European markets plunge as fear over new restrictions takes hold
Third consecutive day of losses
Merkel pushing for month-long leisure and hospitality lockdown
Macron announcing new measures tonight
Wall Street shares fall hard at open
Jeremy Warner: Climate change should be centre in trade policy
Time to wrap up. Here are some of the day's top stories:
US stocks worst since June
The S&P 500 benchmark index fell 3.5pc on Wednesday, to 3,271.03, in its biggest drop since June as coronavirus cases and hospitalisations surge, particularly in the Midwest. It is down almost 6pc so far this week.
Energy shares sank with oil prices, and technology stocks were also among the worst performers. The VIX Index, a measure of expected U.S. equity volatility, climbed to the highest level since June.
Commodites fall over concerns of waning demand
Oil, gold and other commodities fell sharply on Wednesday on concern rising infections will hit demand.
West Texas Intermediate crude sank 5.3pc to $37.46 a barrel.
Gold weakened 1.6pc to $1,877.99 an ounce.
Nationwide lockdown in France
French president Macron has imposed a new nationwide lockdown to start on Friday, less than a week after France expanded a curfew to about two-thirds of the population.
According to Bloomberg economists, the new rules could strip 0.8pc to 2pc off fourth quarter GDP if they stay in place for a month. This is added to a 1.1pc contraction already forecast for Q4.
Markets tumble in another day of Covid turmoil
Global markets continue to be battered by Covid, with almost £40bn wiped off the FTSE 100’s value after a third day of sell-offs on the London market.
My colleague Louis Ashworth reports:
The US dollar rallied as fear once again gripped traders, prompting a widespread rout that hit mining and financial firms particularly hard.The FTSE 100 closed 2.5pc lower , shedding almost 150 points to 5,582, while France’s Cac 40 fell 3.4pc and Germany’s Dax sank 4.2pc - the worst declines for Paris and Frankfurt since late September.The Stoxx 600 index fell 3pc to its lowest level since May, while Brent crude oil fell below $40 a barrel on fears of a further hit to demand.
Tech drags on US stocks
Giant tech companies, which have a large influence on the direction of market indexes, are falling sharply.
Google’s parent, Alphabet, slid 4.8pc by 15:00 in New York, while Apple and Microsoft dropped 3.2pc and 3.8pc respectively.
On Tuesday Microsoft fell short of analysts’ highest projections, according to Bloomberg, despite an upbeat profit and sales report.
Read more here: Microsoft boosted by pandemic as cloud and video game sales soar
Banks likely to play follow the leader on account fees
Experts say the UK's 'free' banking model means "those at the back of the plane are subsidising those in business class".
My colleague Lucy Burton reports:
HSBC said this week that it is looking at charging for basic banking services in some markets as it lost money on a "large number" of customers.Bank profits are already being squeezed by record low interest rates that could be cut into negative territory, meaning banks would be charged for hoarding cash instead of lending it out.Simon Westcott, a financial services expert at PwC, predicts that if one bank starts charging "the industry would seek to move quite quickly together". Failure to do so risked a sudden "big rush of customers, which is a bigger drag on performance [in a negative rate environment]".
Asda buyers hit back at debt downgrade
Moody's has lowered its rating on EG Group, the Issa brothers' petrol station empire, sparking an angry response from the billionaires.
My colleague Laura Onita reports:
The Issa brothers “strongly disagree” with the decision of a leading credit ratings agency to downgrade the debts of their petrol station business. Moody’s said the downgrade was partly because EG Group had been slow to improve its financial reporting and governance processes to keep up with its acquisition spree over the past two years. The Blackburn-based entrepreneurs, who are buying Asda in a £6.7bn deal with private equity firm TDR, have more than 6,000 petrol stations in 10 countries.
Read more: Asda buyers hit back at debt downgrade
S&P 500 looks set for biggest drop in seven weeks
The US' S&P 500 benchmark looks set for its biggest drop in seven weeks as coronavirus hospitalisations surge. It was down 2.9pc, or 98.29 points, to 3,292.39 roughly two hours before closing time. This is the index’s biggest drop since early September, taking it to the lowest levels since September 24.
Energy shares sank with oil prices, and technology stocks were also among the worst performers. The VIX Index, a measure of expected U.S. equity volatility, climbed to the highest level since June.
Notable movements were American multinational conglomerate General Electric, which gained after reporting a surprise profit and Boeing, which slumped to a one-month low as it announced plans for more job cuts.
Read more about the aerospace giant here: Boeing slashes another 7,000 jobs after $3.5bn loss
Germany re-enters lockdown
Germany has confirmed it will impose an emergency month-long lockdown, including the closure of restaurants, gyms and theatres and limit private gatherings to 10 people from a maximum of two households. The plans will be effective on November 2, according to Chancellor Angela Merkel.
State leaders will reconvene in two weeks to assess how effective the measures are.
A €10bn aid package will pay a share of their lost sales to firms that have to close during the shutdown. Smaller companies, of up to 50 employees, will receive 75pc of the year-earlier revenues for November.
Coronavirus cases in Europe’s second largest economy rose by almost 15,000 to 464,239 in the last 24 hours.
Germany’s DAX index fell 4.17pc to 11,560.51 as investors awaited the news which was announced after market close.
Tiffany glimmers in NY afternoon trading
Tiffany & Co shares shot up to the highest level since March 11 in afternoon trading in New York, after a report from the Wall Street Journal said the jewellery company - featured in the Hepburn film - is nearing an agreement to revive its deal with French luxury conglomerate LVMH.
The new price for the deal would be $131.50 a share (£101.28), down from the original $135, according to the Journal. It said Tiffany’s board will meet today to discuss the new terms.
Tiffany’s stock erased losses on the news, rising 0.78pc to $129.89 by 13:30 in New York.
FTSE 100 performance year to date
London market falls to lowest in over six months
London had a battering on Wednesday, closing at its lowest level since April 3, the early days of lockdown. It shed 2.8pc, or 146.19 points, to 5,566.32. The index slammed through the day before paring some losses in the last hour or so.
Among the positive news, insurance company Admiral Group led the gains with a 0.87pc rise to 2781p. Retailer Retailer Next also rose, by 0.7pc to 6134p, after it said it expects annual profits to be £365m, coming in £65m higher than forecasts last month.
Rolls-Royce led the falls by a long stretch, slamming 61pc to 84.54p: its lowest level since 2003. Shareholders yesterday backed its plans for a £2bn equity sale.
With European markets about to close (with a dull thud), I’m handing over to my colleague Louise Moon, who will steer us past the close. Thanks for following along today!
Red all over
European markets have pulled back their losses slightly over recent minutes, but barely any of London’s blue-chips are in the green – at the time of going to pixel, just insurer Admiral and retailer B&M are gaining ground.
City Intelligence: Aston Martin finally shifts out of reverse gear
With new owner Lawrence Stroll at the wheel, luxury carmaker Aston Martin has had a full MOT this week – bringing in over £1bn in new investment and access to electric car technology from Mercedes-Benz owner Daimler.
But the boost comes at a cost, writes City commentator Ben Marlow, with Daimler able to put a person on the board and demand payments if shares keep sinking.
Get more of Ben’s incisive business analysis every weekday lunchtime by subscribing to the City Intelligence newsletter.
Apple building rival to Google’s search engine
Apple is increasing its efforts to build a search engine amid a US government investigation into the payments made by Google to make sure its engine is the default option on iPhones.
My colleague James Cook reports:
According to the Financial Times, the recent release of Apple’s new iPhone software, iOS 14 includes a limited Apple search engine which handles web queries made through the new Today View screen.
Apple’s web crawler, Applebot, has also increased its activity in recent weeks. Crawlers like Applebot automatically visit millions of web pages as they seek to build up a comprehensive map of the internet in order to improve search engine results.
The changes point to efforts by Apple to build a rival to Google's search engine, which is used 1.2 trillion times per year worldwide.
European markets have sunk even lower in recent minutes, with the US benchmark S&P 500’s losses briefly passing 3pc to mark the biggest fall since August.
Germany agrees toughest restriction since lockdown – Bloomberg
Germany will impose the tightest restrictions since its spring lockdown, sources have told Bloomberg.
The news service reports:
The deal to impose a one-month partial shutdown was agreed by Chancellor Angela Merkel’s government after talks with leaders of the country’s 16 states, according to a person familiar with the situation.
The details will be released later Wednesday when Merkel addresses the press. Merkel’s proposal called for closing bars, restaurants and leisure facilities to stem surging coronavirus infections. She also urged citizens to keep social contacts to an absolute minimum and avoid all non-essential travel.
Ms Merkel previously vowed to avoid a repeat of the previous lockdown, but a raidly-rising case count appears to have forced her hand.
GSK lowers sights on profit as pandemic dents demand
GlaxoSmithKline said annual profits will be at the lower end of forecasts as the pandemic hit demand in its vaccines business.
My colleague Hannah Uttley reports:
The FTSE 100 drugmaker reported a 12pc fall in vaccine sales during the third quarter as sales of Shingrix, its blockbuster shingles that was GSK's biggest driver of sales growth last year, plunged 30pc to £374m.
Profit attributable to shareholders fell 17pc to £1.2bn over the quarter as total sales dropped 8pc to £8.6bn.
GSK now expects 2020 profit to be at the lower end of its forecast of a 1pc to 4pc decline, which did not include any potential impact from the coronavirus crisis.
However, the company said it has seen a recent recovery in vaccination rates, particularly among adults in the US where rates have returned to prior year levels.
Bloomberg: Brexit trade talks ‘making progress’
Bloomberg is reporting that Brexit talks are “making progress” with a deal possible by early November.
The pound has started to climb against the dollar after an earlier decline, building pressure on the FTSE 100.
FTSE heading for worst year since financial crisis
A series of drops over recent days have kept the FTSE down about a quarter on the year, leaving it firmly on track for its worst year since the financial crisis:
London’s blue-chip gauge is the worst performer among Europe’s top indices this year, with France’s Cac down about 23pc and Germany’s Dax – which got within inches of flattening out last month – now down 13pc.
Wall Street drops
As expected, Wall Street has dropped sharply at the open, with the tech-heavy Nasdaq leading fallers across the three main indices at nearly 2pc down.
US stocks set to tumble at open
With only a few minutes until the US open, futures trading points to deeper losses on Wall Street, with the benchmark S&P 500 set to drop about 2pc.
European stocks hit session low
European markets have extended their losses in recent minutes, hitting their lowest level of the day. Germany’s Dax is driving much of the losses, although no index is doing well.
SpreadEx’s Connor Campbell called the picture “grim”, adding:
That’s the only word that can describe the markets on Wednesday morning, investors’ Covid-19 fears attacking stock prices in ways not seen since the start of the Western phase of the pandemic back in March.
They’re not wrong to be worried. Emmanuel Macron is likely to announce a month-long national lockdown in France this evening, after the country posted its highest number of daily fatalities since April. Angela Merkel is set to argue for ‘lockdown light’ when she talks to Germany’s regional leaders later today. And in the UK, the daily death total hit its worst levels since May, increasing the call for a nationwide ‘circuit breaker’, rather than the government’s current piecemeal approach.
US goods trade deficit narrows as imports fall
The US’s goods trade deficit unexpectedly shrunk last month after the first drop in imports for four months.
The value shortfall between exports and imports was $79.4bn dollars during September, missing economists expectations of $84.5bn. The drop suggests lower demand for the US, which may be a sign of a slowdown amid spiking virus cases.
Imports fells 0.2pc to $201.4bn, while exports rose 2.7pc to $122bn.
Heineken to cut jobs as pandemic hits profits
Heineken will slash its workforce by a fifth after profits plunged following the widespread closure of pubs and bars during the pandemic.
My colleague Hannah Uttley reports:
The brewing giant, which employs 85,000 people worldwide, said the job losses will take place across its head and regional offices next year where about 1,700 staff are employed. The cuts will not affect the brewer's UK workforce, Heineken said.
It comes as the group looks to slash costs across its offices amid uncertainty caused by the coronavirus crisis.
Heineken, which also owns Birra Moretti, Amstel and Tiger beer, suffered a 76pc plunge in profits to €396m (£358m) in the nine months to September compared with the same period last year.
Read more: Heineken to axe jobs after profits plunge
Paris Charles de Gaulle overtakes Heathrow for passengers
Heathrow has lost its crown as Europe's busiest airport to Paris Charles de Gaulle after passenger numbers collapsed by 84pc during the third quarter.
My colleague Simon Foy reports:
The London operator expects just 22.6m passengers this year and 37.1m in 2021, compared to June forecasts of 29.2m and 62.8m. Last year a total of 81m passengers passed through Heathrow.
Bosses at the airport blamed the weak traffic on the Government's slow adoption of passenger testing.
Chief executive John Holland-Kaye said: “Britain is falling behind because we've been too slow to embrace passenger testing.
“European leaders acted quicker and now their economies are reaping the benefits. Paris has overtaken Heathrow as Europe’s largest airport for the first time ever, and Frankfurt and Amsterdam are quickly gaining ground.”
Rolls-Royce rises after shareholders back equity sale
There aren’t a ton of bright spots on the London Stock Exchange today, but Rolls-Royce is gaining strongly after shareholders yesterday back its plans for a £2bn equity sale. At one point, it was up as much as 27pc – the biggest one-day climb in 32 years.
ConvaTec shares jump after update
Shares in Convatec, which specialises in wound treatments, have jumped higher this morning after it raised its full year guidance in the wake of strong revenue growth.
The FTSE 250 company said it expected overall revenue growth at the “high end” of its 2pc to 3.5pc estimate, while warning it expects no growth in the fourth quarter.
Its reported revenue in the third quarter was $493m, up 6.5pc year-on-year, despite demand disruption caused by the pandemic.
Chief executive Karim Bitar said:
We delivered a good trading performance in the third quarter. We continued to respond well to stronger than anticipated customer and patient demand, particularly in our Infusion Care and Continence and Critical Care businesses.
We now expect to deliver revenue growth at the higher end of our guidance range and to exceed our previous margin guidance for 2020.
Royal Bank of Canada’s Charles Weston said investor were “right to react positively” to the update, noting ConvaTec’s Advanced Wound Care division had performed particularly well.
After a rapid slide at the open, European markets have pulled out of their nose dive – but are still solidly in the red. The FTSE 100 is outperforming its continental rivals, buoyed by a weaker pound.
Sunak to deliver spending review on November 25th
The Chancellor tweets:
On 25 November I will deliver the 2020 Spending Review alongside the OBR forecast, setting out spending plans for the next year so we can continue to prioritise our response to Covid-19 and protect jobs. #PlanForJobshttps://t.co/Qcy1enScmj
— Rishi Sunak (@RishiSunak) October 28, 2020
Read more (from last week): Sunak warned against tax raid as borrowing surges to £208bn in six months
Shoe Zone boss warns of closures as he slams business rates
Shoe Zone’s boss has warned the retailer could close up to 90 store by April 2022 unless there is a radical rethink on business rates.
Shoe Zone has 460 shops but chief executive Alistair Smith said about a fifth of them are at risk within the next couple of years.
Mr Smith, who has warned of closures in the past, said the Government's decision to suspend business rates during the Covid-19 crisis provided a "significant benefit" to the business and helped save high street stores.
“However, the Government has announced the reintroduction of the antiquated business rates system in April 2021 and to make matters worse has delayed the revaluation,” he said.“The consequence to Shoe Zone will be the closure of up to 45 stores prior to April 2021 and the potential closure of a further 45 stores in the 12 months following the reintroduction.”
He said a 2015 decision by the Government to delay a revaluation of rates by two years cost his business £2.5m.
Kaz Minerals’ chair and top investor plot to take miner private
Copper miner Kaz Minerals has recommended a $2.4bn deal masterminded by its chair and top shareholder, which would take the group private after its expansion plans drew the ire of investors.
Under the deal, Nova Resources BV, a vehicle controlled by Vladimir Kim and Oleg Novachuk, would purchase the 60.6pc of the Kazakh-focused group it doesn’t already own.
The offer at 640p per share represents a 12pc premium to Kaz’s closing price yesterday, which the group said would give it a valuation of around £3bn.
Bloomberg has more details on the company’s chequered history with shareholders:
KAZ Minerals sparked anger among minority shareholders in 2018 when it agreed a $900 million acquisition of the Baimskaya copper project in Russia from Chelsea Football Club owner Roman Abramovich and his partners. The shares lost almost 30pc on the day the deal was announced as investors weighed up the cost of the project, which has since climbed to around $7 billion.
The dilemma KAZ has faced with the giant Baimskaya project sums up a constant headache for listed miners. The project is one of the largest undeveloped copper deposits in the world, a material the biggest miners are universally bullish on. Yet the eyewatering cost, and time to first production, spooked many shareholders who have a shorter investor timeframe.
Mr Novachuk said:
We remain confident that the execution of a higher risk, capital intensive strategy remains the optimal long term path for KAZ Minerals, but we recognise that our risk appetite may be misaligned with the preference of many investors in the mining sector. In taking this important step, we wanted to ensure that KAZ Minerals Shareholders were provided with the opportunity to crystallise the value of their investment at a premium valuation.
The group’s price has risen, but not to the offered deal price – that suggests it will be accepted.
Here are some of the day’s top stories from the Telegraph Money team:
Why fleeing the city for the countryside may blow your budget: You may get value for money when buying a property, but the hidden costs of rural living quickly add up.
Property market braces for final rush of 420,000 sales before stamp duty deadline: The post-lockdown boom means that there are an extra 140,000 sales in the pipeline and the South East is leading the surge.
Grainger’s Simms to take finance chief role at Land Securities
Property developer Land Securities has appointed Vanessa Simms as its next chief financial officer, poaching her from mid-cap Grainger.
Ms Simms, who has held the CFO role at Grainger since 2016, with move to landSec “no later than 1 June 2021”, the FTSE 100 group said.
With over 20 years in roles linked to UK real estate, she has previously held role at companies such as Unite Group and Segro.
She will replace Martin Greenslade, who announced his intention to step down last month.
Landsec chief executive Mark Allan said:
I am delighted that Vanessa is to join Landsec as our next CFO, building on the strong foundations established by Martin. She brings a valuable combination of expertise and experience and I have been particularly impressed by the role she has played in helping to deliver strategic change and business transformation at Grainger in recent years.
The group’s shares have dropped sharply today as part of the wider downwards move across markets.
FTSE at six-month low
With sterling weakening amid a global risk-off turn, the FTSE 100’s falls are slightly more narrow than those of its European peers. Still, London’s blue-chips are currently on track for their lowest close since April.
European stocks hit a five-month low
Things are going from bad to worse in European markets, with the continent’s top indices extending their losses to take the Stoxx 600 – the benchmark index of top stocks across Europe and the UK – down to its lower level since late May.
Deutsche Bank surprises with profit
Deutsche Bank swung to a surprise net profit in the third quarter as it shook off losses driven by the coronavirus pandemic and ploughed on with a wide-ranging restructuring.
My colleagues report:
Germany’s largest lender posted a net profit of €182m (£164.3m), compared with a loss of €942m euros in the same period last year.
The results beat expectations for a loss of €82m as Deutsche started to move on from years of poor management and overblown investment banking ambitions with a transformation plan that launched last year.
“Our more focused business model is paying off,” said chief executive Christian Sewing.“We not only demonstrated continued cost discipline, but also our ability to gain market share.”
Read more: Deutsche Bank posts surprise profit
European markets dive
European markets have dropped sharply at the open, extending falls from yesterday and on Monday as a sharply negative mood grips investors.
German stocks face further hit as Merkel moves to shut bars and restaurants for a month
The pain is set to continue for German stocks today, on reports Chancellor Angela Merkel is pushing for tough restrictions that would include closing bars, restaurants and leisure facilities until the end of November.
Bloomberg has more details:
In talks with regional premiers later on Wednesday on Germany’s coronavirus response, Merkel will also urge citizens to keep private contacts to an absolute minimum, and to avoid all non-urgent private travel, according to a draft federal government briefing paper obtained by Bloomberg.
The document notes that effective contact tracing has become impossible in many parts of the nation, and that without further restrictions, exponential growth in the number of infections would overburden the health system within a few weeks and lead to a significant rise in serious cases and deaths.
Next upgrades profit forecast again
Next upgraded its full-year profit forecast for a second time after sales beat expectations in the third quarter, driven by its online business.
My colleague Simon Foy reports:
The high street bellwether said under its central scenario, it expected pre-tax profit for the year to be £365m – £65m higher than it forecast last month.
It comes after the retailer reported a 4.1pc increase in full-price sales during the three months to Oct 24, with online sales soaring by more than a fifth compared to the same period last year. Total sales, including interest income, rose by 2.8pc.
Home and childrenswear outperformed, while demand for men's and women's formal and occasion clothing remained weak, Next said.
The strong online performance offset an 18pc decline in retail sales, while markdown sales also fell by 12.3pc due to lower footfall in its bricks-and-mortar stores.
However, the retailer warned that it expects virus-induced restrictions to hit sales in the final three months of the year, and forecast an 8pc decline under its most likely scenario where local lockdowns are in place.
Agenda: Stocks set to extend retreat
Good morning. The FTSE 100's retreat is set to extend as major European economies, including Germany and France, are expected to announce stricter virus-induced curbs on Wednesday.
5 things to start your day
1) Consultants given £180m taxpayer contracts to work on Brexit: Ministers are paying six of the world's biggest consulting firms up to £180m for work on “thinking, shaping and delivering” Brexit.
2) CBI boss Carolyn Fairbairn: ‘We are all leavers now’: Outgoing CBI head says the dire need to prop up the economy amid the pandemic set aside any bad blood between the group and Tory leaders.
3) One in five young workers on furlough lost their jobs already: Youth joblessness thought to have hit 20pc - highest since after the financial crisis - as inexperienced workers bear the brunt of the crisis.
4) Microsoft boosted by Covid as cloud and video game sales soar: Demand for cloud computing, tablet and video games has pushed Microsoft sales to leap as more people work, play and socialise remotely.
5) Inside the brutal rivalry between Monzo and Starling Bank: Insiders reveal the bitter personal and professional rivalry between Anne Boden and her former-protégé, Tom Blomfield.
What happened overnight
US equity futures fell with most Asian stock markets as concern lingered about the impact of the worsening pandemic on economic activity in some parts of the world. The dollar rebounded against major peers.
Shares dropped in Japan and Hong Kong, with South Korea trading flat. S&P 500 futures retreated and European contracts were down about 1.5pc. Microsoft shares slipped in extended trading as a forecast for revenue in some divisions fell short of the highest analysts’ projections.
China’s yuan was steady as traders digested news that the nation’s banks abandoned inclusion of a key factor used to calculate the currency’s daily reference rate. Treasury yields edged down.
Volatility remains elevated as the possibility of a US stimulus package before next week’s election fades, and as analysts warn against assuming that Joe Biden will beat President Donald Trump.
In China, indicators tracked by Bloomberg showed the recovery continued to display mixed signals while remaining broadly steady in October.
Coming up today
Corporate: GlaxoSmithKline (Interim); Elementis, John Laing Group, Next (Trading statements)
Economics: Economics Consumer confidence (France), goods trade balance (US)