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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

UK’s FTSE 250 index hits one-year low; crypto firms Gemini, Genesis and DCG sued – business live

Nokia United States Middle East Joe Biden Kyle Rodda Rentokil Rightmove the Middle East
Currency traders at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea.
Currency traders at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea. Photograph: Ahn Young-joon/AP

Closing post

Time to wrap up.. here are today’s main stories:

After a nervous day, the FTSE 100 has closed 88 points lower tonight at 7499 points, down 1.17%.

The FTSE 250 index of medium-sized firms ended at a one-year low, as flagged earlier, down 1.1% at 17,213 points.

Other European markets also had a weak day, with the pan-European Stoxx 600 index down over 1%.

Meanwhile in the bond markets, Italy’s ten-year borrowing costs hit their highest level since the eurozone debt crisis today.

Reuters has the details:

Italy’s 10-year bond yield rose to an 11-year high on Thursday as the country’s debt got caught up in a global sell-off, before paring their increase as investors waited to hear from U.S. Federal Reserve Chair Jerome Powell.

The Italian 10-year yield rose to 5.035%, the highest since November 2012, as bonds across the world fell in European morning trading. It was last down 1 basis point (bps) at 4.982%.

Bloomberg reports that hundreds of London-listed stocks are affected by the incident with the Stock Exchange systems…

Food delivery operator Deliveroo is caught up in the ‘incident’ affecting the London stock market, it appears.

Deliveroo’s shares haven’t traded for the last hour. They were broadly flat at 2.47pm, the last time a deal went through, having reported a a 5% rise in third-quarter gross transactions this morning.

London Stock Exchange investigating incident

The London Stock Exchange say it is currently investigating an incident and that only FTSE 100, FTSE 250 and IOB securities are available for trading.

FTSE 250 hits one-year low

Back in London, stocks have fallen deeper into the red.

The blue-chip FTSE 100 share index is now down 95 points or 1.25% at 7493 points, the lowest in over a week.

Pest control firm Rentokil are down 16% after reporting weaker sales in the US, followed by Rightmove (-12%) after its rival OnTheMarket was bought for £100m

But the smaller FTSE 250 index has hit its lowest level in almost a year.

The index of medium-sized firms, which is more representative of the UK economy than the FTSE 100, is down 0.87% or 150 points at 17,253, the lowest since October 2022.

Michael Hewson, chief market analyst at CMC Markets UK, has all the details:

It’s been another poor day for European markets with the FTSE100 getting hit the hardest of Europe’s markets from a few big fallers caused by the fall-out from an M&A deal, and some disappointing trading updates, while the FTSE250 has slipped to a one year low. The DAX [Germany’s share index] is also under pressure although it is finding some support at the 15,000 area and its October lows.

Sentiment continues to remain fragile and while the geopolitical noise from the Middle East hasn’t been as apparent today, it’s still there and remains a clear and present danger for nervous investors.

Rightmove is amongst the worst performers on the news that CoStar is buying one of its rivals OnTheMarket for £99m, or 110p in cash, raising concern that its now better resourced competitor will eat into its own market share, at a time when the UK housing market is facing its most challenging period since 2008.

Pest control company Rentokil has seen its shares plunge after a disappointing Q3 update, particularly over concern in its US operations. While the acquisition of Terminix saw growth increase, the rise was below the levels of organic growth seen in Europe which was 9.5% and 5.2% in the UK. The company also cut its operating margin in North America to 18.5% to 19%.

US existing home sales hit 13-year low

Back in the US, home sales have dropped to their lowest level since the aftermath of the financial crisis.

Sales of existing homes (ie, excluding new builds) fell by 2% in September to an annual rate of 3.96 million – the lowest in 13 years – according to the National Association of Realtors.

On an annual basis, sales were 15.4% lower than a year ago as the market was hit by surging mortgage rates and tight supply.

NAR chief economist Lawrence Yun says:

“As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales.

“The Federal Reserve simply cannot keep raising interest rates in light of softening inflation and weakening job gains.”

NAR reports that the average selling price rose by 2.8% year-on-year, to $394,300 up from $383,500.

But sales volumes fell over the last year in all four major regions – the Northeast, Midwest, South and West.

Financial markets have been “extremely blasé so far” about the risks of a wider conflict in the Middle East, argues Enrique Diaz-Alvarez, chief risk officer at financial services firm Ebury.

Diaz-Alvarez says:

“I have been surprised by the absence of impact, outside of very specific local assets in the area.

The usual trade that we see in situations like this with enhanced geo-political risk is flight to safe currencies, like the US dollar, Swiss Franc, Japanese Yen, and more importantly flight to US Treasuries. But we are not seeing this at all.

“Markets have been extremely blasé so far. They are pricing in almost no financial or macro-economic impact, even the oil price has barely budged since the attacks.”

“Clearly markets have reacted very calmly, and they are expecting the conflict to remain contained to the area.”

“However, you could interpret the fact that US yields are back to nearly their highest point in the last week, as the markets being relaxed about the impact of the conflict, but you could also take it as a sign of how worried fixed income market are about this tsunami of issuance that’s coming from the US government.”

Today is the anniversary of Black Monday, the famous stock market crash which saw Wall Street’s Dow Jones industrial average plunge by over 22% in a single day.

But, fortunately, we’re not seeing any repeat of those scenes today.

Instead, the New York stock exchange is rather calm. In early trading, the Dow has risen by 3 points, or 0.009%, to 33,668 points.

The broader S&P 500 is up 0.1%.

There is some drama among individual stocks, though.

Netflix shares have surged by 15%, after it reported a jump in subscribers and announced plans to raise prices.

But Tesla have slumped by 7%, after missing Wall Street expectations for revenues and earnings last night:

Back in the UK, the Treasury’s independent economic forecaster has admitted that it underestimated the scale of the inflation shock triggered by the Covid pandemic and Russian invasion of Ukraine.

Blaming the rapid succession of shocks hitting the economy, the Office for Budget Responsibility said in its annual forecasting evaluation report that it “significantly underestimated the strength and persistence of inflation”.

It also found corporate profits had significantly stronger than expected in the past two years, including a 50% leap in finance industry profits fuelled by a boom in the banking industry, rather than the 13% rise it had anticipated.

In its annual forecasting evaluation report, the OBR said it had made some “genuine errors,” but that many of the differences between its predictions and the outcomes for the economy had been difficult to anticipate.

It says:

“To a significant extent these differences between outturns and previous forecasts are inevitable given the inherent difficulty in forecasting the path of the economy and the consequent effect on the public finances, which has been amplified recently by unforecastable shocks that hit the economy.”

US jobless claims fall

Just in: there’s been a drop in Americans filed new claims for unemployment support.

The number of initial jobless claims fell to 198,000 last week, down from 211,000 in the previous seven days, and lower than expected.

That suggests US firms are holding onto workers, despite the pressure from higher interest rates.

NY Attorney General sues crypto firms Gemini, Genesis and DCG

Newsflash: New York Attorney General Letitia James is suing cryptocurrency companies Gemini, Genesis, and Digital Currency Group (DCG), accusing them of defrauding hundreds of thousands of investors.

A lawsuit filed today in New York accuses the three firms of defrauding more than 230,000 investors, including at least 29,000 New Yorkers, of more than $1bn.

The New York Attorney General’s office (OAG) says that Gemini lied to investors about an investment program it ran with Genesis called Gemini Earn.

Gemini is a New York-based digital asset platform that allows investors to buy and sell cryptocurrencies.

OAG expains:

Gemini repeatedly assured investors that investing with Genesis through their Gemini Earn program was a low-risk investment. However, OAG’s investigation found that Gemini’s internal analyses of Genesis showed that the company’s financials were risky.

The lawsuit alleges that Gemini knew Genesis’ loans were undersecured and at one point highly concentrated with one entity, Sam Bankman-Fried’s Alameda, but did not reveal this information to investors.

The lawsuit also charges Genesis, its former CEO Soichiro Moro, its parent company, DCG, and DCG’s CEO Barry Silbert with defrauding investors and the public by trying to conceal more than $1.1bn.

Those losses were borne by investors, the OAG says.

Attorney General James says “middle-class investors” suffered losses, adding:

“Hardworking New Yorkers and investors around the country lost more than a billion dollars because they were fed blatant lies that their money would be safe and grow if they invested it in Gemini Earn.

Instead, Gemini hid the risks of investing with Genesis and Genesis lied to the public about its losses. This fraud is yet another example of bad actors causing harm throughout the under-regulated cryptocurrency industry.

My office will continue our efforts to stop deceptive cryptocurrency companies and push for stronger regulations to protect all investors.”

There are more details of the case here.

Bloomberg: London wins back Europe’s stock market crown from Paris

The rally in oil company shares this year has helped London to recapture its crown as Europe’s largest stock market from Paris, according to Bloomberg.

Bloomberg’s own market capital indexes show that the combined market capitalization of primary listings in London is now $2,888.4bn, ahead of Paris’s $2,887.5bn.

London’s market has been helped by strengthening share prices for oil firms, such as BP (up 15% this year), and Shell (up almost 18%).

Some of France's luxury good makers, though, have been hit by China’s weak recovery, with shares in LVMH down almost 4% this year.

London was overtaken by Paris last November, which prompted concerns that Brexit and the UK’s economic woes were hurting share prices.

But while today’s reversal will be welcome, it doesn’t tell the full story. Bloomberg’s calculations only include actively traded, primary securities on the country’s exchanges, and does not include exchange-traded funds (ETFs) or American Depositary Receipts (ADRs).

Include those, and London was still larger last year.

Full story: Nokia to cut up to 14,000 jobs after profits plunge

Nokia has been hit by sluggish global growth, rising interest rates, and weaker-than-hoped demand for 5G network equipment, reports Victoria Scholar, head of investment at interactive investor.

“Nokia is cutting up to 14,000 jobs as quarterly comparable sales slumped 20% in the third quarter year-on-year to 4.98 billion euros. Profits dropped sharply by 69% versus the same period last year to 133 million euros.

According to the CEO, North America exhibited particular weakness with third quarter sales down 40%. The telecoms company is looking to save costs to the tune of 800 million euros by 2026. The job cuts echo similar moves recently by Ericsson, BT and Vodafone which have also reduce the sizes of their workforces.

Despite the job cuts, Nokia shares are trading sharply lower, down around 3.5% reflecting the sense of nervousness among investors towards the company and its weak sales performance. The move extends this year’s decline, landing Nokia down nearly 30% since the beginning of January and down by more than a third over a one-year period.

It has been hit hard by the macroeconomic headwinds of sluggish global growth and rising interest rates. Nokia has also been dealing with weaker infrastructure spending among mobile operators and sluggish demand for 5G equipment. The business cut its full-year outlook in July. Its rival Ericsson also issued a profit warning earlier in the month underscoring the challenging backdrop for the telecoms industry.

In the early days of the mobile phone market, Nokia dominated but it has since sold its handset business to Microsoft with companies like Apple and Samsung currently leading in the global smartphone market. Nokia now concentrates on telecoms equipment instead.”

The pound is losing ground against the US dollar, in an edgy trading session.

Sterling has lost a third of a cent to $1.211, more than two cents lower than a week ago.

Fiona Cincotta, senior financial markets analyst at City Index, says:

The pound is struggling after sticky inflation data yesterday, and softer wage growth earlier in the week fueled concerns of a recession.

High interest rates and sticky inflation often slow consumption which accounts for a large part of the UK economy.

The weaker pound is providing some support to the FTSE 100, which is now only down 0.7% or 55 points at 7533 (having lost more than 1% earlier).

Oil drops as US eases Venezuela sanctions

There’s drama in the oil markets again today, where prices are down almost 2%.

Brent crude has dropped back below $90 per barrel, away from yesterday’s two-week high of $93.

The tumble comes after the US government announced last night it is easing sanctions on Venezuela’s oil sector.

The U.S. Treasury Department has issued a new licence authorizing Venezuela – a member of Opec – to produce and export oil to its chosen markets for the next six months without limitation.

The prospect of more crude hitting the markets has pushed down the oil price, explains Joshua Mahony of Scope Markets.

For energy markets, the prospect of conflict in the Middle East has been overshadowed by the confirmation that sanctions on Venezuelan energy exports have been lifted, with Biden hoping to negate the inflationary efforts of OPEC+ by flooding the world in cheap oil.

However, while Venezuela holds the largest proven oil reserves of any country, years of underinvestment means that the upside may be limited to roughly 200,000 barrels per day for the time being.

The deal between the Washington and Caracas should also allow banned opponents of President Nicolás Maduro to compete in next year’s election.

UK consumers cut back on spending last week, according to the latest real-time economic indicators.

UK spending on debit and credit cards decreasing in all categories last week, the Office for National Statistics reports.

Total debit card expenditure through Revolut fell by 6% in the week to 8 October 2023, the ONS says.

And “aggregate” spending on credit and debit cards (measured by the Bank of England) decreased by 8%, including a 10% drop in staple goods and a 7% drop in spending on social activities.

Overall footfall at UK retailers dropped by 1%, to 99% of the level in the previous week, as fewer people visited the high street.

Unexpected interest rate hike in Indonesia

Over in Jakarta, the central bank of Indonesia has unexpectedly raised interest rates, to support its currency in the face of rising geopolitical risks.

Bank Indonesia increased its seven-day reverse repurchase rate by 25 basis points to a fresh four-year high of 6%, surprising economists who had expected no change today.

The move follows rising pressure on the rupiah, which had fallen to its lowest in over three years as nervous investors sought out safe-haven assets.

BI governor Perry Warjiyo said.

“This increase is to strengthen stabilisation measures for the rupiah against the impact of increasing global uncertainty, and as a pre-emptive and forward-looking step to mitigate its impact on inflation through imported goods.”

Warjiyo described the global market condition as “fast changing and very unpredictable”.

ING analyst Nicholas Mapa says Bank Indonesia was forced to raise interest rate by the “intense pressure” on the rupiah.

Mapa explains:

The central bank believes that the global economy is set to face increasing headwinds with uncertainty on the uptick, and indicated that a “stronger policy response” was needed given the heightened uncertainty in the financial markets. It now predicts that global growth should settle around 2.9% year-on-year in 2023 and 2.8% next year with the US Federal Reserve now set to keep rates higher for longer. Given the backdrop, BI sees capital outflow persisting for the rest of the year.

With the Rupiah down 1.77% for the month, BI had little choice but to whip out additional policy support for the currency.

A wary mood is spreading in the markets today, as the Middle East crisis looks increasingly intractable, while a high-interest rate environment looks set to stay for longer.

That’s the view of Susannah Streeter, head of money and markets at Hargreaves Lansdown, who explains:

President Biden has left Israel, having extracted a promise of aid for Gaza, but there are little signs of an easing in high tensions.

Other diplomatic efforts will be closely watched, with the UK’s Prime Minister visiting Israel, and the foreign secretary meeting leaders in neighbouring countries, but a resolution still looks very difficult to achieve and concerns remain about the conflict potentially widening.

Oil prices have dipped back after shooting higher yesterday but Brent is still trading above $90 dollars a barrel as supply concerns continue to swirl amid the Middle East turmoil.

Consumer goods maker Nestlé has reported a drop in sales volumes, after hiking prices.

Nestlé says its real internal growth (RIG) - a measure of sales volumes - fell 0.6% in the first nine months of this year.

Prices have risen by 8.4% this year, leading to organic growth of 7.8%.

Prices for Nestlé’s Water and Petcare producs are both up 10.4% this year.

Nestlé has also said it has “temporarily shut down” of one of its production plants in Israel as a “precaution”.

Nestlé chief executive Mark Schneider said on an earnings call with journalists:

“Our focus is on keeping our colleagues and employees safe. I have no comment on the development of the business,”

“We’ve taken necessary precautions.”

Shares in Nokia have dropped by 1.4% in early trading, after it announced a drop in sales in the last quarter and a cost-cutting plan.

This has helped to drag the Finland’s benchmark share index, the OMX Helsinki 25, down by 0.9% to a three-year low this morning.

France’s CAC 40 share index has hit a seven-month low in early trading, down 0.9%, Reuters reports, as a risk-off mood sweeps European markets.

FTSE 100 drops, dragged down by Rentokil and Rightmove

Britain’s stock market is open…. and shares are falling.

The FTSE 100 index of blue-chip shares has shed 77 points, or 1%, to hit 7512 points – the lowest in over a week.

Every sector is in the red, led by Industrial stocks, Technology and Financials.

Pest control firm Rentokil are down 13%, after warning of softer demand from consumers in North America.

Rentokil says revenues at its US products wholesale distribution business fell by 2.5% in the quarter, reflecting “lower demand for chemical products for use in pest control and in turf and ornamental end markets”.

Online property portal Rightmove have also fallen by 13%, after its smaller rival OnTheMarket agreed to be bought by CoStar Group, a $33bn New York-listed property giant (announcement here).

US 10-year Treasury yields nearing 5%

The rise in US government bond yields is causing anxiety in the markets, reports Kyle Rodda of Capital.com.

The yield (or interest rate) on 10-year Treasuries is nearing 5%, for the first time in 16 years. This indicates investors are concerned that inflation will remain higher for longer than hoped, prompting central banks to keep monetary policy tight.

Rodda says this increase (to 4.96% right now) is weighing on share prices, and financial conditions.

While the crisis in the Middle East is a source of significant uncertainty, a problem running at the markets like a freight train is the continued upward pressure on bond yields.

The causes of the move remain multi-faceted: resilient US growth, profound US deficits and subsequently onerous Treasury issuance, supply shocks stemming from the energy markets, and the Fed’s quantitative tightening. There’s debate about which factor reigns supreme as the primary driver of bond market dynamics.

Nevertheless, the inescapable reality US Treasuries are climbing towards 5% right across the curve, which is weighing heavily on equity market valuations and future global financial conditions.

Updated

Nokia to cut up to 14,000 jobs as sales fall

The company logo for Nokia Corporation on the floor of the New York Stock Exchange (NYSE) in New York City.
Photograph: Brendan McDermid/Reuters

There’s bad news from the telecoms sector this morning – Nokia is planning to cut up to 14,000 jobs

The Finnish telecoms equipment maker is cutting its workforce in a new cost-cutting drive, following a drop in sales.

The drive will cut its workforce from 86,000 today, to between 72,000 and 77,000, as Nokia aims to cut its costs by up to €1.2bn over three years.

The news comes as Nokia also announced that sales fell by 20% in the last quarter, which it blames on “macroeconomic uncertainty and higher interest rates” which are hitting spending by mobile operators.

Nokia’s President and CEO Pekka Lundmark said:

“We continue to believe in the mid to long term attractiveness of our markets. Cloud Computing and AI revolutions will not materialize without significant investments in networks that have vastly improved capabilities.

However, while the timing of the market recovery is uncertain, we are not standing still but taking decisive action on three levels: strategic, operational and cost.

First, we are accelerating our strategy execution by giving business groups more operational autonomy. Second, we are streamlining our operating model by embedding sales teams into the business groups and third, we are resetting our cost-base to protect profitability. I believe these actions will make us stronger and deliver significant value for our shareholders.”

Updated

European stock markets are set for further losses today.

The futures market shows the UK’s FTSE 100 on track to fall 0.35% when trading begins at 8am.

Germany’s DAX futures are down almost 0.6%, as is the pan-European Eurostoxx 50.

Jim Reid, strategist at Deutsche Bank, says:

The market selloff gathered pace over the last 24 hours, as rising geopolitical risks and a fresh surge in long-term borrowing costs added to the downbeat mood.

The main drivers were investor fears about an escalation in the Middle East, which drove gold prices (+1.34%) to their highest since the end of July and meant the rebound in oil prices continued, with Brent Crude up a further +1.78% to $91.50/bbl.

But the negative sentiment was clear throughout global markets, and the 10yr Treasury yield (+8.1bps) closed at a new post-GFC [Global Financial crisis] high of 4.91%, and this morning is up a further +4.7bps to 4.96%, which leaves it within touching distance of 5% for the first time since July 2007

Updated

Introduction: Global markets anxious about Middle East and inflation

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The financial markets remain gripped by anxiety over rising tensions in the Middle East, and concerns that the Israel-Hamas war could drive up oil prices, fuelling inflation.

Markets across the Asia-Pacific region are in the red today, with Japan’s Nikkei losing 1.85%, and China’s CSI 300 down 1.9%. That follows a sell-off yesterday in Europe, and then losses on Wall Street.

Gold hit its highest level since 1 August yesterday, touching $1,962 per ounce, as investors favoured traditional safe-haven assets.

Oil jumped too, with Brent crude hitting $93 per barrel on Wednesday, before slipping back to $91 this morning.

Investors have also been driving down the price of government bonds.

This pushed the yield, or interest rate, on 10-year US government bonds to their highest since 2007, early in the financial crisis.

Global investors are focused on the Middle East, where US president Joe Biden yesterday met with Israeli PM Benjamin Netanyahu – who has pledged to allow aid into Gaza via Egypt.

But Biden’s meetings with leaders from the Arab world were cancelled, following the explosion at Gaza’s al-Ahli Arab hospital

Risky assets face the double risks of higher real yields and increasing geopolitical tensions, says Mohit Kumar, chief economist for Europe at investment bank Jefferies.

He told clients:

Geopolitical risks moved up a notch [yesterday] as Biden’s peace visit was snubbed by a number of Arab countries. Peace efforts are ongoing with the UK’s PM expected to make a visit to the region.

Rating agency Standard & Poor’s fears that the crisis could create a new inflationary shock, and hurt global growth, if it escalates.

In a new report they warned:

“Even in the absence of a material energy supply shock, the evident sensitivity in energy prices to recent events indicates that some inflationary pressures could persist through the northern hemisphere winter.”

The agenda

  • 8.30am BST: Bank of Indonesia sets interest rates

  • 1.30pm BST: US weekly jobless claims

  • 5pm BST: Federal Reserve chair Jerome Powell speaks at the Economic Club of New York

Updated

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