Wall Street and FTSE lower despite US economy growing faster than expected

LIVE COVERAGE IS OVER23 updates

• Thu 25 July 2024 at 5:30 pm CEST

  Blog close

  Well that’s all from us today — thanks for following along in what was a busy day of corporate results.

  Be sure to join us again tomorrow when we’ll be back for more of the latest market moves and all that’s happening across the global economy.

  Have a great evening!

• Thu 25 July 2024 at 4:36 pm CEST

  Bitcoin price falls amid broader stock market downturn

  Bitcoin has fallen by over 3% in the past 24 hours amid a broader stock market downturn as investors are losing appetite for riskier assets.

  The largest digital asset by market capitalisation (BTC-USD) dropped from over $65,500 (£50,868) to nearly $64,000 in early trading on Thursday, according to Coingecko data. The price of ethereum (ETH-USD) also lost ground, plunging 8% in the past week after net outflows from the newly launched spot ethereum exchange-traded funds (ETFs), which commenced trading on stock exchanges on Tuesday.

  The drop in major cryptocurrencies follows a general weakening of sentiment for risk assets. US equity markets took a hit on Wednesday, causing the tech-heavy Nasdaq (^IXIC) to lose 660 points, its largest fall since 2022. The so-called ‘Magnificent 7’ tech stocks saw their market capitalisation decrease by over $750bn, marking the largest single-day loss on record for this group of stocks.

  The downturn in equity markets extended to Asian markets on Thursday morning, with Japan’s Nikkei (^N225) falling more than 3%, down 1,285.34 points to 37,869.51. This decline was fuelled by worries that the Bank of Japan might increase interest rates.

  Read more here

• Thu 25 July 2024 at 4:14 pm CEST

  Vodafone’s growth slows on Germany decline

  

  Vodafone reported a 5.4% rise in service revenue in the first quarter after Germany, its biggest market, went into reverse due to changes in cable TV regulation.

  The European and African mobile operator said however that its performance was in line with guidance for the full year despite the slowdown on the previous three quarters,

  Margherita Della Valle, chief executive, said revenue was growing strongly in Africa and Turkey, while in Europe lower inflation was slowing revenue growth and accelerating core earnings growth.

  “We continue to progress our transactions in Italy and the UK as well as the broader transformation of Vodafone, focused on customer experience, business growth and operational execution in Germany,” she said.

  Della Valle has simplified Vodafone since she permanently took the helm in April last year. Operations in Spain and Italy have been sold, a merger with rival Hutchison’s Three in Britain has been agreed and around 11,000 job cuts have been announced.

  The company expects to reports adjusted core earnings of around €11bn ($11.92bn) and adjusted free cash flow of at least €2.4bn for the year to end-March 2025.

• Thu 25 July 2024 at 4:00 pm CEST

  US jobless claims fall

  US jobless claims for the week ending 20 July fell by 10,000 to 235,000 from 245,000 the previous week, the Labour Department reported on Thursday.

  It was the ninth straight week claims came in above 220,000. Before that stretch, claims had been below that number in all but three weeks so far this year.

  The total number of Americans collecting unemployment benefits fell for the second time in three weeks.

  Around 1.85 million Americans were collecting jobless benefits for the week of 13 July, around 9,000 fewer than the previous week.

  The four-week average of claims, which evens out some of the week-to-week volatility, rose by 250 to 235,250.

• Thu 25 July 2024 at 3:46 pm CEST

  US economy in a stronger position than UK and Europe

  CJ Cowan, portfolio manager at Quilter Investors, said:

  “The US economy remains in a stronger position than the UK and Europe, adding complexity to the Federal Reserve’s interest rate decision making and increasing the apparent risk of a reacceleration in inflation.

  “This latest GDP print likely removes any hope of a July interest rate cut but we can still expect to see one or two by the end of the year.”

• Thu 25 July 2024 at 3:39 pm CEST

  US economy grows faster than expected

  The US economy expanded faster than expected in the second quarter, with a rise of 2.8% in the three months to June thanks to an increase in consumer spending “in both services and goods”.

  According to the Commerce Department, this was much faster than the 2% that had been predicted by analysts.

  The economy grew at a 1.4% rate in the first quarter. Growth remained considerably slower than the 4.2% pace logged in the second half of last year.

  Within services, the leading contributors were healthcare, housing and utilities, and recreation services.

• Thu 25 July 2024 at 3:11 pm CEST

  Ford loses $50,000 on every electric car

  

  Ford loses nearly $50,000 (£38,700) on every electric car it sells, results from the company show, as traditional manufacturers struggle with the switch away from petrol.

  The Telegraph has the details…

  The company posted a loss of $1.1bn for its electric vehicle division, Ford E – equivalent to about $47,600 per car. It sold 23,957 electric vehicles (EVs), an increase of 61pc from a year earlier.

  The numbers contributed to a torrid first half in which Ford E lost $2.5bn, with the business on track to lose $5bn overall this year.

  Ford blamed a price war across the industry for the loss, which came despite efforts to slash costs by $400m.

  The stark figures underline the huge sums of cash even mass market car manufacturers are burning through as they electrify their product line-ups. The $50,000 loss per car was first reported by industry expert Robert Bryce in his Substack newsletter.

  Battery-powered cars are more expensive to produce than their internal combustion engine counterparts, complicating government efforts to slash carbon emissions by mandating their sale in greater numbers. Meanwhile, a wave of Chinese rivals are seeking to enter the market with cheap mass-produced EVs of their own.

• Thu 25 July 2024 at 2:49 pm CEST

  Massive moves in the yen

  The yen has experienced some big moves of late. AUD/JPY has dropped by more than 7% over the last two weeks, the largest drop since 2016.

  These moves are all the more surprising given the absence of an external shock like COVID. So why is the yen strengthening?

  Deutsche Bank said:

  “We think the trigger behind the sharp JPY rally is the market’s re-assessment of the prospects of success of a soft dollar policy following President Trump’s interview in Businessweek last week where he explicitly mentioned the yen.

  “Japan is the only G7 country with sufficiently large FX reserves to be able to engineer a market impact on its currency. Japan is unique in a number of other ways.

  “First, the Japanese government is the only G10 government that has voiced concerns against an excessively cheap yen, and we highlight recent comments by potential PM candidate Kono as especially notable.

  “Second, the currency is the only G10 exchange rate that is fundamentally out of line with medium-term valuations.

  “Third, there is a realistic prospect of potential policy convergence between the BoJ and the Fed. Fourth, and most important, beyond official reserves, the Japanese semi-official sector has an unusually large influence on capital flows, most notably the GPIF.”

• Thu 25 July 2024 at 2:20 pm CEST

  Best UK mortgage deals of the week

  Mortgage rates below 4% are back on sale in the UK as Nationwide is now offering a 3.99% deal for new customers looking to borrow up to 60% of the property’s value. Experts anticipate other lenders will follow suit to stay competitive, meaning it could be a “summer of savings” for homebuyers.

  Overall, the average rate on a two-year fixed deal this week stood at 5.94%, a drop from last week’s 6.09%, while rates for a five-year deal came in at 5.32%, also lower than previous 5.45%, according to figures from Uswitch.

  Nicholas Mendes​, a mortgage technical manager at the broker John Charcol, said: “Nationwide is the first lender to finally breach the 4% benchmark following recent weeks of downward repricing. This is fantastic news for borrowers and signifies a significant change in the mortgage landscape after recent months of increased rates.”

  He added that the 3.99% rate was for house purchases only, and those looking to remortgage would need to wait a bit longer.

  Read more here

• Thu 25 July 2024 at 1:56 pm CEST

  Gucci-owner Kering slips after profit warning

  

  Well it certainly is a busy day for corporate results, here’s yet another update from Gucci-owner Kering…

  Gucci-owner Kering fell as much as 7% in Paris after it warned that profits will tumble in the second half of the year as demand for luxury goods wanes.

  The French group said its recurring operating income, a key profit measure, could fall by about 30% in the period compared with the previous year.

  The company is struggling with turnaround efforts at Gucci, which accounts for two-thirds of its profits.

  It had issued an earlier profit warning in April because of weak demand, particularly in China.

• Thu 25 July 2024 at 1:39 pm CEST

  Over half of UK adults taking domestic trips this summer

  With holidays on the horizon for many, new research from American Express shows that British holidaymakers expect to spend £2,804 across the summer on international trips, with almost 4 in 10 (39%) planning to spend more on foreign holidays this summer versus last.

  Many UK travellers are planning to take multiple foreign holidays this summer (summer defined as 1 June to 30 September), with 39% of those going abroad planning at least two international trips.

  Whether it’s a hotel, B&B or villa, accommodation is the highest area of spending for those holidaying overseas – costing £812 across summer. Travel comes in next, with Brits planning to spend nearly £698 reaching their getaway destinations, followed by holiday dining at £492.

  The research revealed that it’s not just overseas holidays Brits are looking forward to. More than half of UK adults (53%) are planning to take, or have already taken, a staycation this summer.

  In total, Brits taking domestic holidays will spend £1,754 across all their UK-based holidays this summer and one-third (33%) are planning to spend more on domestic holidays this summer versus last.

  Holidaymakers in the UK will go on nearly two (1.8) domestic summer trips, on average. Younger travellers have the most appetite for discovering domestic holiday spots, with 63% of 18- to 34-year-olds planning a staycation this summer. The same is also true for international travel, at 59%.

• Thu 25 July 2024 at 1:17 pm CEST

  Oil prices fall amid China economy fears

  

  Oil prices fell on Thursday as concerns about China’s economy outweighed lower US stockpiles.

  The move lower echoed the current sentiment in the market which has seen commodities and equities slide.

  The international benchmark, Brent Crude (BZ=F), dropped 1.8% to around $81 a barrel, after gaining 0.9% on Wednesday, while West Texas Intermediate is sitting below $77.

  Crude has eased from a peak at the start of the month amid concern about a soft demand outlook in Asia’s largest economy, as well as selling from trend-following commodity trading advisers.

  Crude imports by China were 2.3% lower in the first half on this year compared with the same period of 2023.

  Harry Tchilinguirian, group head of research at Onyx Capital Group, said:

  “The bullish impetus from constructive weekly EIA statistics yesterday has been swept under the carpet with concerns roaring back to the economy, notably that of China.

  “Markets cannot be if but a little concerned when China’s PBOC delivered a second rate cut in one week to support activity.”

• Thu 25 July 2024 at 12:54 pm CEST

  Unilever shares rise after it beat profit estimates

  Dove soap maker Unilever climbed as much as 7.1% after it beat profit estimates for the first half of the year.

  It comes even though sales growth by the London market’s fourth biggest company came in a little short of expectations.

  Underlying sales growth at the firm grew 3.9% compared with an expected 4.2% uplift. The maker of Magnum ice cream raised prices by only 1% in the second quarter, well below a consensus estimate of 1.6%.

  The group maintained its sales growth outlook of 3% to 5% for the year, driven by growing sales volumes. The company expects its underlying operating margin to be at least 18% for the year, well ahead of expectations.

  It comes as Unilever is undergoing a major turnaround in a bid to boost growth. This has included splitting off its ice cream business by the end of next year, as well as job cuts.

  It is look to axe around a third of all office roles in Europe by the end of next year.

  Chief executive Hein Schumacher said:

  “We continue to embed the growth action plan, doing fewer things, better and with greater impact,” adding that the productivity programme and separation of its ice cream unit announced earlier this year was “progressing at pace”.

  “There is much to do, but we remain focused on transforming Unilever into a consistently higher-performing business.”

• Thu 25 July 2024 at 12:33 pm CEST

  UK bond market rallies

  The yield on two-year UK gilts, the return the government promises to pay buyers of its bonds, has fallen to 3.89%, which is its lowest level since February.

  It comes as traders rush to safe haven assets following the global rout in stocks. Investors are also increasing bets on an interest rate cut by the Bank of England this summer.

  Money markets indicate there is a 55% chance of a cut in August.

  The yield on 10-year gilts fell nearly five basis points to 4.11%. Yields move inversely to prices.

  “There’s a knee jerk reaction to safer haven trades. We’re seeing bonds firm up, especially at the short end of the yield curve,” said Ben Laidler, head of equity strategy at Bradesco BBI.

  “The global contagion from the U.S. tech sell-off is affecting everything, however the tech sell-off is just a here and now thing. In the long term, earnings ultimately end up being much more important.”

• Thu 25 July 2024 at 12:15 pm CEST

  Lloyds hikes dividend by 15% as profits dip

  

  Lloyds (LLOY.L) reported a drop in profit in the first half of the year as the interest rate boom slowed but shareholders will still benefit from an increase in payout.

  The banking group, which includes Halifax and Bank of Scotland, said it made a pre-tax profit of £3.3bn in the first six months of the year.

  This marks a 14% decline from the £3.9bn reported this time last year, however, it comes in higher than some analysts had predicted.

  Analysts had expected the lender to report statutory pretax profit of £3.21bn for the six months to the end of June and £1.58bn for the second quarter, according to consensus estimates supplied by the bank.

  Net interest income, the gap between what it pays out to savers and borrowers in interest, fell 10% as the net interest margin declined to 2.94% from 3.18% a year earlier and 2.95% at the end of March.

  For the full year, management continued to guide to a banking net interest margin of greater than 2.90%. Operating costs were also up 7% to £4bn.

  Read the full article here

• Thu 25 July 2024 at 11:52 am CEST

  British Gas owner Centrica at bottom of FTSE after profit fall

  British Gas reported an operating profit of £159m in the first half of the year, down from the record £1bn reported in the same months last year.

  Profit levels are now “normalising” it said, after the energy crisis which saw watchdog, Ofgem allow British Gas to claw back more money from household bills to recoup the costs of supplying its 10 million customers.

  It came as its owner Centrica (CNA.L), revealed a sharp drop in overall profit on Thursday, pointing to “a more normalised environment”.

  After energy prices fell back from the elevated levels hit after Russia’s invasion of Ukraine, the FTSE 100 company said its operating profit was down 74% to £1.7bn.

  It added that the future of its gas storage business looked “challenging” with energy markets back to normal. Its facility at Rough was upgraded during the price spikes, and was now faced with what Centrica called “low seasonal spreads”.

  It also said there were “marked improvements in customer satisfaction.”

  Centrica slipped to the bottom of the FTSE 100 with a 9% decline on the back of the news.

• Thu 25 July 2024 at 11:25 am CEST

  Is the dip a buying opportunity or the beginning of something bigger?

  Following the global sell-off last night, European stocks have continued to drop as fear trading dominated after the earning season’s disappointing start and hints of softer consumer demand in the US.

  Selling pressure keeps deepening on riskier assets after key sectors – US tech and EU luxury shares – have frustrated investors by not delivering the figures and short-term outlook they previously anticipated.

  Pierre Veyret, technical analyst at ActivTrades, said:

  “After such a strong market rally in the first semester of 2024, it is only natural to see investors taking out some profit and proceeding with a temporary reassessment of their risk exposure in the light of the recent disappointing developments, especially during the summer period where most investors tend to take a break.”

  “However, the question now is: is it a dip buying opportunity or the beginning of something bigger?”

  “The answer will likely be provided shortly as the earnings season continues to roll, with more results from big US tech companies like Microsoft, Meta Platforms, Amazon, and Apple due next week.”

  “On the macro front, investors have started to brace for tomorrow’s key US PCE Price Index, a crucial data for the Fed’s monetary policy design.”

  “Meanwhile, investors will also wait for today’s US GDP and jobless claims figures, following this morning’s disappointing batch of data from Germany.”

  “Volatility should remain high on most benchmarks through the end of the month, as the STOXX-50 index already broke a key mid-term support level, with prices now trading below the 4,800pts mark.”

• Thu 25 July 2024 at 11:03 am CEST

  ITV boosted by Euros but hit by actors strike

  

  ITV reported a 17% rise in ad revenue in the second quarter of the year boosted by the Euro 2024 football tournament.

  The broadcaster, which is behind hit show Love Island, said that overall first half ad revenues increased by 10%, beat its forecasts of a 12% rise in the second quarter and 8% over the first six months.

  Overall adjusted profit before tax was up 51% year-on-year to £178m in the first half, with a 3% dip in total revenues to £1.9bn.

  However production arm ITV Studios reported a 13% fall in revenues for the first half, impacted by the writers’ and actors’ strike in the US which brought productions to a halt.

  ITV added that its production arm has taken a majority stake in Hartswood Films, the production company behind the Emmy-winning series “Sherlock”, for an undisclosed sum.

  Shares in the group fell 5% on Thursday morning after the trading update.

  Dame Carolyn McCall, ITV chief executive, said the group remained “confident” of delivering a group underlying earning this year after heavy investment in its ITVX streaming platform over 2023.

  She cheered a 17% jump in digital ad revenues over the first half as these investments begin to pay off.

  “This was driven by strong viewing across our broadcast channels and ITVX, with a very successful Euros, a year-on year-increase in viewing of Love Island and a slate of great dramas,” she said.

  “We have strong momentum in improving efficiency and simplifying ways of working right across ITV and are on course to deliver the £40 million of incremental in-year savings in 2024 that were previously guided.”

• Thu 25 July 2024 at 10:44 am CEST

  Universal Music Group shares nosedive

  Universal Music Group (UMG.AS) lost as much as 29% after reporting a slowdown in its subscription and streaming segment in the second quarter.

  Despite revealing better than expected revenue thanks to merchandising, analysts downgraded the company amid concerns over is streaming income.

  Revenue rose to €2.9bn (£2.5bn) in the three months to June, with its top sellers including releases by Taylor Swift and Billie Eilish.

  However, analysts at Citi, Barclays, Guggenheim and Kepler Cheuvreux all lowered their ratings, with Citi saying streaming and subscription growth was meaningfully below what had been expected.

  It raised concerns about volatility between the music giant’s different lines of revenue.

  Commenting on the results, UMG´s Chairman and CEO Sir Lucian Grainge, said:

  “Our continued strong revenue growth this quarter demonstrates that we are, by design, a multifaceted music entertainment company that places our artists at the centre of everything we do.”

  “Our unique structure, which is both innovative and constantly evolving, enables us to support our recording artists and songwriters with an ever-expanding array of revenue sources, reinforced by new products and the exciting next phase of development of streaming services.”

• Thu 25 July 2024 at 10:29 am CEST

  Revolut gets UK banking licence

  Revolut has received its UK banking licence after a three-year wait, it said on Thursday,

  The licence brings Revolut, a global firm with more than nine million UK customers, closer to the same UK permissions as the traditional banks it seeks to compete against.

  It will now enter the “mobilisation” stage, sometimes referred to as “Authorisation with Restrictions”, a common step for many new banks in the UK. During this period, banks can only hold £50,000 of total customer deposits.

  The status allows new banks to invest in the final stages of their build-outs, according to the Prudential Regulation Authority’s website.

  According to the Bank of England, mobilisation “could take as little as a few months but cannot continue indefinitely and should take no longer than 12 months.”

  Nik Storonsky, CEO of Revolut, said:

  “We are incredibly proud to reach this important milestone in the journey of the company and we will ensure we deliver on making Revolut the bank of choice for UK customers.”

  Revolut first applied for a banking licence in 2021 but has waited an unusually long time for a verdict from regulators.