Yahoo Movies FTSE 100 Live: China reveals Covid hit to economy, Vodafone shares surge
The economic impact of China’s zero-Covid policy has been revealed after the country’s industrial output and consumer spending figures hit their worst levels since the pandemic began.
Oil prices fell as Beijing reported an 11.1% drop in retail sales and an unexpected 2.9% decline in factory production, adding to worries about the global economic outlook.
The updates follow Friday’s rebound for stock markets as Wall Street pared back losses during a sixth consecutive week of declines.
FTSE 100 Live Monday
China’s retail and production figures disappoint
Vodafone shares higher on e&’s 9.8% stake
Ryanair sees “fragile” recovery, posts loss
Stocks close higher in London
17:02 , Oscar Williams-Grut
The FTSE 100 has ended the day up 46 points, or 0.6%, at 7464 despite opening lower.
Gains were broad-based with healthcare stocks, miners and commodity giants, energy and utilities all banking gains. The rally came even as Wall Street turned lower, with the S&P 500 now down 0.3% and the Nasdaq off 0.8%.
The big story in the market tomorrow is likely to be UK unemployment numbers, out at 7am, and Vodafone’s full-year results. Imperial Brands, the tobacco giant, also has inerim results.
That’s all from us on the blog today, join us again tomorrow.
US markets open lower as sell-off looks set to continue
14:38 , Rhiannon Curry
The markets have opened in the US, with all major indexes down at the opening bell.
The S&P 500 fell just over 10 points as the market attempts to rebound from weeks of sell-off that has focused on tech stocks, while the Dow Jones Industrial Average was 66 points lower following a bounce on Friday.
The Nasdaq Composite slipped 0.6%.
Brent crude, meanwhile, is at $111.03 a barrel.
Here are the top stories this afternoon:
Both Ryanair and Greggs have warned of price increases today.
April inflation could hit 9.2%, according to economists
13:54 , Rhiannon Curry
Deutsche Bank has suggested that April’s inflation could be as high as 9.2%, a new record high, when figures are released later this week.
In March, prices rose annual by an average of 7%, a new 30-year record, according to the Office for National Statistics.
But the rise in the Ofgem price cap for energy bills, plus increased wages in the new financial year and already higher prices, could push inflation to fresh multi-decade highs, the bank’s economists suggested.
A note to investors said Deutsche Bank expected “a lot of price volatily as seasonal price changes and more inflation-linked price rises kick in”. Inflationary pressures will remain “broad-based”, they said.
They anticipate a large increase in service-linked inflation, as housing costs rise in both the rented and owned sectors, and the cost of travel and leisure rises.
With household energy bills set to rise even further this year, Deutsche Bank said energy consumer price index (CPI) could jump by a staggering 52% year-on-year.
Shares in Tesco and Sainsbury’s jump on prediction of cash returns
12:11 , Rhiannon Curry
Shares in Tesco and Sainsbury’s have risen this morning on the bank of a note from Barclays which suggested both supermarkets are currently undervalued and offered a good prospect of cash returns for shareholders.
Tesco was up 1.08% at lunchtime at 284.24p, while Sainsbury’s jumped 1.34% to 242p after the analysts put price targets of 325p on Tesco and 300p on Sainsbury’s.
“Over the next three years we forecast that Sainsbury’s offers the higher free cash flow yield, but that Tesco offers the higher cash return yield to shareholders,” the note said.
It has been a quiet morning in the UK markets, with the FTSE 100 almost unchanged at midday, at 7,420.87.
The miners were leading the gainers, with Fresnillo up 3.32%, Glencore up 2.59%, and Antofagasta up 2.34%.
Both the French CAC and German Dax indexes are slightly down.
The pound is currently worth just under $1.23, and almost €1.18.
McDonald’s facing $1.4bn hit as it quits Russia after 30 years
11:52 , Bloomberg
McDonald’s said it will pull out of Russia after more than 30 years of operation in the country and take a write-off of $1.2 billion to $1.4 billion for the move.
The seller of hamburgers and milkshakes has initiated a process to sell the Russian business after temporarily closing its restaurants there, the company said in a statement on Monday.
“Brinkmanship” over the Northern Ireland protocol risks damaging the gilts market, analyst warns
11:49 , Rhiannon Curry
As Boris Johnson hold talks in bid to break the deadlock over the Northern Ireland protocol, one Bank of America analyst has warned that “brinkmanship” over the issue could damage foreign interest in UK government bonds.
Mark Capleton said although overseas demand for gilts seems to be in “rude health” thanks in part to a resurgence in other global imbalances, there are risks ahead.
Tension over the Northern Ireland protocol of the Brexit treaty is a “major concern”, he wrote in a note on Monday.
“Since this has been simmering for a long-time, the market appears to assume that the threat to override large parts of the protocol is only brinkmanship,” he said.
“Should the Prime Minister elevate the threat, the market would quickly come to treat the heightened chance of a trade war with the EU as a stagflationary risk.”
The UK is reliant on overseas investors buying government bonds to fund its budget and current account deficits.
In the past, overseas investors have tended to pause their purchases of gilts when they are worried about depreciation of the UK currency, such as during the financial crisis.
Made.com shares plummet on profit alert and finance chief exit
11:20 , Simon Hunt
Made.com lost a fifth of its value today after the online furniture retailer U-turned on an earlier forecast of turning a profit this year and announced its CFO was leaving.
Shares fell 22% in early trading after the company posted a 10% drop in sales in the first quarter. Made was hit by falling consumer demand and supply chain disruption.
The retailer warned supply chain issues would lead to a £5 million earning hit this year and said losses could be as much as £35 million for 2022. In March, the company had predicted a profit.
Banks ‘pulling up the drawbridge’ on small business lending
11:16 , Rhiannon Curry
The UK’s largest business group has warned that banks are “pulling up the drawbridge” to small companies and stifling economic growth, as successful finance applications plummet to the lowest level on record.
The Federation of Small Businesses (FSB) found that fewer than one in ten small firms applied for finance in the first quarter of 2022, the lowest proportion since its records began.
Of those, just 43% had their applications approved, fewer than at any other time.
FTSE 100 recovers ground, power firms higher
10:17 , Graeme Evans
Vodafone’s ailing share price surged today after an Abu Dhabi telecom group’s surprise swoop for 9.8% of the mobile phone giant.
In a boost for Vodafone’s under-pressure boss Nick Read ahead of tomorrow’s annual results, the new backer is not seeking board representation and has declared its support for management and current strategy.
Emirates Telecommunications Group, otherwise known as e&, paid a premium price of about £3.3 billion for its “mutually beneficial” investment. Its boss Hatem Dowidar used to run Vodafone’s Egypt operation.
The London-listed company, whose shares rose 3% or 3.8p to 121.62p, said it looked forward to building a long-term relationship with its new largest shareholder.
The move, which extends deal making in the sector after French billionaire Patrick Drahi’s swoop for 18% of BT, contributed to a steady session for the FTSE 100 index.
The top flight was 8.92 points higher at 7427.07, having initially been as low as 7361 after disappointing figures from China’s Covid-hit economy showed pressure on rates of retail sales and industrial production.
A warning from former Goldman Sachs chief executive Lloyd Blankfein that recession in the United States is a “very, very high risk” added to the earlier downbeat mood.
Amid the increasingly uncertain demand outlook, mining stocks Antofagasta and Glencore managed a 3% recovery and Asia-focused Prudential improved 1.5%.
The FTSE 250 also recovered from a weak start to stand 40.14 points higher at 19,962.03, led by gains of over 3% for power companies Drax and Centrica after regulator Ofgem said it would consider whether to review the energy price cap every three months.
National Express says its Stagecoach offer remains the best
09:48 , Oscar Williams-Grut
National Express won’t sweeten its takeover offer for rival Stagecoach despite being gazumped by German asset manager DWS.
National Express said its all-share offer for Stagecoach, which values the company at £445 million, was “full and fair.” It continues to believe a merger would unlock more value for investors than a sale.
Stagecoach agreed to merge with National Express in December but pulled support for the deal after DWS tabled a £595 million cash bid in March.
Saudi oil profits soar
09:26 , Oscar Williams-Grut
Saudi Arabia made almost half a billion dollars in profit every day during the first three months of the year as resurgent oil prices boosted its coffers.
Saudi Armaco, the state owned giant and the biggest oil company in the world, reported a profit of $39.5 billion in the first three months of the year, almost double the $21.7 billion in made in the same period a year earlier.
The company announced a $18.7 billion dividend on the back of what it said were “exceptional” results.
Greggs warns on rising prices
09:10 , Rhiannon Curry
The boss of Greggs has warned that prices will have to rise as the bakery chain grapples with higher costs and slower sales in cities.
Roger Whiteside said the business was in “uncharted territory” as supply constraints, the war in Ukraine and sluggish recovery of consumer demand post-Covid push up costs.
“We see ourselves as value leaders in the food-to-go market, and that market has been forced to put prices up - we’re no different,” he said. “But we make sure that the gap between us and our competitors never narrows so that we’re always the best value.”
The bakery chain today reported a 27.4% increase in sales in the first 19 weeks of the year, partly because the beginning of 2021 was hampered by Covid lockdowns.
Vodafone shares 3% higher, FTSE 100 dips
08:50 , Graeme Evans
Vodafone shares are up 3% after the disclosure that Emirates Telecommunications has taken a 9.8% stake in the FTSE 100-listed group.
The “mutually beneficial” strategic investment by the former Etisalat business has been made on the eve of Vodafone’s full-year results on Tuesday. The new major shareholder declared it is “fully supportive” of Vodafone's management and its current business strategy.
It is not seeking board representation and says it is confident about the company's ability to “unlock value” from its business activity and other potential strategic transactions.
Vodafone shares rose 3.56p to 121.38p in a downbeat session for the wider London market as today’s weak figures from China’s economy caused the FTSE 100 index to drop 56.28 points to 7361.87.
Fallers of more than 2% included British Airways owner IAG, Rolls-Royce and Royal Mail, while credit checking firm Experian dropped 63p to 2633p after it acquired a minority stake in Brazilian fintech Mova.
The FTSE 250 index was 117.61 points lower at 19,804.28, with Dunlem among the leading fallers following a 3% drop.
Ryanair posts loss, sees fragile recovery
08:19 , Graeme Evans
Low-cost airline Ryanair today posted an annual loss of 355 million euros (£302.1 million), but said it expects a return to the black this year amid a “fragile” recovery.
Bookings have improved in recent weeks, although customers are leaving it later than usual to commit to their summer holiday plans.
There is, however, pent-up demand and Ryanair believes that peak summer fares will be ahead of pre-Covid levels. It plans to grow 2023 financial year traffic to 165 million customers, from an improved 97 million in the year to March 31 and 149 million pre-Covid.
Despite the expected recovery, boss Michael O’Leary said the impact of Covid and the Ukraine war meant it was impractical to provide “a sensible or accurate profit guidance range” to investors.
Markets hit by weak China data
08:14 , Graeme Evans
An unexpected fall in China’s industrial production rate has put markets back under pressure after the much-needed rally seen on Friday.
The 2.9% year-on-year decline represents the first decline since March 2020 and comes amid the impact of Covid lockdowns on levels of factory activity. Economists had predicted a small rise in output, albeit much slower than the 5% rise seen the previous month.
China’s retail sales, which were also released this morning, told a similar story after the bigger-than-expected 11.1% decline in April.
Michael Hewson, CMC Markets chief market analyst, said: “These numbers are unlikely to improve significantly in the coming months given that China is unlikely to alter its zero-Covid policy, given the vulnerability of its health service to too many infections, which means that after a poor first quarter, the second quarter could well be even worse.
“The poor nature of these numbers, along with the probability of how much improvement can be expected given China’s zero-covid policy, Asia markets have seen a mixed start to the week, which looks set to translate into a lower open for markets here in Europe.”
Brent crude dropped 2% to $109.60 a barrel on the China concerns, while the FTSE 100 index is forecast to open 22 points lower at 7396.
The S&P 500 was close to bear market territory before Friday’s rally, although this improvement failed to a sixth week in a row of declines.
