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Tuesday, November 29, 2022

FTSE 100 Live 20 April: Netflix subscribers fall sends shares lower, US rates pressure grows

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Netflix goes lower

There really is no end in sight. As I type Netflix is down 35%….

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Netflix slumps 30% at the open

Oooof.

Netflix has slumped 30% at the start of trade on Wall Street, erasing $47 billion of market value in a matter of seconds.

It is now down over $160 billion so far this year. The latest slump follows the first fall in subscriber numbers for the streaming service in a decade. Analysts think difficult trading conditions could persist a while yet.

Read more about the goings on at Netflix.

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FirstGroup names new CEO

Aberdeen-headquartered public transport provider FirstGroup has appointed Graham Sutherland as chief executive.

The business veteran has held a number of senior leadership positions including boss of broadband provider KCOM Group and head of the BT business and public sector division. He will also join the board as executive director.

Sutherland said: “I look forward to working with my new colleagues to drive the Group forward and deliver the vital services that are key to achieving society’s sustainability and economic goals. With its prime positions in bus and rail, strong balance sheet and clear purpose.”

He will take up the role on 16 May.

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London jobs market resilient

London’s job market shows no sign of slowing down despite rising inflation and growing fears about the economic outlook.

The Recruitment and Employment Confederation (REC)’s latest quarterly employment report found short-term hiring intentions in London were stronger than in any other region of the UK.

Employers in the capital were also more optimistic about the UK economy than the national average.

Hiring intentions across the country remain strong despite a sharp drop in confidence among business leaders as inflation hits a 30-year high.

Neil Carberry, chief executive of the REC, said: “Businesses are seeing tax rates and uncapped energy costs rise, as well as pressure on salaries from staff who are seeing their own bills go up. So it is no surprise that firms are more concerned about the outlook.

“But British firms are resilient and investment in staff and growth remain on the agenda when employers think about their own business.”

Hiring will “decouple further from their economic outlook,” he said. months as they face a tight labour market.

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Netflix mulls advert-funded offering

Netflix has signalled a move into advertising to allay investor concerns over falling subscriber numbers.

In a shareholder call late last night, CEO Reed Hastings said the company would introduce advertising on low-end subscription plans in a dramatic u-turn for the firm’s previous blanket opposition.

Hastings said he remained “against the complexity of advertising”, but said the move would offer greater consumer choice.

The announcement runs in stark contrasts to a 2019 shareholder letter when Netflix said staying out of advertising would make it “a more valuable business in the long term.”

“When you read speculation that we are moving into selling advertising, be confident that this is false,” the company said previously.

Russ Mould, investment director at AJ Bell, said: “The cost of creating shows and films continues to go up and Netflix is spending big on marketing to keep its brand in front of consumers, so it needs to think beyond subscription income in terms of money coming through the door.”

Read more about how Netflix is looking to tackle its woes.

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L’Oréal shrugs off inflation and war in Ukraine

L’Oréal has reported market-busting sales growth of 13.5% in the first quarter, as consumers continue to buy luxury cosmetics despite the cost of living crisis.

Sales across the L’Oréal portfolio, which includes Elvive and Revitalift, hit €9.06 billion (£7.5 billion), up from €7.6 billion (£6.3 billion) a year prior.

CEO Nicolas Hieronimus said shopping patterns had been “unaffected by inflation” but said the company was “mindful of volatility and uncertainty”.

Analysts at Bernstein called the results “great” and said: “The impact of Russia and Ukraine is hardly noticeable.”

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Petropavlovsk in crisis as sanctioned Russian bank calls in debts

London-listed Russian gold miner Petropavlosk was in near crisis today when Gazprombank called in $300 million of loans for immediate repayment.

Petropavlosk was once one of the biggest gold miners listed in London, but its future is now far from certain.

It had already put itself up for sale noting that it has “limited cash reserves outside Russia”.

Gazprombank is itself on the UK sanctions list, which complicates any repayment.

Petropavlosk said it is “considering the implications of these notices” to pay back the debts, with its advisers.

The company website says it has been “unlocking Russia’s gold potential since 1994”.

The shares are down 90% this year, falling another 10% today to 1.92p.

Petropavlosk joined AIM in 2002 and was promoted to the London Stock Exchange in 2009.

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Return of bars and restaurants boosts Danone and Heineken

The reopening of bars and restaurants has been good business for drinks makers, with Evian maker Danone and brewer Heineken both reporting soaring sales.

France’s Danone reported its fastest sales growth in seven years in the first quarter, while Heineken’s first quarter revenue grew by more than a third.

Danone said restaurant sales of Evian, advertised by Emma Raducanu, right, were a particular highlight. Revenue in the first quarter hit €6.24 billion (£5.18 billion) delivering a 7.1% boost for the company, which also makes Activia and Volvic.

Both firms warned a bitter aftertaste may be

on its way, however, with Heineken flagging “significant additional inflationary headwinds” and Danone warning about the “highly volatile” economic environment.

Dolf van den Brink, chief executive of Heineken, said the brewer would “take additional actions including pricing to manage these challenges”.

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Credit Suisse warns of first quarter loss

More woes piled on Credit Suisse today as it said it would make a loss in the first quarter after setting aside another £480 million to pay for various legal issues.

The extra CHF600 million takes the total to CHF700 million for the first quarter for what it said were litigation issues stretching back a decade — it was not more specific.

Last month it lost a long-running legal case against the former prime minister of Georgia, however.

Credit Suisse, a Swiss national champion with a strong presence in the City, also has a heavy exposure to Russia of about £1.3 billion.

Today it said: “With regard to our exposure to the impact of Russia’s invasion of Ukraine both on our counterparties and on our credit risks, our results will be adversely affected by an aggregate of approximately CHF200 million of negative revenues and provisions for credit losses [in the first quarter].”

Shares dropped 1.5% in Zurich. Analysts at Vontobel said the update was “a clear disappointment.”

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Pershing Square down on Netflix stake, miners lower

The shockwaves from Netflix’s surprise fall in subscriber numbers were felt in London today amid pressure on star fund manager Bill Ackman’s Pershing Square Holdings.

Ackman added Netflix to the portfolio of FTSE 100-listed Pershing Square in January after describing the US giant’s earlier fall in value as an opportunity too good to miss.

Backing the company’s long-term growth potential, Ackman told investors he was “all-in on streaming” by adding a major Netflix stake to one in Universal Music Group.

He’s now sitting on heavy initial losses after Netflix shares last night slid 25% in after-hours trading, wiping $40 billion off its value following growth below expectations.

Pershing Square shares have enjoyed a strong run since early March but fell 2% or 55p to 2905p. AJ Bell investment director Russ Mould said: “Ackman is likely to shrug off any criticism for buying when the problems were clear to see as he is used to going against the tide.

“One must wonder if he might buy more of the company as he takes a longer-term view of its opportunities.”

Other growth stocks under pressure in London’s top flight today included grocery technology business Ocado but the FTSE 100 index still rose 19.01 points to 7620.29.

Mining stocks featured on the fallers board after Rio Tinto reported a disappointing first quarter as a lack of labour and supply chain problems hit shipments of iron ore.

Rio shares fell 3% or 157p to 5985p as it also flagged the potential growth risks from the largest raw material cost hikes since the oil crisis in 1973. The selling pressure in the sector left Anglo American 62p lower at 4093p.

Banking stocks moved higher after yesterday’s IMF growth forecasts signalled room for aggressive action on tackling inflation. The interest rate outlook lifted Lloyds Banking Group by a penny to 46.3p and NatWest by 3.5p to 223.9p.

The FTSE 250 index fell 24.63 points to 20,937.54 but defence technology business Qinetiq rose 6.6p to 344p after revealing full-year results marginally ahead of forecasts.

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