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Monday, December 5, 2022

FTSE 100 Live 25 April: China lockdown fears hit shares, Brent crude price falls sharply

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Activist turns up the heat at Just Eat Takeaway

The heat under Just Eat Takeaway increased today after a major shareholder called for an AGM revolt over the re-election of finance boss Brent Wissink.

Cat Rock, which owns 6.9% of the food delivery company, also wants fellow shareholders to vote against the supervisory board at next week’s annual meeting.

The pressure from the activist investor follows a 75% slide for Just Eat shares in the two years since its acquisition of US-based Grubhub. As well as reporting a 1% drop in orders in the first quarter, the company said last week it was considering the partial or full sale of Grubhub.

Cat Rock founder and managing partner Alex Captain said management had made a mistake buying Grubhub but that this alone could not fully explain the loss of value.

Read the full story.

1650897294

FTSE firmly lower as China fears, Anglo disappointment drags

The FTSE 100 is 130 points, or 1.7%, lower in afternoon trade as fears of a slowdown in China and woes for Anglo American drag on the index.

Concerns about possible lockdowns in China are denting stocks with big exposure to the country, including commodity giants like Glencore and Rio Tinto, and luxury brand Burberry. All three are down more than 4%.

Oil is back at $100 a barrel as traders bet that China will need less of it if curbs are introduced to slow the spread of Covid-19. That’s pushed BP down 5.2% and Shell 4.4% lower.

But Anglo American is the worst performer of the day though, off almost 6% after warning that authorities in Chile were minded not to extend a permit for a copper project in the country.

Elsewhere, the FTSE 250 is down over 300 points and Wall Street stocks are in the red, though not by as much as those in London.

1650894928

US markets open narrowly in the red

Two major US stockmarkets fell at the opening bell but the drop seems to have been less severe than some had expected.

The S&P 500 index fell 0.74% to 4,240.27just after trading began, while the tech-heavy Nasdaq slipped 0.39% to 166.2.

A strong earnings beat from Coca-Cola earlier in the day may have helped mitigate losses, in a week where the major tech giants Apple, Microsoft, Amazon and Alphabet (owner of Google) will report results.

The signposted moves by the US Federal Reserve to raise interest rates is seen as negative for tech stocks.

Although rising bond yields can be bad for equities generally, as they make fixed income more appealing for investors, and can increase the costs of borrowing.

A total of 180 S&P 500 companies are reporting earnings updates this week, which is likely to have a major bearing on the performance of the index this week.

1650893138

Bitcoin wobbles as US dollar lures investors

The rising attraction of the US dollar is weighing on cryptocurrencies, with Bitcoin extending this month’s losses in trading today.

The largest cryptocurrency slid as much as 3.3% to $38,223, the lowest since March 15, and down more than 20% from last month’s high. The second-biggest coin, Ether, slumped as much as 4.8% to $2,799, a level not seen since March 18.

Commentators say the move is being driven by the US Federal Reserve, which has guided that it will raise interest rates in the coming months.

Rising rates are usually positive for currencies, meaning investors may reallocate away from the likes of Bitcoin to the greenback instead.

So far in 2022, Bitcoin has traded between $35,000 to $45,00, but given that it often trades in-line with the tech-heavy Nasdaq, whcih is viewed as being under pressure from rising rates, and is negatively correlated with the dollar, some expect the cryptocurrency to go below this range.

“Like the negative correlation of Bitcoin to the dollar, the negative correlation of Bitcoin to real rates has only emerged in the last couple ofyears,” analysts at Bitcoin firm Nydig wrote in a note.

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Fears for US markets after Netflix miss helps erase $1trn from Nasdaq

Index futures in the US are pointing to further losses on the nation’s stockmarkets, suggesting the Nasdaq’s $1 trillion drop in value since Netflix’s disappointing results last week could worsen.

Fears about monetary tightening by the Federal Reserve and worries about China’s renewed battle with Covid-19 and creating market jitters, alongside the prospect of rising bond yields and their impact on sectors such as tech.

S&P 500 index futures were 0.7% lower, while Nasdaq 100 contracts retreated 0.6% by 5:51 am in New York, paring earlier declines of as much as 1.2%.

The Nasdaq 100 Index has erased about $1 trillion in market value, caused in significant part by Netflix’s 25% share price drop on the back of its Q1 earnings, which revealed it had lost 200,000 subscribers – the first time it had lost subscribers in more than a decade.

On Friday, Federal Reserve Chair Jerome Powell’s endorsement of aggressive actions to curb inflation sent traders racing to price in half-percentage-point interest-rate increases at the bank’s next four meetings, anticipating a stark break with its decades-long practice of tightening monetary policy at a gradual pace.

“Our view is that the market may have now priced in too great an extent of Fed tightening this year,” said UBS Wealth Management chief investment officer Mark Haefele.

“A month ago, the Fed’s dot plot pointed to a year-end federal funds rate of 1.9%, the market now expects that level to be reached in July and fed funds to end the year at 2.83%.”

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Coca-Cola posts earnings beat as fizz returns to US hospitality sector

A resurgence in the US hospitality sector helped Coca-Cola beat earnings expectations.

The soft drinks giant posted revenues of $10.5 billion, surpassing the $9.84 billion average estimate of analyst predictions compiled by Bloomberg.

The 18% rise in revenues – almost double the expected rate – was driven in large part by a huge uptick in the restaurant industry, as well as price rises, which have been instigated to battle raw ingredient price increases.

The impressive results extend a string of in-line-or-better earnings for Coca-Cola going back to 2019.

Analysts said the company was navigating supply constraints andcost pressures better than some of its peers, according to Bloomberg.

Coca-Cola said suspending its business in Russia due to the conflict in Ukraine will have a 1% to 2% impact on revenue and 4-cent effect on earnings per share.

1650887156

Elon Musk could reach takeover deal with Twitter ‘as soon as today’ as shares rise

Elon Musk’s audacious bid to buy Twitter is moving closer, with reports that a deal could be thrashed out as soon as Monday.

The two sides met to discuss a deal for the first time over the weekend and Blomberg reported that Twitter was “in the final stretch of negotiations” about a sale to the Tesla CEO.

Shares in the company rose 5% to 51.40 in pre-market trading, nearing the level of Musk’s offer.

Twitter hasn’t responded to a request for comment and Musk hasn’t tweeted on his Twitter pursuit in recent days.

Tesla boss Musk met with executives from the social media service on Sunday, the Wall Street Journal reported, claiming a deal could be done as soon as this week.

It was the first meeting of the two sides since Musk stunned the world with his surprise attempt to buy Twitter a week and a half ago.

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Dollar gains put pound at lowest rate against the greenback for 18 months

A rapid strengthening in the US dollar has pushed the pound to a one-and-a-half year low against the greenback.

The pound now sits at $1.2711 – the lowest rate since September 2020 – as the US currency strengthens amid projected rises in interest rates by the Federal Reserve.

Broadly speaking, higher interest rates often lead to currencies strengthening as long as there are no major fears about a country’s economy relative to its peers.

Neil Wilson, chief market analyst at Markets.com, said the dollar was “steamrolling everything in its way”.

He said that while there were some worries about the UK economy, such as the soft retail sales figures last week, the currency move was mainly a response to the predicted direction of monetary policy in the US.

“Markets are pricing for an aggressive rate hike cycle with multiple 50 basis point hikes to 1.9% by August and 2.7% by the end of the year, a level at which it would be actively restraining potential,” he said.

Wilson said the pound’s weakness versus the dollar would be good for exporters but bad for consumers and “is liable to make the inflation situation even worse”.

The euro hit a two-year low versus the dollar at $1.07.

1650884723

Commodity stocks take brunt of FTSE fall as global markets drop

Commodity stocks on the FTSE 100 are dragging the index down as shares across Europe slip after a sea of red across Asian bourses.

Anglo American and Glencore are down more than 6%, while Rio Tinto and BP have both dropped more than 5%, taking the FTSE 100 to 7,360.12 – a fall of 2.15%.

Pressure is being put on commodity stocks as fears rise about a slowdown in China, which is fighting to control the latest outbreak of Covid-19, which has seen the country lockdown its largest city, Shanghai.

This scale of UK stockmarket drop is being mirrored across Europe, with France’s CAC 30 index falling 2.4% to 6,424.68, in spite of French president Emmanuel Macron secruing re-election, and Germany’s DAX 40 down nearly 1.8% to 13,888.35.

The falls come after a torrid session in Asian markets, where the Shenzen Composite index in China slipped more than 6% to 10,379.28, and the Shanghai-based market fell 5.1% to 2,928.51.

After a sell-off on Wall Street on Friday, investors will be hoping for a strong showing from the slew of tech giants reporting this week, including Microsoft, Apple, Amazon and Google’s parent company, Alphabet. A total of 180 S&P 500 companies are reporting earnings updates this week.

1650883631

Cost of living fears rocketed before energy price rise

Nearly nine in 10 adults saw a rise in their cost of living in March – a rapid spike compared to just 62% in November last year, according to new data from the Office for National Statistics.

The ONS said 87% of those surveyed reported an increase in their cost of living in March, with nearly a quarter (23%) stating it was ‘very difficult’ or ‘difficult’ to pay ther usual household bills – up from just 17% in November.

Perhaps worryingly, among the people who pay energy bills, roughly four in 10 (43%) reported that it was ‘very difficult’ or ‘somewhat difficult’ to afford their enrgy bills.

This will be a concern for households given that the energy price cap rose by £693 from 1 April under Ofgem rules, and is scheduled to rise again in October.

For borrowers, nearly a third (30%) rpeorted it was ‘very difficult’ or ‘somewhat difficult’ to afford hosuing costs, and 3% claimed to be behind on rent or mortgage payments.

Furthermore, 43% of adults said they would not be able to save money in the next 12 months, the highest percentage since March 2020.

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