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Stocks under pressure after Apple downgrade shock – business live Stocks under pressure after Apple downgrade shock – business live
(35 minutes later)
The first mega deal of the year has just landed in the US: pharma company Bristol-Myers Squibb plans to buy biotech firm Celgene for a cool $74bn.
The $102.43 per Celgene cash and stock share offer will give Bristol-Myers 69% of the new business. It is expected to close in the third quarter of the year, generating cost synergies of $2.5bn by 2022.
Shares in Celgene, which specialises in treatments for cancer and other severe, immune, inflammatory conditions, have surged by about 30% in pre-market trading. Bristol-Myers shares fell by 13%.
Giovanni Caforio, chairman and chief executive of Bristol-Myers Squibb (who cannot have had much of a holiday), said he was “impressed by what Celgene has accomplished for patients”.
Just after midday, the European stock sell-off has accelerated in Germany and France.
The Dax is down by 1.5% and the Cac 40 has lost 1.4%.
The FTSE 100 has lost 0.3%, and the mid-cap FTSE 250 has edged down by 0.15%.
Next is the biggest riser of the blue chips, up by 4.6%, followed by Tesco, up by 2.8%. Fashion house Burberry has lost 5.5% and miner Evraz is down by 4.8%.
It’s a big anniversary today for the cryptocurrency world: bitcoin turns 10.It’s a big anniversary today for the cryptocurrency world: bitcoin turns 10.
The original distributed ledger currency has offered much – although what it (or the underlying technology) has actually delivered so far is a different question. For many of the speculators who drove its price up above $19,000 in December 2017, the subsequent fall back to around $3,800 has hit them where it hurts.The original distributed ledger currency has offered much – although what it (or the underlying technology) has actually delivered so far is a different question. For many of the speculators who drove its price up above $19,000 in December 2017, the subsequent fall back to around $3,800 has hit them where it hurts.
“The most impressive feature of bitcoin is that it is still there”, writes Tibor Fischer today to mark the birthday.“The most impressive feature of bitcoin is that it is still there”, writes Tibor Fischer today to mark the birthday.
It has survived crash after crash and state hostility. It has truly been battle-tested in the harshest of conditions.It has survived crash after crash and state hostility. It has truly been battle-tested in the harshest of conditions.
Yet it has also failed in one of its key aims, Tibor says.Yet it has also failed in one of its key aims, Tibor says.
The identity-hiding creator of bitcoin, Satoshi Nakamoto, wanted it to be a currency. That looks unlikely. In the near future, you won’t be buying a pint of milk with it at the corner shop.The identity-hiding creator of bitcoin, Satoshi Nakamoto, wanted it to be a currency. That looks unlikely. In the near future, you won’t be buying a pint of milk with it at the corner shop.
Read more here:Read more here:
Happy 10th birthday, bitcoin. It’s amazing you still exist | Tibor FischerHappy 10th birthday, bitcoin. It’s amazing you still exist | Tibor Fischer
Amid the risk-off sentiment, gold is gaining, hitting six-month highs.Amid the risk-off sentiment, gold is gaining, hitting six-month highs.
Gold spot prices reach a high earlier of $1,292.32, although they have now retreated to around $1,287.45, a gain of around 0.3% for the day.Gold spot prices reach a high earlier of $1,292.32, although they have now retreated to around $1,287.45, a gain of around 0.3% for the day.
Dean Popplewell, a vice president at spreadbetter Oanda, said:Dean Popplewell, a vice president at spreadbetter Oanda, said:
Gold prices scaled to a new six-month high earlier this morning as investor worries about a global economic slowdown, couple with equity markets volatility is supporting investor safe-haven buying, while a weaker dollar also offered some support.Gold prices scaled to a new six-month high earlier this morning as investor worries about a global economic slowdown, couple with equity markets volatility is supporting investor safe-haven buying, while a weaker dollar also offered some support.
The price rise boosted London-listed gold miner Fresnillo, which was one of the best performers on the FTSE 100 approaching midday as shares rose by 2.1%.The price rise boosted London-listed gold miner Fresnillo, which was one of the best performers on the FTSE 100 approaching midday as shares rose by 2.1%.
It looks like the Apple waves are going to rock US markets as well.It looks like the Apple waves are going to rock US markets as well.
After a brutal start to the first trading session of the year the major American indices actually finished Wednesday up. But that was before Apple cut its revenue guidance on the back of weakness in the Chinese market. US companies will do well to escape pain later.After a brutal start to the first trading session of the year the major American indices actually finished Wednesday up. But that was before Apple cut its revenue guidance on the back of weakness in the Chinese market. US companies will do well to escape pain later.
S&P 500 futures are down by 1.7% with just over three hours to go until the opening bell on Wall Street, but futures for the Nasdaq, on which Apple is listed, are down by 2.8%. Dow Jones industrial average futures are down by 1.6%.S&P 500 futures are down by 1.7% with just over three hours to go until the opening bell on Wall Street, but futures for the Nasdaq, on which Apple is listed, are down by 2.8%. Dow Jones industrial average futures are down by 1.6%.
In pre-market trading Apple’s shares are down by 8.5%, after its first revenue downgrade in almost 12 years.In pre-market trading Apple’s shares are down by 8.5%, after its first revenue downgrade in almost 12 years.
Mostly red across main European stock markets at late morning.Mostly red across main European stock markets at late morning.
The FTSE 100 has weakened again, and is now down by 0.36%.The FTSE 100 has weakened again, and is now down by 0.36%.
Germany’s Dax and France’s Cac 40 are both down by 1.2%, dragging down the Stoxx 600 by 0.9%.Germany’s Dax and France’s Cac 40 are both down by 1.2%, dragging down the Stoxx 600 by 0.9%.
An “uninspiring end to 2018” for the British construction sector.An “uninspiring end to 2018” for the British construction sector.
The UK construction PMI has not exactly made waves this morning, with barely a murmur on sterling markets – the pound’s 0.3% fall today was mainly a result of the market confusion around the flash crash last night.The UK construction PMI has not exactly made waves this morning, with barely a murmur on sterling markets – the pound’s 0.3% fall today was mainly a result of the market confusion around the flash crash last night.
Construction industry activity is “lacklustre”, with limp new business numbers not pointing to any likely pick-up, said Howard Archer, chief economic adviser to the EY Item Club.Construction industry activity is “lacklustre”, with limp new business numbers not pointing to any likely pick-up, said Howard Archer, chief economic adviser to the EY Item Club.
He added:He added:
It is evident that there are significant headwinds currently hampering the construction sectors’ upside.It is evident that there are significant headwinds currently hampering the construction sectors’ upside.
Some clients’ willingness to commit to major new projects (particularly in the commercial sector) is currently being limited by Brexit uncertainties and a subdued domestic economy.Some clients’ willingness to commit to major new projects (particularly in the commercial sector) is currently being limited by Brexit uncertainties and a subdued domestic economy.
However, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, is more positive. He said: “The construction sector has had little to cheer recently, but 2019 should be a better year.”However, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, is more positive. He said: “The construction sector has had little to cheer recently, but 2019 should be a better year.”
Optimism among builders about the outlook for activity over the next 12 months rose to its highest level since April. While many were concerned by Brexit, others anticipated winning work related to some big-ticket transport and energy infrastructure projects in 2019.Optimism among builders about the outlook for activity over the next 12 months rose to its highest level since April. While many were concerned by Brexit, others anticipated winning work related to some big-ticket transport and energy infrastructure projects in 2019.
More detail on the Apple ructions, with European suppliers particularly in the spotlight, writes Mark Sweney.More detail on the Apple ructions, with European suppliers particularly in the spotlight, writes Mark Sweney.
Apple's shock profit warning sends European shares slidingApple's shock profit warning sends European shares sliding
European suppliers to Apple have been hit hard, with the London-listed, Cardiff-based chip manufacturer IQE down 4%. The Newcastle-based software firm Sage fell 1.6%.European suppliers to Apple have been hit hard, with the London-listed, Cardiff-based chip manufacturer IQE down 4%. The Newcastle-based software firm Sage fell 1.6%.
Across Europe, Dialog Semiconductor, STMicroelectronics and BE Semiconductor fell down 8%, 7% and 3% respectively. The Austrian chipmaker AMS had more than a fifth wiped off its stock value.Across Europe, Dialog Semiconductor, STMicroelectronics and BE Semiconductor fell down 8%, 7% and 3% respectively. The Austrian chipmaker AMS had more than a fifth wiped off its stock value.
Chancellor Philip Hammond has appointed Dame Colette Bowe and Dame Jayne-Anne Gadhia as external members of one of the Bank of England’s top committees.Chancellor Philip Hammond has appointed Dame Colette Bowe and Dame Jayne-Anne Gadhia as external members of one of the Bank of England’s top committees.
They will join the financial policy committee (FPC), led by governor Mark Carney, which is responsible for monitoring financial stability.They will join the financial policy committee (FPC), led by governor Mark Carney, which is responsible for monitoring financial stability.
They will replace two men in the second half of the year. The Bank has faced persistent concerns about the gender balance in its top echelons. Of the 42 applicants to the jobs, 20 were women. Five women from 8 were invited to final-stage interviews.They will replace two men in the second half of the year. The Bank has faced persistent concerns about the gender balance in its top echelons. Of the 42 applicants to the jobs, 20 were women. Five women from 8 were invited to final-stage interviews.
Bowe and Gadhia will start their new jobs shortly after the UK’s departure from the EU in March 2019. The Bank has braced itself for financial market turmoil if the UK leaves without a deal.Bowe and Gadhia will start their new jobs shortly after the UK’s departure from the EU in March 2019. The Bank has braced itself for financial market turmoil if the UK leaves without a deal.
Bowe is the current chairman of the Banking Standards Board and has served as a board member of the UK Statistics Authority and the Department for Transport. Gadhia was the chief executive of Virgin Money from 2007 until last year’s takeover by CYBG, and is one of the City’s most prominent business figures.Bowe is the current chairman of the Banking Standards Board and has served as a board member of the UK Statistics Authority and the Department for Transport. Gadhia was the chief executive of Virgin Money from 2007 until last year’s takeover by CYBG, and is one of the City’s most prominent business figures.
They will replace Richard Sharp and Martin Taylor, who are stepping down at the end of the first quarter of 2019 and the second quarter of 2019 respectively.They will replace Richard Sharp and Martin Taylor, who are stepping down at the end of the first quarter of 2019 and the second quarter of 2019 respectively.
British builders are suffering from “an intense headwind” from – you guessed it – Brexit uncertainty, according to Tim Moore, economics associate director at IHS Markit. It was the weakest upturn in commercial activity for seven months.British builders are suffering from “an intense headwind” from – you guessed it – Brexit uncertainty, according to Tim Moore, economics associate director at IHS Markit. It was the weakest upturn in commercial activity for seven months.
UK construction firms signalled a slowdown in housing and commercial activity growth during December, which more than offset a strong performance for civil engineering at the end of 2018.UK construction firms signalled a slowdown in housing and commercial activity growth during December, which more than offset a strong performance for civil engineering at the end of 2018.
Despite the weaker housing market, housebuilding came in as the fastest growing sub-sector for builders during the course of 2018.Despite the weaker housing market, housebuilding came in as the fastest growing sub-sector for builders during the course of 2018.
Yet “residential growth remains much softer than the two-and-a-half year peak achieved last summer”, adds Moore.Yet “residential growth remains much softer than the two-and-a-half year peak achieved last summer”, adds Moore.
The growth of the British construction industry slowed in December because of subdued demand, according to the latest purchasing managers index (PMI) for the sector.The growth of the British construction industry slowed in December because of subdued demand, according to the latest purchasing managers index (PMI) for the sector.
IHS Markit’s closely followed barometer fell to a reading of 52.8 in December, down from 53.4 in November. The index remained above the 50 no-change mark, indicating the sector is still growing, but it came in slightly below economists’ expectations of 52.9.IHS Markit’s closely followed barometer fell to a reading of 52.8 in December, down from 53.4 in November. The index remained above the 50 no-change mark, indicating the sector is still growing, but it came in slightly below economists’ expectations of 52.9.
Next reactions are still coming in, and it’s mostly positive for the retailer.
“Not such a bleak midwinter”, according to analysts at UBS, the investment bank. They said that Next’s performance “showed the benefit of holding full price for as long as possible”.
The company could also benefit from “industry capacity reduction”, UBS said – banker code for other companies failing amid a struggling industry.
Greg Lawless, consumer equity analyst at Shore Capital, said:
Like the company, we believe that we need to get through calendar Q1 and understand the political and economic backdrop of any potential Brexit deal. Given the macroeconomic environment and difficult clothing market through the autumn, management should be applauded for such a credible trading update.
And, of course, there’s also the story we know well across the retail sector, with investment in online technology key as shopping moves online.
Next’s update basically not as bad as feared, no car crash which should lift hopes for others. Online sales apace while stores struggle
Some more interesting detail on the currency flash crash last night which, as ever with these strange incidents, has left traders scratching their heads.
The Japanese yen gained by as much as 7% against the Australian dollar, while it also fell steeply against the US dollar. Liquidity was constrained because Japan is still on holiday, meaning a few traders could have an outsized effect.
The dramatic slump (and quick rebound) are evident in the chart below.
Fritz Louw, currency analyst at Japanese bank MUFG, said:
The sharp strengthening of the yen and weakening of the Australian dollar was clearly exaggerated by the flash crash but it does also reflect building fears over slowing global growth particularly in China and Australia.
The flash crash also likely caused problems for holders of short positions against the Japanese yen. The below graph from Louw shows that short positions (the grey columns) have increased recently, meaning there will be a lot of losers from the big and brief rise in the yen’s value.
Some more good news for Next: stockbroker Liberum has upgraded its recommendation from “hold” to “buy” in light of the stronger sales growth.
Liberum analysts Tom Musson, Wayne Brown and Adam Tomlinson write:
We think is an excellent performance considering how bad November was for the sector and the scale of the downgrades we have seen elsewhere in fashion and clothing.
Their target price is now £61 for the shares – so still a lot of upside in their view from the current mark of around £43.
A spike in sales in the last three weeks of December helped save Christmas for the fashion chain Next but a surge in costly web orders will hit annual profits, writes Zoe Wood.
The high street bellwether is among only a few retail chains that resist pre-Christmas discounting and it was expected to have suffered as struggling rivals slashed prices to attract shoppers as Brexit jitters weighed on consumer confidence.
In the end the retailer reported overall sales growth of 1.5% for the last two months of 2018.
Read more here:
Next's Christmas saved by late splurge from shoppers
Early trading confirms that Apple-inspired slowdown fears are leaving their mark on European stocks.
Shares are down across major European markets – although the FTSE 100 has now recovered most of its early losses. London’s blue-chip index is down by 0.1%
Losses are steeper in Germany and France, where the Dax and Cac 40 are both down by 0.9%.
The Apple contagion is spreading across Europe. Companies with large Chinese sales volumes are in the spotlight.
Watchmaker Swatch and Kering, the luxury goods brand owner, have both taken a tumble, while Burberry is down by 3%. London-listed chipmaker IQE is down by 1%.
Mining stocks are down across the board (with the exception of miners of safe-haven gold) as the Apple update feeds into fears that the slowdown in China, the world’s second-largest economy, will drag on demand for minerals. Evraz and Antofagasta are among the largest fallers in the FTSE 100, both down by 2%.
Next shares jump by 6%.
The market appears to be pleased with Next’s update, with shares hopping over Marks & Spencer to lead the FTSE 100.
Associated British Foods, which owns the Primark retailer, gained by 2%. Kingfisher, the owner of DIY chain B&Q, gained by about 1%.
Next chief executive Simon Wolfson said, “The UK consumer is not in a bad place.”
FTSE falls by 0.5% at the open.
Marks & Spencer is the early leader, up by more than 4% in the opening minutes, boosted by the readacross from Next’s results.
Burberry, which is highly exposed to the Chinese market, is among the biggest fallers early on, down by 2.8%.
Let’s get some more detail on that Apple forecast downgrade overnight.
Trading in Apple shares was temporarily halted after the California-based company cut revenue forecasts, writes Dominic Rushe.
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in greater China,” said Apple chief executive Tim Cook. He cited falling sales of iPhones, Mac computers and iPads.
Apple stocks tumble after company cuts forecasts for key quarter
Apple’s statement was its first profit warning since 2002 and its first of the smartphone age.
Welcome to the business live blog, with our rolling coverage of markets, global economics and corporate news.
After John Lewis yesterday reported a bump in sales in late December following a rocky pre-Christmas period, fellow retailer Next has also issued a relatively positive update, with trading in line with its previous forecasts.
Sales at the FTSE 100 retailer rose by 1.5% from 28 October to 29 December, although it slightly downgraded its pre-tax profit forecast for the full year by £4m, to £723m.
The retail industry has been under serious pressure, but some analysts have argued that Next, which resisted the temptation to chase volumes with widespread discounting, may be able to weather the storm.
On global markets, a shock revenue forecast downgrade from Apple overnight added to jitters that have carried over from the end of 2018.
Apple’s update after the close on US markets – which recovered from earlier falls to edge up on Wednesday – shocked Wall Street. Apple shares fell by as much as 7.5% in after-hours trading, as the company issued a warning that sales in the key Chinese market were dragged back by slowing growth. US stock futures point to another tricky session coming up later.
The news prompted nerves on currency markets, where what appears to be a flash crash saw the Japanese yen soar against the US dollar as investors surged towards safe havens.
The new year is only a few days old when an apparent “flash crash” has hit currency markets. It took 7 minutes for the Yen to surge through levels that have held through almost a decade. Apple’s rev cut may have been a trigger Algorithms may be cause. https://t.co/sMaKraVMOt pic.twitter.com/hdQDibJ3Oa
Japanese markets remain on holiday, but Nikkei 225 futures fell by 2.2%. South Korea’s Kospi 200 index fell by 0.95%.
However, Thursday’s trading was less painful in Hong Kong and Shenzhen after heavy falls on Wednesday: shares on the Shanghai SE composite index fell by only 0.2%, while the Shanghai Shenzhen CSI 300 Index lost 0.3%. Australian shares bucked the trend as the Australian dollar fell to near decade lows, boosting mining companies.
The agenda
9:30am GMT: UK construction purchasing managers index (PMI)
1:15pm GMT: US ADP employment change
3pm GMT: US ISM manufacturing PMI