19 February 2020 • 4:48pm
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Dow Jones Industrial Average
European and US stock indices pushed back to record highs on Wednesday, as investors continue to pile into equities, shrugging off fears about the coronavirus’s potential impact on growth. These were the day’s top stories:
- UK consumer price inflation rose to 1.8pc, marking the first increase in six months
- Businesses warned they would face ‘critical’ worker shortages under new immigration rules
- Metro Bank said its interim chief has agreed to stay on permanently
- Qatar Airways upped its stake in IAG
- Laura Ashley avoided a cash crunch
Wrap-up: Europe ends on a high
That’s a wrap: European trading’s finished, with shares across the continent finishing as fresh record highs as investors continued to buy into the equity dream. The FTSE 100 outperformed slightly, as a softer pound gave Britain’s blue-chips some support.
Thanks for following along today – we’ll be back tomorrow morning!
Full report: Laura Ashley strikes funding deal
My colleague Hannah Uttley has a full report on Laura Ashley’s funding success. She reports:
Laura Ashley’s biggest shareholder MUI Asia has struck a deal with its lender Wells Fargo for emergency funding in order to keep the business afloat.
US bank Wells Fargo agreed to provide the retailer with a £20m loan last year, but Laura Ashley has struggled with restrictions on how much it could draw down after stock and customer deposit levels dropped. It now expects to be able to use the credit to keep trading.
The chain – which is a penny stock – climbed as much as 45pc to 1.9p following the announcement, but is still worth just £17m.
- Read more: Laura Ashley wins emergency cash lifeline
Jefferies: Rolls-Royce’s engine contracts should be safe
Analysts at Jefferies aren’t too worried about General Electric seeking extra work with Airbus (see 1:26pm update). They say a current exclusivity arrangement between the FTSe 100 engineer and the aerospace giant should offer a decent amount of protection, writing:
We believe the Trent 7000 enjoys exclusivity on the A330neo. We do not say GE cannot seek to compete, merely that the barriers to entry may be higher than normal.
…few details have made it into the public domain, but we figure one would want exclusivity for some time; up to five years feels marginal to us so we imagine it could be closer to ten years.
Rolls-Royce workers with one of its engines
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S&P 500 back at record highs
Over in the US, the benchmark S&P 500 is back at record highs, having shrugged off yesterday’s losses.
Saxo Bank’s Eleanor Creagh said investors risk looking “complacent” as buying continues in the face of the spreading coronavirus. In a note, she wrote:
Equities are to date resilient and not reflecting the state of demand destruction in China and hit to growth…
…We still maintain that this attitude is complacent given the capacity for non-linear secondary effects to cascade as shutdowns and quarantines become more protracted. Monetary stimulus and tax cuts will not be effective whilst people are quarantined and factories continue to operate at reduced capacity.
Goldman Sachs analysts added:
Both Chinese equities and Chinese high yield sold off in late January/early February but have regained much of losses over the past two weeks. To us, this suggests investors view the economic disruption to the Chinese economy as short-lived, in part driven by the decline in new confirmed cases over the past two weeks. However, early indications suggest that the restart in industrial activity post the Chinese New Year has been slower than expected.
US producer prices rise
One bit of econ data I passed over earlier: the US producer price index – i.e. the change in prices being paid ‘at the factory gate’ ticked sharply upwards in January.
Capital Economics’ Michael Pearce said the gain unlikely to be repeated, writing:
The 0.5pc jump in final producer prices in January was driven by one-off factors, including a jump in retail margins and an administered increase in Medicare hospital payments.
He added that the results shouldn’t produce any long-term shift in inflation numbers:
The jump in Medicare hospital payments will feed through into the Fed’s preferred PCE consumer price measure, but it should still remain well below the 2pc target, which means that interest rates are going to remain at or below current levels for many years to come.
Full report: Inflation rise make rate cut less likely
My colleague Tim Wallace has a full report on this morning’s inflation figures. He writes:
The cost of living in January was 1.8pc higher than in 2019 as measured by the consumer prices index.
That is a sharp increase from the 1.3pc annual rise in prices recorded in December and is the highest figure since July, according to the Office for National Statistics.
Family finances are still improving – wages climbed 2.9pc in the 12 months to December, meaning pay is stretching further each month – but the acceleration in prices means that this growth is likely to have slowed at the start of 2020.
US shares rise
US shares have opened higher, with tech and energy stocks leading early gains. Meanwhile, in the UK, the FTSE 100’s gains have just touched 1pc.
Here are some of the day’s top stories from Telegraph Money team:
- Britain on course to become cashless society ‘within the next 10 years’
- Are you affected by NS&I rate cuts? Here’s how to get the best deals
- The Government is planning a pensions tax raid – but a ‘final salary’ problem means it won’t work
US set for gains
With less than half an hour to go until trading opens on Wall Street, the top US indices are looking set to make some modest gains – futures trading points to a rise of about 0.3pc on the Dow and S&P 500, and about 0.5pc on the Nasdaq.
Odey attacks Sirius offer
Hedge fund manager Crispin Odey
Hedge fund Odey Asset Management has said it will would oppose mining titan Anglo American’s rescue bid for Sirius Minerals, in a blow to the company’s controversial takeover.
Odey is run by hedge fund tycoon Crispin Odey, the outspoken Brexiteer accused of betting against Britain.
My colleague Ed Clowes reports:
The London-based fund, which owns 1.29pc of the company, called the deal a “mockery”, saying its terms, which valued fertiliser miner Sirius at £405m, did not represent fair value.
The current offer from Anglo is values Sirius at 5.5p a share. In an open letter to Sirius chief executive Chris Fraser and Anglo boss Mark Cutifani, Odey said it would only back a deal that valued the company’s shares at 7p or above.
Odey’s intervention adds to the already-complicated takeover attempt by Anglo, as many Sirius investors have considered voting against the deal in protest. Many individual investors face huge losses after buying in to the company when the share price was much higher.
- Read more: Odey derides Anglo American offer for Sirius Minerals as ‘mockery’
US housing permits leap
Over in the US, housing permits have risen to their highest level since 2007, with 1,551,000 granted during the January, marking a 9.2pc month-on-month rise.
Housing starts (i.e., actually work starting on properties) rose to 1,567,000.
The figure are a further sign that the US economy was experiencing a bit lift in sentiment during January – but will next month’s figures show more of a hit from coronavirus worries?
Rolls-Royce slips on report GE is pitching for Airbus business
Airbus has struggled to capitalise on problems at Boeing
Shares in Rolls-Royce have taken a knock today, after Dow Jones reported that General Electric is looking for new business with aerospace giant Airbus – presenting the engine-maker with some potential competition.
The news wire reports:
GE is in talks with Airbus to design and sell an engine variant for Airbus’ latest wide-body, called the A330neo, according to people familiar with the matter. The discussions come in the wake of Boeing’s decision to cut back production of that plane’s rival 787 Dreamliner, according to these people.
The interest at GE in pitching for Airbus business comes amid a major shift in the aviation industry’s global supply lines, largely due to the prolonged grounding of Boeing’s 737 MAX. The single-aisle jet is the latest variant of Boeing’s most popular airliner. It was grounded last March after two deadly crashes caused in part by glitches in its flight-control systems.
Rolls-Royce and GE compete to supply engine for Boeing’s 787 Dreamliner, but the former currently offers the only option for the A330neo.
Man Group jumps on upgrade
Shares in hedge fund manager Man Group are up almost 9pc currently, after BNP Paribas lifted its rating on the group from neutral to ‘outperform’ (a positive rating). Analysts at the French bank said they expected Man to beat expectations for full-year results.
Laura Ashley strikes deal for emergency cash
Laura Ashley said it should be able to meet its immediate funding requirements
Christopher Simon Sykes/Camera Press
Laura Ashley says it has reached a deal with its bank Well Fargo over emergency funding that will stop the group needing to declare bankruptcy.
The retailer’s top shareholder, MUI Asia, had been in crunch talks with the US lender over Laura Ashley’s working capital facility.
In a statement a few minutes ago, it said talks “have concluded” and it “should be able to utilise requisite funds… to meet its immediate funding requirements”.
Laura Ashley emphasised that the money is not a “cash injection” by MUI, but said it welcomes the group’s support and “continues to review its working capital needs on an ongoing basis”.
The company will update shareholders in due course in relation to the review of its working capital needs.
Shares in mining group Hochschild are climbing strongly today, rising as much as 9.66pc after it delivered full-year results that beat analysts’ estimates.
The FTSE 250 group posted revenues of $755.7m for 2019, compared to $704.3m the year before.
Royal Bank of Canada called the results “solid”, but said the Hochschild needs “a bit more momentum” in its exploration operations.
More trouble at Boeing
Boeing’s troubled 737 Max has suffered another blow after debris were found in the fuel tanks of planes put in storage while it remains grounded, my colleague Alan Tovey reports.
“Foreign object debris” poses a serious safety risk to aircraft. It can block fuel supplies to engines, causing them to cut out, or damage other components as they move around in flight.
Boeing said the debris was discovered while doing maintenance on aircraft grounded since March after the second of two 737 Max crashes in five months that killed almost 350 people.
A Boeing spokesman said the discovery led to a “robust internal investigation and immediate corrective actions in our production system”.
All 737 Max planes in storage will be inspected to check for any other debris.
- Read more: New blow for Boeing after debris found in 737 Max fuel tanks
Intu owns sites including the Trafford Centre in Manchester
Shares in Intu properties have risen as much as 15pc today, after the retail landlord announced – in a brief update – that it intends to release its annual results for 2019 on March 5.
That has fuelled speculation that the group may have found an investor (or investors) who will act as a lynchpin for its planned rescue deal.
Intu shares lost almost a third of their value last week after a potential backer refused to take part in a £1bn fundraising bid aimed at saving the struggling company.
Numis analyst Robert Duncan told Bloomberg Intu “must feel sufficiently certain” that it has found a backer.
Coronavirus hits Adidas and Puma
German sportwear groups Adidas and Puma have both said that store closures in the face of the coronavirus outbreak have caused sales in China to plummet.
“Our business activity in Greater China has been around 85 percent below the prior year level since Chinese New Year on January 25,” Adidas said in a statement.
Competitor Puma said “business in China is heavily impacted due to the restrictions and safety measures implemented by the authorities.”
More than half of its own stores and partner outlets are closed at the moment, it added.
Adidas said it faced “a significant number of store closures” in its network of 500 owned stores and 11,500 franchises in China, while fewer people are shopping at those which remain open.
Finablr: We’ll get back to you on those shares
NMC and Finablr founder BR Shetty
Payments firm Finablr has said it needs more time to figure out who controls its shares, adding it continues to “urgently” seek further information from the family of its founder, Indian billionaire Bavaguthu Raghuram Shetty.
The FTSE 250 company has been dragged into turmoil recently, after a short attack on UAE-based hospital operator NMC Health – also founder by Mr Shetty – triggered a governance crisis at the top of the company.
Mr Shetty quit his role at NMC over the weekend. Last Friday, the group revealed it cannot account for who controls all its shares after disclosing that many of Mr Shetty’s share were actually in the hands of his Emirati partners, the bin Buttis. Despite revealing around 30m shares in the healthcare group had swapped hands without its knowledge, the company still couldn’t account for a stake worth around £3.5m.
- Read more: EY risks being drawn into NMC Health crisis after former partner resigns
Finablr has been dogged by similar governance worries, but it seems to be a bit behind NMC in its search for answers. In a statement today, it said:
The independent directors have been informed that the Shetty family and their advisers are not yet in a position fully to respond to them but have undertaken to do so as soon as possible. The independent directors are seeking to resolve the position by the end of February 2020 at the latest.
NMC are also awaiting answers from the Shettys.
Here’s how the groups have shifted since early December:
Royal Mail drops
Royal Mail’s shares are worth about a quarter of as much as at their peak
A damning analyst note on Royal Mail has knocked the group’s share price today.
Liberum cut its price target for the group, with analyst Gerald Khoo warning the FTSE 250 group strategy looks “undeliverable” (drum roll).
Earlier this month, Royal Mail warned its UK business could be loss-making next year, sending its shares plunging to an all-time low.
The company also said the coming year looks challenging, especially with the threat of industrial action hanging over its operations as rows with its workforce continue.
“Management openly questioning the achievability of its 2024 targets just nine months after its strategy launch is hardly encouraging,” wrote Mr Khoo. He warned that continued pressure on margins and falling revenues could lead to the group’s dividend being cut.
Berkeley is the biggest riser on the FTSE 100 currently, after HSBC shifted its rating on the group to “buy”, saying the bumper dividend yields enabled by Help to Buy should be sustainable until the scheme ends in 2024. The upgrade means HSBC now has positive ratings on all the UK builders it covers.
Business alarm over new immigration rules
Home Secretary Priti Patel
Industries will face “critical” worker shortages under Home Office plans to clamp down on the flow of “cheap labour” from Europe, business leaders have warned.
The Confederation of British Industry (CBI) said under-pressure sectors “will be left wondering how they will recruit the people needed to run their businesses” amid the lowest unemployment in more than four decades.
My colleague Tom Rees reports:
The Government risked a backlash from businesses after outlining its plans for a new points-based immigration system that will prioritise high-skilled workers.
The Home Office told employers they will need to adjust as it shifts “the focus of our economy away from a reliance on cheap labour from Europe”.
- Read more: Business warns of ‘critical’ worker shortages under new immigration rules
Pound still whipsawing
After initially jumping following this morning’s higher-than-expected inflation data, the pound has snapped back downwards again, continuing a pattern of recent volatility.
…while England leads the UK
No doubt spurred to some extent by London, England has maintained its major lead as the UK country with the highest housing prices.
Once again, here’s Pantheon’s Samuel Tombs:
December’s official house price data confirm that a recovery already was underway before the election… we expect year-over-year growth in house prices to continue to strengthen, reaching 4pc by the end of this year.
Britain’s capital city stayed well ahead of the pack in today’s figures, with the average house price rising to £484,000 in December. The North East remained the weakest, and is the only region where average prices are still below their pre-crisis peaks.
Reaction: Inflation data
Rising inflation shows there’s no need for the Bank of England’s Monetary Policy Committee to cut rates any time soon, says Pantheon Macroeconomics’ Samuel Tombs. In a note, he wrote:
This upward trend in domestically-generated inflation should remain intact over the coming months—indeed, surveys of services’ firms price intentions leapt in January –ensuring that the MPC holds back from cutting Bank Rate this year.
Ruth Gregory, an economist at Capital Economics, said they figures “are unlikely to move the dial on the outlook for interest rates”, despite the likelihood that energy prices gains should fizzle out in the coming months. She added:
…for the MPC, the fact that inflation is evolving in line with its projections provides another reason not to cut interest rates in the near term.
Yorkshire houses see biggest price rise
God’s own county saw the biggest house price rises
Mark Sunderland Photography / Alamy Stock Phot
Homeowners in Yorkshire had the biggest cause to cheer the ‘Boris bounce’ in December as house prices jumped 3.9pc, official figures showed.
For the first time in more than two years, all regions of the country managed to show annual house price growth.
Our Economics Editor Russell Lynch reports:
Apart from Yorkshire and the Humber, the next strongest performer was the East Midlands where prices also rose 2.8pc, faster than the national average.
There were also signs of relief at the top end of the London property market after a big jump in the share of £3m-plus homes changing hands. That helped push average London price growth up 2.3pc over the year to December, compared to 0.4pc in November.
The South-East was the laggard but still saw prices up 1.2pc in the year to December.
The North East has the the lowest average house price, at £131,000, and is the only English region yet to surpass its pre-economic downturn peak of July 2007.
What drove inflation last month?
The ONS reports that housing and household services continues to make the largest contribution to inflation figures.
The stats body said:
Despite the division providing the largest upward contribution since November 2018, its contribution has fallen since May 2019 as a result of falling contributions from electricity, gas and other fuels.
These were the biggest shifts between December and January:
House prices pick up
Alongside this morning’s inflation data (which I will get back to shortly), UK house price growth picked up again slightly in December, rising to 2.2pc from a revised November figure of 1.7pc. It’s a sign that homebuyers are on the prowl once more following a slowdown last year that was widely blamed on Brexit uncertainty.
UK inflation hits six-month high
That’s a beat – UK consumer price inflation has picked up for the first time in half a year to its fastest level since July. The year-on-year figure was 1.8pc, versus expectations of 1.6pc. The gains were driven by rises in the cost of energy, plane tickets and fuel.
Coming up: Inflation figures
UK consumer price index inflation figures for January are just a few minutes away. Here’s what analysts (polled by Bloomberg) are predicting:
- CPI down 0.4pc month-on-month (from 0pc in December)…
- …but up 1.6pc year-on-year (from 1.3pc)
- CPIH – including housing costs – at 1.7pc (from 1.4pc)
- CPI core – with volatile elements stripped out – at 1.5pc (from 1.4pc)
Figures probably increased overall thanks to a rise in energy costs during the month, but the jump may not last.
Moneysupermarket boss steps down
Mark Lewis, chief executive officer of Moneysupermarket.com, has told its board he wishes to step down and “pursue his career in a new direction”. The FTSE 250 price-comparison site said:
No date for this has been agreed, but Mark has said that he wishes to ensure a smooth transition to his successor
A formal search process has begun to find a replacement for Mr Lewis, who has been in place for three years.
In a statement this morning, Moneysupermarket said it will announce that it has met market expectations when it reports its preliminary results tomorrow.
Stifle analyst Bridie Barrett said the affirmation of results would be welcomed, but warned 2020 looks set to be a “fairly mixed” year for the company.
Sterling is all over the place ahead of this morning’s inflation data (due out at 9:30am). After an initial upwards push as London trading began, it has now dropped sharply downwards again. The release ought to offer a bit more stability.
Times: Bank speech was leaked
A market-moving speech by Bank of England deputy governor Ben Broadbent was sent to a foreign exchange trader over an hour before its publication, the Times has reported.
The paper says that news provider Livesquawk posted a copy of a speech by Mr Broadbent a market trader before it was delivered. It adds:
The speech, in July 2017, moved markets because the interest rate decision was on a knife-edge. The pound rose ahead of the speech amid expectations that Mr Broadbent would vote for a rate rise, then fell sharply because he did not address monetary policy, taken as a signal that he would vote to leave rates unchanged.
- Read the Times’s full piece here: Bank speech was leaked to market trader
The Bank admitted in December that hedge fund managers had been listening in on some of its press conferences before they were officially broadcast, taking advantage of a few second of delay between the main video feed and a lower-latency audio feed.
Ben Broadbent, the deputy governor for Monetary Policy at the Bank of England
Palladium pushes ever higher
Among the mixed market activity prompted by the coronavirus outbreak, one commodity has shown no signs of fear: Palladium has burst above $2,800 an ounce, extending a record-breaking rally after warnings the world is facing a shortfall of the metal – which is a crucial part of catalytic convertors.
Palladium has been on a meteoric rise since 2018, with analysts warning a shortage could grow worse this year. Earlier this week, Anglo American predicted there will be a shortfall of 1.9m ounces this year, widening from 1.2m last year. ING analysts warned that a fall in demand for cars could ease pressure on supplies of the metal, however.
Be right back
As we strive towards ever-greater websiting, the tech team is briefly taking down our live blogging systems – I’ll be back in a few minutes. Stay tuned!
Reaction: Metro’s new strategy in focus
Responding to Metro Bank’s appointment of Dan Frumkin as it new chief executive, Goodbody analyst John Cronin says it is further proof the struggling lender faced a struggle to secure a “true C seat candidate with considerable – and relatively fresh – board experience” in UK retail and commercial banking.
Mr Frumkin spent eight years at a community bank based in Bermuda, and previously held roles at RBS and Northern Rock.
Mr Cronin added:
This is not to suggest that Frumkin is a second-tier candidate but he was not a name that was on the radar. Clearly, the board is comfortable that he has the credibility to steer the ship and we welcome the appointment in the context of the delivery of [Metro’s] revised strategy next week
The group’s shares have dipped a little today:
European shares rise
It’s been a decent start for European stock indices, which are making moderate gains following some losses during yesterday’s session. Once again, the backdrop is against a slowdown in coronavirus infection rates.
In a note to clients this morning, Deutsche Bank analysts led by Jim Reid wrote:
While the economic impact may be more limited and short-lived outside of China, Apple’s latest earnings guidance was a decent reminder that second order impacts on both demand and supply shocks remain a risk for markets. It remains to be seen how long the impact will persist, however it did cause US markets to pause for breath, even if equity markets closed off their lows in the US last night.
Metro bank names boss
Metro Bank has appointed Dan Frumkin as permanent chief executive, replacing longstanding boss Craig Donaldson who left at the end of 2019 after a torrid year for the lender.
My colleague Simon Foy reports:
Mr Frumkin, a restructuring specialist, has served as the bank’s interim chief since January.
Sir Michael Snyder, the bank’s chairman, said: “We have conducted a comprehensive evaluation from a strong field of candidates and Dan stood out.”
Former chief executive Craig Donaldson announced plans to step down in December, just two months after its chairman Vernon Hill resigned. The group had an absolutely torrid 2019, with shares obliterated by the fallout from revelations of an accounting scandal.
- You can read our developing report here: Metro Bank names interim chief as permanent boss
Qatar ups IAG stake
IAG owns carriers including British Airways
Qatar Airways Group says it had increased its stake in British Airways-owner IAG to a quarter, adding its investment had been highly successful and it continued to support the group and its strategy.
Qatar previously held 21.4pc of IAG, which also owns carriers Iberia, Aer Lingus and Vueling.
Agenda: Beijing considering cash injections and mergers
Global shares dipped on Tuesday after Apple warned on an impending hit to its revenues due to coronavirus
Good morning. Europe is set to open higher, following Asian markets, after reports suggested that China is considering direct cash injections and mergers to bail out the airline industry, as the coronavirus continues to weigh on its economy.
One proposal involves allowing some of the nation’s biggest carriers – which are controlled by the state – to absorb smaller ones suffering the most from the mass grounding of planes.
The death toll from the virus has now passed 2,000.
5 things to start your day
1) Jaguar Land Rover is just a fortnight from having to shut down production at its UK car plants as coronavirus wreaks havoc with its supply chain.The carmaker is so short of parts following a string of Chinese factory shutdowns that it has resorted to bringing key products over in luggage by plane, boss Sir Ralf Speth said.
2) Look under the bonnet and the jobs market is not as strong as you might think: While we can all cheer real-terms regular pay being at an all-time high, nominal pay growth is slowing – growing at its weakest pace for a year.
3) The failure to electrify thousands of miles of railway threatens Boris Johnson’s promise to make Britain the cleanest country on earth, industry leaders have warned. Rail chiefs have written to Transport Secretary Grant Shapps urging him to press on with electrification so that the industry can cut out carbon emissions by 2040.
4) Beales to shut remaining 11 department stores: The company made a further 20 staff redundant at its head office in Bournemouth with hundreds of jobs at risk.
5) Donald Trump has pardoned financier and philanthropist Michael Milken, the face of financial scandals in the Eighties. The US president said that the “junk bond king”, who was convicted of securities fraud, had done an “incredible job” supporting cancer research.
What happened overnight
Asian stocks and US and European equity futures recouped some of Tuesday’s losses after signs that China may be planning to offer more support to its economy, reeling from the virus-induced slowdown.
Equity benchmarks rose in Tokyo, Hong Kong and Sydney, while Shanghai dipped from the highest level in about four weeks.
China’s latest moves to aid growth include possible bail-outs for some airlines, Bloomberg reported Wednesday.
On Tuesday, Wall Street closed slightly lower; Apple ended off of its lows after its sales warning had triggered Asia’s sell-off yesterday.
Brent crude was set for the longest run of gains in more than a year as US sanctions on Russia’s largest producer and conflict in Libya shifted the focus to supply threats from virus-driven demand concerns.
Coming up today
Full-year results: Gooch & Housego
Preliminary: Hochschild Mining, Temple Bar Investment Trust
Economics: CPI inflation (UK), building permits and housing starts, FOMC minutes (US)
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