European markets are sharply lower after Wall Street tumbled amid the S&P 500’s worst session since June 2020.
The US slide, which followed a profit warning from retailer Target, also left the Nasdaq 4.7% lower in a continuation of the recent heavy selling pressure.
Today’s session in London featured results from Royal Mail, National Grid, low-cost airline easyjet and the Tesla and Amazon backer Scottish Mortgage Investment Trust.
FTSE 100 Live Thursday
FTSE 100 down 2% on consumer slowdown fears
Target warning sends S&P 500 down by 4%
“No time to waste” in Royal Mail turnaround
‘Grey-zone warfare’ boost Qinetiq
15:24 , Graeme Evans
Defence technology firm Qinetiq reported positive momentum today as the Ukraine war and a proliferation of “grey-zone warfare” boosts demand for its products.
The company, which was formed in 2001 following a demerger from the MoD, reported a much stronger second-half performance but annual operating profits fell 9% to £137.4 million.
It said: “We enter the 2023 financial year with confidence, a healthy order-book, £900 million revenue under contract and positive momentum.”
Qinetiq noted the growth of “grey zone” hostility such as cyber attacks, which highlight the need for advanced capabilities, informational advantage and better interoperability.
Investec enjoys strong start to the year
14:03 , Simon English
City bank Investec had a strong year, with funds under management, profits and the loan book all growing. That should be good news for the near 3500 UK staff of the South Africa-based financial services giant.
The loan book grew by 13% to £30 billion in the year to March. Profits jumped 82% to £687 million. Funds under management rose by £1.2 billion to £44.4 billion.
Chief executive Fani Titi said: “The group is well positioned to serve its carefully chosen client base and continues to navigate the uncertain outlook from ongoing inflationary pressures and the economic effects of the invasion of Ukraine.”
Google Russia goes bust
13:55 , Mark Banham
The Russian subsidiary of search giant Google is to file for bankruptcy following the seizing of its bank account.
It reported earnings of 134.3 billion roubles (£1.73 billion) in Russia in 2021 and had more than 100 employees.
A statement from Google said: “The Russian authorities’ seizure of Google Russia’s bank account has made it untenable for our Russia office to function, including employing and paying Russia-based employees, paying suppliers and vendors, and meeting other financial obligations.”
In March, Google suspended the sale of advertising in Russia in response to the country’s invasion of Ukraine. Google-owned YouTube also blocked the sale of ads and then removed its service completely.
In December, Google was fined 7.2 billion roubles by Russian authorities for refusing to remove content that was deemed unsuitable from its platforms.
13:34 , Oscar Williams-Grut
Spiralling inflation could be about to jeopardise a great British institution: the Sunday pub roast.
One of the UK’s biggest pub chains is to temporarily stop serving chicken because of soaring prices.
Boss Patrick Dardis told the Standard: “We will sell out the fresh chickens we’ve got in our fridges, and we won’t be ordering any more.
“We can communicate to our pubs and say: ‘sell out the stock you’ve bought, don’t buy any more and swap out the menu’.”
Return to office is good news for GPE
13:04 , Oscar Williams-Grut
GPE, the office landlord formerly known as Great Portland Estates, today reported an annual profit of £167.2 million as the value of its 2.5 million square foot property portfolio rose by 6.1% and rents climbed 3%.
“Our occupancy rates have been going up,” Courtauld said. “We’re not back to pre-pandemic occupancy levels yet, but we’re getting there and there’s no question that London streets are significantly busier.”
FTSE 100 suffers £40 billion wipe-out
12:56 , Oscar Williams-Grut
The FTSE 100 is on track for a dreadful end to the week, with billions wiped off the index by fears of a consumer slowdown.
The blue-chip index is currently down 2%, or 153 points. Thats around £43 billion wiped off the value of the market.
The sell-off comes after a brutal session of Wall Street that saw the S&P 500 close down 4%. That came after a disappointing update from Target, hot on the heels of a similar missive from Walmart, prompted concerns about a serious slowdown in consumer spending.
“Earnings from Walmart and Target amounted to a red flag on the health of the consumer and helped send stocks on Wall Street to their worst daily decline since 2020,” said Neil Wilson, chief market analyst at Markets.com.
“Whenever the trend breaks everyone rushes for the exits so they’re not left holding the bag – this is the slow grind of a bear market.”
Pivot to electric boosts National Grid
12:34 , Oscar Williams-Grut
National Grid has unveiled a rise in profits in a busy year that saw it pivot towards electricity and away from gas as it prepares for net zero.
National Grid bought electricity network Western Power Distribution for £7.9 billion and sold 60% of its gas business to Australian and Canadian investors for £4.2 billion. The deals have left National Grid with 70% of its business focused on electricity and 30% on gas.
Operating profits rose 11% to $3.9 billion in the 12 months to the end of March when stripping out the impact of various deals and other exceptional items. That was higher than City forecasts.
“When you stand back, underpinning the good performance is a record level of investment for National Grid this year,” CEO John Pettigrew said.
Canada’s Brookfield snaps up Homeserve for £4.1 billion
11:57 , Mark Banham
Canada’s Brookfield Asset Management has struck a deal to buy emergency household repairs business Homeserve for £4.1 billion.
Stockholders in the company will receive 1200p for each HomeServe share. Takeover talks were first revealled last month.
Founder Richard Harpin, his family and directors of Homeserve will tender their shares as part of the bid. They own a combined 12.8% stake. The deal will bring an end to FTSE 250 Homeserve’s 18 years as a listed company.
Harpin said: “I am proud of the company we have built and am delighted that Brookfield is committed to providing long-term capital and global expertise.”
Homeserve was founded by Harpin in 1993 as a joint venture with South Staffordshire Water and listed in 2004. Its staff help customers with boiler installation, plumbing repairs and other jobs around the house.
Shares in Homeserve jumped 10% on the announcement.
Economic turmoil good for Begbies Traynor
11:46 , Oscar Williams-Grut
A spike in the number of companies going bust as Covid support tapers off and inflation soars is good news for some people.
Begbies Traynor, the advisory group that specialises in restructuring advice and picking through the wreckage of collapsed businesses, today said it was seeing a big jump in profits as more firms hit the skids.
Executive chair Ric Traynor said the company was on track for results “comfortably ahead of market expectations and significantly ahead of the prior year.” Profit is now expected to jump by 55%.
The rise partly reflects deal-making that has grown the size of the group but Begbies has also been boosted by “increased volume of liquidations” and an uptick in corporate insolvencies, which rose by 50% last year as pandemic-era support measures ended.
Increasing numbers of businesses in distress looks to be a trend that will continue, with warnings the UK economy is rapidly hurtling towards recession.
Overnight, Lord Bilimoria president of the Confederation of British Industry, urged Rishi Sunak to introduce immediate support for businesses.
At a dinner attended by the Chancellor, Lord Bilimoria said: “There is a genuine and real cost of living crisis squeezing firms, communities and people across the UK. Businesses are doing their level best to ease the pressure, but firms are faced with collapse unless they cut costs and put up prices.
“We need to work together to increase confidence and keep investment flowing. We cannot wait until the autumn to turn the page on low growth.”
EasyJet warns on higher fuel costs and strong dollar
11:08 , Oscar Williams-Grut
EasyJet is looking forward to a summer getaway boom but has warned that rising fuel prices and a weak pound are causing new headaches for the business.
The airline reported another period of losses today but said it “faces summer 2022 with optimism.”
EasyJet lost £557 million in the six months to the end of March, down 13.6% on the same period a year earlier as passengers returned.
CEO Johan Lundgren said:"Since Easter we have been flying up to a quarter of a million customers and 1600 flights every day and in the second half leisure and domestic capacity will be above 2019 levels.”
The company “expects to deliver attractive continued improvement “ but stopped short of predicting a return to profit as rivals Ryanair and Tui have.
Higher fuel prices and a strong dollar will add “additional costs” and easyJet said it “would not be appropriate” to provide forecasts for the year ahead given “ the continued level of short-term uncertainty.”
Shares are down 15.2p, or 3%, at 485.8p.
Consumer confidence fears hit shares
10:38 , Graeme Evans
Signs that US consumers have reined in spending on “big ticket” items triggered another exodus from shares today.
Tesco and B&Q owner Kingfisher were among stocks 4% lower in London as the FTSE 100 index tumbled 2% in response to a bleak session on Wall Street last night.
The S&P 500 is now facing its seventh consecutive weekly decline after this week’s poor updates from retail giants Target and Walmart sent the US benchmark 4% lower in its worst daily performance since June 2020.
Target’s shares were 25% lower as consumer caution on big ticket purchases of furniture and electronics was compounded by its warning that higher fuel prices and supply chain costs were also eating into margins.
Hargreaves Lansdown senior analyst Susannah Streeter said: “With consumer spending power expected to be eroded further through interest rate rises, the worry is that Target’s pain is a precursor for yet more struggles to come for retailers.”
The consumer confidence concerns left the FTSE 100 index 149.52 points lower at 7288.57.
Bunzl, whose outsourcing services are used by multiple retailers, slumped 5% or 159p to 2760p and investment firm 3i, which owns Benelux-based discount retailer Action, weakened 8% or 106p to 1218p.
Scottish Mortgage Investment Trust, the Tesla and Amazon backer whose results today showed a 13.1% decline in net asset value (NAV), was 5% or 37.2p lower at 751.2p. It urged investors to take a longer-term view of its performance, however, after pointing out that NAV is up 200% over five years.
The FTSE 250 index fell more than 2% or 373.91 points to 19,575.53, with recruitment firm Page down 7% and electronics business Currys off 6%.
Cyber security firm Darktrace fell another 3.9p to 319.3p, despite a statement dismissing any connection between the company and the ongoing Autonomy civil action.
It also emerged today that Darktrace chief executive Poppy Gustafsson spent £100,000 on the company’s shares at a price of 336.5p, having seen the stock fall 15% yesterday.
FTSE 100 down 1%, Royal Mail off 6%
08:48 , Graeme Evans
The FTSE 100 index is down by more than 1% after US markets slumped last night on consumer confidence fears sparked by weak updates from retailers Target and Walmart.
Shares in Tesco and B&Q owner Kingfisher fell 4%, while consumer goods giant Unilever traded more than 2% lower.
Royal Mail was the biggest faller, declining 6% as annual results warned that 2023 guidance depended on striking a pay deal with unions broadly in line with the current offer. It pointed out that every 1% of pay equated to about £45 million of cost inflation.
Scottish Mortgage Investment Trust, the Tesla and Amazon backer whose annual results today showed a 13.1% decline in net asset value, was also 4% lower.
The FTSE 100 index fell 86.62 points to 7351.47, while the FTSE 250 index was down 1.4% or 278.73 points to 19,670.71.
Boiler repair company Homeserve surged 10% after its board backed a £4.1 billion takeover proposal from Canadian asset manager Brookfield, while low-cost airline easyJet was 2% higher following its interim results.
Royal Mail transformation at a “crossroads”, profits rise
08:12 , Graeme Evans
Royal Mail operating profits rose 6.5% to £707 million in the year to March 27, while share owning postal workers are poised to benefit as the final dividend increased to 13.3p a share for payment on September 6.
Despite the progress, the company warned that it needs to adapt to a post-pandemic world and that its transformation is at a crossroads. Royal Mail is currently in pay discussions with CWU amid the threat of potential industrial disruption.
Chief executive Simon Thompson said over 50% of parcels are now processed automatically, but more needs to be done in reinventing services for the digital age.
He told investors: “The need to accelerate the transformation of our business - particularly in delivery - has become more urgent.
“Our future is as a parcels business, so we need to adapt old ways of working designed for letters and do it much more quickly to a world increasingly dominated by parcels.
"The last two years has shown us all how quickly customer needs can change.
“Our focus now is to work at pace with our people and our trade unions to reinvent this British icon for the next generations, so that we can give our customers what they want, grow our business sustainably and deliver long-term job security for our great team. We have no time to waste."
Weak start for FTSE 100 after S&P 500 slides
07:47 , Graeme Evans
The S&P 500 fell 4% in its worst session since June 2020 as US markets responded to weak updates from retailers Target and Walmart.
Amid fears over declining consumer confidence and the impact of inflation on corporate profit margins, the Dow Jones Industrial Average also slid 3.6% and the tech-focused Nasdaq lost 4.7% in the latest heavy sell-off on Wall Street.
Target lost a quarter of its value in the retailer’s worst session since 1987 after missing expectations for the most recent quarter and lowering profit forecasts due to cost pressures. Walmart, which issued a warning the previous day, fell 7%.
Deutsche Bank analyst Henry Allen said weak housing data also fed concerns that the US consumer might not be in as strong a position as previously thought.
He said: “That’s on top of all the other worries of late that the global economy is heading in a stagflationary direction amidst various supply-chain issues, alongside the prospect that tighter central bank policy is going to further dent growth and risks tipping various economies into recession.”
The latest Wall Street downturn means traders in Europe are expecting a weak start, with CMC Markets forecasting a decline of 44 points to 7394. The top flight closed 80 points lower last night after a late sell-off in response to the US weakness.
The S&P 500 is now facing its seventh consecutive week in negative territory, the longest run of declines for the index since 2001. Yesterday’s session saw just eight constituents end the day higher, which is the lowest number since November.
And with recessionary concerns back in focus, bond markets rallied as investors sought out safe havens. Yields on 10 year US Treasuries were at 2.90% this morning.