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FTSE 100 Live: US rates to jump, oil rises as EU sanctions Russia, new boss at Aston Martin

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

The focus of global stock markets is on the Federal Reserve ahead of the biggest hike in US interest rates in over two decades.

Wall Street has already priced in the half a percentage point increase in the Fed funds rate to an upper limit of 1%, meaning attention will be on the guidance for future rises as the US attempts to get inflation back on track.

In today’s corporate news, Aston Martin Lagonda is in the spotlight after announcing first quarter results and the replacement of chief executive Tobias Moers with former Ferrari boss Amedeo Felisa.

FTSE 100 Live Wednesday

  • Federal Reserve due to raise rates by 0.5%

  • EU plan for ban on Russian oil lifts Brent crude price

  • Aston Martin replaces CEO, shares rise

  • Boohoo shares crash on weak sales guidance

Estée Lauder cuts forecasts due to Chinese lockdowns

15:07 , Mark Banham

Estée Lauder, the company behind the Clinique and Jo Malone brands, has slashed its sales forecasts for the year to July almost in half due to delays in shipping its products in China due to “temporary Covid-driven headwinds”.

The cosmetics manufacturer now expects overall growth of just 7% to 9%, down from as much as 16%.

Overall sales at Estée Lauder were up 10% to $4.25 billion (£3.4 billion)in the first quarter of 2022, compared to the same period last year. Profits were $558 million (£446 million), up more than 20%.

Outside China, shoppers are returning to normal patterns of buying makeup and perfume again, the company said. Sales in the US were up 15% year-on-year, while in EMEA they were boosted 17%. The UK led growth in Europe, as in-person shopping was revived.

Fabrizio Freda, president and CEO of Estée Lauder, said: “The Americas and EMEA regions outperformed our overall sales growth.

“In the Asia Pacific region, several markets prospered, led by Japan while our China results were pressured by Covid restrictions.”

Airbnb stock price lifts, Lyft price plummets: US market open

14:52 , Simon Hunt

It was a mixed bag for technology stocks in the opening minutes of trading opened in New York, as gains at Airbnb were offset by big losses in ride hailing stocks, causing the Nasdaq to open relatively flat overall.

Airbnb shares went up 7.6% as the company exceeded 100 million nights and experiences booked for the first time, in signs of a return to pre-pandemic levels of overseas travel.

Airbnb CEO Brian Chesky said: “Millions of people are now more flexible about where they live and they work, and as a result, they’re spreading out to thousands of towns and cities.

“They’re staying for weeks, months or even entire seasons at a time.

“We are also seeing guests return to cities and cross borders at of even above pre-pandemic rates.”

Things took a turn for the worse for ride hailing apps. Lyft, which reported a drop in sales in the first quarter comparted to the previous one, took a 28% hammer blow to its share price, while rival Uber, which posted more upbeat results, still suffered a 8% share price dip.

Lyft points to driver woes as revenues fall short

14:24 , Simon Hunt

Ride hailing app Lyft has struggled to rise above its pandemic woes, posting a drop in sales.

The California-based company reported revenues of $876 million in the first quarter of 2022, a fall of 10% compared with the previous quarter, while operating costs went up almost $50 million.

In an earnings call, the company complained of driver supply headwinds and signalled a need to invest in attracting greater numbers of drivers to meet demand.

Hargreaves Lansdown senior analyst Susannah Streeter said: With hospitality also starved of staff as the economy re-opened it’s become tough to attract drivers back without the lure of bigger incentives.

“Instead of being seen as a nimble player using tech efficiencies to streamline costs, Lyft is being weighed down by real world labour costs and that’s why its shares have careered down the hill.”

Lyft rival Uber performed better, surpassing analyst expectations and forecasting second-quarter growth of 30-35%, with the total value of bookings set to reach $29 billion.

Pfizer and Moderna boosted by Covid-19 vaccine sales

14:23 , Mark Banham

Pfizer and Moderna, two US pharma companies key to Covid-19 vaccine development, have both had strong starts to the year.

Overnight, Pfizer reported record first quarter revenues of $25.7 billion (£20.5 billion), ahead of analyst expectations driven in large part by sales of the world’s best-known Covid vaccine, Comirnaty.

The result represents a 77% revenue increase on the $14.5 billion (£11.6 billion) generated in the same period of last year.

Reported net income for the quarter came to $7.8 billion (£6.3 billion), a 61% increase.

Comirnaty recorded a market-stripping $13.2 billion (£10.5 billion) in direct sales and alliance revenues.

Dr. Albert Bourla, chairman and chief executive of Pfizer, said: “We continue to supply the world with Comirnaty, which remains a critical tool for helping patients and societies avoid the worst impacts of the Covid-19 pandemic, and we are on track to fulfil our commitment to deliver at least two billion doses to low- and middle-income countries in 2021 and 2022, including at least 1 billion doses this year.”

Other strong performers included the Prevnar family of vaccines, which combat pneumococcal bacteria infections in adults. US sales rose 59%.

This afternoon, Moderna has followed with bumper numbers of its own.

First quarter revenue hit $6 billion (£4.8 billion) thanks to a boost from its Covid-19 vaccine. Moderna said vaccine sales to be higher in the second half of the year than in the first.

The biotech company’s shares soared by more than 7% in premarket trading today. The company has kept its full-year guidance of $21 billion (£16.8 billion) in Covid vaccine sales.

Direct Line warns over higher second hand car prices

14:03 , Mark Banham

One of UK’s largest car insurers has warned that motorists could see an increase in premiums due to the soaring price of used cars.

Direct Line said higher prices were needed to combat shortfalls in covering claims for increasingly expensive second-hand cars.

Current price rises across the market are not enough to cover “the level of claims inflation” driven by “continued elevated used car prices,” Direct Line said.

Elevated used car prices impacted Direct Line’s total loss and theft claims in general in the first quarter of the year, while supply chain disruption delayed the time it took to repair broken down motors.

Read more of the insurance company’s first quarter performance.

SuperBowl boosts Flutter

13:49 , Mark Banham

The owner of Paddy Power and Betfair has charged through to deliver a touchdown in the US, with a 45% boost in revenue there in the first quarter of the year.

Flutter’s US sales rose to £429 million in the first three months of the year, with a 43% rise in average monthly players to 2.36 million.

Gambling stakes in the territory, where Flutter owns platform FanDuel, more than doubled to £5.7 billion on the back of big ticket events including the SuperBowl, which saw the company enjoy its best ever day for new sign-ups.

The group itself recorded revenue growth of 6%, rising to £1.57 billion in the first quarter.

Read more about first quarter performance at Flutter.

Ferrari takes growth up a gear with record sales

13:37 , Simon Hunt

Ferrari has got off to a flying start in 2022 with record sales and double digit growth.

Revenues reached 1.2 billion euros as the luxury carmaker shipped 3,251 cars in the first quarter of the year, a 17% increase on the previous year. Net profits neared 250 million euros, up 16%.

China and Taiwan were among the strongest growth regions with a 47% increase in car sales, while sales in Europe went up 19%. Revenues in the Americas dipped 13%.

The Modena-based carmaker has plans to upgrade the technology in its vehicles, having announced a partnership with California-based Qualcomm to design an enhanced digital cockpit.

Musk takes aim at NFTs

13:09 , Simon Hunt

Elon Musk has taken aim at NFTs in his latest controversial Twitter pronouncement.

The Tesla CEO changed his Twitter profile picture to a cartoon ape resembling the popular ‘Bored Ape’ NFTs before tweeting “I dunno … seems kinda fungible.”

NFTs or non-fungible tokens have been the subject of ridicule in recent weeks after the owner of a NFT of the world’s first tweet, who purchased the image for $2.9 billion, was unable to get bidding higher than a few thousand dollars before the deadline of an online auction.

Despite this, the volume of NFTs traded over the past year has surpassed $50 billion, according to data from blockchain intelligence business IntoTheBlock.

Cineworld seeks second delay in three months on Regal payment

12:25 , Simon Hunt

Cineworld is trying to delay payments to disgruntled shareholders of Regal for as second time in four months as the debt-ladened business tries to shore up cash.

Cineworld agreed a $262 million settlement with former Regal shareholders last September, following a legal dispute claiming Cineworld’s takeover of the company undervalued it.

The beleaguered cinema chain, hoping from a boost from upcoming releases such as Top Gun: Maverick, has struggled under an almost £4 billion heap of debt after coronavirus restrictions forced closures of cinemas.

$79 million of that settlement is still outstanding. The company, which also owns the Picturehouse chain, negotiated a delay to repayment in February but is now seeking more time.

Shares are down 3%.

Boohoo crashes on weak sales guidance

11:54 , Oscar Williams-Grut

Fast fashion juggernaut Boohoo today warned sales growth will grind to a halt this year as the cost of living crisis hits shoppers.

The warning came as industry data pointed to the fastest rise in shop prices on record. Boohoo said it hoped to avoid raising its prices but could be forced to by rising costs.

Manchester-based Boohoo painted a bleak picture of the year ahead. “Uncertain consumer demand”, higher levels of returns and continued shipping delays mean revenue will be flat in the first half of this year. Growth for the full year will be, at best, half what it was last year.

That guidance was below City forecasts, sending the stock crashing 8.2p, or 10.3%, to 71.74p.

Read the full story on today’s update.

Just Eat COO investigated over ‘personal misconduct’ claim

11:31 , Oscar Williams-Grut

The shock departure of two Just Eat Takeaway execs was announced today just hours before the start of the company’s AGM.

The company’s COO will not seek re-election to the management board following a misconduct complaint against him. Just Eat’s chairman is also departing following soured relations with shareholders.

The fast food delivery service said a formal complaint was made to the board regarding personal misconduct by COO Jörg Gerbig at a corporate event. Just Eat wouldn’t comment on details of the allegation, the nature of the misconduct or where it took place, citing privacy concerns.

Separately, Just Eat chairman Adriaan Nühn today announced his departure.

He said: “It is clear that shareholders have concerns about the challenges the company is facing.

“Not seeking re-election is, I believe, the best decision I can take with regard to serving the interests of the company and its stakeholders, including its shareholders.”

Read the full story.

Consumer weakness hits shares, Joules slides 36%

10:27 , Graeme Evans

A surge in oil prices after Europe unveiled plans for a ban on Russian imports within six months heaped more pressure on companies and households today.

Brent crude futures jumped 3.5% to $108.56 a barrel as European Commission president Ursula von der Leyen unveiled the bloc’s sixth set of sanctions targeting Russia.

She pledged to phase out the use of the country’s oil in an orderly fashion that minimises disruption for global markets: “Let us be clear: it will not be easy. But we simply have to work on it.”

As almost two-thirds of the bloc’s crude oil imports came from Russia in 2019, the move reignited the Brent price after China’s zero-Covid policies had begun to weigh on the demand outlook.

UBS thinks the market is underpricing the energy supply risks and expects Brent crude to trade around $115 a barrel. This will do little to alleviate the price pressures squeezing margins and sapping consumer confidence.

BP and Shell were predictable beneficiaries of the oil price rise, with their shares up more than 1% today. BP, which yesterday reported a bigger-than-expected share buyback and its highest quarterly profit since 2008, rose another 4.85p to 419.1p.

The FTSE 100 index drifted 24.59 points to 7536.74, with consumer uncertainty created by record levels of inflation reflected in falls of 3% and more for B&Q owner Kingfisher, JD Sports Fashion and Primark business AB Foods.

It was a similar story outside the top flight as the UK-focused FTSE 250 index lost more than 1%, down 227.79 points to 20,292.97 after heavy falls of 4% for Currys and Mike Ashley’s Frasers Group.

Joules shares tumbled 36% or 19.7p to 35.3p on AIM after the lifestyle retailer reported a squeeze on margins as sales become promotionally driven. Alongside profits below expectations, it said chief executive Nick Jones is due to leave this year.

Oil price up 2.5%, Admiral and Direct Line shares skid

08:57 , Graeme Evans

Brent crude futures are 2.5% higher at $107.66 a barrel as traders react to European moves to ban Russian oil over the next six months and refined fuels by the end of 2022.

The latest sanctions proposed this morning by European Commission president Ursula von der Leyen have added to the industry’s wider supply concerns following figures yesterday showing a surprise drawdown in US inventories.

BP and Shell shares rose 0.5% following Brent’s rise but the FTSE 100 index weakened 22.64 points to 7538.69 in lacklustre trading ahead of tonight’s US Federal Reserve announcement.

Gambling business Flutter Entertainment was the biggest riser, lifting 4% or 360p to 8650p as the Paddy Power owner reported a strong first three months of the year for its US business FanDuel. Shares in rival Entain were boosted 43p to 1535p.

Car insurer Admiral was at the top of fallers board after rival Direct Line Insurance said its motor new business premiums increased by mid-single digits early in January and were flat through the rest of the quarter.

It added: “Across the market, we do not believe this adequately covers the level of claims inflation experienced over the last 18 months.”

Direct Line shares fell 7% or 17.5p to 238p in the FTSE 250 and Admiral dropped 5% or 118p to 2443p.

The FTSE 250 index eased 93.54 points to 20,427.22, although Aston Martin Lagonda shares rose 3% or 26.8p to 872.4p after its first quarter results and change of chief executive.

New boss at Aston Martin, Q1 loss jumps

08:22 , Graeme Evans

Aston Martin Lagonda chief executive Tobias Moers is leaving with immediate effect, to be replaced by ex-Ferrari boss Amedeo Felisa.

Canadian billionaire Lawrence Stroll, who is the company’s executive chairman and a major shareholder, said: “Now, there is a need for the business to enter a new phase of growth with a new leadership team and structure to ensure we deliver on our goals.”

He said Felisa, who is already a non-executive director at Aston Martin, had an “excellent track record” and previous experience of leading a major ultra-luxury car manufacturer. Stroll added: “His technical acumen and charisma will be inspirational for the entire company.”

The replacement of Moers after two years in the role came as Aston Martin stuck by 2022 guidance despite a big rise in its first quarter operating loss to £47.7 million.

More big US rate rises to come

08:02 , Graeme Evans

Today’s rate rise will be the first time the Federal Reserve has hiked at consecutive meetings since 2006.

Deutsche Bank sees chairman Jerome Powell affirming market pricing that further half point rate hikes are ahead.

The bank’s US economists believe this will be the first of three consecutive half percentage point moves, which will eventually take the Fed fund rates to a peak of 3.6% in mid-2023.

They also expect an announcement that balance sheet rundown will begin in June, with a cap of $60 billion a month for Treasuries and $35 billion for mortgage backed securities.

Deutsche Bank commentator Jim Reid added today: “While the Fed might have already begun their hiking cycle seven weeks ago, the sense that they’re behind the curve has only grown over that time.”

Focus on Fed rates decision, Wall Street steady

07:47 , Graeme Evans

Stock markets are trading sideways ahead of tonight’s Federal Reserve decision, when policymakers are expected to increase interest rates by half a percentage point.

Despite this being the largest rise in over two decades, the main focus for investors will be the Fed’s guidance on the path for interest rate hikes over the rest of the year.

Wall Street is pricing an end-of-year level of near to 2.5% as another half point increase is expected at the Fed’s next gathering before further rises at subsequent meetings as policymakers battle to bring inflation back under control.

Tight labour market conditions, which risk inducing a wage-price spiral and more persistent inflation, continue to be a concern after figures yesterday showed the number of job openings in the US rose by a bigger-than-expected 205,000 to a new high.

Oil-driven inflationary pressures also remain after Brent crude futures rose 1% to $106 a barrel on supply concerns created by a surprise drawdown in US inventories. The prospect of fresh EU sanctions targeting Russia’s oil industry added to the pressure.

The Federal Reserve decision is at 7pm, followed by a press conference with chairman Jerome Powell 30 minutes later.

Until then, investors appear content to sit on the sidelines after Wall Street indices traded moderately higher on Tuesday and are set for a flat session today. It’s a similar story in Europe, with the FTSE 100 index forecast to open unchanged at 7561.

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