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FTSE 100 Live: Amazon drops 11%, Musk sells $8.5bn chunk of Tesla, NatWest profits surge, AO drops

·16-min read
 (Evening Standard)
(Evening Standard)

A volatile April for stock markets is ending on an upbeat note, despite Amazon’s below par results dealing another blow to confidence in the technology sector.

NatWest contributed to the positive mood today by posting a big rise in first quarter profits and reporting that bad debts remain low despite the economic challenges.

AstraZeneca, Reckitt Benckiser and Pearson have also posted updates at the end of a week of largely encouraging earnings from London-listed companies.

FTSE 100 Live Friday

  • NatWest profits rise in first quarter

  • Amazon on track for worst fall since 2014

  • Elon Musk sells $8.5 billion Tesla stake

  • FTSE 100 higher, Johnson Matthey surges

FTSE 100 ends higher

16:49 , Oscar Williams-Grut

The FTSE 100 has ended the day up 28 points, or 3%, on a relatively quiet day in London.

The index was boosted by paper and cardboard makers after an upbeat update from Smurift Kappa this morning, which ended the day 4.3$ higher.

That’s all from us on the blog today. We’ll be back after the bank holiday on Tuesday.

Musk sells more Tesla shares

15:13 , Oscar Williams-Grut

It turns out Elon Musk has sold way more Tesla shares than first thought.

Filings published last night showed Musk had sold a chunk of the company worth around $4.5 billion. But additional filings just out in New York show he actually offloaded stock worth $8.5 billion in total.

The mammoth share sales came after Musk struck a deal to buy Twitter for $44 billion at the start of the week. He has said he will personally put in $21 billion to fund the deal, with the rest coming from borrowing.

Shares in Tesla are up around 3.5% in New York this morning after Musk said on Twitter that he had no plans to carry out any more Tesla stock sales.

Read our updated story here.

Can Netflix fix its subscriber woes?

14:55 , Oscar Williams-Grut

Netflix has been in the doldrums recently, with billions wiped off its market value after posting its first fall in subscriber numbers in a decade.

Our reporter Lucy Tobin has taken a deeper dive into what the streaming giant needs to do to fix its problems. Here’s a flavour of her piece:

How can the Oscar-nominated firm behind smash hits The Crown, Bridgerton, Stranger Things, Squid Game, Call My Agent! and realms more get its mojo back?

“Netflix will survive but the path it takes in order to do so is unclear,” says Cameron Day, managing partner at digital agency Future Platforms. “The problems it’s experiencing are about the streaming sector as a whole — just this week, we have seen CNN Plus shutting down after only one month, as more and more services are competing for a decreasing market share.”

There’s some fire-fighting to be done: where once Netflix’s founder and chief executive Reed Hastings said “we love people sharing Netflix”, the latest wobbly figures have triggered a change of approach. Some 100 million households share their accounts— in the UK at least 27% of Netflix’s 15 million subscribers are sharing their passwords with other households, according to the research firm Digital i — and a crackdown is expected. Ads are on their way too, but will take at least a year to roll out.

“The challenge for Netflix specifically,” Day says, “is how to recapture the newness and innovation it leads the market with, and reduce cost without further significantly taxing its loyal subscriber base.

“Integrating advertising alongside a reduced cost subscription alone won’t fix the longer term issues.”

You can read the full article here.

Amazon sinks 11% in New York

14:50 , Oscar Williams-Grut

Amazon has dropped 11% at the start of trade on Wall Street this afternoon following last night’s disappointing earnings. It puts the online giant on track for its biggest one-day share price fall since 2014.

Amazon shares dropped sharply at the start of trade in New York on Friday (Reuters/Evening Standard)
Amazon shares dropped sharply at the start of trade in New York on Friday (Reuters/Evening Standard)

Russ Mould, investment director at AJ Bell, sums up why investors were so spooked by last night’s update: “Online store sales fell by 3%, shipping costs surged by 14% and operating profits fell year-on-year for the third time in a row as Amazon served up a disappointing first quarter of 2022 and weak guidance for the second.

“The firm therefore isn’t answering any of the questions begged by its mixed-bag fourth-quarter results from last year and shareholders also need to note that the company was cash-flow negative for the sixth time in eight quarters.”

Airbnb lets employees work from anywhere forever

14:40 , Mark Banham

Property rental site Airbnb is to let its employees work from anywhere indefinitely.

Its employees will be able to work from home or the office, and move anywhere in the country they live, without pay being impacted.

Airbnb chief executive Brian Chesky set out the new policy in an email to employees and said that in a decade flexible working would be the norm for most companies.

Chesky said: “We want to hire and retain the best people in the world (like you). If we limited our talent pool to a commuting radius around our offices, we would be at a significant disadvantage.

“The best people live everywhere, not concentrated in one area. And by recruiting from a diverse set of communities, we will become a more diverse company.”

He added that employees would have flexibility to travel and work around the world from September for up to 90 days.

Other tech firms who have flexible working policies include Twitter, Cisco and Microsoft.

Allianz to stop insuring Arctic oil and gas

14:06 , Mark Banham

Insurance giant Allianz is to cease insuring Arctic oil and gas fields, clamping down on policy renewals by the middle of next year as part of a push for a greener future.

The German multinational, which supplies policies across the oil and gas sector, pledged to stop insuring new oil and gas fields, oil powerplants, and oil pipelines in the Arctic by January 2023.

The firm also said it would not renew existing contracts for Arctic fossil fuel projects, starting in July of next year.

“In view of the current geopolitical situation, the reliable energy supply for households and companies must be reprioritised in the short term. Policymakers must now work together with the business community to define conditions that enable planning, and in addition enable the acceleration of renewables globally,” said Günther Thallinger, member of the board of Management at Allianz.

M&C Saatchi back in the black

13:31 , Oscar Williams-Grut

Advertising agency M&C Saatchi has bounced back into profitability with a boost of £21.6 million during 2021, compared to an £8.5 million loss in 2020.

The network that evolved from infamous advertising shop Saatchi & Saatchi in 1995 said it would now reinstate its dividend for 2022, after failing to pay it last year, and said it expects to achieve between £31 million and £41 million in profits during 2022.

The results have landed only a day after M&C Saatchi extended its “put up or shut up” deadline for bidder AdvancedAdvT led by tech entrepreneur Vin Murria. The two companies have now had months of back and forth negotiations.

Today M&C Saatchi stock climbed by more than 11%.

Chief executive Moray MacLennan said that the company had achieved “an exceptional turnaround and return to growth at a time of unprecedented change’.

Reckitt price hikes help drive first quarter sales

13:10 , Oscar Williams-Grut

The company behind everything from Dettol disinfectant to Durex condoms has joined the rapidly growing list of companies increasing prices.

FTSE giant Reckitt said today it had raised prices by 5.3% during the quarter as it faces a “challenging operating environment”.

Higher prices helped Reckitt post a 5.6% increase in net revenue growth to £3.4 billion in the first quarter. Barclays said the results should be taken positively as they showed Reckitt was winning market share across the business.

Read the full story.

AstraZeneca shares dip on Covid revenue outlook and debt concerns

12:02 , Oscar Williams-Grut

AstraZeneca has admitted revenues from its Covid-19 vaccine could fall by as much as a quarter this year as demand drops off for the product.

The Anglo-Swedish pharmaceuticals giant said income from sales of Vaxzevria, or the Oxford/AstraZeneca vaccine as its more commonly known, is expected to decline later this year as the severity of coronavirus strains wanes.

Sales of the vaccine increased fourfold in the first quarter of the year to more than $1.1 billion (£876 million). However, in Europe sales were down by 40%.

Group revenue totalled $11.3 billion (£9 billion) in the first three months of the year, rising by more than 50%. Cancer treatments accounted for $1 billion (£802 million) of growth.

Read the full story on Astra’s first quarter performance.

AO World crashes as cost of living slump hits

11:11 , Oscar Williams-Grut

Online white goods retailer AO World lost nearly a fifth of its value today after warning that the cost of living crisis was prompting more customers to cancel warranties and announcing that its founder would start selling shares for the first time.

AO, which sells fridges and washing machines, told investors it could face a “material” hit to profits this year if it is forced to reassess the value of insurance packages sold alongside its products.

That may be likely after March saw “higher warranty cancellations than average historical trends as customers responded to the escalating cost of living.” AO is hoping it will be a temporary blip.

Read the full story.

Packaging stocks surge, FTSE 100 higher

10:29 , Graeme Evans

Underwhelming results from Amazon as consumers begin to rein in online purchases failed to knock London-listed packaging giants out of their stride today.

Shares in Mondi, Smurfit Kappa and DS Smith were 3% higher in the FTSE 100 index as investors focused on their progress in offsetting sharply higher costs.

Dublin-based Smurfit reported a 33% rise in revenues and earnings for the first quarter and told investors today that demand continued to be good while it recovers cost and other supply chain pressures through higher prices.

Chief executive Tony Smurfit said the quarter had presented significant operational challenges: “Practically all input costs have risen sharply and already tight markets and supply chains have been exacerbated by the war in Ukraine.”

Smurfit lifted 89p to 3360p, Mondi added 55p to 1516p and DS Smith rose 8.6p to 334.2p following the update, which came a few hours after internet giant Amazon had given a sales forecast below Wall Street’s expectations for the second quarter.

Amazon shares reversed 9% in extended trading, although earlier strength for the Nasdaq ensured London’s FTSE 100 index found positive territory today.

Ocado and tech investor Scottish Mortgage were both 3% higher as the top flight ended a volatile April with a rise of 21.85 points to 7531.04, aided by a UK corporate results season that has largely avoided major scares.

One sector showing resilience has been building supplies after reassuring updates today from Travis Perkins, roofing firm SIG and insulation business Kingspan.

Interest in energy efficiency projects boosted Toolstation owner Travis as sales rose 13.6% in the first quarter and it reported “manageable” levels of cost inflation.

Shares dipped 16.5p to 1250.5p despite broker Peel Hunt’s 1850p target price. Kingspan fared better, lifting 4% on optimism for the current quarter based on a strong order backlog and “decent activity” in most markets.

SIG took top billing, however, as it reported a 25% jump in like-for-like sales for the March quarter, well ahead of previous expectations. Shares surged 14% or 5.15p to 41.9p.

The FTSE 250 index rose more than 1%, up 241.88 points to 20,861.50, with Dr Martens and Marshalls among the stocks 4% higher. Clean air firm Johnson Matthey jumped 24% or 430.5p to 2302p as it emerged that New York-based Standard Investments had built a 5% stake in the former blue-chip company.

The shares are back where they were in November, when investor confidence was shaken by a surprise decision to pull out of the battery materials sector in favour of a pivot towards green economy technologies including hydrogen.

Legoland boss stepping down after 23 yaers

09:28 , Mark Banham

The chief executive of the company behind Madame Tussauds, Alton Towers and Legoland is stepping down after 23 years.

Merlin Entertainments said CEO Nick Varney plans to retire after serving a 12-month notice period, during which time the board will identify a successor. Mark Fisher, Merlin’s chief development officer, is also retiring on the same timeline.

Merlin was formed in 1999 following the £47 million management buyout of Vardon Entertainments, with Varney heading the company ever since. Earnings have grown from £7 million to £569 million prior to the pandemic.

Today, the company operates 140 attractions, 23 hotels and six holiday villages in 24 countries across four continents. It was listed on the stock market until 2019 when it went private in a £4.8 billion deal.

Varney said: “Merlin has been my life for most of my career. I love the people, the attractions, the visitors and the industry and I am proud to have played my part as we built Merlin into an incredible business.”

Chair Roland Hernandez said Varney had “created one of the best leisure businesses in the world through his passion, dedication, and talent” and thanked him for his “outstanding leadership.”

Musk offloads $4 billion Tesla stake

09:20 , Oscar Williams-Grut

Elon Mask sold $4 bilion (£3.2 billion) worth of Tesla shares in the days after sealing a deal to buy Twitter, new filings show.

Musk sold around 4 million shares in the electric car company he runs on Tuesday and Wednesday. On Monday, he had reached a deal with Twitter’s board to buy the social media company for $44 billion.

The stock sales appear to go some way to answering the question of how Musk will fund his portion of the Twitter takeover. He has pledged to provide $21 billion in equity towards the deal, but estimates suggests he had just $3 billion of cash on hand prior to the latest stock sales.

Tesla shares have fallen 10% since Monday amid speculation that Musk could be forced to sell down his stake to fund the deal. The CEO’s large share sales over recent days are likely to have contributed to the decline.

Read more.

FTSE 100 higher, AO World slides 18%

09:00 , Graeme Evans

The FTSE 100 index is 0.4% higher, up 30.89 points to 7540.08, amid strong sessions for packaging businesses Mondi and Smurfit Kappa.

Their shares rose 3% after Smurfit reported 33% growth in revenues and earnings for the quarter to March 31.

Shares in Ocado and Scottish Mortgage Investment Trust were also 3% higher after yesterday’s strong rebound for the tech-focused Nasdaq. AstraZeneca and Reckitt Benckiser stood 1% lower after their first quarter updates.

The FTSE 250 index climbed 142.71 points to 20,762.33, led by a 4% recovery for shares in Dr Martens.

Elsewhere, shares in roofing insulation specialist SIG jumped 13% after its update but online white goods supplier AO World slumped 18% as figures highlighted the pressure caused by weaker consumer demand and supply chain challenges.

NatWest upbeat as first quarter profits jump

08:24 , Graeme Evans

NatWest profits have jumped to £1.2 billion in the first quarter, from £885 million a year earlier.

The improvement has been aided by recent interest rate rises, which helped its net interest margin to improve 15 basis points to 2.46%.

The state-backed lender also became the first UK lender in the current reporting season to announce a credit impairment release, rather than increase its provision.

NatWest said the £38 million move reflected low levels of realised losses across its portfolio, although the “economic outlook remains uncertain”.

Its capital strength recently enabled NatWest to buy back £1.2 billion of shares from the UK government, reducing the stake to minority ownership at 48%.

Richard Hunter, head of markets at Interactive Investor, said: “NatWest has brought the curtain down on the banks’ reporting season in some style, with progress being seen virtually across the board.”

Shares opened broadly unchanged today.

House price growth slows in April

08:11 , Graeme Evans

Nationwide today said the average house price rose by 0.3% month-on-month in April, the smallest monthly gain since September last year.

Annual house price growth slowed to 12.1%, down from 14.3% in March but still the 11th time in the past 12 months that the figure has been in double digits.

Nationwide’s chief economist Robert Gardner said: “Housing market activity has remained solid with mortgage approvals continuing to run above pre-Covid levels.

“Demand is being supported by robust labour market conditions, where employment growth has remained strong and the unemployment rate has fallen back to pre-pandemic lows. With the stock of homes on the market still low, this has translated into continued upward pressure on house prices.”

The average house price, according to Nationwide’s figures, now stands at £267,620.

Amazon shares slide, Apple impresses

07:54 , Graeme Evans

Amazon shares fell 9% in extended Wall Street trading last night as disappointing results from the online retail giant halted tech sector momentum from earlier in the day.

The Nasdaq was 3% higher in regular trading but futures markets are today pointing to a weaker start as traders factor in Amazon’s below-par first quarter performance, which included a $3.8 billion (£2.4 billion) net loss. Operating profit fell 58.6% to $3.7 billion (£3 billion).

Projected sales for the current quarter of between $116 billion and $121 billion (£92.7 billion-£96.7 billion) were also behind Wall Street expectations as consumers rein in their spending in the uncertain climate.

Hargreaves Lansdown equity analyst Sophie Lund-Yates said: “Amazon is still a titan, no one can deny that. $116 billion (£92.7 billion) of quarterly sales takes a mighty beast.

“Sadly though, the market isn’t asleep to the fact that Amazon is suffering badly at the hands of economies of scale. The group had to double its capacity to meet demand when the pandemic hit, and as of yet, revenues aren’t keeping pace to keep margins up.

“The focus now is on building scale so that each extra package off the distribution line can contribute meaningfully to group profits. There is no easy fix here. The plan is the right one, but the speed at which margin accretion comes through is a different question entirely.”

Apple’s results got a better reception on Wall Street as the iPhone giant overcame supply chain pressures to report that net sales rose 8.6% in the quarter to $97.3 billion (£77.7 billion).

This was better than the market expected and helped operating profits to hit $30 billion (£24 billion), despite a 19% rise in operating expenses. Its shares were initially higher in after-hours trading but later stood 2% lower.

Despite its 3% rebound yesterday, the Nasdaq is down by about 10% this month after a hammering for growth stocks on the outlook for sharply higher interest rates.

On the back of Thursday’s stronger Wall Street session, IG is forecasting that the FTSE 100 index will open 0.8% higher at 7569.

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