Yahoo Finance FTSE 100 Live 2 August: 'The damage is done': Intel shares plummet amid big US stock sell-off, Vodafone-Three merger hit by delay
US recession fears have intensified during a poor session for global stock markets.
The Nikkei 225 closed 5.8% lower after Intel’s disappointing update fuelled tech sector selling.
On a brighter note, IAG shares rose after unveiling its first dividend since the pandemic.
FTSE 100 Live Friday
US recession fears increase
Nikkei 225 down 5.8%
BA owner resumes dividend
US stock sell-off continues as key recession indicator triggered
17:01
The huge stock sell-off on Wall Street has shown no signs of slowing down.
The S&P 500 is now down as much as 2%, while the tech-heavy Nasdaq Composite has fallen further, down 2.2%.
It comes as worse-than-expected US jobs data triggered a key recession indicator known as the Sahm rule, in which the three-month average of the national unemployment rate rises by at least 0.5 percentage points relative to its low during the past year.
Here’s economist Claudia Rae Sahm offering an explanation of what the rule means on Bloomberg TV:
US hiring slowed sharply in July and the unemployment rate rose to the highest level in nearly 3 years.
The data triggers a recession indicator dubbed the "Sahm rule" https://t.co/JX23LBYWNF pic.twitter.com/a02V9hWr3R— Bloomberg TV (@BloombergTV) August 2, 2024
FTSE 100 finishes the week lower, reversing earlier gains
16:34
Earlier this week, the FTSE 100 was within touching distance of hitting an all-time high. But a steep decline in US stocks this afternoon has helped send British blue-chips lower, with the London index finishing the day down 1.4% and the week down 1.5% at 8,164 points.
Shares in Next have been a big winner this week, with the clothing retailer’s stock rising as much as 6.5% on last week after yet another upgrade to its profits and sales forecasts.
But a big loser has been Diageo, with the Guinness and Smirnoff maker seeing a downturn in sales in Africa and Latin America. Its shares have sunk more than 7% this week.
Victoria Scholar, Head of Investment at interactive investor said Diageo’s results “signal more pain for the spirits giant after it issued a profit warning in November last year.
“Cost-of-living pressures have prompted consumers in certain markets like Latin America to switch to cheaper, unbranded substitutes to Diageo’s labelled, often more premium offering. Even in North America, where the economic backdrop has been relatively resilient, Diageo said it has struggled with a ‘cautious consumer environment.’”
Amazon suffers one of its biggest-ever single day falls
16:10 , Simon Hunt
Amazon shares have suffered one of their biggest-ever single-day falls, with the stock down around 11% an hour after markets opened on Wall Street.
That translates to an eye-watering $200 billion drop in the value of the company. The stock has lost around a fifth of its market cap in the past month.
Amazon’s quarterly revenue, covering the three months to 30 June 2024, missed forecasts for the first time since 2022’s third quarter numbers. Margins in the Amazon Web Services arm narrowed by 2 percentage points to 36% versus the previous quarter amid an increase in infrastructure spending. The company also guided for operating income for the third quarter to be in the range of $11.5 billion to $15 billion, below analysts’ expectations for $15.1 billion.
Dan Coatsworth, investment analyst at AJ Bell, said: “Amazon’s share price slump comes in the middle of a broader risk-off shift in the market with investors worrying about when companies will make positive financial returns from the significant amount of money being spent on AI, and whether the US is facing a hard landing as economic indicators flash red.
“Investors have begun to scrutinise big tech companies a lot more than they’ve done over the past few years. After lapping up significant share price returns as companies like Amazon enjoyed strong profit growth and were at the centre of a new technology revolution powered by artificial intelligence, the wheels are coming off the AI bandwagon.
“There are growing fears that companies seeking to deploy AI might take their foot off the accelerator and that could reduce demand for cloud computing servers or advanced semiconductors used to process information. Given that Amazon and its peers have been spending big to increase capacity to support extra supply, they don’t want to be caught out by a slump in demand.
Weak US jobs data could suggest sharper rate cuts ahead
15:20
Ronald Temple, Chief Market Strategist at Lazard, said: “The question is no longer whether the Fed will cut in September—it’s whether the Fed should cut more aggressively than by 25 basis points in September.
“Today’s job report suggests that the easing of tightness in US labor markets is threatening to turn into weakness.
“The Fed was late to recognize the inflation problem. Let’s hope it doesn’t make the same mistake in the opposite direction.”
Intel shares plummet as US stocks take a battering
14:35
Shares in Intel plunged as much as 27% in the opening minutes of trade on Wall Street amid a widespread tech selloff.
The stock, which has lost more than half its value since the start of the year, is now on course to hit its lowest value in at least a decade.
Intel yesterday announced plans to slash its workforce by a massive 15,000 amid plans to ‘refocus’ its strategy and cut non-essential projects.
Other chipmakers also appear to have taken a knock as a result. Nvidia is down around 4%, while the UK’s Arm has fallen 7%.
Social media firms are also faring exceptionally badly today, with Snap shares falling by more than 20% on the back of its weak earnings outlook. Pinterest is also down 5%, while Facebook owner Meta is down two-third of one percent.
The S&P 500 fell 70.1 points, or 1.29%, at the open to 5,376.63, while the Nasdaq dropped 413.7 points, or 2.41%, to 16,780.446 at the opening bell.
“While the fault does not lie exclusively with the silicon chip maker’s capital allocation policies, shareholders in Intel could be forgiven for wondering whether the firm could have put the $63 billion it has spent on share buybacks in the past decade to better use,” said AJ Bell investment director Russ Mould.
“If Intel still had those $63 billion the picture might look different and its ability to keep on investing to defend its competitive position would surely be enhanced, but the damage is done and CEO Gelsinger is having to budget accordingly.”
Weak employment data suggests big US selloff
14:10 , Simon Hunt
US stocks are set for a hammering when markets open shortly after weaker than expected jobs figures.
The Labor Department's report showed nonfarm payrolls rose by 114,000 jobs in July, where economists polled by Reuters forecast an increase of 175,000 -- while the unemployment rate increased to 4.3%.
Neil Birrell, Chief Investment Officer at Premier Miton Investors, said: “US employment data couldn’t have been released at a more sensitive time; markets are wobbling, concerns over Fed policy abound and corporate earnings are in the spotlight. The weak data will cause more angst, and concerns over the health of the economy will increase.
“We have pivoted from looking at a robust economy to a weakening one and while markets will reflect this, they will also price in the fact that the Fed still has plenty of scope to act.”
Virgin Money has already spent £10m on Nationwide takeover fees
13:04 , Simon Hunt
Virgin Money has already spent £10 million on fees related to its takeover by Nationwide but the bill is expected to be “significantly higher” during the rest of the year.
Britain’s sixth biggest bank said the £2.9 billion acquisition was still on course to be completed in the last quarter of the year.
An offer document published in April estimated the total bill for City advisory fees to be close to £80 million with Nationwide spending £41.3 million and Virgin Money £38 million. City firms standing to collect the most include Goldman Sachs, JP Morgan, UBS, as well as legal and PR advisers.
A third quarter trading update today showed outstanding customer loans 0.7% lower that last year at £72.0 billion “reflecting lower mortgage balances and broadly stable lending balances...” Mortgages were 2.7% lower at £56.0 billion, “reflecting disciplined approach to trading to protect overall spreads.”
Vodafone-Three merger hit by delay
11:39 , Simon Hunt
The UK’s competition regulator has extended the deadline for its investigation into Vodafone’s blockbuster merger deal with rival Three.
The Competition and Markets Authority (CMA) probe is now set to conclude eight weeks later than originally scheduled, with a new deadline of 7 December.
In a statement the CMA said: “The Inquiry Group now considers that it will not be possible to complete the investigation and to publish its final report within the revised reference period. The Inquiry Group aims to complete the inquiry as soon as possible.”
The CMA set out four separate reasons for why it sought what in law is known as a “special reasons” deadline extension. Those include the major spectrum sharing tie-up unveiled between Vodafone and Virgin Media O2 last month, which it said “will require the Inquiry Group to assess the implications of the agreement, including gathering and analysing further evidence from third parties.”
IAG shares lead FTSE 100 amid tech volatility
09:55 , Graeme Evans
Dividend-paying IAG today provided one of the London market’s few bright spots in a session dominated by US recession and tech sector worries.
The British Airways owner surged 6% or 9.7p to 169.7p after results showed second quarter profits in line with the previous year’s record 1.25 billion euros (£1.06 billion).
It also set aside 147 million euros (£125 million) for next month’s dividend payment of three euro cents.
This will be IAG’s first distribution since the pandemic in a move chief executive Luis Gallego said showed confidence “in our performance and our transformation”.
Defensive focused stocks were also in favour in London as Smith & Nephew continued its progress following yesterday’s results by adding another 16p to 1215p and consumer healthcare firm Haleon lifted 4.5p to 362.5p.
The FTSE 100 index fell 22.70 points to 8260.66, which represented a decent showing given the turbulence in other global markets.
Japan’s stock market was the worst hit as the Nikkei 225 closed 5.8% lower, its worst performance since 2020 due to yen strength and the selling of tech stocks after Wall Street’s Nasdaq Composite closed 2.3% lower.
US traders are braced for another tough session later today after Intel shares slumped 19% in dealings following Thursday’s closing bell. The chipmaker said it would axe 15% of its workforce and suspend its dividend on the back of a disappointing second quarter.
Recession jitters also swept through Wall Street yesterday after weekly initial jobless claims rose to their highest in nearly a year at 249,000. The focus is now on today's non-farm payrolls figures, which are forecast to slow to 175,000 from 206,000 in June.
Heavily sold stocks in the FTSE 350 included Baillie Gifford Japan Trust, which lost 6% or 42p to 710p, and Alphabet backer Pershing Square Holdings with a fall of 158p to 3638p.
FTSE 350 trusts down 5% amid tech worries
09:19 , Graeme Evans
The 5.8% plunge for the Nikkei 225 amid wider US tech sector jitters today dealt a blow to investors in the FTSE 350 index.
JP Morgan Japanese Investment Trust lost 5% or 27p to 523p, Baillie Gifford Japan Trust fell by 36p to 716p and Allianz Technology Trust reversed by 17p to 356.5p.
Alphabet backer Pershing Square Holdings topped the FTSE 100 fallers board with a decline of 5% or 194p to 3602p.
The Nikkei’s worst performance in four years was driven by selling of tech stocks following last night’s poor Intel guidance, although it also reflected the impact of a stronger yen.
The Tokyo benchmark closed at 35,909, having topped 42,000 as recently as last month.
Focus on US jobs figures amid Wall Street sell-off
08:52 , Graeme Evans
Wall Street’s recession jitters will be tested later by non-farm payrolls figures, which are forecast to show a moderation in growth to 175,000 from 206,000 in June. The unemployment rate is expected to stay at 4.1%.
US markets reversed yesterday after weekly initial jobless claims rose to their highest in nearly a year at 249,000, compared with 236,000 expected.
In addition , the ISM manufacturing PMI reading fell to 46.8 in July versus the 48.8 expected.
Deutsche Bank said: “The past 24 hours have seen an increasingly precarious backdrop for risk markets, with a risk-off mood on the back of another batch of weak US data yesterday followed by mostly downbeat tech earnings overnight.”
FTSE 100 lower amid US recession fears, Scottish Mortgage down 3%
08:32 , Graeme Evans
The FTSE 100 index is down 0.6% or 53.49 points to 8229.87, reflecting expectations of another poor session on Wall Street later.
Recession fears pushed US markets sharply lower yesterday, while last night’s Intel results have added to the pressure on risk sentiment.
Big fallers in the FTSE 100 index included tech investors Scottish Mortgage Investment Trust and Pershing Square, down 3% or 29.5p to 822.1p and 140.1p to 3656p respectively.
Defensive focused stocks were in favour as Smith & Nephew continued its progress following yesterday’s results by adding another 16p to 1215p.
IAG led the FTSE 100 risers board, lifting 4% or 67p to 166.7p after announcing it will restore dividend payments from next month.
Capita shares sink despite swing to profitability
08:15 , Simon Hunt
Shares in Capita have fallen as much as 7.5% in the opening minutes of trade despite the outsourcing business swinging back to profitability.
Capita posted a pre-tax profit of £60 million in the year to end June, turning around a loss of £68 million in the previous year, as the company’s efficiency programme showed signs of paying off.
But revenues slipped 16% to £1.2 billion.
Adolfo Hernandez, Chief Executive Officer, said: ""We are implementing changes that will make us more competitive and drive growth, by becoming more efficient and spending less, digitising our offerings and leveraging technology partnerships.
“This, together with more precision in delivery and evolving our culture, is enabling us to accelerate execution.
“We are on track to deliver on our cost reduction programme, having taken action to deliver £100m out of the £160m of annualised cost reductions we expect to achieve by June 2025.
IAG dividend return boosts shares in BA owner
08:07 , Graeme Evans
IAG shares today stood 3% or 5p higher at 165p after the British Airways, Iberia and Aer Lingus owner revealed its first dividend since the pandemic.
The three euro cents interim award, which will be paid from 9 September, was declared last night alongside half-year results and the disclosure that IAG had abandoned its Air Europa takeover.
The figures showed a second quarter operating profit in line with the previous year’s record of 1.25 billion euros (£1.06 billion).
Chief executive Luis Gallego said the dividend, which amounts to 147 million euros (£125 million), reflected confidence “in the business, our performance and our transformation”.
He reported strong demand in IAG’s core markets of North Atlantic, Latin America and intra-Europe, although there has been some softness in long-haul pricing in Dublin and in Asia.
IAG withdrew a previously announced dividend in April 2020, with the last full-year payout amounting to 17 euro cents.
The dividend return was delayed by the airline industry’s disjointed recovery from the pandemic, as well as the terms of IAG’s loan agreements.
It completes the post-pandemic restoration of FTSE 100 dividends after Rolls-Royce yesterday said it would bring back payments with 2024 results.
Tech stocks under pressure as Intel slides 19%
07:30 , Graeme Evans
Apple shares held firm after results last night, unlike two other tech heavyweights following heavy selling of Intel and Amazon.
Strong demand for iPads and Macbooks meant the $3 trillion company posted an earnings and revenue beat for the June quarter.
However, Amazon shares fell by 7% as disappointing third quarter guidance outweighed a robust performance in the previous three months.
And chipmaker Intel plunged by 19% as it said it would axe 15% of its workforce and suspend its dividend on the back of a poor second quarter.
It reported margin headwinds from the accelerated ramp of its AI PC product and said that second half trends were more challenging than expected.
The updates led to heavy selling of tech-based shares in Tokyo, where the Nikkei 225 fell by 5.8% in its worst session since 2020.
FTSE 100 seen lower after Asia markets slide
07:12 , Graeme Evans
Asia markets have fallen sharply and the FTSE 100 index is forecast to open lower after a weak session for US markets last night.
The Wall Street reaction to disappointing economic data left the S&P 500 index down by 1.4% and the Dow Jones Industrial Average 1.2% lower.
Apple shares were 2% cheaper, although they rose in after-hours dealings following the release of forecast-beating quarterly sales figures.
In Asia, the Hang Seng index was 2.4% lower and the Nikkei 225 tumbled by more than 5% amid higher interest rate worries in Japan.
The FTSE 100 index closed 1% lower last night and is forecast to lose another 35 points to 8248 at this morning’s opening bell.
Recap: Yesterday's top headlines
06:59 , Simon Hunt
Good morning from the Standard City desk.
At last! The Bank of England has cut interest rates for the first time since 2020, but signalled people should not expect borrowing costs to start dropping rapidly in the months ahead.
The central bank reduced the base rate from 5.25% to 5% after a split vote among its policymakers -- with a cut narrowly winning out by five votes to four.
It means pressure will be eased for some homeowners who will see their mortgage costs come down, but it could prompt banks to start reducing savings rates.
Bank governor Andrew Bailey said: “Inflationary pressures have eased enough that we’ve been able to cut interest rates today.
“But we need to make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much.”
That has prompted some to fear the Bank’s schedule of rate cuts is going to move too slowly.
~
Here’s a summary of our top headlines from yesterday:
House price growth edges up to 2.1% in July after election campaign lull in the market says Nationwide
Barclays first half profits drop 8% to £4.2 billion as high street lender is squeezed by mortgage price war in UK
BAE ups guidance after £15bn in new orders takes order book backlog to a record £74.1 billion amid global geopolitical turbulence
Rolls-Royce restores dividend as underlying profits double to £1.04 billion
Next upgrades profit guidance yet again to £980 million after early summer trading exceeded expectations
Hugo boss becomes latest high end fashion brand to suffer as profits plummet in first half of the year
Shell second-quarter adjusted earnings of $6.29 billion are down from $7.73 billion
