FTSE 100 Live: Microsoft buying Activision, Goldman earnings miss, oil at 7-year high, THG and Unilever slump
The UK job market continues to improve after new figures showed a better-than-expected unemployment rate of 4.1%.
Vacancies in October to December were also a record 1.25 million, an increase of 462,000 from the pre-Covid January to March 2020 level.
The figures from the Office for National Statistics come with the FTSE 100 index trading at a two-year high.
Key Points
Unilever sell-off continues
Oil hits $88 a barrel
Microsoft buying Activision for $70 billion
Economists predict rate rise to 0.5% after jobs data
THG falls further on profit margin concern
Goldman Sachs slumps on earnings miss
Shares fall as US bond yields hit two-year high
15:48 , Simon English
Markets are choppy, led by concern in the US that the Federal Reserve is going to ramp up interest rates faster than investors thought.
New York was shut for business on Monday, the end of a holiday weekend, and opened down sharply today.
The Dow Jones is presently the down jones, off 505 points at 35,407.
US bond yields rose, with the benchmark 10-year Treasury note yielding 1.827%.
American economists have been talking of “lift off” for interest rates as the Fed moves to fend off inflation.
That has led to a shift into bonds and away from shares.
Back in London, the FTSE 100 is down 40 at 7570. The top fallers are Ashtead, down 294p at 5447p, and Rightmove, down 28p at 662p.
Energy and enthusiasm not required at Phoenix Group
14:22 , Simon English
An old age friendly move from the giant insurer Phoenix, which owns Standard Life.
It says the words “energetic” and “enthusiastic” won’t appear in job adverts anymore, because they put off older people who might otherwise apply.
Since the CEO Andy Briggs is the “business champion” for older workers, that sounds fair enough.
Those words do sound like code for “we want young people”, so this is probably a good move.
It also, I think, shows that big employers realise they can’t afford to alienate any potential workers. They need the staff...
$70bn Microsoft / Activision buy-up jolts games makers
14:01 , Simon Freeman
X-Box maker Microsoft’s surprise buy-up of Call of Duty maker Activision for $70 billion has lifted shares in rival games makers.
Electronic Arts +6%Take-Two Interactive +3.5%Roblox +4.2%Ubisoft +11% in France
Trading in Activision shares was halted as they skyrocketed 40%.
Major UK holders including Legal And General, Janus Henderson and asset manager Abrdn.
Goldman Sachs falls on earnings miss
13:41 , Oscar Williams-Grut
Shares in Goldman Sachs are falling in the pre-market in New York after the US investment bank disappointed with its fourth quarter update.
The investment bank reported profits of $3.9 billion in the fourth quarter, down 27% on the prior three months and down 13% on the same quarter a year earlier. A fall had been expected but this was worse than forecast.
Profits were hit by a big jump in compensation. Payouts to bankers jumped by a third to $3.2 billion in the quarter. Like almost all industries, banking is facing a talent squeeze and having to pay up to hang on to - and attract - talent.
Shares in the bank are down about 4% in the pre-market on Wall Street.
Microsoft in blockbuster $70bn buy-up of Activision
13:34 , Simon Freeman
Microsoft is nearing a deal to buy Activision Blizzard, the video game maker behind the “Call of Duty” franchise, in what would be the US technology giant’s largest-ever takeover.
The $95-a-share all-cash transaction values Activision at around $70 billion and is expected to close in 2023.
Shares in Activision rocketed by 40% on the reports. Microsoft was off by 2.8%.
Hotels chair checks out
13:11 , Simon Freeman
Patrick Cescau is stepping down after nine years as chair of InterContinental Hotels.
Cescau retires from the Holiday Inn owner at the end of August to be replaced by finance industry veteran Deanna Oppenheimer.
He took home £384,000 in fees last year as the company navigated the pandemic's devastation to the travel industry.
The 73-year-old started his corporate career with consumer goods group Unilever in 1973, working his way up to chief executive between 2005 and 2008.
Oppenheimer, 63, who is based in the US and presently serves as non-executive chairwoman of Hargreaves Lansdown, will start the new role on September 1.
She will be IHG's first female chair, and join an elite club of women heading up FTSE 100 companies.
IHG shares dipped 1%, or 46p, to 4856 today.
888 wins bet on boredom
11:53 , Simon Freeman
Gambling firm 888 posted a jump in revenues for 2021 thanks, in part, to pandemic punters betting their way through lockdown boredom.
The Gibraltar-based business said sales increased by 14% to $972 million (£714 million) year-on-year.
Recent revenues have also been lifted by its expansion across the US, as states continue to ease gambling laws.
888 is buying William Hill’s international arm in a £2.2 billion deal which will give it control of around 1,400 William Hill branches in the UK, a deal expected to complete in the second quarter.
Shares slipped 2.2% lower to 262.4p, as investors noted sales had slowed as lockdown’s lifted.
Unilever shares continue to fall
10:42 , Graeme Evans
Unilever selling pressure continued today as shares dived to a fresh five-year low on City fears of an expensive bid battle for GlaxoSmithKline's consumer healthcare arm.
The Marmite maker's boss Alan Jope regards the potential acquisition as a perfect fit, but investors are more worried about the strain on the balance sheet if the price tag rises over the £55 billion threshold.
The financial implications of any cash-plus-shares deal wiped £7 billion from Unilever's valuation yesterday and the stock was down another 3% or 105p to 3557p in trading today, the lowest level since early 2017.
The consumer goods giant was far from alone on the blue-chip fallers board as the FTSE 100 index retreated from last night's two-year high, down 65.24 points to 7545.99.
High growth technology stocks were again under pressure after the US 10-year bond yield climbed above 1.8% for the first since before the pandemic, reflecting Wall Street expectations for as many as four interest rate rises in 2022.
Scottish Mortgage Investment Trust, whose portfolio includes Tesla and Amazon, fell 3% or 31.5p to 1118p and there was a fall of 290p to 12,240p for US plumbing business Ferguson.
The seven-year high for oil prices meant BP and Royal Dutch Shell stopped the FTSE 100 from falling further, while BT and Vodafone shares were 2% stronger.
Darktrace bucked the tech gloom, rising 6p to 419.2p in the FTSE 250 index after a major airline renewed a contact for self-learning AI technology to defend against cyber attacks.
The second tier weakened 280.90 points to 22,590.74 but there were pockets of cheer for investors after updates sent several stocks sharply higher.
Financial services business Just Group rose 6% or 5.15p to 91.35p after reporting 25% growth in retirement income sales alongside “attractive” profit margins.
Landscape products firm Marshalls shares jumped 5% as it reported record revenues of £589 million for 2021, driven by a surge in homeowners improving their patios and driveways.
There was also encouragement from defence firm Qinetiq after its difficult end to 2021. The MoD supplier reported “excellent” order intake and said it had more clarity on the end-date for a problem contract that overshadowed recent interim results.
Shares rose 10p to 280.8p as Citi analysts backed market confidence to improve.
Interest rates to double to 0.5% next month, says City
10:26 , Simon English
PRESSURE on the Bank of England to move quickly to raise borrowing costs increased today when the latest jobs figures showed that pay rises have fallen behind inflation for the first time since last summer.
While the jobs market is healthy, at 4.2% a year pay increases are lower than inflation which is at 5.1% now and set to go higher, perhaps much higher.
The spectre of rising prices could lead to a cost of living squeeze even worse than experts have so far predicted.
The latest inflation figure is reported tomorrow and could hit 5.4%. That’s ahead of looming surges in energy bills which should take inflation well past 6%.
The oil price today lept another 97 cents to $87.45, a seven-year high and a harbinger of what may be to come.
THG slumps on profit margin woes
10:17 , Oscar Williams-Grut
Beleaguered e-commerce group THG saw its stock slip further today after missing forecasts on profit margins.
THG said margins for 2021 were set to be between 7.4% to 7.7%, compared to market expectations of 7.9%, after taking a foreign exchange hit. Analysts at Jefferies said the squeeze was “mostly due to spiking whey protein prices”.
The company said margins were expected to improve this year but that wasn’t enough to stop shares dropping another 15.1p, or 8.1%, to 170.5p.
Investors zeroed in on the margin squeeze in what was an otherwise upbeat Christmas trading update. Revenues rose 30% in the three months to 31 December to hit £711.7 million. That helped full year revenue rise 38% to £2.2 billion. THG forecast growth of 22% in 2022.
Once a hot stock, THG has seen its share price collapse over 70% since a peak last September. The City has been spooked by plans to spin out core parts of the company, a complex investment deal with SoftBank, and uncertainty around its platform business Ingenuity, which has become a prime focus. Long-running concerns around governance have also come to the fore.
Founder and CEO Matt Moulding has blamed short sellers for his woes. Public disclosures show roughly 1% of the company’s shares are on loan to investors betting against it.
Today, Moulding said it had been a “challenging” first year on the stock market but thanks staff for their “for their dedication and hard work.”
"The new year has started well, and we remain confident in delivering our strategic growth plans during 2022 and beyond,” he said.
Sweet Christmas for Hotel Chocolat
09:03 , Oscar Williams-Grut
Hot chocolate subscriptions and high-end gifts like a wreath box helped posh treat maker Hotel Chocolat to a bumper Christmas.
The company, which both manufactures and sells chocolates, said sales in the 13 weeks to 26 December jumped 37% or 63% when compared to two years prior.
CEO Angus Thirwell said the “very strong Christmas” was driven by demand for high-end items - chocolate boxes costing upwards of £50, such as its wreath - and its hot chocolate machine, the Velvetiser. Hotel Chocolat launched a major ad campaign for the product in the run up to Christmas, which helped drive strong sales.
“We could see it had the potential to be a real belter for us,” Thirwell said.
Velvetiser sales also boosted income as customers can also opt for a subscription alongside it, with hot chocolate recipes delivered to their door. The company plans to launch 12 new flavours this year and has 70 more in development. Recent new additions include Mayan Chilli and Cinnamon and Maple and Pecan.
Strong sales over Christmas, which was the second quarter of the company’s financial year, mean first half sales were up 40% on last year. Hotel Chocolat now expects trading for the full year to be “marginally ahead” of prior forecasts. Liberum raised its forecast for full-year profits from £19.5 million to £21 million.
Shares rose 6p, or 1.1%, to 516p.
FTSE 100 drops, BT rallies
08:35 , Graeme Evans
The FTSE 100 index has fallen 0.4% to 7580, despite a further rally for BP and Royal Dutch Shell on the back of higher oil prices.
The heavyweights added another 1%, but were beaten to the top of the risers board by BT as the telecoms group continued its recent improvement. Shares were 2% or 2.9p higher at 183.95p, the highest level since last summer.
Technology-focused stocks underperformed amid ongoing concerns about faster policy tightening from the US Federal Reserve.
The fallers board included Scottish Mortgage Investment Trust, while the prospect of higher borrowing costs sent US-focused plumbing business Ferguson down 2% or 235p to 12,295p.
The FTSE 250 index dropped 0.6% to 22,734, with Trustpilot the biggest faller after a decline of 4%.
Triple figure oil price in sight
08:18 , Graeme Evans
Fears over supply disruptions following an attack by Yemen's Houthi group in the United Arab Emirates contributed to the surge in oil prices.
Brent crude is up by 13% in 2022 at $88 a barrel, reflecting signs that the Omicron variant won’t have a long-lasting impact on fuel demand.
It means that Brent and its West Texas Intermediate equivalent are both at their highest level since October 2014.
The focus is now on whether OPEC+ can deliver the 400,000 barrels a day increase it has promised each month.
Oanda's senior market analyst Craig Erlam said: “The evidence suggests it's not that straightforward and the group is missing the targets by a large margin after a period of underinvestment and outages.
“That should continue to be supportive for oil and increase talk of triple-figure prices.”
Rates set to rise in February as inflation beats pay rises
08:02 , Simon English
Pay is falling for the first time since the summer as inflation bites, suggesting the Bank of England might have to move faster to raise interest rates.
While the jobs market remains healthy, the spectre of rising prices could lead to a cost of living squeeze even worse than experts have so far predicted.
In December last year there were 29.5 million UK people in work, up 184,000 on November.
That is up 409,000 on the pre-pandemic level of February 2020. The UK employment rates increased by 0.2 percentage points. Unemployment is down a little 4.1%.
Oil prices continue to surge
07:43 , Graeme Evans
Oil prices continue to rise after Brent crude futures hit a seven-year high at almost $88 a barrel.
Supply tightness as some OPEC+ countries struggle to meet their production targets and the recovery in fuel demand has sent prices surging in 2022.
Brent rose another 1.5% or $1.22 to $87.70 a barrel overnight.
The FTSE 100 index is expected to fall back today after closing at its highest level in almost two years last night.
CMC Markets has forecast a decline of 18 points to 7593 as London follows the downward set by Asia markets overnight.
US markets were closed yesterday but futures markets are pointing to a 1% fall for the Nasdaq after the US 10-year bond yield climbed above 1.8% for the first since the pandemic on expectations for higher interest rates.
Wall Street is pricing in a March hike and up to four rises over the course of 2022.
