Closing summary: US stock markets drop sharply
European markets have taken something of a fright before Christmas on Monday thanks to concerns about new restrictions to tackle the omicron variant - and Wall Street has followed their lead.
Here are the opening snaps from the three main US benchmark stock indices:
- S&P 500 DOWN 59.17 POINTS, OR 1.28%, AT 4,561.47
- NASDAQ DOWN 227.60 POINTS, OR 1.50%, AT 14,942.08
- DOW JONES DOWN 455.76 POINTS, OR 1.29%, AT 34,909.68
The mood has improved somewhat over the course of the day, however. The FTSE 100 has fallen by 0.9% to just over 7,200 points - but that is an improvement over the first few hours of trading.
The pound has recovered against the US dollar - it is almost flat for the day at about $1.3235.
Here are some of the other notable business events from today:
- Rolls-Royce won the backing of Qatar for small modular nuclear reactors.
- A $10bn spreadsheet error was among the reasons for a £47m Standard Chartered fine.
- Ex-Tesco boss Sir Dave Lewis was appointed to lead GSK’s consumer products spinout, which is expected to become one of the FTSE 100’s biggest companies.
- UK pubs and restaurants have warned of plummeting sales and “decimated” bookings.
- Data showed UK high streets have also suffered markedly, with falling sales in what should have been their most profitable weekend.
- The annual shindig for corporate types at Davos has been postponed for the second year in a row.
- Cruise ship company Carnival has said it will be back to 2019 earnings before various costs by 2023 - but that the first half of 2022 could result in another loss.
You can continue to follow the Guardian’s coverage from around the world on our homepage and via our live blogs:
In the UK, Boris Johnson and ministers are meeting to consider further coronavirus restrictions for England
In our global coronavirus coverage, Thailand is considering ending quarantine-free travel, and the EU is set to back the Novavax vaccine
The bounce on European stock markets has run out, it seems.
The FTSE 100 is wavering around a 1.1% decline for the day - perhaps it is waiting for direction from the UK cabinet, which is about to meet. However, any leaks (or indeed official messages) are likely to come very near the end of the trading day, if not after.
The Dax in Germany is down by 1.8% and France’s Cac 40 has lost 1.1%. The Stoxx 600, which combines all of the above and more, is down by 1.5%.
Britain’s largest pub chain JD Wetherspoon has appointed two employees to its board in response to criticisms of its corporate governance.
Four out of about 100 managers of Spoons pubs were chosen after shareholders and employees said it would “benefit from having more pub experience at board level”, the company said on Monday.
Debbie Whittingham, a regional manager for the West Midlands, and Hudson Simmons, area manager for Sheffield, will join the board, while another two will be “associate employee directors”.
Tim Martin, Wetherspoon’s founder and chairman, has previously lashed out at those who have criticised the company’s corporate governance in lengthy letters published on the stock market’s news service. However, he said:
Pub and area managers, and other members of pub teams, have always participated in weekly decision-making meetings, which distil suggestions from the ‘front line’.
The appointment of employee directors will extend this approach to board meetings and will help to preserve the culture of the company for the future.
It was cautiously welcomed by the High Pay Centre, a thinktank focused on pay, corporate governance. Luke Hildyard, the High Pay Centre’s executive director, said:
The perspectives workers directors can offer in terms of improvements to customer service and employee relations are obvious.
The new Wetherspoons directors would have more credibility and independence if they’d been elected by colleagues rather than appointed by existing board members and it should also be remembered that boardroom representation is a complement not a substitute for full trade union rights and recognition. But this is a positive step by Wetherspoons that will benefit both workers and shareholders in the long term.
One to watch on the UK politics front: the prime minister has called a cabinet meeting at 2pm.
As Andrew Sparrow points out on the Guardian’s UK politics live blog, there is not usually a cabinet meeting on a Monday, so this is an emergency coronavirus meeting. Dress codes and wine pairings have not yet been released.
You can follow updates on the cabinet here:
One for the central bank watchers: Germany’s new government has picked a new head of its central bank: “career central banker” Joachim Nagel.
Nagel’s predecessor, Jens Weidmann, was perhaps the European Central Bank’s most prominent internal critic -arguing against the stimulus that it has used to prop up the EU economy. (All eurozone central bank heads get a place on the governing council, which sets monetary policy for the bloc.)
Nagel, a former Bundesbank board member, will take over on 1 January.
Reuters summarised his recent career as:
A former board member of the state-owned development bank KfW Bank, Nagel currently works for the Bank for International Settlements, which is often considered the central bank of central banks.
Early in his career, he was also a consultant for the SPD, the party that took over government earlier this month and will make the Bundesbank appointment one of its first decisions.
Germany’s finance minister under the new coalition government, Christian Lindner, said on Monday:
In view of inflation risks, the importance of a stability-oriented monetary policy is growing. He is an experienced personality who ensures continuity at the Bundesbank.
World Economic Forum at Davos postponed in light of omicron concerns
The World Economic Forum at Davos has been postponed to the summer because of concerns about the coronavirus variant, it said on Monday.
The event, usually held every year at the Swiss ski resort, was scheduled for 17 to 21 January 2022, but will instead happen in “early summer”. In January the World Economic Forum will instead run online meetings.
Davos usually serves as an occasion for many of the world’s most powerful people from the realms of business, economics and politics to gather and pontificate about the world’s problems. However, the meeting of thousands of people from all over the world has been difficult to continue during pandemic conditions. The 2021 event was cancelled in favour of online events in the summer.
In a statement, the event’s organisers said:
Current pandemic conditions make it extremely difficult to deliver a global in-person meeting.
Despite the meeting’s stringent health protocols, the transmissibility of Omicron and its impact on travel and mobility have made deferral necessary.
Christmas shoppers skipped city centres on weekend, data suggest
The number of shoppers across British high streets fell over the weekend before Christmas, according to new data from Springboard that show people spurned city centre shopping during what should have been the biggest weekend of the year.
Retail footfall was 19% down for the week ending on Saturday compared to the equivalent in 2019, Springboard said - although it was higher than December 2020, when the UK government dramatically u-turned to put in place a Christmas lockdown.
Shopping centres fared particularly badly, with footfall down by 27% on 2019, but high streets were also down by a fifth on 2019. Retail parks, which are generally accessed by private car and are often open-air, performed slightly better.
Weekend traffic overall fell compared to the previous weekend by 8.5% in Central London and by 6.4% in cities outside of the capital.
Diane Wehrle, insights director at Springboard, said:
The nervousness of shoppers about making in-person shopping visits inevitably meant that large city centres lost out to smaller high streets, particularly over the weekend when footfall declined from the week before in Central London and large cities outside of the capital whilst rising in market towns.
There has been a bit of movement on currency markets as well this morning: sterling is down by 0.4% against the US dollar. One pound will buy $1.3195.
That in itself is not a huge move, but it puts the pound perilously close to its lowest level since December 2020, when the UK was facing the prospect of belated Christmas restrictions in the hope of limiting the spread of a new coronavirus variant (a familiar tale).
If it drops below $1.3165 it will mark a new low for 2021, an unusual situation considering the Bank of England only just last week shocked markets with an interest rate rise - pre-empting the Federal Reserve.
However, the Fed has itself also made it clear that it will tighten the US money supply. The prospect of a series of interest rate rises next year has made the dollar more attractive to investors.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said the dollar will be, pace the omicron variant, one of the “winners from global growth” during 2022.
There has also been a similar bounce on oil markets. The price of Brent crude, the North Sea benchmark, is still down by 3.3% today - but that is a recovery from earlier.
Brent crude futures were down by as much as 5% earlier this morning, with one barrel for February delivery going for as little as $69. It is now back at $71.30.
Victoria Scholar, head of investment at interactive investor, an investing platform, said:
Heavy selling has hit the oil markets again this week with WTI and Brent crude both shedding more than 3% extending losses after a week in the red with Brent already ending down 2.6% as the Omicron variant continues to spread, weighing on the demand outlook and market sentiment. The Netherlands’ latest lockdown from Sunday sparked investor concerns of fresh restrictions in Europe and the US to curb the spread of Covid, prompting fears of a near-term economic slowdown.
Brent crude has shed more than 17% from the October high, trading in a descending trendline and retracing around 70% of its prior gains from the August trough.
Kit Juckes, a strategist at Société Générale, a bank, is in a festive mood - albeit the wrong feast. “It’s a lot more like Halloween than Christmas,” he said:
Oil prices, equity indices and bond yields are lower on a mix of omicron concerns and Senator Joe Manchin’s announcement that he won’t vote for President Biden’s spending bill.
Just over half an hour after the FTSE 100 slumped further, it has just regained a percentage point.
It is now down by just 1.3% at 7,179 points, having earlier dropped by as much as 2.2%.
European stocks have also recovered somewhat: Germany’s Dax is now down by 2.2% and France’s Cac 40 is down 1.4%.
All the usual disclaimers apply at this point in the year: a fair few investors will have shut up shop for the holidays, and few of those who remain will have planned any major moves in the absence of central bank activity. That means that there will be lower liquidity and fewer buyers to soak up any sales, so moves can be exaggerated.
Nevertheless, that is a notable swing over the course of less than an hour.
It may have been partly helped by vaccine maker Moderna. It said on Monday (in an interview published at 10am GMT) that a booster dose of its Covid-19 vaccine appeared to offer protection against the omicron variant. Reuters reported:
The vaccine maker said the decision to focus on the current vaccine, mRNA-1273, was driven in part by how quickly the recently discovered variant is spreading. The company still plans to develop a vaccine specifically to protect against Omicron, which it hopes to advance into clinical trials early next year.
“What we have available right now is 1273,” Dr. Paul Burton, Moderna’s Chief Medical Officer, said in an interview. “It’s highly effective, and it’s extremely safe. I think it will protect people through the coming holiday period and through these winter months, when we’re going to see the most severe pressure of Omicron.”
London's West End footfall 29% below pre-pandemic level
Some detail on how the UK’s shops fared over the last week - usually one of the the strongest of the year: it was not great.
Footfall on and near London’s Oxford Street, the country’s biggest shopping district, was 17% below pre-pandemic levels, according to the New West End Company, which represents about 600 shops.
Shopping was 5% below the previous weekend, and across the entire week of the 13th December footfall was down by 29% compared with 2019’s figures.
Jace Tyrrell, chief executive of the New West End Company, said businesses were “disappointed” with how the weekend went:
With less than five days to go until Christmas day and the probabilities of a circuit-breaker lockdown increasingly on the horizon, the retail and leisure sector is now facing a huge amount of financial uncertainty when it should be enjoying a much needed shot in the arm.
We are therefore backing the #BusinessBooster campaign and calling on the government to provide urgent and swift financial support. Temporary measures such as a 100% business rate relief for the first quarter of the year, extension of the VAT reduction and introduction of grants could be the difference between viable businesses avoiding closures and job losses in the new year.
The FTSE 100 sell-off has accelerated - it is now down by 2.2%.
It has hit the lowest level since the start of December as concern over the spread of the omicron variant ramp up.
While the UK government is fielding a lot of questions about parties, the hospitality industry is trying to put the pressure on over the lack of them, given how the current lockdown-lite has affected their bookings.
The Guardian’s Joanna Partridge writes:
Pubs and restaurants have warned of plummeting sales and “decimated” bookings, as pressure increases on the government to offer urgent financial support to struggling hospitality businesses.
The weekend just passed should have been the busiest trading period of the Christmas season, but customers chose to stay away, said Nick Mackenzie, the chief executive of the pub and brewery chain Greene King, which runs 2,700 pubs, restaurants and hotels across the UK.
“Demand has dropped, bookings have been decimated, some parts of the country we are 70%, 80% down on 2019, so the situation is pretty unsustainable,” Mackenzie told BBC Radio 4’s Today programme on Monday.
Warnings from the government had led to “lockdown in all but name”, Mackenzie said, and he urged the chancellor, Rishi Sunak, to deliver “quick and effective support”.
You can read the full report here:
Some interesting detail from the notice detailing the reasons for the errors Standard Chartered made.
One key reporting problem was caused by a spreadsheet error in which a workers put the wrong sign - so it read as positive rather than negative.
Sure, we all make that kind of mistake, except in this case the error meant the calculation was out by a staggering $10bn. That sounds like a very bad day at the office indeed.
Updated
Standard Chartered to pay £47m fine for failing to cooperate with regulators
Standard Chartered will have to pay £46.5m after it failed to cooperate with regulators at the Bank of England.
It was a record fine imposed by the Bank’s Prudential Regulation Authority (PRA), which is tasked with overseeing the UK banking sector’s financial stability.
The fines came in relation to reporting errors related to movements of US dollars, amid concerns in October 2017 about the outflow of cash. StanChart made five errors reporting, which “meant the PRA did not have a reliable overview of its USD liquidity position,” the regulator said on Monday.
Yet StanChart failed to report one of the breaches until four months later, following its own internal investigation.
Somewhat oddly, however, StanChart still managed to qualify for a discount for agreeing to pay the fine. It would have paid another £20m had it not cooperated when faced with a fine for not cooperating.
Sam Woods, the Bank of England’s deputy governor for prudential regulation and chief executive of the PRA, said:
We expect firms to notify us promptly of any material issues with their regulatory reporting, which Standard Chartered failed to do in this case. Standard Chartered’s systems, controls and oversight fell significantly below the standards we expect of a systemically important bank, and this is reflected in the size of the fine in this case.
Two more companies have edged into positive territory on the FTSE 100 this morning:
Royal Mail and Ocado. It appears that investors are expecting a lot of us to be stuck at home sending and receiving parcels, like in previous lockdowns.
Former Tesco boss Dave Lewis appointed head of GlaxoSmithKline spin-out
GlaxoSmithKline has appointed former Tesco chief executive Sir Dave Lewis to oversee its consumer products division once it is split from the main pharmaceutical company, it announced on Monday.
Lewis will chair the business, which will make its own way from the middle of 2022 with revenues of about £10bn annually - meaning it will likely join the FTSE 100 when it lists itself on the London Stock Exchange. GSK will give up 80% of the equity to other shareholders, while it focuses on pharma in the hope that investors will appreciate a more targeted business.
From 2014 to 2020 Lewis was in charge of Tesco, supervising its recovery from an accounting scandal. Before that he held a senior role at Unilever overseeing its personal care products.
Lewis said:
GSK Consumer Healthcare is a world-class business with significant prospects and a high-quality leadership team. I am looking forward to being part of its exciting future as an independent company and the very positive impact it can have on people’s health all over the world.
It is a very broad-based sell-off; there isn’t much happening on markets beyond the reaction to omicron.
The below grab from the terminal shows the extent of the selling among the FTSE 100: only miner Polymetal is in positive territory.
Everyone else has lost ground, with travel shares like Rolls-Royce and British Airways owner IAG among the big losers. Events and publishing company Informa doesn’t have much to gain from the prospect of new restrictions either - but to be honest there are potential negative effects for almost any sector if the economic recovery is delayed or even thwarted.
And the opening snaps are in - steep declines across Europe as expected:
- BRITAIN’S FTSE 100 DOWN 1.7%
- EURO STOXX INDEX DOWN 1.5%; EURO ZONE BLUE CHIPS DOWN 1.4%
- FRANCE’S CAC 40 DOWN 2.1%, SPAIN’S IBEX DOWN 2.5%
No Dax yet - which usually means a big move as it takes a few minutes to calculate.
Updated
European markets will open very shortly. Futures are still looking painful: the FTSE 100 is pegged for a 1.8% decline.
Rolls-Royce wins Qatari financial backing for small nuclear reactor project
The investment arm of the Qatari state has jumped on board Rolls-Royce’s plans to build small modular nuclear reactors (SMRs) which the British engineering stalwart hopes will prove to be a significant new source of revenues.
The Qatar Investment Authority (QIA) will invest £85m for 10% of the project, Rolls-Royce announced on Monday.
While not a huge amount of money for a company that burned through about £2bn in the last year, Rolls-Royce will hope that the involvement of the Qatari state, which has huge financial wealth stored up from decades of oil sales, will prove to other investors that the SMR business is the real deal. Rolls-Royce already has the backing of BNF Resources UK Ltd and Exelon Generation Ltd as shareholders in Rolls-Royce SMR - plus £210m from the UK government.
Rolls-Royce has had a tough pandemic, as long-haul flights that rely on its engines have been grounded. The omicron variant has dealt it another blow in recent weeks.
However, it hopes that the SMRs - modelled on the technology powering nuclear submarines - will be considerably bigger than its existing business as it takes a key role in the transition to net zero carbon emissions. The jury is still out for the investment community.
Mansoor bin Ebrahim Al-Mahmoud, chief executive of the QIA, said:
QIA is investing in the energy transition and funding the technologies that enable low carbon electricity generation. We will continue to seek out investments that align with our mandate to deliver long-term value for future generations through responsible sustainable investments.
Warren East, Rolls-Royce’s chief executive, said:
I am tremendously pleased to announce that we have further strengthened our relationship with Qatar, through QIA’s investment in the Rolls-Royce SMR business. We have successfully raised the capital we need to establish Rolls-Royce SMR and it is encouraging to confirm that the business is now set up to succeed.
European stock markets braced for steep selloff
Good morning, and welcome to our live, rolling coverage of business, economics, the eurozone and financial markets.
Investors have their eyes on one thing this morning: just how bad is the omicron coronavirus going to be for economies across the world. UK and European stock market futures suggest that traders are rattled: the FTSE 100 is on course to fall by 1.9% on opening, while Germany’s Dax benchmark index and France’s Cac 40 are set for declines of 2.4% apiece.
The week before Christmas is usually a fairly odd affair on financial markets, as investors lock up their trading terminals and put their feet up. The last two years have been somewhat different. Omicron is the ghost of Christmas past following last year’s holiday lockdowns when the delta coronavirus variant swept across the world.
Asian markets have set the tone: Hong Kong’s Hang Seng index dropped 2.2%, while China’s SSE Composite index, which covers Shanghai-listed shares, dropped 1.1% and Japan’s broad-based Topix fell 2.2%.
There was no sign in the UK of any new restrictions - but that has not stopped a large proportion of the population from locking down in order to save themselves from a Christmas period of self-isolation. Pubs and restaurants say their business has evaporated like England’s batting lineup.
Neither over the weekend have we seen any action from the UK government to help hospitality companies whose Christmas trading period has been destroyed - although health secretary Sajid Javid trailed the possibility of restrictions to come yesterday.
The calls for support have been flooding in, including so far this morning from the bosses of restaurant chain Franco Manca, pub chain Greene King, and the boss of the City of London Corporation, which runs London’s central business district, which is already looking like the ghost of Christmas future.
Instead, the government is fighting yet another battle over its apparent habit of holding gatherings during lockdowns. Here is the Guardian exclusive picture that has sparked the latest round of criticisms:
Deputy prime minister and secretary of state for justice Dominic Raab has this morning opined that the wine and cheese evening constituted work.
And let’s not forget that the under-pressure government also faced the resignation of the man who had been tasked with renegotiating key parts of the UK’s trading arrangement with its largest trading partner, the EU. Foreign secretary Liz Truss will take charge of talks over the Northern Ireland Protocol, which Boris Johnson signed up to just two years ago to rush a Brexit deal through.
