Yahoo Finance FTSE 100 Live: Meta cuts 10,000 jobs, US inflation at 6%, FTSE rebounds
Pressure on banks and other blue-chip stocks continued today following the collapse of Silicon Valley Bank.
London’s FTSE 100 index, which tumbled 2.5% on Monday amid the turmoil in the banking sector, lost another 0.5% on the back of lower energy stocks and further selling of banking assets.
Elsewhere today, the Office for National Statistics said the unemployment rate for three months to January was unchanged at 3.7% compared with City expectations for 3.8%.
FTSE 100 Live Tuesday
Real pay falls at fastest rate since 2009
Oil prices fall as global economy fears grow
Moody’s downgrades 7 US banks in wake of SVB crisis
FTSE makes up much of this week’s losses in afternoon rally
15:49 , Daniel O'Boyle
The FTSE 100 gained more than 120 points in the last six hours, rising back to 7635.
Despite a rough start to the day in which the index crept towards a yearly low, it picked up as the day went on. During the afternoon, the continued decline of US inflation may have eased investors’ concerns about further interest rate hikes.
Rolls-Royce was easily the biggest gainer of the day, with its shares up by 7.4%, followed by Barclays with a 3.5% increase.
Moody’s downgrades entire US banking system after Silicon Valley Bank turmoil
14:51 , Simon Hunt
Moody’s has downgraded the entire US banking system in the wake of the collapse of Silicon Valley Bank last week as it warned on a sharp drop in investor confidence.
The credit ratings agency said it had changed its rating from stable to negative amid concerns over capital flight from small and mid-sized institutions.
Moody’s said “The rapid and substantial decline in bank depositor and investor confidence precipitating this action starkly highlight risks in US banks’ asset-liability management (ALM) exacerbated by rapidly rising interest rates.
“Banks with substantial unrealized securities losses and with non-retail and uninsured US depositors may still be more sensitive to depositor competition or ultimate flight, with adverse effects on funding, liquidity, earnings and capital.”
Budget 2023: Retail, brewing and beauty trade bodies draw up wish lists
14:47 , Joanna Hodgson
Trade bodies that represent scores of companies that collectively employ more than 1.7 million people in the brewing, beauty and retail sectors have set out their wish lists for the Spring Budget.
A common plea from businesses to Chancellor Jeremy Hunt ahead of his Budget on Wednesday is for more support around apprenticeship schemes, while wider business rates reform is on the wish list from retailers.
The British Retail Consortium’s Helen Dickinson said: “Government must tweak the Apprenticeship Levy to allow retailers to invest more effectively in training a higher skilled, more productive and better-paid workforce.”
Meta to cut another 10,000 jobs
13:46 , Simon Hunt
Meta is to cut another 10,000 jobs and eliminate 5,000 vacancies as the social media giant wrestles with a slump in advertising revenues amid harsher economic conditions.
In an update to staff, Meta boss Mark Zuckerberg told employees he would begin restructuring plans focused on flattening teams, canceling lower priority projects, and reducing hiring rates.
“This will be tough and there’s no way around that. It will mean saying goodbye to talented and passionate colleagues who have been part of our success,” he said.
Zuckerberg added: “At this point, I think we should prepare ourselves for the possibility that this new economic reality will continue for many years. Higher interest rates lead to the economy running leaner, more geopolitical instability leads to more volatility, and increased regulation leads to slower growth and increased costs of innovation.”
US inflation comes in at 6%
13:01 , Daniel O'Boyle
The US inflation rate declined to 6% in February, in line with expectations.
Core inflation, which removes food and energy prices, was 5.5%. On a month-on-month basis, prices were up by 0.4%.
Richard Carter, head of fixed interest research at Quilter Cheviot, noted that the move will calm markets, particularly as the demise of Silicon Valley Bank may make the Fed more hesitant about further rate rises.
“US inflation continues to fall and suggests the actions by the Federal Reserve are doing their job in bringing it down, while not tipping the economy into recession. However, core inflation continues to be troublesome and stickier than many would like, leaving further rate hikes on the table,” he said. “Inflation will continue to be key driver of decision making for the Fed, but events of recent days are beginning to weigh on market sentiment, and there are risks that under the bonnet, the US economy is under strain.
“The Fed will be delighted, however, that there are no gremlins in this inflation report and should help to calm things following a very uncertain past week.”
Small cap spotlight: profits surge for software firms
12:21 , Simon Hunt
Britain’s small cap software businesses are defying economic gloom and show continued signs of rapid-paced growth.
Marketing software business Eagle Eye today posted a 32% jump in sales to £20 million for the six months to end December, while gross profits shot up 35% to £18.8 million.
Meanwhile, financial data control and cash management software business Gresham Technologies said it saw a 32% leap in revenues to £48.7 million for the year to end December, while pre-tax profits came in multiple times higher than the previous year, at £3.2 million.
Ian Manocha, CEO of Gresham, said: “This is a decade-long growth journey, and we’re cashflow breakeven for the first time.
“In a software business you reach a tipping point where operational leverage comes through.
“Where we’re getting to is the kind of margins you would expect with a large global software business.”
Eagle Eye shares rose 4.8% to 600p. Gresham shares were up 0.9% to 162p.
BusinessLDN: Chancellor must unlock London growth to drive UK economy
12:16 , Daniel O'Boyle
BusinessLDN has submitted its Budget asks to ChancellorJeremy Hunt, arguing that measures to unlock the capital like rates reform and VAT-free shopping will also help drive nationwide growth.
John Dickie, CEO of the cross-sector business body, said the organisation aimed to focus on a smaller number of goals, as it recognised it would be difficult to ask for a long list of wants.
“The Chancellor is going into this budget with very limited room for maneouvre, so we can’t go in with a huge shopping list,” he said. “We focused on a few changes.”
Silicon Valley Bank collapse sends shockwaves across global markets
12:05 , Daniel O'Boyle
The collapse of Silicon Valley Bank has sent further shockwaves around the global financial sector, after tens of billions was wiped from the stock market value of some of the world’s largest banks and credit ratings agency Moody’s put several mid-sized institutions on notice for a downgrade.
Since fears first emerged over the stability of Silicon Valley Bank on Thursday, a staggering $46 billion was wiped from the market caps of the six biggest US banks by the time markets closed on Wall Street last night, while euro swap spreads, an indicator of financial market stress, rose to their highest in over five months.
CMA: ASDA’s purchase of Co-op petrol stations could lead to higher prices
11:44 , Daniel O'Boyle
The Competition and Markets Authority (CMA) has poured cold water on a plan for ASDA to buy 132 Co-op petrol stations, finding the deal could lead to higher prices at 13 locations, including two in London.
The CMA said the deal “raises competition concerns” in 13 locations, including the Caledonian Road and East Peckham, where ASDA is already considered an “important option” for customers.
“Groceries and fuel account for a large part of most household budgets. As living costs continue to rise, it’s particularly important that deals that reduce competition among groceries and fuel suppliers don’t make the situation worse,” CMA senior director of mergers Colin Raftery said.
Why did Silicon Valley Bank collapse? And how did HSBC rescue its UK arm?
10:57 , Simon Hunt
Outside tech circles, Silicon Valley Bank was relatively unknown in the UK. Now, its name is on the lips of almost everyone in business after its sudden collapse – and the swift rescue of its depositors – followed a weekend of high drama.
A wave of fear swept global financial institutions on Friday night, moving into a weekend of crisis talks involving chancellor Jeremy Hunt, Prime Minister Rishi Sunak and the governor of the Bank of England, Andrew Bailey.
Who is Silicon Valley Bank, and how did it fail?
Oil stocks add to FTSE 100 pressure, banks steady
10:15 , Graeme Evans
Heavyweight oil stocks kept the FTSE 100 index in the red today as the fallout from Silicon Valley Bank’s collapse continued.
The pressure on shares in BP and Shell came as oil prices slipped on fears that banking stress will mean tighter lending conditions and a further drag on the global economy.
The hard landing jitters left Brent Crude futures down by more than 2%, below the $80 threshold for the first time since early February at $78.87 a barrel.
BP and Shell shares dropped 1.5%, off 8p and 35.5p to 514.5p and 2402.5p respectively, as the FTSE 100 weakened another 0.5% on top of the 2.6% slump seen during Monday’s worst session since last summer.
The latest decline of 40.25 points to 7508.38 now means the top flight is only 50 points above where it started the year, having traded above 8000 as recently as last month.
Top banking stocks including Barclays and HSBC have lost around 10% of their value since Thursday night, but the sector at least showed signs of resilience today.
Asia-focused lender Standard Chartered lost another 2% or 16.2p to 672.6p but NatWest, Lloyds Banking Group and Barclays were within sight of their opening marks.
Signs that the Silicon Valley crisis will deter central banks from hiking interest rates much further meant property stocks dominated the FTSE 100 risers board, led by a 2% or 12.8p gain to 630.6p for Piccadilly Lights owner Land Securities.
British Land and warehouse business Segro also rallied by more than 1%, up 5p to 409.6p and 12.8p to 630.6p respectively.
Elsewhere in the top flight, Rolls-Royce shares returned to the front foot with a gain of 2% or 3p to 148p and US sports betting business Flutter Entertainment lifted 115p to 13,840p thanks to Berenberg’s “buy” recommendation and new 16,000p target.
The FTSE 250 index lost another 40.05 points at 18,785.03, with fallers including Tullow Oil and Harbour Energy after declines of 3%.
Among smaller companies, the rally for Costain shares continued as the infrastructure firm revealed a big improvement in its cash position and said it had already secured around 80% of expected revenues for 2023. The All-Share stock rose 3.65p to 48.2p.
European sales help Fred Perry rebound from lockdowns
09:59 , Daniel O'Boyle
Sales at Fred Perry grew by 10.4% to £112.4 million in 2021, as the fashion brand rebounded from the impact of Covid-19 lockdowns. Just over £80 million of this came from Europe.
In its delayed 2021 accounts, the Japanese-owned company said that lockdowns heavily impacted business in the first three months of the year, but while it recovered from 2021’s closures more quickly than in 2020, the pandemic continued to affect the business in other ways as supply chain issues and fuel costs hit profitability.
Fred Perry said that these factors, plus the impact from the Russian invasion of Ukraine, would impact profitability “for some time”, but added that its cash reserves would ensure the business remains healthy.
Pre-tax profit was up by more than 50% to £11.7 million.
TP ICAP surges thanks to interest rate trades
09:08 , Simon English
TP ICAP shrugged off the turmoil in the finance sector and the slump in trading activity to record a jump in revenues and profits for 2022.
It also said it was close to unveiling a crypto-assets trading platform, for which it has approval from the Financial Conduct Authority.
Revenue went from £1.86 billion to £2.11 billion, while profits soared from £24 million to £113 million.
Sharp moves in interest rates across the world helped TP ICAP’s trading desks counter a fall in equity dealing.
Chief executive Nicolas Breteau said: “We have a clear strategic roadmap and a strong franchise. Our market-leading positions in broking, and our deep liquidity pools, mean we are well positioned as central banks continue to withdraw liquidity and interest rates remain elevated."
Broker Peel Hunt said the results were better than City expectations. It told clients: “Markets remain volatile but in our view TCAP remains an undervalued stock.”
It thinks the shares are worth 240p. Today they fell 11p to 168p.
Oil stocks lead FTSE 100 lower, banks down 1%
08:29 , Graeme Evans
Selling for blue-chip banking shares continued today, but the losses have been limited to around 1% after Barclays fell 0.8p to 146.7p and NatWest slipped 1.6p to 270.6p.
The FTSE 100 index is down another 0.5% or 37.63 points to 7,511, mainly due to pressure from the oil sector after Brent crude futures traded below $80 a barrel for the first time since early February. Shell shares lost 22p to 2416p and BP dropped 6.5p to 516p.
The flight to defensive assets continued as water companies Severn Trent and United Utilities rose 1%, while Rolls-Royce added 2.7p to 147.7p.
The FTSE 250 index was 35.80 points lower at 18,789.28, with shares in Close Brothers down 5% after annual results.
Playtech takes $85 million stake in Hard Rock Cafe owner’s online gambling arm
08:11 , Daniel O'Boyle
Gambling technology group Playtech has taken an $85 million stake in Hard Rock Digital, the online arm of Native American-owned casino group Hard Rock International.
Playtech - which makes much of the back-end technology behind online casino sites - will offer its services to Hard Rock as it looks to expand in the US, where a number of states have recently legalised online gambling. It will also cover as-yet-unnamed international markets.
Hard Rock Digital is the online gambling arm of Hard Rock International, which owns a number of American casinos including the Seminole Casino in Florida. The company, which also owns the Hard Rock Cafe, is owned collectively by the Seminole Tribe.
Centrica to extend use of existing nuclear power stations
08:03 , Michael Hunter
Energy company Centrica is extending the lifespan of two of its nuclear power stations as part of the UK’s move to prioritise secure, domestic supplies of electricity.
The move comes after the market turbulence that followed the war in Ukraine and stoked the cost-of-living crisis and will mean Heysham 1 and Hartlepool nuclear power stations will now run until March 2026, two years later than expected.
It comes alongside the company’s move to re-open its Rough gas storage facility off the Yorkshire Coast and as Centrica has faced public controversy over the record profits it has made during a time of high energy prices.
Chris O’Shea, Centrica’s chief executive said: “We will continue to focus on supporting energy security in our core markets during these uncertain times.”
Virgin Wines profits in the cellar
07:49 , Simon Hunt
Profits at Virgin Wines were down by 97%, prompting the business to look for new growth opportunities after partnerships with Moonpig and rail operators were a rare highlight for the online wine business.
The business narrowly remained in the black, with pre-tax profit at £100,000, due in part to issues with a new warehouse management system. This, combined with postal strikes, meant the business missed out on around £1.5 million in revenue in the pre-Christmas period.
However, strategic partnerships with companies including Moonpig, Avanti and Great Western Railway performed well.
The business said a review was now underway to “identify new initiatives for future growth and profitability”.
South West of England water utility Pennon Group says storm outflows down 30%
07:42 , Michael Hunter
Pennon Group, the water utility in South West England that has some of the country’s best beaches in its area said today it has cut “storm outflows” by 30% after the nationwide outcry at sewage pollution in UK waterways.
The FTSE 250 company also said it was now able to “monitor” around 100% of its 1,600 storm overflows as it stood by its existing profit guidance for the 2022/23 financial year.
It also said that after a “very dry February” “the drought status declared in the South West by the Environment Agency last year remains in place,” adding: “Our focus remains on securing resilient water supplies for current and future generations through investment in a suite of innovative solutions and engaging with customers to ‘Save Every Drop’.”
Rough trading at Close Bros
07:39 , Simon English
CITY merchant bank Close Bros must rue the day it bought litigation loan business Novitas for £31 million back in 2017.
Today it took a near £90 million hit from the business it is winding down, which whacked profits for the last six months, down from £129 million to £11.7 million, a plunge of more than 90%.
Chief executive Adrian Sainsbury said: “While developments at Novitas are disappointing, we are confident that the group is in a strong position to navigate the current environment and make the most of available opportunities.”
A slowdown in trading by retail punters hit market making arm Winterflood. Its profits fell 73% to just £2.4 million.
Close said: “Although we are alert to the impact of rising inflation and interest rates on our customers and wider financial market conditions, we are well placed to move forward on the delivery of our strategic priorities.”
It added: “We remain confident in the quality of our loan book, which is predominantly secured, prudently underwritten, diverse, and supported by the deep expertise of our people.”
US inflation figure in focus, FTSE 100 remains under pressure
07:37 , Graeme Evans
London’s FTSE 100 index is forecast to open 18 points lower, with the next key event for markets likely to be the latest US inflation figure at 12.30pm UK time. Economists are looking for a decline to around 6.1% from 6.4% previously.
The reading for February could have a bearing on whether the Federal Reserve decides to proceed with an interest rate hike next week, having come under pressure not to do so since the Silicon Valley Bank collapse.
Expectations for US interest rates have slumped in recent days, with Deutsche Bank noting today that pricing for the Fed funds rate by the year end has fallen by 140 basis points since last Wednesday. The next meeting for US policymakers takes place on 22 March.
In the meantime, share prices for major UK and US-listed banks have slumped on expectations for lower interest rates and amid fears that the global economy is heading for a hard landing.
The KBW Banks Index fell 11.7% in its worst performance since the height of the pandemic in March 2020, with Standard Chartered and Barclays down 6% in London yesterday.
Markets in Asia this morning continued yesterday’s selling trend, although futures markets are pointing higher in the US after the S&P 500 index yesterday fell for a third consecutive session.
Real pay falls at fastest rate since 2009
07:31 , Jonathan Prynn
Living standards for millions of workers plummeted at their fastest rate since 2009 over the winter as rampant inflation deepened the cost of living crisis, official figures show today.
Total average wages including bonuses dropped by 3.2% in real terms in the three months to January, the biggest decline since the February to April 2009 quarter, according to the Office for National Statistics, and among the largest falls seen since detailed records began in 2001. If bonuses are excluded real wages fell by 2.4%.
In cash terms total pay with bonuses rose by 5.7% and regular pay by 6.5%. But this was heavily outstripped by soaring prices, which have been going up at close to or above 10% since last summer, peaking at 11.1% in October.
Today’s ONS figures also showed regular pay for private sector workers went up by 7% compared with just 4.8% for public sector employees. The data comes on the eve of another wave of strikes by Underground workers and teachers. However, the number of days lost to strikes fell from 822,000 in December to 220,000 in January 2023
Moody’s downgrades 7 US banks in wake of Silicon Valley Bank demise
07:19 , Simon Hunt
Credit ratings agency Moody’s has downgraded 7 US banks after the Silicon Valley Bank collapse sent shockwaves around the financial sector.
The fallout from the collapse of Silicon Valley Bank hit UK banking stocks including HSBC, Standard Chartered and the wider financial sector, despite HSBC’s deal to acquire the collapsed bank’s UK arm yesterday morning.
The ratings changes are as follows:
Signature Bank: Moody’s downgrades Signature Bank (subordinate debt to C from Baa2) and will withdraw ratings
First Republic: Moody’s places First Republic Bank’s ratings under review for downgrade
INTRUST Financial Corporation: Moody’s places INTRUST Financial Corporation’s ratings under review for downgrade
UMB Corporation: Moody’s places UMB Financial Corporation’s ratings under review for downgrade (UMB Bank, N.A. long-term deposits Aa3)
Zions Bancorporation: Moody’s places Zions Bancorporation, N.A.’s ratings under review for downgrade (long-term deposits A1)
Western Alliance: Moody’s places Western Alliance’s ratings on review for downgrade
Comerica Incorporated: Moody’s places Comerica Incorporated’s ratings on review for downgrade
Recap: Yesterday’s top stories
06:48 , Simon Hunt
Good morning. Here’s a summary of our top stories from yesterday.
The UK arm of Silicon Valley Bank was rescued by HSBC for £1 in an eleventh-hour deal. Read an explainer on the demise of SVB here.
More than £50billion was wiped off the FTSE 100 yesterday amid a sell-off in banking stocks.
FTSE 250 insurer Direct Line swung to a loss for 2022, after it took a hit from its biggest ever amount of claims relating to bad weather as well as the rising cost of car repairs.
Today we’re expecting results from:
Yu Energy
Virgin Wines
Close Brothers
TP Icap
