‘Another week, another regional bank failure’; BP in new profits fury; EU shock inflation rise
Huge profits by two of the UK’s biggest companies ensured a lively post-holiday session for traders today.
HSBC published its results early this morning, with quarterly profit rising to $12.9 billion thanks mostly to the impact of the reversal of a write-down on its French business as the likelihood of a sale falling through increased, plus a $1.5 billion gain on the emergency £1 purchase of Silicon Valley Bank UK.
BP, meanwhile, saw profits come in ahead of expecations, but they were still below last year’s record highs.
FTSE 100 Live Tuesday
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BP shares fall despite Q1 profits beat
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HSBC profits haul beats expectations
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Superdry plans £15m shares sale
Business confidence recovering but ‘dark clouds’ on horizon – survey
15:50 , Daniel O’Boyle
Business confidence is being restored after plummeting at the end of last year, but “dark clouds” are on the horizon as costs remain high, according to a new report.
Sentiment improved among small business owners and sole traders over the first three months of the year, a welcome step for the wider industry, the Federation of Small Businesses (FBS) found in its survey.
Sky aims to shake up home insurance market with new service
15:08 , Daniel O’Boyle
Sky is aiming to shake up the home insurance market with a new “smart home protection” service.
Sky Protect will let customers insure their homes and keep an eye on them, helping to spot potential problems.
Customers will be offered home insurance and smart home tech that work together in one app, in a move that Sky said will “take the pain out of home insurance”.
ChatGPT warning knocks $1 billion off market caps of education giants Pearson and Chegg
15:05 , Daniel O’Boyle
Shares in US-listed education firm Chegg and London-listed textbook publisher Pearson tumbled today – each seeing roughly $1 billion (£803 million) knocked off its market cap – after the former warned that students were using ChatGPT instead of its services.
Chegg – which offers services including homework help, digital and physical textbook rentals, textbooks and online tutoring – published a trading update after markets in the US closed yesterday. It said that while first-quarter results were mostly unaffected by the rise of generative AI, that has changed in the last two months.
Majority of NHS unions vote to accept Government pay offer
14:34 , Daniel O’Boyle
The majority of NHS unions have voted to accept the Government’s pay offer, it has been announced.
In a statement, the NHS staff council confirmed that a majority of its 14 members had backed the deal – despite opposition from the Royal College of Nursing (RCN) and Unite.
The move could pave the way for an end to strikes in the NHS, which began in December last year.
Oxford Street rebound continues as Footasylum plans new flagship store
14:19 , Daniel O’Boyle
The revival of Oxford Street continues as Footasylum today announced the opening of a new flagship store on London’s busiest shopping street, hot on the heels of HMV’s return.
The trainers and streetwear retailer will open a new 20,000 sq ft, two-storey shop at 73-89 Oxford Street, close to Tottenham Court Roadstation.
The flagship store will open in the second half of this year.
“When rates are high, smaller lending organisations may fail”
14:13 , Daniel O’Boyle
George Lagarias, Chief Economist at Mazars, says the collapse of First Republic yesterday noted that the failures of smaller banks are a natural consequence of a high-interest-rate environment.
“Another week, another regional bank failure. First Republic, a 37-year-old bank from San Francisco became the third US regional bank and fourth in a row to fail (including Credit Suisse),” Lagarias said. “Apart from the actual day of the failure, curiously a Monday as opposed to the classic Friday, there isn’t much to write home about.
“First Republic had been on life support since the week after SVB’s failure, with slim chances of recovery. The Federal Deposit Insurance Company (FDIC) stepping in was simply the signing of its official death certificate.
“When rates are high, smaller lending organisations may fail. It’s part of the game. SVB and Signature have gone under and First Republic followed. And while it is the really problematic entities that failed, the pressure continues throughout the US banking system, with peripheral banks still heavily using the Fed’s discount window.”
HSBC profits surge as CEO lays out fresh vision for Silicon Valley Bank UK
14:04 , Daniel O’Boyle
HSBC boss Noel Quinn laid out a fresh vision for the development of SVB UK after it bought the beleaguered bank for £1 in March.
Quinn said he planned to unveil a new name for the entity following the demise of its US parent, and give it the opportunity to grow into a global business.
There would be no staff cuts at the bank, its Finsbury Square offices would remain open and employees would not be asked to move to HSBC’s headquarters in Canary Wharf.
Wall Street shares set to dip
13:32 , Daniel O’Boyle
US shares are set to open slightly lower today, after authorities sold failing bank First Republic to JPMorgan after markets closed yesterday.
The Dow Jones is set to fall by 0.2% to 34073, according to futures markets. The S&P 500 is also set to decline by 0.2%, to 4177, while the Nasdaq is expected to dip by 0.1% to 13294.75.
BP reports blockbuster profit for the first quarter but slows from 2022’s record-breaking pace
12:27 , Daniel O’Boyle
BP reported more blockbuster profits today, but was not on course to break last year’s earnings record and slowed the pace at which it is returning cash to investors.
The UK oil giant’s key earnings measure for the first quarter hit was £4 billion, down by almost £1 billion from the same part of a record-breaking 2022, but more than City experts had forecast.
It left the company braced for further calls for deeper windfall taxes after Russia’s invasion of Ukraine left high energy prices as a hot-button political issue. BP slowed the pace at which it is returning cash to investors. That knocked its stock, which fell 28p to 507p, a loss of around 5% and the biggest fall on the FTSE 100.
Muller recalls six Cadbury desserts over listeria concerns
12:26 , Daniel O’Boyle
Six Cadbury desserts have been recalled over concerns they could be contaminated with listeria.
The affected products are Daim Chocolate Dessert 75g (use by May 18), Crunchie Chocolate Dessert 75g (use by May 17), Flake Chocolate Dessert 75g (use by May 17), Dairy Milk Buttons Chocolate Dessert 75g (use by May 18), Dairy Milk Chunks Chocolate Dessert 75g (use by May 18) and the Cadbury Heroes Chocolate Dessert (6x75g) (use by May 18).
UK manufacturing declines again in April
10:53 , Daniel O’Boyle
The UK manufacturing sector contracted again in April, as output, new orders, employment and stocks of purchases all declined.
Manufacturing production fell for the second month in a row, according to the S&P Global / CIPS UK Manufacturing PMI, with the index dipping slightly to 47.8. Any score below 50 represents a decline.
“The UK manufacturing sector remained in the doldrums at the start of the second quarter,” S&P global market intelligence director Rob Dobson said. “Output and new orders contracted, as manufacturers felt the impacts of client uncertainty, destocking and tightening cost controls.
“There was no escape from the subdued mood of the market, with both domestic and export customers remaining reticent to commit to new contracts.”
Euro inflation surprisingly increases
10:39 , Daniel O’Boyle
Eurozone inflation surprisingly rose in April, to 7.0%.
Energy drove much of the acceleration in price rises, after a slowdown in March as much of the impact of last year’s price rises fell out of the calculation. Core inflation, which excludes food and energy, dipped slightly to 5.6%.
headline inflation was lowest in Luxembourg at 2.7% and highest in Latvia at 15%.
“Looking ahead, inflation developments in the eurozone will be determined by two rather opposing forces: on the one hand, negative base effects on energy and food prices as well as dropping selling price expectations in industry argue for a further drop in headline inflation,” Carsten Brzeski, global head of macro at ING, said. “On the other hand, still high selling price expectations in services as well as wage increases are likely to fuel underlying inflationary pressures.
“Over the last year, inflation in the eurozone, which started as a supply-side issue, has become a demand-side issue. This is a clear invitation for the ECB to continue hiking interest rates.”
FTSE 100 subdued, builders and travel stocks rally
10:26 , Graeme Evans
Blue-chip shares struggled to maintain April’s momentum today as the focus turns to a big week for interest rate decisions.
The FTSE 100 index rose more than 3% last month but dropped into negative territory in the first session back after the May Day bank holiday, easing 7.42 points to 7863.15.
Whereas banking turmoil dominated trading in March, April was one of the least volatile since the pandemic as markets awaited the next moves by central banks.
The opportunity to hear from the Federal Reserve comes tomorrow evening, when policymakers are likely to add to pressure on a slowing US economy by hiking borrowing costs another quarter percentage point in the fight against inflation.
A further hike in June can’t be ruled out, but for now traders are hopeful that a target funds rate of 5%-5.25% ends up being the peak of the cycle.
The European Central Bank follows on Thursday, with a half point increase on the table after today’s flash inflation reading edged up to 7% in April. The Bank of England’s next meeting concludes on 11 May, when economists are predicting another quarter point increase to 4.5%.
The prospect of more rate rises put pressure on the demand outlook for commodity stocks as Rio Tinto shares slipped 2% or 96.5p to 4952.5p and Endeavour Mining weakened 32p to 2026p. Among rate sensitive stocks, British Land fell 5.9p to 394.3p.
Banks enjoyed a stronger session following HSBC’s better-than-expected results and relief over yesterday’s regulator-brokered deal that will see JP Morgan Chase buy the assets of stricken lender First Republic Bank.
Barclays rose 0.7p to 160.6p while Lloyds Banking Group improved 0.3p to 48.5p ahead of tomorrow’s first quarter update.
A stronger session for UK-focused stocks after today’s robust Nationwide house price data helped to keep the FTSE 250 index into positive territory with a gain of 63.33 points to 19,488.47.
Housebuilders Vistry and Redrow both rose 3%, while there was a brighter performance by travel-focused stocks after TUI rallied 18p to 525.4p and cruise ship operator Carnival cheered 5% or 31.6p to 686p.
Ferrexpo boss exits as firm seeks resilience amid Ukraine war
09:22 , Daniel O’Boyle
Jim North is to exit as CEO of miner and commodity trader Ferrexpo after nine years at the company as the business seeks to change strategy to adapt to the war in Ukraine, where it mines iron.
North joined Ferrexpo as chief operating officer in 2014 before taking charge of the business in 2020. He made $2.1 million (£1.7 million) last year.
He will leave on 30 June, with chairman Lucio Genovese taking over CEO duties as executive chair.
Genovese said North had been appointed to drive growth, which was no longer the company’s focus after the invasion: “Jim was appointed to the role of CEO at a time when our focus was on accelerating growth, leading Ferrexpo’s decarbonisation plans and furthering cultural development within the business.
“However, given the situation in Ukraine with the ongoing war and the uncertain outlook, we have had to slow our growth programmes and the CEO’s focus has necessarily shifted to that of business continuity and operational resilience.”
North said: “It has been a privilege to lead Ferrexpo and to be part of the management team for the past nine years.”
Collapsed London pizza chain Mamma Dough bought out saving 47 jobs
08:39 , Daniel O’Boyle
Administrators have sold collapsed South London pizza chain Mamma Dough, saving 47 jobs, but two of its restaurants will close.
Mamma Dough entered administration just before Christmas, blaming “soaring cost inflation and energy bills, combined with the impact of the cost-of-living crisis and train strikes on consumer spend and footfall”.
Administrators Begbies Traynor have now sold five Mamma Dough restaurants — in Brixton, Peckham, Ladywell, Sydenham and South Norwood — to London Dough Co: a newly created firm owned by the directors of Balham’s Exhibit Bar, keeping 47 of the chain’s staff in their jobs.
However, sites in Honor Oak and Whitechapel are not included, and appear set to close.
HSBC and housebuilding stocks rally, BP shares lower
08:31 , Graeme Evans
HSBC shares have risen 4%, up 21.9p to 595.7p, after its first quarter profits figure of $12.9 billion came in significantly ahead of City hopes. Investors also cheered the lender’s confirmation of a share buyback programme of up to $2 billion and reintroduction of a quarterly dividend through the payment of 10 US cents a share.
Housebuilders featured on the risers board following the reports yesterday that the government is planning to extend support for first time buyers. Persimmon shares rose 43.5p to 1357.5p and Taylor Wimpey by 3p to 131.2p.
BP shares struggled despite the oil giant reporting better-than-expected results for the first quarter. The heavyweight blue-chip fell 3% or 18.7p to 515.7p during a generally weak session for commodity-focused stocks.
The FTSE 100 index was 23.90 points higher at 7894.47 and the FTSE 250 index improved 78.02 points to 19,503.16. Vistry and Redrow shares both rose 3%, while travel company TUI rallied 16.6p to 524p and cruise ship operator Carnival improved 5% or 30.4p to 684.8p.
Greene King back in black but CEO warns to “expect a tough backdrop to continue”
08:28 , Simon Hunt
Greene King today said it was back in the black as one of the UK’s biggest pub chains announced a surge in sales.
The firm posted profits of just shy of £100 million for 2022, while revenues climbed £834 million to £2.2 billion amid a reopening of venues following the end of coronavirus restrictions.
However the pub chain cautioned: “We remain mindful of the significant cost pressures impacting both consumers and our business and we expect the tough environment to persist through the year.”
Wagamama owner defies activist investors with strong growth
08:25 , Daniel O’Boyle
Shares in Wagamama owner The Restaurant Group soared as it defied activist investors with strong growth so far this year, setting the stage for it to accelerate the rollout of Wagamama restaurants.
Sales at Wagamama were up 9%, while it also reported growth in its pubs, leisure and concessions divisions. As a result, the group now plans to open eight new Wagamama restaurants this year instead of five.
The growth will help TRG’s case in its fight with activist investors Oasis, which last week said it would aim to vote down CEO Andy Hornby’s “disproportionate” pay packet as it called for radical change.
Shares in The Restaurant Group are up 9.8% to 44.7p.
FTSE 100 higher after calm April
08:18 , Graeme Evans
The new month for European stock markets has opened on the front foot, with the FTSE 100 Index extending April’s robust performance by moving 19.16 points higher at 7889.73.
Strategists at Deutsche Bank pointed out this morning that April looked to have been the least volatile month since the pandemic, with just five of the 38 non-currency assets in its research sample seeing a move of more than 3% in either direction. This follows the heightened volatility seen during the banking industry turmoil in March.
Deutsche Bank said one factor keeping returns subdued were growing expectations that the Federal Reserve would deliver another hike at their May meeting.
Even after the OPEC+ group decided to cut output, Brent crude oil gave up its initial gains to keep up its record of falling in every month of 2023 so far. The benchmark traded below $80 a barrel this morning.
Overhaul planned for US deposit insurance
08:00 , Graeme Evans
JPMorgan Chase shares rose 2% on the back of its First Republic rescue, but the rest of the Wall Street banking sector came under pressure yesterday on plans for a review of America’s deposit insurance system.
In response to the failures of Silicon Valley Bank and Signature Bank, the US Federal Deposit Insurance Corporation released a report addressing concerns over the impact of uninsured depositors in specific pockets of the banking system.
It also warned that the speed with which information is disseminated and the speed with which depositors can withdraw funds in response to information may contribute to faster, and more costly, bank runs.
While the overwhelming majority of deposit accounts remain below the deposit insurance limit, it said the growth in uninsured deposits has increased the exposure of the banking system to bank runs. At its peak in 2021, uninsured deposits accounted for nearly 47% of domestic deposits, higher than at any time since 1949.
It favours targeted coverage where business accounts are treated separately and have a higher coverage cap than individuals. This would require congressional approval.
Struggling Superdry seeks fresh cash with share sale
07:51 , Daniel O’Boyle
Struggling fashion brand Superdry is to sell £15 million worth of shares as it deals with weaker consumer spending.
Last month, the retailer said it was considering a fundraise in a bid to shore up cash to help it “emerge from the current turbulence”. It blamed cost-of-living pressures for weaker demand.
The business has been seeking extra funding to help it put a transformation plan in place. In March, it sold its IP rights in Asia for $50 million.
BP profits beat forecasts but ease back from record-breaking levels year-on-year
07:37 , Michael Hunter
BP’s key profit measure for the first quarter fell year-on-year, as oil and gas prices eased back from elevated highs, but the FTSE 100 oil major made £4 billion in the period, more than City experts had forecast.
Underlying replacement cost profit came in at $5 billion, down from $6.2 billion a year ago but up from $4.8 billion the previous quarter.
Consensus forecasts has pointed to earnings of $4.3 billion, or £3.4 billion.
The annual drop leaves profit heading away from the controversial record peaks of 2022, in line with oil and gas prices easing back as the stresses in energy markets after Russia’s invasion of Ukraine ease. Oil prices peaked around $130 a barrel, are now around $80. But the overall extent of the earnings will leave the industry in the spotlight during the cost-of-living crisis.
Last year the government slapped a windfall tax on the sector. Today’s earnings are likely to stoke calls for more action.
BP called the earnings “resilient”.
Focus on EU inflation, FTSE 100 set for further progress
07:26 , Graeme Evans
US markets held firm on Monday after a regulator-backed deal saw JP Morgan Chase swoop for the bulk of troubled lender First Republic.
The intervention involving America’s 14th largest bank helped shares in the Wall Street giant to close 2% higher, while the Dow Jones Industrial Average and S&P 500 index finished near to their opening marks.
The focus now turns to tomorrow’s US Federal Reserve committee meeting, when policymakers are expected to announce another 0.25% rise in interest rates.
Today’s EU inflation number is also expected to be a key factor in determining whether the European Central Bank goes for a 0.25% or 0.5% rate rise later this week.
The flash CPI figure for April, which is due for release at 10am today, is predicted to edge up to 7% from 6.9% the previous month.
The resilient performance on Wall Street means the FTSE 100 index is forecast by CMC Markets to open 14 points higher at 7884. In April, London’s top flight rose by 3.4% and is 7% stronger in the year-to-date.
Noel Quinn lays out fresh vision for SVB UK as HSBC profits soar
07:21 , Simon Hunt
HSBC boss Noel Quinn laid out a fresh vision for the development of SVB UK following its acquisition of the bank in March.
Quinn said he planned to change the name of the entity but keep its head offices on Finsbury Square and give it the opportunity to grow into a global business.
In a media call he told the Standard: “It’s a unit we purchased and we want to keep it with a separate identity and separate purpose.
“They’re known for their expertise in supporting the technology and life sciences sectors…we want to give them the opportunity of building that on a global basis.”
It comes as the Canary Wharf based bank reported a surge in pre-tax profits by more than four billion dollars (£3.2 billion) in the first three months of 2023, while revenue soared by 64% to 20.2 billion dollars (£16.2 billion) compared to the same period 12 months ago, with the firm crediting the rise to higher net interest income due to rate rises across the globe.
Friday’s top stories
07:02 , Daniel O’Boyle
Good morning. Here is are a selection of Friday’s biggest news stories:
