Evergrande's future was back in focus today after it emerged that China's debt-laden property firm had failed to complete a key $2.6 billion asset sale.
Its shares plunged more than 10% at one point following their resumption of trading, with Asian markets also back under pressure on fears of contagion in the region through any subsequent default.
The developments have meant a weaker session for European markets, despite London's blue-chip quarterly results season seeing an impressive profits haul from Barclays and resilient performance by consumer goods giant Unilever.
FTSE 100 Live Thursday
FTSE 100 lower amid Evergrande fears
Greyhound business sold by FirstGroup
Tesla upbeat despite chip shortages
07:40 , Graeme Evans
The Dow Jones Industrial Average hit an intraday record on Wall Street yesterday, but the mood for European markets is one of uncertainty today after it emerged that a lifeline stake sale involving debt-laden Chinese property firm Evergrande had fallen through.
Evergrande shares were suspended earlier this month pending the transaction with Hopson Development, which had been expected to buy a 51% stake in the struggling company's property services unit in a move raising $2.6 billion.
The precarious position of Evergrande has spooked markets in the past month amid fears of contagion. The Nikkei 225 and Hang Seng were both lower today and the FTSE 100 index is expected to open down 20 points at 7203, according to CMC Markets.
The weakness comes despite another robust day of earnings updates on Wall Street, helping the Dow to its record intraday high and leaving the S&P 500 within a whisker of doing the same.
Elon Musk's Tesla kept up the run of strong earnings performances last night, with its best-ever net income, operating profit and gross profit figures. It also reported an operating margin of 14.6%, which compares with medium-term guidance for a figure in the low-teens and comes despite pressure from chip shortages and ports disruption.
The electric car maker's shares are back close to record highs, but succumbed to some profit-taking in after-hours trading on Wall Street, dipping by more than 1%.
The other focus for markets is bitcoin after the cryptocurrency traded at a record high of $66,974.77, buoyed by the start of trading for an exchange-traded fund in the US. The price later settled at $64,924, which is more than double the level seen in July.
Record profit for Barclays
08:03 , Graeme Evans
Blue-chip highlights in a busy session of corporate updates include Barclays after its investment banking arm benefited from the recent surge of M&A activity to leave group profits for the first three quarters of the year at a record £6.9 billion.
With the bank's CET1 measure of capital strength coming in at 15.4%, chief executive Jes Staley said Barclays was in a strong position to return excess capital to shareholders.
Consumer goods giant Unilever also reported third quarter figures, with underlying sales growth of 2.5% reflecting a 4.1% rise in prices and 1.5% fall in volume. Cost inflation is at “strongly elevated levels”, which boss Alan Jope expects to continue into next year.
08:13 , Graeme Evans
FirstGroup has sold Greyhound, the operator of iconic North American long-distance buses, to a subsidiary of Germany’s FlixMobility, as it exits the US market to focus on UK public transport.
Greyhound’s fleet of 1,300 vehicles and 2,400 employees provide services connecting 1,750 destinations across North America.
FirstGroup picked up the business in 2007 as part of its acquisition of Laidlaw International for over $3 billion, when it also became the largest operator of yellow school buses in North America.
FirstGroup will generate cash proceeds of $172 million from the deal for the Greyhound business, which it has been trying to sell since 2019.
Barclays’ bankers set for big bonuses as profits boom
08:22 , Simon English
Barclays landed record profits of £6.9 billion in the last nine months, setting the stage for a bumper round of bonus payments to top bankers in London and New York.
Those results are a vindication of the strategy pursued by CEO Jes Staley, who fought to keep the bank’s investment banking arm in the face of scepticism from some in the City and outright protests from some investors.
Barclays has been involved in many of the biggest takeover deals this year, raising money for clients who needed cash to survive in many cases.
Staley told the Standard: “We have been questioned for the last six years as to whether this strategy would work, can we manage the investment bank, can we compete with the big Wall Street banks. This is a pretty strong answer.”
Pre-Budget boost for Sunak
08:24 , Oscar Williams-Grut
Public sector borrowing figures have provided some cheer for Chancellor Rishi Sunak ahead of next week's Budget, with the figure of £21.8 billion for September coming in below City expectations of £22.6 billion.
Borrowing last month, however, was still the second highest September on record and public sector net debt of 95.5% of GDP the highest since March 1963.
UK economist Paul Dales of Capital Economics said Sunak will be able to say next week that he has reduced government borrowing much quicker than expected: “But we suspect he’ll set himself some tight fiscal rules that will mean he won’t announce a major net giveaway next week.”
FTSE 100 lower as Barclays dips
08:39 , Graeme Evans
Barclays investors appear to have used the quarterly results as an opportunity to lock in profits after seeing the banking giant's shares almost double over the past year.
Michael Hewson, of CMC Markets, said: “With Barclays share price at three-year highs leading into today’s Q3 numbers, expectations were high given the fairly decent results from US banks last week.
“The trends were similar to last week’s US banks with outperformance in equities trading, and underperformance in fixed income, and also similar to how Barclays performed in Q2.”
Barclays fell more than 1%, off 2.36p to 196.08p, in a session when the FTSE 100 index declined 0.5% or 36.12 points to 7186.98.
Miners and travel-focused stocks were among the biggest fallers as the Evergrande fears and the recent spike in Covid-19 cases fuelled risk aversion. The bad week for British Airways owner IAG also continued as shares fell another 1.7p to 155.78p.
Greyhound becomes Windhund
10:03 , Simon Freeman
Greyhound will continue its journey across the American landscape under new ownership after FirstGroup finally found a buyer for the storied long-distance bus operator.
Germany's FlixMobility will pay $140million upfront plus another $32 million over the next 18 months to add the iconic brand to the global fleet of subsidiary FlixBus for a total of $172 million (£128 million).
It will hold onto depots and various properties worth around $176 million to lease back to Greyhound at market rates but these are expected to be sold over the next five years.
The cash deal marks the end of a two-year sales process for FirstGroup and is a milestone in its strategy to double-down on the UK market, where it operates around a fifth of local bus services.
It sold its other US divisions First Student and First Transit to EQT Infrastructure in July for $4.6 billion.
Shares jumped by as much as 5% in early trading today.
FlixMobility has been building a low-cost network across Europe for almost a decade and launched FlixBus in the US in 2018 to link California colleges with spring break destinations like Las Vegas and Disneyland before expanding to New York and Texas.
The Munich-based firm raised $650 million in new financing in June from investors including BlackRock.
Greyhound launched in Minnesota in 1914 and now serves some 2400 destinations across North America, carrying almost 16 million passengers each year.
FlixBus said the acquisition will help it tap into surging demand as economies recover and travellers shun cars and planes to reduce carbon emissions.
CEO André Schwämmlein said: “A compelling offering will draw significantly more travelers away from private cars to shared intercity bus mobility.”
FirstGroup’s executive chairman David Martin said: "Greyhound is an iconic business which has been at the heart of North American life for more than a century, through its unique national network which connects communities across the continent.
"This transaction realises an appropriate value for Greyhound's operations and ensures Greyhound’s legacy liabilities are suitably managed.
“Today’s agreement regarding Greyhound’s future completes the Group’s portfolio rationalisation strategy which has refocused FirstGroup on its leading UK public transport businesses with a strong platform to create sustainable value going forward.”
Liberum said the sale price was “materially higher” than expected.
AJ Bell and St James’s Place enjoy wealth management boom
10:27 , Simon English
THE boom in wealth management showed no sign of abating today with strong figures from relative newcomer AJ Bell and established City firm St James’s Place.
Both are in competition with industry leader Hargreaves Lansdown for customers, though all surged during the pandemic as locked-down investors found they had spare cash to tuck away.
AJ Bell said today that customer numbers are up 30% in the year so far to nearly 383,000. Funds under administration rose 52% to £6.4 billion.
Miners lower on Evergrande fears
10:44 , Graeme Evans
Mining stocks were rattled today as contagion fears linked to the crisis at debt-laden property firm Evergrande returned to spook markets.
Evergrande's shares plunged 13% on today's resumption of trading in Hong Kong after it emerged that a potential lifeline transaction with Hopson Development had collapsed.
The deal would have seen Hopson buy a 51% stake in the struggling company's property services unit in a move raising $2.6 billion. The focus is now on whether Evergrande can stave off collapse and avoid a damaging knock-on effect for the wider Asia economy.
As China is the world's biggest consumer of many metals and minerals, the shares of London-listed commodity stocks fell by as much as 4% today. Anglo American led the way with a drop of 120.5p to 2717.5p, followed by Rio Tinto at 184.5p lower at 4701p.
The recent surge in Covid-19 cases also contributed to the risk-off sentiment, despite the strong run of Wall Street earnings helping the Dow Jones Industrial Average to an intra-day high on Wednesday.
The FTSE 100 index fell from its recent post-pandemic high, down 25.75 points to 7197.35.
Rentokil Initial also featured on the fallers board, despite the pest control and hygiene business reporting a “strong performance” as revenues rose 0.5% to £761.9 million for the third quarter. Shares fell 2.5% or 15p to 588.6p.
Unilever shares were 3% higher after its trading update at the top of the FTSE 100 risers board, while Legal & General shares were up 1.6p at 276.4p after Jefferies upgraded the insurer to a “buy” recommendation” and lifted its target price to 340p.
Pressure on IAG shares also eased after three days of heavy losses as the British Airways owner rose 0.4p to 157.92p.
The FTSE 250 index was 12.54 points at 22,979.36, but shares in Bermuda-based insurance company Lancashire Holdings fell 5% after disclosing losses from its exposure to recent natural catastrophe events such as Hurricane Ida of up to $185 million.
EY goes carbon negative
11:06 , Oscar Williams-Grut
Corporates are rushing to cut out emissions as COP26 looms. Accountant EY has gone one step further, saying today it is now offsetting and removing more carbon from the atmosphere than it emits.
The company’s emissions have fallen by 71% since 2019 after a collapse in business travel due to the pandemic. Meanwhile, EY is paying for new trees to be planted in places like China and investing in regenerative agriculture - projects that such carbon out of the atmosphere.
EY said it was removing or offsetting 528k tons of CO2 emissions, which is 34% more than it emits.
Global chair and CEO Carmine Di Sibio said: “Businesses need to take the lead and the reality is that carbon neutrality simply isn’t enough if we are to deliver a sustainable planet for future generations.”
Travel Chapter plots London float amid staycation boom
11:45 , Joanna Bourke
Travel Chapter, which manages over 8000 properties on behalf of landlords and is behind the holidaycottages.co.uk brand, said the self-catering market has recorded long term growth. It expects further consumer demand ahead.
Read more HERE.
Investors flock to invest in London’s warehouse property sector
14:00 , Joanna Bourke
Scores of firms want to develop shorter supply chains as driver shortages and logistics problems bite, a property agent said as it calculated more than £2 billion has been invested in London warehouses in the year to date.
Investors have been attracted to the UK industrial property sector, betting on online retail demand remaining high and firms wanting to improve their supply chains. That could fuel more tenant demand for storage and distribution space.
That is well ahead of the £1.4 billion and £1.7 billion of transactions recorded respectively for all of 2020 and the prior year.
Read more HERE.
WeWork finally comes to the public markets
14:44 , Oscar Williams-Grut
Flexible office rental company WeWork has finally come to market.
WeWork first tried to list in New York in 2019 with a valuation of $47 billion but investors baulked at the richly valued company and its new age CEO Adam Neumann who said WeWork’s purpose was to “elevate the world’s consciousness”. The company was ultimately forced to abandon its IPO, write down its value by tens of billions and get rid of Neumann.
Now WeWork has successfully joined the Nasdaq through a merger with SPAC company BowX. Shares are changing hands at $10.78 in New York shortly after the open.
FTSE pulled down by mining stocks
17:25 , Oscar Williams-Grut
The FTSE 100 has closed down 32 points, or 0.4%, at 7190. It was dragged lower by mining stocks, with Rio Tinto dropping 4.8% to the foot of the index. Commodities players were hit by Evergrande news — the Chinese property developer saw a crucial sale fall through, leaving questions about its future in doubt. Any collapse would have consequences for the Chinese property market, which sucks up huge amounts of natural resources.
Elsewhere, the top stories in the market were:
- Bitcoin pushed to a new high overnight as it continues to benefit from the listing of ETFs in the US and the perception that it’s an inflation hedge
That’s all from us on the blog today. Have a good evening and join us again tomorrow.