Wall Street followed the FTSE 100 (^FTSE) and European stocks lower on Wednesday as Tesla (TSLA) shares sank more than 12% after shrinking car sale margins disappointed investors.
The electric carmaker’s profit margin fell to a five-year low in results released after the bell last night while its earnings missed estimates for a fourth straight quarter.
The selloff came as the UK manufacturing sector hailed its strongest growth in two years, according to the latest data from S&P Global.
The manufacturing index rose to 51.8 for July, up from 50.9 in June. A reading below the 50 mark on the index indicates a drop in activity, but above 50 indicates growth.
London’s benchmark index ended 0.1% lower but precious metal miners rebounded as gold prices steadied
Germany's DAX (^GDAXI) dipped 0.9% on the day and the CAC (^FCHI) in Paris headed 1.1% into the red
Wall Street opened lower with the S&P 500 down 1% after the bell, on track for its fifth fall in six days
The pound was 0.1% higher against the US dollar (GBPUSD=X) at 1.2925
“European markets slid lower on Wednesday as risk appetite dropped following a disappointing start of the earning season in Europe and the US," said Pierre Veyret, technical analyst at ActivTrades.
“Investors were disillusioned with the first slew of corporate results from the US tech sector after Alphabet and Tesla published results falling short of expectations.”
“Traders also face the same situation in Europe, but with the luxury sector this time, after LVMH showed a significant decrease in sales due to uncertain global economic conditions as well as a drop in Chinese Demand.
"But so far, these disappointing results have only provided investors more reasons to take some profits out, naturally leading to corrective moves across many benchmarks.”
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LaToya Harding
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Well that's all from us for today — thanks for following along. Be sure to join us again tomorrow when we will be back for more of the latest market news and all that is happening across the global economy.
Have a good evening all!
LaToya Harding
Bank of Canada cuts interest rates to 4.5%
The Bank of Canada has cut interest rates to 4.5%, lowering borrowing costs for a second meeting in a row.
It said: "With broad price pressures continuing to ease and inflation expected to move closer to 2%, governing council decided to reduce the policy interest rate by a further 25 basis points.”
The central bank began hiking rates from a record low of 0.25% in March 2022 in a bid to tame soaring inflation. It held the rate for almost a year at 5%, the highest level in two decades, before initiating a cut in early June.
The Bank of England has its next meeting on 1 August — will it follow suit?
The Bank of Canada cut interest rates by 25bps to 4.5% as expected.$USDCAD ticks up toward 1.3790 in the initial reaction. pic.twitter.com/TOFOr1Jadu
Screens show a blue error message at a departure floor of LaGuardia Airport in New York on Friday, July 19, 2024, after a faulty CrowdStrike update caused a major internet outage for computers running Microsoft Windows. (AP Photo/Yuki Iwamura) (ASSOCIATED PRESS)
CrowdStrike has said it will make changes to the way it operates after a failed update for Windows systems caused a mass global IT outage on Friday last week.
The cybersecurity firm said in a detailed review of the incident published on Wednesday that it would make future updates on a “staggered deployment strategy”. This means that it will roll them out gradually rather than to every computer at once.
It will also monitor the effects of updates more closely, and allow customers to chose when updates are installed.
The faulty update crashed 8.5 million Microsoft Windows computers around the world.
LaToya Harding
Thames Water credit rating downgraded to ‘junk’ status
Thames Water has had its credit rating downgraded to “junk” status by the Moody’s agency.
Moody’s said the company may struggle to find new investment after regulator Ofwat imposed restrictions on the company earlier this month.
It downgraded the rating from Baa3 to Ba2. Baa3 is the last tier of Moody’s ratings that counts as “investment grade”, a category that makes it easier to access funding. Ba2 is the second rating in “junk” status.
Moody’s said:
"We see elevated risk that existing or future equity investors may view the proposed risk and return profile as not sufficiently attractive to provide the sizeable equity requirement of at least £2.5bn under Thames Water’s current business plan and likely more in the context of the proposed determination."
LaToya Harding
1 in 3 Brits use contactless payments
New research from Accenture has revealed that 1 in 3 Brits made contactless payment via their phones last year.
Some 18.3 billion contactless payments were made in the UK in 2023, a 7% increase from 2022. While younger people are more likely to use contactless payments, older generations are catching up with the ease of Apple Pay and Google Pay.
While this is an easy way for people to handle their spending, there have been warnings about consumer protections and app security.
Jack Kerr, director at mobile app security company Appdome, said:
The surge in mobile banking is undeniable. However, this convenience comes with a price – cybercriminals are drawn to the lucrative potential.
“A rise in popularity highlights the need for robust mobile app security with consumers are increasingly aware of the risks. For example, nearly all consumers surveyed (99.5%) demand comprehensive protection across mobile apps – from secure logins to safe data storage and transit, along with robust anti-fraud measures.
"The financial institutions that prioritise proactive security will be the ones that come out on top. To do so, financial institutions must focus on proactive mobile app protection.
“Banking and payment apps need to lead with their front foot and implement robust protections to ensure they meet standards, like the FCA’s Business Plan. By implementing these robust protections, banking and payment apps not only meet regulatory standards but also foster trust, leading to safer banking and loyal customers.”
LaToya Harding
Wall Street to open lower as Tesla profits fall
New York, United States. 22nd July, 2024. Traders work on the floor of the New York Stock Exchange (NYSE) on Wall Street in New York City on Monday, July 22, 2024. Markets were up slightly at the open after President Joe Biden's surprise announcement on Sunday that he is ending his reelection campaign and endorsement of Vice President Kamala Harris to replace him at the top of the Democratic ticket. Photo by John Angelillo/UPI Credit: UPI/Alamy Live News (UPI, UPI)
Wall Street is set to open lower in just over half an hour's time after Tesla reported mixed second quarter results after the bell on Tuesday.
Revenue came in at $25.05bn (£19.41bn) compared to the $24.63bn expected, per Bloomberg consensus, slightly higher than the $24.93bn a year ago.
Investors are becoming concerned about the dominance of Big Tech stocks that have pushed Wall Street to all-time highs,
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said:
"The first view on Big Tech earnings wasn’t inspiring. Two of the Magnificent 7 stocks failed to create euphoria when they reported their Q2 results. The less-than-ideal set of earnings comes at a time when investors are questioning whether the AI rally has gotten ahead of itself.
In premarket trading, the Dow Jones was down 0.4%, the S&P 500 fell 0.7% and the tech-heavy Nasdaq had fallen 1%.
LaToya Harding
Shoplifting in England and Wales hits highest in 20 years
The number of shoplifting offences in England and Wales has risen to its highest in 20 years amid a cost of living crisis, new records from shown.
Shoplifting offences rose by 30% to 443,995 compared with 342,428 in the previous year, according to the Office for National Statistics.
The British Retail Consortium estimates that shoplifting costs UK businesses £3.3bn each year. It is awaiting details of a pledge by the Labour government to bring in stronger measures to tackle shoplifting in its Crime and Policing Bill.
Shoplifting had already reached its highest since records began in 2004, and has now risen further.
LaToya Harding
Should children work during school holidays?
There’s usually roughly five minutes from the moment a typical teenager walks out of the school gates on the last day of term to the first time they complain that they’re bored.
Keeping them entertained can be a horribly expensive business for parents, but as soon as they’re aged 13 there is another option — and a more lucrative one — because they can work during the holidays.
Commentary: UK PMIs show manufacturing sector fuels growth
Kyle Chapman, FX markets analyst at Ballinger Group said:
“In an encouraging sign for the new UK government, this report points to a healthy pace of growth at the beginning of Q3. Most interestingly, the improvement in activity is being fuelled primarily by a rebounding manufacturing sector.
"Manufacturing output is now rising at the fastest pace in 29 months, and this stands in stark contrast to the likes of Germany and France suffering from sluggish demand.
“Yet, Bank of England policymakers have a few things to be concerned about. The strengthening in employment growth to the fastest pace in a year underscores the lingering tightness in the labour market, and swelling inflationary pressures within the manufacturing sector will keep rate-setters on high alert.
"With the August rate decision on a knife-edge, marginal changes to the inflationary outlook like this could be enough to tip the balance.”
LaToya Harding
UK manufacturing sector sees strongest growth in two years
The UK manufacturing sector hailed its strongest growth in two years, according to data company S&P Global.
The manufacturing index rose to 51.8 for July, up from 50.9 in June. A reading below the 50 mark on the index indicates a drop in activity, but above 50 indicates growth.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said:
"The flash PMI survey data for July signal an encouraging start to the second half of the year, with output, order books and employment all growing at faster rates amid rebounding business confidence, while price pressures moderated.
"The first post-election business survey paints a welcoming picture for the new government, with companies operating across manufacturing and services having gained optimism about the future, reporting a renewed surge in demand and taking on staff in greater numbers."
"Prices have meanwhile risen at their lowest rate for three and a half years, further raising the prospect of a summer rate cut.
Business confidence fell to a six-month low in June, but rebounded in July, and was only slightly below the two-year high seen in February. S&P Global said:
"Manufacturing and services firms were alike in showing greater optimism towards future business activity, amid expectations of improving demand conditions, stronger business investment, interest rate cuts and political stability."
LaToya Harding
Gold prices edge higher
Precious metal miners rebounded as much as 2% on the day, as gold prices steadied. The sector is poised to snap a five-session losing streak, its longest since February.
Gold prices edged up in early Wednesday trading, albeit modestly, with gains limited by the US dollar strengthening against other major currencies.
Ricardo Evangelista, senior analyst at ActivTrades, said:
“Bullion prices are hovering above the $2,400 level, as the background narrative for traders remains positive due to the recent slowdown in US economic activity and lowering inflation, which has increased the likelihood of a Fed rate cut in September.”
“Nevertheless, gold price gains are capped by uncertainty over the outcome of the US presidential election.”
“Many see Donald Trump as the favourite to win, meaning a more protectionist administration in Washington.”
"This scenario entails a stronger dollar, as more expensive imports could increase inflation and drive higher interest rates, creating headwinds for the precious metal's price.”
LaToya Harding
Reckitt Benckiser to axe Air Wick and Cillit Bang brands
Puilboreau, France - October 14, 2020:Row of Household Cleaning Product, Cillit Bang, in a French Supermarket (Pixinoo)
Reckitt Benckiser is looking to sell off some of its household name brands including air freshener Air Wick and cleaning product Cillit Bang.
It comes as part of its effort to focus the company on health products, including Strepsils cough sweets, Nurofen painkillers and Durex condoms, and ditch brands from the portfolio that are “no longer core” to the business.
Operating profit fell 4.3% year on year to £1.7bn for the first half of 2024, while revenue fell 3.7% to £7.2bn.
Kris Licht, chief executive of Reckitt Benckiser, said:
“Today I am pleased to announce a set of actions to significantly sharpen our portfolio and simplify our organisation for accelerated growth and value creation.”
LaToya Harding
Santander sees profits slump 31%
Half-year profits slumped by almost a third at Santander UK thanks to shrinking mortgage lending and higher savings rates.
The Spanish-owned high street lender reported a 31% drop in pre-tax profits to £804m in the first half of 2024, but is hoping for a boost from “tailwinds” over the final six months.
Mortgage loans slumped by £4.4bn over the half year, while its net interest income, the difference between the interest it generates from loans and pays out to savers, fell by 11%.
This came after it forked out more to savers in the first three months of the year following interest rate hikes.
However, the group said it had since taken “pricing” action to make savings rates less attractive, which has seen customer deposits fall by £5.6bn.
This also helped profits increase by 6% quarter-on-quarter to £413m in the three months to the end of June, although the out-turn was 52% lower than a year earlier.
Mike Regnier, chief executive of Santander, said: “Our first half financial results were in line with our expectations, with a more positive trajectory reflecting improvements in the second quarter.”
Santander is the first out of the stalls this week with its half-year results, with Lloyds Banking Group and NatWest also expected to report lower profits when they report interim figures on Thursday and Friday respectively.
LaToya Harding
Investors flock to tech funds amid AI race
Investors are going global and targeting tech with most of the popular funds at investment platform Interactive Investor focusing on technology shares.
The UK’s second largest investment platform for retail investors has launched an investment barometer, which ranks the most-popular funds, investment trusts, and exchange-traded funds (ETFs) each quarter.
Many investors are increasingly seeking focused exposure to the US technology sector. This trend is highlighted by the fact that seven of the top 50 investment funds are specifically targeting the tech industry.
While the risk of late entry into a trending sector remains, investors are betting on the longevity of artificial intelligence (AI) as a pivotal growth driver in the years ahead.
Of these seven technology-focused funds, three are actively managed. Investors in these funds place their confidence in professional stock pickers to identify and capitalise on the best opportunities within the tech landscape. Notably, two of these actively managed funds are investment trusts currently trading at a discount, offering investors the opportunity to acquire tech stocks at attractive valuations.
The remaining four funds are passively managed, delivering returns linked to the performance of technology company indices.
The frontage of a branch of the Nationwide Building Society. Two automated teller machines (ATMs) are available for use. (Alan Morris via Getty Images)
Nationwide is offering a mortgage with an interest rate below 4%. From Wednesday, the UK's biggest building society will reduce its five-year fixed mortgages, for new customers moving home with a 40% deposit, to a rate of 3.99%.
Other lenders have also been lowering rates ahead of a possible interest rate cut in August from the Bank of England.
The last time Nationwide offered rates below 4% was in February. Mortgage analyst Kylie-Ann Gatecliffe said this could be the start of a "rate war" between the big banks.
LaToya Harding
Heathrow Airport hails passenger record
Heathrow saw a record 39.8 million passengers travel through its terminals in the first half of the year — a 7.3% from 37.1 million last year.
In the first half of 2019, before the pandemic, the total stood at 38.8 million.
Despite a fall in half-year revenues of 2.9%, the airport swung to an underlying profit of £178m, from a £139m loss a year earlier.
It said 30 June was its busiest day ever, with over 268,000 passengers travelling on over 1,300 flights.
Heathrow chef executive Thomas Woldbye said:
"Serving record-breaking passenger numbers while continuing to deliver excellent customer service is no easy feat and is testament to the dedication of my hardworking colleagues.
"In addition to the nearly 40 million passengers that flew through Heathrow during the first six months, so did 765 tonnes of cargo, supporting world leading British industries to access global export markets.
"We are working hard to deliver economic benefits for all of the UK, but this needs to be supported by joined up policy making that prioritises global competitiveness and sustainable growth.
"We are encouraged by the new Government’s recognition of Heathrow’s role in powering growth across the country, and look forward to working with ministers to ensure we are firing on all cylinders and retain our global standing."
LaToya Harding
Aston Martin to invest £2bn in electric vehicle switch
Aston Martin is set to plough £2bn in its switch to electric cars as losses at the firm deepen.
It revealed widening losses in the first half of the year today, deepened from £142.2m to £216.7m in the first half, as revenues fell 11% to £603m.
It delivered 1,998 vehicles during the period, almost a third lower than the same time last year.
The luxury car maker said it expected to invest the £2bn by 2027 in its “long-term growth and transition to electrification”.
Lawrence Stroll, Aston Martin executive chairman and its biggest shareholder, said:
“As we commence an exciting second half of 2024, Aston Martin is at a pivotal moment in its journey, with our immense product transformation supporting volume growth and sustainable positive free cash flow generation later this year, of which we have full confidence in achieving.
“In line with prior guidance, our execution in the first half of the year focused on the successful delivery of our new Vantage and upgraded DBX707 and we remain on track to deliver a strong second half performance.”
LaToya Harding
EasyJet sees 16% rise in profits
Getty Images
EasyJet (EZJ.L) shares are more than 5% in London as traders hail the low-cost carrier's 16% rise in third-quarter profits.
The airline said it remains on track for a record summer performance as it reported profits of £236m in the second quarter of 2024, up from £203m during the same period last year.
It carried 8% more passengers in the quarter at 25.3 million and said trading was also boosted by strong demand for easyJet holidays, with the division seeing pre-tax profits jump to £73m from £49m a year earlier.
EasyJet now expects the holidays arm to deliver annual pre-tax profits of more than £180 million, up more than 48% year on year.
Outgoing chief executive Johan Lundgren said:
“Our strong performance in the quarter has been driven by more customers choosing easyJet for our unrivalled network of destinations and value for money.
“This result was achieved despite Easter falling into March this year, demonstrating the continued importance of travel and this means we remain on track to deliver another record-breaking summer, taking us a step closer to our medium-term targets.”
LaToya Harding
Asia and US stocks
Stocks in Asia mostly fell overnight as traders digested Japanese and Australian business data.
The Nikkei (^N225) slipped 1.1% on the day in Japan, with the Japanese yen trading at its highest level in months ahead of a Bank of Japan policy decision next week.
Meanwhile the Hang Seng (^HSI) fell 0.9% in Hong Kong and the Shanghai Composite (000001.SS) was 0.5% down by the end of the session.
It came as a business survey released on Wednesday showed Japan’s factory activity contracted in July, as weak demand weighed on the manufacturing sector. Services were on the rise, helping to drive growth in overall activity in Japan’s private sector.
On Wall Street, the S&P 500 (^GSPC) lost 0.2%, to 5,555.74 points, while the Nasdaq Composite (^IXIC) slipped almost 0.1% to 17,997.35. The Dow Jones (^DJI) fell 0.1%, to close at 40,358.09.
Eight of the major S&P sectors ended in negative territory last night, with the energy index the worst performer, down 1.6%, as US crude prices hit a six-week low.
The yield on benchmark US 10-year Treasury bonds gained 0.9 basis points to 4.246%.
LaToya Harding
Coming up...
Good morning, and welcome back to our live markets blog. As usual we will be taking a deep dive into what's moving markets and happening across the global economy.
It's a busy day for trading updates in London so be sure to stay tuned.
Here's a quick look at what's on the agenda for today:
7am:Trading updates: Aston Martin, EasyJet, Heathrow, Unite, Banco Santander, PensionBee
8:30am: Germany HCOB manufacturing purchasing managers’ index (PMI) flash reading
8:30am: Germany HCOB services PMI flash
9am: Eurozone HCOB manufacturing PMI
9am: Eurozone HCOB services PMI
9:30am: UK S&P Global services PMI
9:30am: UK S&P Global services PMI
12pm: US MBA Mortgage Applications
3pm: US New Homes Sales
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