What to watch: Rolls-Royce warns on new virus strains, JD considers cash call, and unemployment soars

Oscar Williams-Grut and Tom Belger
·3 min read
A Rolls-Royce logo on an Airbus A380 engine. Photo: Ivan Alvarado/Reuters
A Rolls-Royce logo on an Airbus A380 engine. Photo: Ivan Alvarado/Reuters

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Rolls-Royce warns on new virus strains

Plane engine-maker Rolls-Royce (RR.L) has sounded the alarm over the impact of new COVID-19 variants and tougher global travel restrictions on its aviation customers and cashflow.

The company warned it expected to burn through £2bn ($2.7bn) this year with use of its engines at just 55% of 2019 levels, as its earnings are based on usage and from servicing as well as production.

The level of cash burn is at least £500m more than expected by analysts, as Rolls-Royce had previously anticipated engine usage at 70% of pre-virus levels. The company’s stocks fell 2.5% on the news.

JD considers cash call

JD Sports (JD.L) has confirmed a report it is planning to raise cash to fund a continued acquisition spree.

The group said it is considering funding options, including an equity placing, to boost its ability to “invest in future strategic opportunities”.

Sky News reported late on Monday that JD Sports was in talks over a potential £400m share sale after last month’s £491m acquisition of US chain Show Palace.

Shares slipped 3.5% in early trade.

Unemployment soars

The UK unemployment rate has hit its highest level since 2016, leaving more than one in 20 jobless as the coronavirus crisis hammered the UK labour market.

The latest official figures from the Office for National Statistics (ONS), published on Tuesday, suggest 5% of the workforce was job-hunting in December, the highest in more than four years. It had stood at 4.9% a month earlier, though is lower than the rise to 5.1% expected by analysts.

Some 2.6 million people are now claiming out-of-work and low-income benefits, 1.4 million more than last March.

The number of payroll employees dipped by another 52,000 compared to November, leaving a total of 828,000 fewer salaried staff compared to February in the very early stages of the pandemic.

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Markets recover losses

Stock markets opened slightly higher in Europe on Tuesday, arresting the sell-off seen late in the previous session.

The FTSE 100 (^FTSE) was trading up 0.7% by mid-morning in London, while the CAC 40 (^FCHI) was up 1.1% in Paris and the DAX (^GDAXI) was up 1.5% in Frankfurt.

The rises followed big declines for stocks on both sides of the Atlantic on Monday. A jittery open on Wall Street left the DAX and CAC down 1.6% by the end of the day, while the FTSE shed 0.8%.

“European equity markets traded higher on Tuesday, recovering the losses of Monday’s soft session after a largely positive, though choppy, day on Wall Street,” said Neil Wilson, chief market analyst at Markets.com.

Futures pointed to a quiet open in New York later today. S&P 500 futures (ES=F) were down 0.1%, Dow Jones futures (YM=F) were flat, and Nasdaq futures (NQ=F) sold off 0.3%.

Asian markets sold-off overnight on concerns about delays to US stimulus checks. Japan’s Nikkei (^N225) fell 1% and the South Korean KOSPI (^KS11) dropped 2.1%. China’s Shanghai Composite (000001.SS) slid 1.5% and the Shenzen Component (399001.SZ) declined by 2.3%. The Hong Kong Hang Seng (^HSI) was down by 1.5%.

US earnings

A slew of big companies are reporting earnings in the US later today. They include: Microsoft (MSFT) Johnson & Johnson (JNJ), Verizon Communications (VZ), Starbucks (SBUX), American Express (AXP), General Electric (GE) and Lockheed Martin (LMT).

Disclosure: Verizon Communications is the parent company of Yahoo Finance.

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