Markets went into retreat on multiple fronts on Monday, as the rising drumbeat of war in Europe gave pace to a rout in US technology stocks and compounded fears that the longest bull run in history is finally ending.
European shares had their worst day since June 2020, with the FTSE 100 falling 2.6pc and knocking around £53bn off Britain’s biggest companies. It was the worst day for London’s blue chips since November.
The US benchmark S&P 500 swung wildly with a drop of more than 4pc shortly after the open in New York before recovering to close 0.3pc in the green.
Despite the sharp rebound amid volatile trading on Wall Street, the Nasdaq remains on the precipice of a bear market. Earlier in the day the S&P was dragged close to 10pc off the record highs it hit at the start of the year.
It marked another chaotic 24 hours for global stocks amid a severe sell-off since the start of the month, as Russian troops marshalling at the border with Ukraine push Europe to the brink of war.
In Paris, the CAC 40 index of France’s top companies plunged 4pc, while Germany’s DAX dropped 3.8pc.
British stocks also took heavy losses, despite London coming out of the sell-off less bruised than its continental rivals.
The increasingly tech-focused education behemoth Pearson was the biggest blue-chip faller, down 9.1pc, while FTSE 250 cybersecurity business Darktrace plunged 14.6pc as the global tech bloodbath dragged on.
The CBOE Vix index, a measure of stock volatility known as Wall Street’s ‘fear gauge’, underwent its biggest one-day jump since November, hitting levels last seen in October 2020.
Fears of a conflict added to concerns that a years-old bubble in tech will finally burst as the US Federal Reserve puts up interest rates and scales back massive pandemic stimulus.
Stocks which have benefitted from the long era of cheap money and the rise of remote working suffered badly ahead of an apparent return to normal life.
Major losers on the tech-heavy Nasdaq index included Netflix, which dropped 2.6pc and has lost close to a third of its value in the past week following a fall in subscription growth, and the internet services company Baidu which fell 5pc.
Zoom, the video conferencing business which was adopted by millions of people in the early days of the Covid crisis, briefly slid below its pre-pandemic level before rallying to end the day roughly flat.
Bitcoin whipsawed, initially tumbling more than 8pc before recovering. It is down 29pc this month as investors shift their money into less risky assets such as bonds.
The fall has hit shares in Tesla, which dropped 5.6pc on Monday. Elon Musk’s car company placed a $1.5bn (£1.1bn) bet on the cryptocurrency around a year ago and is now at risk of a loss on its investment.
Tesla sold some of its bitcoin last year, but its remaining holdings are now believed to be worth less than what it paid for them.
Worries over the market were underscored by purchasing managers’ index data that showed US economic activity slowed during January.
Analysts at investment bank Jefferies said the sell-off may signal markets expect the US will enter a recession. John Canavan from Oxford Economics said the sell-off “highlight[s] the risks of an aggressive Fed”.
The Federal Open Markets Committee is expected to continue a shift towards tighter policy at its Wednesday meeting. Krishna Guha from investment bank Evercore said anything but the most hawkish language was likely to “provide a bit of relief in markets”.
Panicked selling also sent shockwaves through other assets, with US bond yields falling and the dollar jumping in strength as investors sought safe-haven assets for their money.
The pound, which had enjoyed a strong start to the year that put it within inches of a post-Brexit referendum high against the euro, fell against both the common currency and the dollar.
Jordan Rochester from Nomura advised clients to short sterling, betting the currency will fall in the near term. He warned “cracks are starting to show” in Britain’s economic recovery.
Strain is also emerging in other parts of the market, with gauges of credit risk in the US soaring to the highest level since November 2020 on fears a jump in the cost of borrowing will push many debt-laden companies over the edge.
The Ark Innovation exchange-traded fund, managed by Cathie Wood, fell the most since March before recouping most of its losses later in the session.
The tech-heavy fund has been seen as a bellwether for the investor appetite for risk. Its recent plunge means it is now only narrowly outperforming legendary investor Warren Buffett’s more conservative portfolio since the onset of the pandemic.
Some traders are now building their bets against ARK, with 8.6pc of its shares held by short sellers according to data from IHS Markit.
06:07 PM
Wrapping up
That’s all from the blog today, thank you for following us! Before you go, check out the latest stories from the business desk:
06:00 PM
ITV boosts expansion after Piers Morgan defects to Talk TV
ITV will extend its evening bulletin to an hour as it faces a new challenge from Piers Morgan on Rupert Murdoch’s new channel TalkTV. Ben Woods has more:
Britain’s biggest commercial broadcaster will transform its 6.30pm update into an hour-long show from March, marking its biggest expansion in news for 20 years and a significant shake-up of its prime-time schedule.
The multimillion-pound investment will pay for 27 new journalists, including correspondents across Wales, Scotland and the north of England, as it deepens its coverage outside of London.
The move comes as the broadcaster awaits the Spring launch of TalkTV, a new broadcast channel run by Mr Murdoch’s newspaper publisher News UK.
It hired Mr Morgan, 56, after he angrily walked off the set of ITV’s flagship current affairs show Good Morning Britain last March. The former editor of the News of the World was challenged on-air by a colleague for criticising claims of poor mental health made by the Duchess of Sussex.
05:38 PM
FTSE 100 closes lower amid mounting concerns over Russia tensions
The FTSE 100 has closed lower as the escalating drumbeat of conflict risk in Ukraine is concerning European investors.
London’s main index dropped 2.6pc to 7,297, as the UK followed the US in announcing that it was removing non-essential embassy staff from Kyiv.
Michael Hewson at CMC Markets said: “Reports during the day that NATO is putting additional ships and aircraft on standby, and that the US is considering sending troops to shore up its Baltic defences, has also upped the ante, after requests from the likes of Estonia for a greater US presence to deter a potential Russian escalation.
“These concerns are outweighing and overshadowing this week’s Federal Reserve rate meeting, and while we can expect to see the US central bank confirm that a March rate rise remains on the cards, anything more than that is likely to be a big ask, given events currently playing out in Europe, with the DAX falling below its November lows, and getting absolutely crushed, as it fell below 15,000 for the first time since 6th October last year.”
05:17 PM
British Gas to take on customers of failed supplier Together Energy
British Gas will take over the responsibilities of pumping energy around 176,000 households that were left without a supplier when Together Energy went out of business last week.
The business has been appointed by Ofgem, the regulator.
The customers are some of the millions whose energy suppliers have gone out of business in recent months. Suppliers have been squeezed as they were stuck between soaring wholesale gas prices and a cap on household energy bills.
Customers’ balances with Together Energy are protected, and they should wait for British Gas to get in touch.
04:58 PM
Ocado alcohol sales slump as consumers drop booze for ‘dry January’
Alcohol sales have slumped at Ocado after middle-class shoppers abstained from drinking this month. Laura Onita writes:
More customers appear to have adopted “dry January” with the grocery website’s sales of booze down 17pc year-on-year.
The firm said its latest data indicated that customers were reluctant to give up alcohol last year when stricter Covid restrictions were introduced.
Laura Harricks, chief customer officer at Ocado Retail, said: “After being stuck in lockdowns over the last two years, many are looking to start the year in a healthier way, with the nation putting down their drinks and focusing on wellbeing.”
Sales of alcohol at the beginning of this month dropped 37pc compared to December, the company said. People turned to alcohol-free alternatives instead, with sales of these drinks up 13pc versus 2021.
04:40 PM
Amigo dives after warning of insolvency again
Troubled sub-prime lender Amigo has seen its shares dive further after warning it could enter insolvency if it fails to receive court and creditor approval for its new business rescue plan.
Shares have plunged nearly 45pc as it continues to battle for its survival after it was hit by a deluge of customer complaints regarding mis-selling loans.
In May, the company saw an initial rescue plan to deal with compensation cases rejected by the High Court. It said that creditors potentially owed compensation will receive less money if the new business plan fails and it enters insolvency, adding that shareholders “would receive nothing” in such a scenario.
04:23 PM
Boeing ploughs another $450m in pilotless flying taxis developer Wisk
Good afternoon, this is Giulia Bottaro taking over from Simon Foy.
Boeing is investing a further $450m (£334.3m) in Wisk Aero to support development of future pilotless flying taxis.
California-based Wisk, owned by Boeing and Kitty Hawk – the air vehicle firm launched by Google co-founder Larry Page – is one of dozens of electric vertical takeoff and landing (eVTOL) makers but differs in focusing its efforts on autonomous flight.
The decision to leapfrog a generation of piloted eVTOL aircraft being developed by independent startups and some aerospace groups entails a later entry to service than the target date of 2024 envisaged by most competitors.
04:04 PM
‘Drumbeat of conflict risk in Ukraine’ hits stocks
Commenting on today’s market rout, Michael Hewson, chief market analyst at CMC Markets, says:
The escalating drumbeat of conflict risk in Ukraine has seen European equity markets fall back sharply today, as the UK followed the US in announcing that it was removing non-essential embassy staff from Kyiv as concerns increased that a conflict was getting closer.
Reports during the day that NATO is putting additional ships and aircraft on standby, and that the US is considering sending troops to shore up its Baltic defences, has also upped the ante, after requests from the likes of Estonia for a greater US presence to deter a potential Russian escalation.
These concerns are outweighing and overshadowing this week’s Federal Reserve rate meeting, and while we can expect to see the US central bank confirm that a March rate rise remains on the cards, anything more than that is likely to be a big ask, given events currently playing out in Europe, with the DAX falling below its November lows, and getting absolutely crushed, as it fell below 15,000 for the first time since 6th October last year.
There’s been precious little to cheer on the company’s front on the FTSE100, which has dropped below the 7,400 level, to its lowest level since before Christmas, with only Unilever and Vodafone posting any gains of note.
03:50 PM
FTSE 250 tumbles nearly 4pc
It’s been a torrid day for the FTSE 250, with the index slumping nearly 4pc to its lowest level since March 2021.
Some of its biggest fallers include:
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Darktrace -13pc
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Reach -12pc
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Cineworld -11pc
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Future -10pc
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Aston Martin -9pc
03:14 PM
Joe Biden’s ineptitude has killed off the bull market
Wall Street is taking another hammering today.
In his latest column, Matthew Lynn argues that Joe Biden’s leftist crusade against big tech and his chaotic foreign policy has killed off the US bull market.
He writes:
The finger should be pointed at one man in particular. President Biden. His reckless spending has stoked inflation and forced the Federal Reserve to start raising interest rates; his determination to raise corporate taxes has hurt investment; his weak, chaotic foreign policy has stoked aggression, especially in Ukraine; and his leftist, ideological crusade against the tech giants has hit the most vibrant sector of the American economy.
Political leaders can’t usually create bull markets, but they can create bear ones – and this is Biden’s bust.
02:47 PM
Wall Street sinks at the open
US equity markets have slumped again at the open as investors become increasingly spooked by a geopolitical crisis in Ukraine and the Fed tightening monetary policy.
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S&P 500 -1.7pc
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Dow Jones -1.5pc
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Nasdaq -2pc
02:09 PM
Ministers to scrap Covid testing for vaccinated travellers
Boris Johnson has said the government will scrap Covid testing for fully vaccinated travellers arriving in England in a boost for the beleaguered aviation industry.
He said: “To show that this country is open for business, open for travelers, you will see changes. People arriving no longer have to take tests” if they are double vaccinated.”
It comes after a recent lifting of pre-flight test requirements as ministers roll back pandemic restrictions.
01:36 PM
Getir to create 6,000 jobs in UK
Rapid grocery delivery firm Getir has revealed plans to create 6,000 more jobs in the UK this year as it continues to dramatically expand across the country.
The Turkey-based start-up has grown to cover 20 towns and cities across the UK with 4,000 staff after launching in London last January.
It comes amid a boom in online grocery delivery start-ups, which has also seen rapid growth for a handful of rivals including Gorillas and GoPuff.
Getir said on Monday that it expects to create thousands more jobs to employ around 10,000 people – who it said will be employees and paid the real living wage – by the end of 2022.
The move is part of a £100 million investment into the UK market which has already seen it launch in locations including Manchester, Liverpool and Portsmouth.
12:43 PM
Johnson refuses to guarantee NI hike will go ahead
The Prime Minister has refused to guarantee that the hike in national insurance contributions will go ahead from April, raising doubt about the tax increase.
MPs have called for the government to postpone or scrap the hike due to the cost-of-living crisis.
12:20 PM
Activist investor pushes Peloton to oust boss and seek sale
Peloton has received a letter from an activist investor demanding that it fire its chief executive officer and pursue a sale.
Bloomberg has the details:
Blackwells Capital, which has a stake of less than 5pc, has called for the departure of CEO and co-founder John Foley, and wants Peloton to explore a sale of the business. Peloton could be an attractive acquisition target for larger technology or fitness firms, according to an investor letter seen by Bloomberg.
The shares rose about 3pc in US pre-market trading.
Peloton’s shares have tumbled more than 80pc from their all-time high a year ago, as the gradual easing of pandemic-era restrictions fueled concern that growth of the stay-home fitness company will slow. The stock touched a nearly two-year low last week after CNBC reported that Peloton was temporarily halting production of its bikes and treadmills.
“With the stock now trading below the IPO price, and down more than 80% from its high, it is clear that the company, the executives and the Board have squandered this opportunity,” Jason Aintabi, chief investment officer at Blackwells, wrote in the letter.
11:37 AM
Red all over
Things have gone from bad to worse for Europe’s equity markets. After a weak start, all main bourses have extended loses and are now trading firmly in the red amid concerns over the Federal Reserve’s imminent rate liftoff.
11:05 AM
FCA staff ballot for industrial action
Staff at the City watchdog will vote on whether to take industrial action, as a pay row with bosses escalates.
Unite, the union representing staff at the Financial Conduct Authority, said it has launched a ballot of its members, which will close next Monday.
It added that management has refused to negotiate with the workforce on a programme of severe cost-cutting.
Dominic Hook, Unite national officer said:
Unite members will today start voting in an indicative ballot for industrial action at the Financial Conduct Authority. The ballot will deliver a clear sense just how dire workforce morale and employee confidence is within the FCA leadership.
Management at the FCA are attempting to implement a program of pay cuts, which has come after two years in which the staff at the FCA have worked gruelling hours to provide financial protection against Covid for borrowers, investors, small businesses and people with mortgages.
10:41 AM
THG in free fall – again
Shares in THG, formerly known as The Hut Group, have crashed again this morning.
The stock has slumped more than 16pc to 125p, meaning it has lost nearly 80pc of its value in the last six months.
It comes after analysts at Citi downgraded the company’s forecasts.
Last week, the online retailer issued a trading update last week that disappointed analysts. The Mum of chief executive Matt Moulding also spoke to the Sunday Times …
10:29 AM
‘We would expect the return to workplaces to lead to greater spending’
Commenting on this morning’s PMIs, Rhys Herbert, senior economist at Lloyds Bank, says:
We saw another month of lower growth in the service sector as many consumers continued to limit their activity in the face of the Omicron variant.
Looking ahead, we would expect the return to workplaces to lead to greater spending as towns and cities get back to normal. But inflationary pressures and rises in the cost-of-living do still risk creating a drag effect on some services should households tighten their purse strings.
Manufacturing continues to perform well overall despite losing some momentum month-on-month. There have been signs that some stubborn supply chain pressures have started to ease. However, the energy crisis and reports of new checks causing delays at ports are challenging many firms in the sector.
10:00 AM
Business activity hits 11-month low
British business activity hit an 11-month low in January as the omicron wave hit consumer-facing companies and manufacturers said orders grew at the weakest pace for a year.
The IHS Markit/CIPS Composite Purchasing Managers Index (PMI) slipped in January to 53.4 from 53.6. Analysts expected it to come in at 55.
The worse-than-expected survey leaves the Bank of England on track to raise interest rates next week.
“Business confidence in the outlook also picked up, driving sustained solid jobs growth,” said Chris Williamson, chief business economist at IHS Markit.
“With inflationary pressures remaining elevated at near-record levels, this all adds to the likelihood of the Bank of England hiking interest rates again at its upcoming meeting,” he added.
Flash estimate of UK composite #PMI edged down to an 11-month low of 53.4 in January, but still holding up relatively well (euro area PMI a full point lower at 52.4) and UK economy should be first to rebound as #Omicron threat lifts… (1/2) pic.twitter.com/PTUsbAioZU
— Julian Jessop (@julianHjessop) January 24, 2022
09:46 AM
FTSE extends losses
Nearly two hours into trading and the FTSE 100 is falling deeper into the red. It is currently down more than 0.7pc.
Russ Mould, investment director at AJ Bell, says:
Anyone hoping for a measure of calm on the markets after a testing period is likely to be disappointed as we start what could be another turbulent week.
The FTSE 100 was just about holding steady on Monday morning having given back its year-to-date gains last week and globally the picture has been significantly worse, with the technology sector decidedly out of favour.
The Federal Reserve is meeting on Wednesday amid expectations of a first interest rate hike in March and more increases to come this year than had previously been pencilled in. This has been signalled by a rise in bond yields.
09:19 AM
French business growth weakens
French business growth dipped by more than expected in January compared to December as pandemic disruption and and inflationary pressures weighed on activity.
Data compiler IHS Markit said its flash purchasing managers’ index (PMI) for France’s dominant services sector fell to 53.1 points in January from 57.0 in December – below a forecast for a January reading of 55.3 points.
Joe Hayes, a senior economist at IHS Markit, said:
Given the surging number of daily COVID-19 cases we’ve seen in France, it’s no surprise to see softer PMI numbers in January.
Supply chain issues continue to impact the economy, particularly manufacturers, but we do appear to have seen the worst as delivery times lengthened to a far weaker extent than seen during much of 2021. That being said, the inflationary side effects remain in play and are being exacerbated by rising staff costs and energy prices,
08:56 AM
Covid ‘levels down’ Britain as richest cities suffer most
Our lead story this morning is about new research showing that the pandemic has “levelled down” Britain.
The crisis has harmed economically prosperous cities even more than poor regions, in a blow to Boris Johnson’s flagship policy.
Central London’s businesses have lost almost an entire year of sales since Covid began, according to research by the Centre for Cities, with Birmingham and Edinburgh hit almost as hard.
08:38 AM
Unilever under pressure from activist
Unilever’s management is facing another week of pressure after an aggressive activist investor was reported to have built a stake in the Marmite maker over the weekend.
Trian Partners has taken a position in the FTSE 100 firm, the Financial Times reported. It comes after Alan Jope, Unilever’s boss, is under fire from shareholders following its £50bn failed attempted takeover of GSK’s consumer health arm.
However, shares have bounced back as much as 5pc in early trading this morning.
08:22 AM
Europe opens lower
European stocks have started the week in the red as the US Federal Reserve looks to tighten monetary policy. The UK’s blue-chip index has recovered some losses having fallen 0.5pc at the open.
08:16 AM
De La Rue issues profit warning
It’s a quiet start to the week in terms of corporate news with one notable exception.
Banknote printer De La Rue issued a profit warning due to ongoing supply chain shortages. Its shares are already down by nearly a third.
The company, which prints banknotes for the Bank of England and other central banks across the globe, said the increased costs of raw materials, energy costs and disruption caused by Covid-19 have “become more pronounced”.
There have also been staff issues due to the pandemic, meaning underlying operating profits are now expected to be between £36m and £40m, compared with expectations of £45m to £37m.
07:59 AM
FTSE set to slide
Good morning. The FTSE 100 is set to start the week in the red as investors mull a higher number of interest rate rises by the US Federal Reserve this year than previously expected.
Global stocks had one of their worst weeks last weeks since the beginning of the pandemic, with the FTSE slumping more than 1.2pc.
Separately, today will mark a return to the office for many after government guidance on working from home was lifted last week, and pressure is mounting on the transport industry not to put workers off from commuting now that many have a choice over where they work.
5 things to start your day
1) The pandemic has “levelled down” Britain: Economically prosperous cities have been harmed even more than poor regions, according to research by the Centre for Cities.
2) Treasury ministers and officials rack up more than £15,000 in travel costs shuttling between Whitehall and new Darlington offices: Rishi Sunak announced the move of up to 300 Treasury officials to the North-East last March.
3) HSBC has started putting pronouns on branch workers’ name badges: HSBC’s decision comes as banks across Britain race to appear more inclusive.
4) Unilever’s management risks coming under further pressure: An aggressive activist investor is reported to have built a stake in the Marmite maker after Unilever suffered its biggest weekly share price fall since March 2020.
5) Bungalow prices rocket as baby boomers retire: Britain’s ageing population has helped push up the price of bungalows at an even faster rate than the rest of Britain’s buoyant property market.
What happened overnight
Most Asian stocks slumped overnight while US and European futures were mixed as traders weighed the likely market impact of Federal Reserve monetary-policy tightening.
Technology stocks in Hong Kong retreated, shares eked out gains in Japan and European futures declined. Still, the advance in S&P 500 and Nasdaq 100 contracts stirred tentative hopes of some respite after one of the worst stretches for global shares last week since the pandemic began.
The Fed on Wednesday is expected to signal a March liftoff in interest rates and balance-sheet reduction later this year to help fight inflation. Ebbing stimulus is forcing a rethink about the economic and market outlook.
Coming up today
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Corporate: Computacenter (Trading update)
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Economics: Services PMI (UK, US, EU), manufacturing PMI (UK, US, EU), composite PMI (UK, US, EU); Chicago Fed national activity index (US)
