li Ka-shing.

No deal was reached and talks are not thought to be ongoing, but the report reignited speculation about consolidation across the European telecoms sector. Vodafone is also said to be working with Iliad about combining their operations in Italy.

BT shares were swept higher, up 3.8p to 192.55p, even though a Voda/Three combination would present a major competition threat in the UK. BT has also been the subject of deal fever in recent months after billionaire Patrick Drahi became its biggest shareholder.

Hargreaves Lansdown analyst Susannah Streeter said the potential Vodafone deals would create a telecoms powerhouse offering “much more clout” across mobile and broadband operations. She added: “It would also layer up Vodafone with armour to fend off private equity bidders thought to be circling.”

Without Vodafone's rise and 5% rebound for Unilever shares after stake building by Nelson Peltz's Trian fund, the FTSE 100 index would have suffered even bigger losses today.

The top flight fell 71.09 points to 7424.24, with tech stocks again the subject of heavy selling.

Fears that the US Federal Reserve will use its meeting on Wednesday to signal the first interest rates hike since 2018 added to jitters ahead of this week's results from Apple, Tesla and Microsoft.

Baillie Gifford's tech-focused Scottish Mortgage Investment Trust fell another 5% or 53p to 1056.2p and Ocado dropped 48.5p to 1,377p.

Interest rate jitters in the UK were also felt in the housebuilding sector as Barratt Developments dropped 6% or 42.8p to 631.6p and Taylor Wimpey slid 7.4p to 149.25p.

One of the bright spots from tech came in the FTSE 250 index as IT services business Computacenter delivered another upgrade to keep it on course for a 17th year of uninterrupted earnings per share growth.

Shares opened 2% higher but succumbed to the selling pressure to stand 38p cheaper at 2658p. Cyber security firm Darktrace and consumer reviews platform Trustpilot fell by more than 7% as the FTSE 250 tumbled 2.5% or 533.22 points to 21,730.76.

Go-Ahead delays results yet again

10:33 , Oscar Williams-Grut

British transport group Go-Ahead has again delayed the publication of its 2021 annual results as investigations continue into its rail franchise scandal.

Auditors at Deloitte are still pouring over the rail and bus group’s figures, which have now been delayed three times and led to its shares being suspended earlier this month.

In September it admitted undeclared £25million funding relating to its South Eastern Railway contract. It was stripped of the contract and faces a government fine.

De La Rue crashes on profit warning

10:04 , Oscar Williams-Grut

Banknote maker De La Rue has lost over a quarter of its value after a Covid-related profit warning.

De La Rue today said operating profits for the current year would be up to £11 million below City forecasts. Shares in the company, which prints Britain’s polymer banknotes, sunk 40.9p, or 27.3%, to 109.1p.

Read the full story.

Bitcoin price continues to fall

08:49 , Graeme Evans

Pressure on bitcoin continued over the weekend, with the cryptocurrency now trading at below $35,000.

Having reached an all-time high of over $68,000 just two months ago, bitcoin has suffered along with other risk assets as the Federal Reserve readies itself to start tightening monetary policy by hiking interest rates.

The slump, which includes a fall of 3% today, is a blow to investors who thought bitcoin might provide a hedge against inflation.

Unilever and Vodafone shares surge, De La Rue slides

08:31 , Graeme Evans

The FTSE 100 index is 7.79 points lower at 7486.34, with housebuilders and tech-based stocks under pressure amid declines of 3% for Barratt Developments and Scottish Mortgage Investment Trust.

Unilever posted the biggest gain, up 5% or 195.5p to 3870p after it emerged that activist investor Nelson Peltz's Trian fund has built a stake in the consumer goods giant.

Vodafone also rose 3% on speculation that it held talks to buy rival 3 from its Hong Kong-based owners. The consolidation talk helped BT shares lift 2.45p to 191.2p.

The FTSE 250 index was 104.24 points lower at 22,159, with Trustpilot the biggest faller after a 3% decline. Computacenter improved 2% as its latest upgrade to guidance left it on course to deliver the IT firm's 17th year of uninterrupted earnings per share growth.

De La Rue shares skidded 29% in the FTSE All-Share after the bank note printer revealed that supply chain inflation, staff shortages and the computer chip drought will mean a shortfall in profits.

Aviva Investors issues sustainability warning

08:04 , Graeme Evans

Aviva Investors today warned that it will vote against the re-election of directors where companies fail to meet expectations on climate change, biodiversity and human rights.

The £262 billion asset manager has written to 1500 companies in around 30 countries setting out its sustainability expectations in 2022.

Chief executive Mark Versey said: “Companies must now turn their pledges into concrete and measurable plans of delivery.

“Our letter sets out clear expectations as to how they should do this, and what those plans must address across climate impact, biodiversity and human rights.”

Aviva Investors said it will hold boards and individual directors accountable where the pace of change does not exhibit sufficient urgency. The asset manager also wants executive compensation structures and performance targets to reflect sustainability goals.

In 2021, Aviva Investors voted against the re-election of directors at 137 companies for lack of progress on ethnic diversity and opposed directors at 85 companies due to human rights concerns.

The firm also rejected 33% and 68% of executive pay proposals in the UK and US, respectively, on concerns over quantum and structure.

The asset manager said it will divest stakes in cases where companies consistently fail to meet its requirements.

Last year, Aviva Investors introduced a 1.5 degree centigrade aligned engagement programme focused on 30 of the world’s worst carbon emitters, with an ultimate sanction of divestment if its expectations are not met over one to three years.

FTSE 100 tracks Wall Street lower

07:40 , Graeme Evans

European markets are set for a poor start to the week as they track the falls seen on Wall Street on Friday.

The Nasdaq posted its lowest weekly close since June last year and its worst weekly loss since February 2020, with the S&P 500 also below its 200-day moving average.

Michael Hewson of CMC Markets said the falls reflected deepening concerns about recent price surges becoming entrenched and the propsect of faster-than-expected tightening of monetary policy by the US Federal Reserve.

China’s determination to pursue a zero-Covid policy has also created the potential for much higher prices in the medium and longer term. And the geopolitical backdrop caused by escalating tensions on the Russia and Ukraine border has added to the jitters.

Hewson said: “For several years, the markets have become accustomed to buying the dips no matter the fundamental backdrop.

“However recent events appear to be seeing a significant loss of confidence in this mindset, and while European markets haven’t seen the levels of selling pressure, the ability to move higher has been tempered by the weakness being seen in the US.”

To add to the inflationary pressures, the geopolitical tensions and ongoing production issues for some OPEC+ countries mean Brent crude is back above $88 a barrel after rising 0.5% overnight.

CMC has forecast that the FTSE 100 index will open 24 points lower at 7470.

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