FTSE 100 Live: Musk gets financing for Twitter bid, Deutsche forecasts US recession, THG takeover approaches
Tesla put the US earnings season back on track last night after the electric car company led by Elon Musk reported a bigger-than-expected jump in sales and profits.
Musk highlighted potential supply chain issues but shares were 5% higher in Wall Street after-hours trading. The update boosted sentiment after a shock fall in Netflix subscriber numbers sent the streaming giant’s shares more than 35% lower by last night’s close.
As well as US earnings from Philip Morris and AT&T due later, investors will be interested in comments from the heads of the Bank of England, Federal Reserve and European Central Bank at gatherings in the United States.
FTSE 100 Live Thursday
Musk lines up financing for Twitter bid
Deutsche Bank predicts US recession
Tesla results ahead of expectations
Bill Ackman dumps Netflix stake
Miners lower after production updates
Leisure and hospitality gains weighed down by metals: FTSE Update
15:31 , Simon Hunt
The FTSE100 index edged up 0.2% as gains in leisure and hospitality stocks were offset by drops in metal mining businesses.
Whitbread and Intercontinental Hotels were up 2.2% and 1.7% respectively amid renewed investor optimisim over international travel.
Antofagasta dropped 6.4% after reporting a fall in copper production in the first quarter, while Anglo American fell 8.7% after forecasting a drop in iron ore production.
Elon Musk explores Twitter tender offer
15:00 , Oscar Williams-Grut
Elon Musk is exploring making a tender offer to buy the remaining shares in Twitter, according to a regulatory filing.
The move is backed by a consortium of banks including Barclays, Morgan Stanley and Bank of America, who together have offered around $25.5 billion debt to finance the deal.
Musk himself has committed to $21 billion of equity financing towards the offer, under which shares would be bought at a price of $54.20 per share.
Tesla market cap jumps $90 billion: US Markets Open
14:50 , Simon Hunt
Tesla shares jumped 9.3% in New York, adding about $90 billion to the car maker’s market cap in the space of a few minutes after it posted record results despite cost pressures and supply chain constraints.
American Airlines shares opened up 12% after the company posted results that exceeded Wall Street expectations.
Shares in consumer discretionary businesses led gains in New York, fueled by a 2.3% rise in Hilton Hotels and a 4.6% rise in cruise ship business Carnival, as positive results from American Airlines buoyed the hopes of investors in the travel and leisure sectors.
Deutsche Bank forecasts US recession as inflation takes its toll
13:42 , Simon Hunt
The US could enter into recession in late 2023 according to forecasts by economists at Deutsche Bank.
Tightening of monetary policy by the Federal Reserve to control inflation would lead to contractions in the fourth quarter of 2023 and the first quarter of 2024 with unemployment topping 5%, according to the forecasts.
Germany “would almost certainly fall into a severe recession” if supplies of Russian gas were shut off from the country, while UK GDP is set to drop to 0.7% in 2023 with import shock and “rising recession risks.”
David Folkerts-Landau, Group Chief Economist at Deusche Bank, said: “The storm clouds over the global economy have darkened dramatically.
“If central banks don’t act soon and more aggressively than forecast, inflation expectations will likely move significantly higher, ultimately leading to an even more aggressive tightening and a deeper recession with a larger rise in unemployment.”
Euro area inflation hit 7.4% in March
13:19 , Simon Hunt
Inflation in the euro area reached 7.4% in March 2022, up from 5.9% in February, according to data released by the European Union.
Energy was the biggest single contributor to the rise, followed by a rise in the price of services.
Lithuania had the highest rate of inflation at 15.6%, while Malta had the lowest at 4.5%.
Walid Koudmani, chief market analyst at financial brokerage XTB said: “While we have already seen a slight change in tone from some members of the ECB, hinting at rate hikes sooner than previously expected, today’s report could further incentivize the bank to act in an attempt to avoid the increasingly likely stagflation scenario."
KitKat maker warns of more price rises on the way
11:32 , Mark Banham
Nestlé has become the latest company to warn of more price increases to come as cost inflation in its supply chain bites.
The food and drink business, which makes everything from KitKat to Nespresso coffee machines, said today it had hiked prices by an average of just over 5% in the first quarter of 2022 and warned of more price rises to follow.
Chief executive Mark Schneider said: “Cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the course of the year.”
The Smarties maker reported first quarter sales of 22.2 billion Swiss francs (£1.78 billion), reflecting growth of 7.6%.
Hedge fund takes £300 million hit on Netflix investment
11:14 , Oscar Williams-Grut
Hedge fund supremo Bill Ackman has cancelled his Netflix - incurring a hefty cost as a result.
Ackman’s company Perishing Square has dumped its stake in Netflix at a loss of $400 million (£306 million) after the streaming business suffered a 35% drop in its share price on Wednesday.
It followed news that the company lost 200,000 subscribers in the first three months of the year. Netflix has pledged to introduce a cheaper ad-funded subscription tier and crackdown on account sharing in a bid to restart growth.
FTSE 100 lags despite IAG Improvement
10:24 , Graeme Evans
Heavy selling hit blue-chip mining stocks today as a series of Covid-disrupted production updates added to speculation that valuations in the sector may be nearing their peak.
Anglo American and Antofagasta shares tumbled more than 6%, reversing a chunk of the gains achieved on the back of this year’s big surge in commodity prices.
De Beers owner Anglo American reported a “challenging” first quarter after a 10% fall in production, which reflected Covid absences and impact of heavy rainfall in South Africa and Brazil. Shares dropped 251p to 3784.5p but remain 20% higher in the year to date.
Antofagasta fell 115p to 1512p as it said its copper mining operations continue to be affected by drought in Chile. BHP, which is no longer listed in the FTSE 100 index, fell 2% after cutting its annual guidance for copper output.
AJ Bell investment director Russ Mould said: “Commodity producers have enjoyed soaring prices in the past year but their moment in the sun might be coming to an end.
“The key question now is whether commodity prices are close to their peak for this cycle as a reduction in selling prices together with rising costs will put a squeeze on profit margins.”
The commodity sector has contributed to the London market’s outperformance during 2022, but the reverse was true today after the FTSE 100 index fell 5.13 points at 7624.09 compared with big gains in Europe.
Investors in London were instead focused on recovery stocks as British Airways owner IAG rallied 5% or 7.8p to 151.8p and Rolls-Royce improved 2.15p to 95.6p.
Rentokil Initial shares were among the best performing in the FTSE 100, lifting 3% or 14.8p to 529.6p after a reassuring update from the washrooms and pest control firm. Revenues rose 1.8% while the company has been successful mitigating cost pressures.
The FTSE 250 lifted 95.83 points to 21,179.83, with brickmaker Ibstock up 9% or 15.5p to 181.9p after a stronger-than-expected first quarter update. There were also big gains for shares in Wizz Air, easyJet and food travel business SSP.
THG rejects takeover approaches
10:10 , Oscar Williams-Grut
Online shopping giant THG has rejected “numerous” early-stage takeover bids in recent weeks as the company’s under-pressure share price attracts bidders.
THG CEO Matt Moulding today confirmed a string of “indicative proposals” following “significant speculation” in the press. Moulding didn’t specify how many approaches had been made but said each had been rejected at an early stage.
“The Board has received indicative proposals from numerous parties in recent weeks,” he said. “The Board has concluded that each and every proposal to date has been unacceptable, failing to reflect the fair value of the Group, and confirms that THG is not currently in receipt of any approaches.”
Industry blog Betaville reported in February that private equity firms Advent, Leonard Green and Apollo were all running the rule over THG.
Mining stocks weigh on FTSE 100
09:05 , Graeme Evans
Mining stocks are at the foot of the FTSE 100 index after some of the sector’s biggest players provided updates on a Covid disrupted first quarter of 2022.
They included Anglo American, which reported a 10% fall in production as high rainfall also affected operations in South Africa and Brazil. Shares dropped 6% or 251p to 3784.5p.
Antofagasta shares fell 8% after its production update as the copper miner’s operations continue to be affected by drought in Chile. BHP, which is no longer listed in the FTSE 100 index, fell 2% after cutting its annual guidance for copper production.
The commodity sector pressure contributed to a weak session for London’s top flight, with the FTSE 100 index down 3 points at 7626.19 compared with big gains in Europe.
Rentokil Initial shares are among the best performing in the FTSE 100, lifting 12.2p to 527p as the washrooms and pest control firm reported a strong first quarter and said it had been successful in offsetting cost pressures.
The FTSE 250 lifted 39.19 points to 21,123.19, with brickmaker Ibstock the biggest riser after it posted a trading update and announced a share buyback programme. The stock lifted 13.6p to 180p, a rise of 8%.
Tesla impresses after 81% sales jump
08:35 , Graeme Evans
Tesla sales jumped 81% to a higher-than-expected $18.8 million (£14.4 billion), fuelled by a 68% year-on-year surge in deliveries to 310,048 and an increase in average selling price.
Operating income improved to $3.6 billion (£2.75 billion) for a first quarter margin of 19.2%, despite factories running below capacity for several quarters due to supply chain issues and Covid disruption.
The company, which has gigafactories in Shanghai, Texas and Berlin, said it expects these challenges to continue through the rest of 2022.
Tesla said: “We plan to grow our manufacturing capacity as quickly as possible. Over a multi-year horizon, we expect to achieve 50% average annual growth in vehicle deliveries. The rate of growth will depend on our equipment capacity, operational efficiency and the capacity and stability of the supply chain.”
Tesla shares closed 5% lower in regular trading for a market capitalisation of $1 trillion, before rallying 5.5% in after-hours business.
Hargreaves Lansdown equity analyst Laura Hoy said: “Tesla’s performance is genuinely impressive. But the stock is priced to reflect this so it takes a lot to move the needle in a positive direction.”
Ackman dumps Netflix stake
08:06 , Graeme Evans
A major Netflix stake bought just weeks ago by star fund manager Bill Ackman’s Pershing Square Holdings has been dumped following Tuesday’s disastrous quarterly results.
Back in January, Ackman praised the US giant’s long-term prospects as he pledged to go “all-in on streaming”.
But Ackman wrote to Pershing Square shareholders last night to reveal that it had sold the entire stake, a move that has reportedly generated a $400 million loss.
The decision comes amid a 35% slide for Netflix shares after it reported a surprise fall in subscriber numbers while signalling that it would modify its subscription-only model and look to incorporate advertising.
Ackman wrote: “Based on management’s track record, we would not be surprised to see Netflix continue to be a highly successful company and an excellent investment from its current market value.
“That said, we believe the dispersion of outcomes has widened to a sufficiently large extent that it is challenging for the company to meet our requirements for a core holding.
“One of our learnings from past mistakes is to act promptly when we discover new information about an investment that is inconsistent with our original thesis. That is why we did so here.”
Tesla shares higher, Netflix closes 35% down
07:46 , Graeme Evans
The tech-heavy Nasdaq closed more than 1% lower last night after Netflix shares slumped 35% on the back of its first fall in subscriber numbers in a decade.
A much stronger reaction to quarterly figures from consumer goods giant Procter & Gamble meant the Dow Jones Industrial Average finished 0.7% higher and the benchmark is expected to post a further gain when Wall Street opens later.
The Netflix update raised concerns that other high growth areas of the market could suffer a similar fate if their earnings numbers fall short in the coming days.
However, Nasdaq futures are pointing to a positive start later after Tesla reported better-than-expected quarterly figures at the closing bell. Elon Musk’s electric car business posted its highest ever profits, with an 81% rise in quarterly sales.
Today’s session will see AT&T and Philip Morris post quarterly figures before the market opens and social media platform Snap after the close.
Traders will also be focused on comments from central bank leaders in the United States, with Federal Reserve chair Jerome Powell, ECB president Christine Lagarde and Bank of England governor Andrew Bailey all due to make public appearances later.
Oil prices, meanwhile, are higher as pressure grows on Europe to impose formal sanctions on Russian oil. Brent crude was 1.5% higher at $108 a barrel.
CMC Markets expects the FTSE 100 index to open unchanged at 7629 and the DAX in Frankfurt to start 20 points higher at 14,382.