The sell-off on the stock markets has gathered pace, and oil prices have also turned negative.
UK’s FTSE 100 down 0.76% at 6,660
Germany’s Dax down 0.19% at 13,883
France’s CAC down 0.44% at 5,740
Italy’s FTSE MiB down 0.76% at 23,002
Sterling has edged higher against the euro and the dollar, and hit the highest level in almost a year against the euro, of 86.65p. The pound has gained more than 2% against the single currency in February.
Britain’s successful vaccination campaign has raised expectations of a faster economic recovery, assuming that coronavirus restrictions can be eased soon. The rollout of Covid jabs has been noticeably slower in EU countries, due to supply shortages.
Brent crude is flat at $64.33 a barrel while US futures are trading 0.1% lower at $61.09 a barrel. Earlier, Brent hit a fresh 13-month high of over $65.
On the stock markets, the FTSE 100 is down 0.18% at 6,698, and other European markets have also edged lower (France’s CAC down 0.1% and Italy’s FTSE MiB down 0.2%) while Germany’s Dax is 0.2% ahead.
In London, the artificial hips and knees maker Smith & Nephew remains the biggest loser on the FTSE 100, down 5% after it reported a slump in 2020 profits. The company has been hit by the pandemic because hospitals around the world have delayed elective surgeries, and it is uncertain when demand for its implants and prosthetics will recover.
Banks are also dragging the bluechip index lower after Barclays’ results. Barclays has lost 2.1% while Lloyds Banking Group has shed 2.9%.
Chris Beauchamp, chief market analyst at online trading platform IG, explains:
The decline was not as bad as feared, and with dividends also returning the outlook for the shares has improved. However, as with so many recent earnings updates, there hasn’t been much in the way of an upgraded forecast for the rest of the year, and as a result the shares have dropped back in early trading.
Turning to the markets overall, he says:
The quiet atmosphere in European markets has continued, with a lack of data to drive trade prompting a mixed performance thus far across stock markets. The generally quieter tone to the week, both on the corporate and earnings front, have generally left investors without much in the way of a catalyst, with US and continental European markets struggling to hold their ground, while in London the FTSE 100’s strong start to the week has not been matched by any notable follow through in the rest of the week.
Currency markets are similarly quiet, although higher bond yields have provided some foundation for the dollar in its move higher. As a result we are seeing some weakness in both the euro and sterling versus the dollar, a situation that has helped to keep European index losses in check.
Oil prices are still pushing higher and Brent crude, the global benchmark, is trading at 13-month highs, up 0.23% to $64.49 a barrel, after venturing above $65 earlier. The unusual winter storms in Texas, the biggest energy-producing state in the US, have forced some refineries and oil wells to shut temporarily, raising concerns over supply.
Why is Texas suffering power blackouts during the winter freeze? How did oil- and gas-rich Texas – the biggest producer of energy in the US – get there, asks Lauren Aratani, one of our US reporters.
Texas is unique among the 48 contiguous US states in that it relies on its own power grid. The other 47 states are all part of the two power grids that service the eastern and western halves of the country.
The Electric Reliability Council of Texas, known as Ercot, manages the state’s power grid. Ercot is technically a non-profit corporation, and while it functions independently from the state’s government, the corporation is overseen by a state agency called the Public Utility Commission of Texas. Members of the commission are appointed by the state’s governor…
Parts of Texas are not serviced by Ercot. El Paso at the western tip of the state gets power from the Western Interconnection, which is why the city has been saved from the most brutal effects of the power outages.
Here is our full story on Moonpig, which recorded its strongest week of sales in its history in the run-up to Valentine’s Day as it benefited from online spending during the latest lockdown.
The company, which floated on the stock market on 2 February, said it was on track to double its annual revenues as Covid restrictions drive greater demand. Revenues last year were £173m, my colleague Jillian Ambrose reports.
Consumers have flocked to the site to buy cards, and many are also choosing gifts, which has raised the average amount spent on each Moonpig order. Moonpig sells flowers, bubbly, wine and beer gift sets.
The company was founded two decades ago by Nick Jenkins, a former commodities trader and Dragon’s Den contestant. Moonpig’s name stems from his schoolboy nickname.
A man looks at his iPhone which displays the Moonpig logo. Photograph: M4OS Photos/Alamy
Oil prices continue to climb, to 13-month highs, after disruption caused by the winter storm in southern US states such as Texas. Some refineries and oil wells have been forced to temporarily shut down due to the rare cold snap, which has killed at least 21 people and left millions of homes without power.
Brent crude, the global benchmark, is trading up 0.87%, or 56 cents, at $64.90 a barrel. It hit $65.62 earlier, the highest level since 20 January, 2020. US crdue futures gained 0.75%, or 46 cents, to $61.6 a barrel.
Texas is the state that produces the most energy in the US, and currently supplies about 1m barrels per day less due to the shutdowns, according to analysts at the energy consultancy Wood Mackenzie. It could be weeks before output returns to normal.
Concerns over supply have been exacerbated by a bigger-than-expected drawdown on US crude oil inventories. US oil stocks fell by 5.8m barrels to 468m barrels in the week to 12 February, according to the American Petroleum Institute.
A car travels down a road in McKinney, Texas, U.S., on Tuesday, Feb. 16, 2021. Blackouts left almost 5 million customers without electricity, while refineries and oil wells were shut during unprecedented freezing weather. Photograph: Getty Images
The FTSE 100 index in London is back in positive territory, up 0.09%, but European markets are very muted and Asia clocked up losses, amid inflation fears.
UK inflation rose to 0.7% in January lifted by rising food prices, official data showed yesterday, and several economists predicted that it would rise to (or even over) the Bank of England’s 2% target this year. Rising shipping prices and Brexit costs are likely to hit consumers in the pocket.
Rising inflation should not be a real headache for the Bank, but will influence the central bank’s policy – it will start to think about how and when to unwind some of the emergency stimulus it has been providing. And negative interest rates look to be off the agenda.
“The results are far from perfect, but in opening the reporting season Barclays has set the bar high for its rivals,” says Richard Hunter, head of markets at the trading platform interactive investor.
The unavoidable spectre of the pandemic dominates the figures. Barclays has continued in its efforts to oil the economy and for the full year provided support to businesses of £27bn, waived fees and interest to the tune of £100m and allowed 680,000 payment holidays.
The dividend part of the distribution of 1 pence is little more than the bank dipping its toe back in the payout waters and may be of some disappointment to income-seekers who were looking back to the pre-pandemic dividend yield of 9.6% as a guide. Even so, the announced share buyback of £700m should lend some support to the share price and is indicative of management confidence in prospects.
In all, the performance is dogged, set against an extraordinary backdrop. The shares have risen 39% since the announcement of a vaccine in early November, which prompted hopes of a much-needed general economic recovery. However, much of the damage was already done and the shares remain down 13% over the last year, as compared to a decline of 9% for the wider FTSE100.
There is light at the end of the tunnel given the bank’s financial strength and diversity, though, and Barclays is currently the preferred play in the sector, with the market consensus of the shares as a buy reflective of recovery prospects.
Here’s some instant reaction to the Barclays results. Sudeepto Mukherjee, of the consultancy Publicis Sapient, says:
As expected, Barclays strong results are largely driven by their corporate and investment banking division up 22%, benefitting from high market volatility as well as strong investment banking activity. Their strong position in equities have helped them improve 43% in marketshare over the last 3 years which is impressive.
However, there’s continued scrutiny on the performance of both their UK retail division as well as their Consumer, Cards and Payments division – the latter down 22% driven by lower credit card balances, margin compression and reduced payments activity. While mortgage lending and pricing is up driven by government incentives and lower interest rates, the latest lockdowns and reduced retail activity in both sides of the Atlantic have created continued headwinds for the retail businesses.
Overall, it’s their diversified business model that ensured a resilient operating performance, and a profitable four quarters during what was a turbulent year for many. Barclays will have to continue to focus more on cost reductions via digitisation and get their retail businesses to be competitive as consumer spending picks up in 2021 to maintain their strong performance against rivals.
Here is our full story on the Barclays results.
Barclays has paid its chief executive Jes Staley £4m and handed larger bonuses to its bankers despite a 30% drop in annual profits during the Covid crisis, reports our banking correspondent Kalyeena Makortoff.
Pre-tax profits fell to £3.1bn for 2020 from £4.4bn a year earlier, with earnings hit by a jump in bad debt provisions. The bank put aside a total of £4.8bn to cover a potential surge in loan defaults linked to the coronavirus outbreak, slightly lower than the £5bn that analysts had expected.
However, the bank highlighted the strong performance of its investment bank, which performed better than expected thanks to a jump in trading due to market volatility last year.
A branch of Barclays, in central London. Photograph: Dominic Lipinski/PA
The FTSE has now turned negative, trading 9 points, or 0.14%, lower at 6,701 while other European stock markets have fared slightly better.
Germany’s Dax up 0.18% at 13,933
France’s CAC up 0.06% at 5,769
Italy’s FTSE MiB up 0.05% at 23,191
In London, the artificial hips and knees maker Smith & Nephew is the biggest faller on the FTSE 100, down 7.4%, after reporting a 7.1% drop in fourth-quarter sales and an 11% fall in 2020 sales to $4.56bn.
The company has been hit by the pandemic, as coronavirus restrictions led to fewer hip and knee replacements last year. Annual profit before tax dropped to $246m from $743m in 2019.
Barclays shares are also down, by just under 3%.
Stock markets have opened slightly higher, as expected. The FTSE 100 index in London is flat at 6,712 while Germany’s Dax and Italy’s FTSE MiB are up 0.2%.
However, in a stark reminder of the damage wrought by the Covid-19 pandemic, another report shows that almost 2 million people in Britain have not worked for more than six months during the pandemic, amid growing risk to workers from long-term economic damage caused by the crisis.
The Resolution Foundation said up to 1.9 million people in January had either been out of a job or on full furlough for more than six months, revealing the lasting impact on employment caused by Covid and multiple lockdowns, writes our economics correspondent Richard Partington.
Business confidence in the UK has jumped to its highest level in five years as firms look ahead to Covid-19 lockdown restrictions easing and a bounce in sales during 2021, according to a leading barometer of corporate activity.
Companies are also preparing to increase exports and employment in the second half of the year in a clear signal that they expect a strengthening economic outlook after a successful vaccination programme, the Guardian’s economics writer Phillip Inman reports.
The business confidence index, compiled by the ICAEW accountancy body from a survey of 1,000 firms, showed confidence for the year ahead rising from -19 in the fourth quarter of 2020 to +10 in the first quarter of 2021.
Rishi Sunak’s March budget will be a fresh Covid rescue package that will defer plans for significant tax increases as the chancellor throws his weight behind a cautious approach to reopening the economy, government sources have confirmed.
The UK chancellor will present his budget on 3 March.
Boris Johnson signalled yesterday that the government would take a slow path towards reopening hospitality, which could mean pubs and restaurants are not able to serve customers without restrictions on groups until June or July, my colleagues Jessica Elgot, Heather Stewart and Rob Davies report. Even then, venues are likely to need to continue to have social distancing measures in place.
The budget will now be dominated by measures to protect jobs and shore up support for shuttered sectors. With the vaccination programme proceeding rapidly, Sunak had hoped to be able to focus on rebuilding the economy for the long term and helping businesses to expand and take on more workers.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Barclays has resumed dividend payments as its 2020 profit dropped by 30% to £3.1bn. This was a better than expected result, as a strong performance by its investment banking division offset provisions against bad loans made because of the Covid-19 pandemic. The bank will pay a dividend of 1p a share for 2020 and embark on a share buyback of up to £700m.
Barclays also released its annual report, which shows that its chief executive Jes Staley was paid £4m last year, down from £5.9m the year before. This includes salary, bonuses and pension payments. Tushar Morzaria, the finance director, received a total package of £2.8m, down from £3.9m in 2019.
Our banking correspondent Kalyeena Makortoff notes that Staley donated £392,000 of his own income last year to the bank’s coronavirus fund, but did not waive his bonus like rivals at NatWest and Lloyds.
The online greeting cards and gifts retailer Moonpig, which recently made its stock market debut, had its strongest week-ever for sales in the run up to Valentines Day and is on track to double its annual revenues. It has benefited from a shift to online spending in the wake of the pandemic, with card shops forced to close during lockdowns.
Global stock markets have had a good few weeks as optimism spread about mass vaccination campaigns against Covid-19, and the proposed $1.9 trillion stimulus scheme in the US. On Monday, the UK hit its target – vaccinating 15m people by 15 February (most of them still need a second shot, though).
David Madden, market analyst at CMC Markets UK, says:
The update triggered chatter that Britain could ease up on some of its restrictions in the next few weeks, so that contributed to the wider view the global economy will recover from the pandemic in the months ahead.
The minutes from last month’s Fed meeting were published last night and it showed the central bank is keen to have an accommodative policy to help assist the economy. It wasn’t exactly new information but the message was that monetary policy is unlikely to change anytime soon as the economy still has a long way to go before the Fed reaches its targets.
Commodities have been rallying too. Oil hit a 13 month high, platinum surged to the highest level since September 2014, and copper rose to an eight-year high.
Bitcoin scaled to a new record high of over $52,000 last night, but has since fallen back to $51,558.
However in Asia, most stock markets are in the red, with Japan’s Nikkei down 0.19% and Hong Kong’s Hang Seng tumbling 1.3%. Trading resumed in China after the Lunar New Year celebrations, where the Shanghai composite index rose 0.55%. We are expecting European stock markets to open cautiously higher, ahead of a raft of US data out later today.
The Agenda
10am GMT: European Central Bank financial statements
12:30pm GMT: ECB Monetary policy meeting accounts
1:30pm GMT: US Building permits, housing starts for January
1:30pm GMT: US Initial jobless claims for week to 13 February (forecast: 765,000)
1:30pm GMT: US Philadelphia Fed Manufacturing Index for February
3pm GMT: Eurozone consumer confidence flash for February (forecast: -15)
