Recession fears weigh on markets as rising inflation bites – business live | Business

European selloff gathers tempo

European stock markets are all sharply decrease, as traders develop more and more nervous that economies are set to fall into recession.

The FTSE 100 index is now down 148 factors, or 2%, with 96 of its 100 members falling this morning.

The FTSE 100, May 19 2022
The FTSE 100 this morning Photograph: Refinitiv

Consumer items and companies corporations, power corporations, banks and industrial shares are the worst-performing sectors.

Germany’s DAX has shed 2%, with France’s CAC 1.9% decrease, as European markets slide following Wall Street’s worst day since 2020.

Europen meals and beverage company shares have dropped 2.5% to a two-month low, on issues that cash-strapped shoppers will probably be pressured to chop again within the face of hovering inflation, and rising curiosity raters.

Susannah Streeter, senior funding and markets analyst at Hargreaves Lansdown, says these disappointing outcomes from US retailers have spooked markets.

The slide was sparked by the US retail large Target warning that prospects have been already shopping for fewer excessive ticket gadgets like furnishings and electronics, with increased gasoline costs and provide chain prices additionally consuming into margins. It comes scorching on the heels of Walmart’s.

With client spending energy anticipated to be eroded additional via curiosity rate rises, the concern is that Target’s ache is a precursor for but extra struggles to come back for retailers. A development additionally appears to be rising of individuals wanting to save lots of their {dollars} to spend on experiences like holidays reasonably than homewares with baggage at Target promoting quick.

Consumers are displaying extra warning however after the pandemic lockdowns there’s clearly pent up demand for journey with airways like easyJet ramping up capability to satisfy demand and bookings at eating places surging. So whereas items value inflation could fall, it could be exhausting to maintain a lid on the worth of companies, notably with increased wage prices amid the battle for labour additionally being handed onto prospects.

Unions are urging Royal Mail to offer a ‘no strings attached’ pay rise.

The postal group says it has made a pay supply price 5.5%, which might be its largest pay supply for a few years.

But it additionally needs to make modifications to its supply mannequin and dealing practices, so it may “compete and adapt more quickly to changing customer needs”

Royal Mail says:

CWU has rejected our supply, and has knowledgeable Royal Mail it’s making preparations for a doable poll for industrial motion. We consider that is untimely and have entered into our formal Dispute Resolution Procedures to attempt to safe settlement.

This course of was put in place to assist cope with this sort of state of affairs. We are going into it in good religion to try to attain an settlement and provides our folks a pay enhance as quickly as doable.

The Communications Workers Union insists, although, that Royal Mail can afford a pay rise with out circumstances connected.

BREAKING 📰 : Royal Mail Group announce big earnings of £758m

This revenue was earned off the backs of our members exhausting work.

RT when you again a no strings connected pay rise for postal staff.

— The CWU (@CWUnews) May 19, 2022


BREAKING 📰 : Royal Mail Group announce big earnings of £758m

This revenue was earned off the backs of our members exhausting work.

RT when you again a no strings connected pay rise for postal staff.

— The CWU (@CWUnews) May 19, 2022

We aren’t having Royal Mail or every other company pleading poverty while asserting huge earnings and paying out shareholders.

No strings pay rise – now.

— Dave Ward (@DaveWardGS) May 19, 2022


We aren’t having Royal Mail or every other company pleading poverty while asserting huge earnings and paying out shareholders.

No strings pay rise – now.

— Dave Ward (@DaveWardGS) May 19, 2022

Shares in Royal Mail are down 7% this morning, the highest FTSE 100 faller.

Royal Mail to slash prices and elevate costs

Royal Mail is planning to slash prices and elevate costs after being hit by rising inflation, as the postal operator misses City forecasts.

Royal Mail reported that pre-tax earnings fell 8.8% within the final year to £662m within the year to 27 March, as its parcels business normalised as pandemic restrictions have been eased, and the increase in on-line purchasing slowed. Adjusted earnings rose 8%, although, to £758m.

Revenues fell 1.6% year on year, with home parcel volumes dropping 7% regardless of development in deliveries of Covid-19 check kits.

Non-executive chair Keith Williams says Royal Mail now faces ‘clear headwinds’, such as weakening GDP and rising inflationary pressures, which it plans to deal with via value will increase and development initiatives.

Royal Mail has already already elevated home costs of our letter companies by a mean of seven%, and parcel costs by a mean of 4%, along with the gasoline surcharge.

The company says:

Inflation rose all through the second half of the year.

Wage inflation in tight labour markets, sharp will increase in power and gasoline prices, exacerbated by the warfare in Ukraine, and a value of dwelling squeeze in lots of nations are leading to an unsure outlook for GDP and client spending, creating vital headwinds as we enter 2022-23.

Royal Mail says it has recognized value financial savings in extra of £350m to mitigate macro-economic pressures.

In the City, the FTSE 100 index has dropped by 1% in early buying and selling, down 74 factors at 7363.

Retailers such as Kingfisher (-4.9%), Tesco (-4.8%) and Next (-2.2%) are among the many fallers.

EasyJet narrows losses

Easyjet aircraft at Manchester Airport
Easyjet plane at Manchester Airport Photograph: Oli Scarff/AFP/Getty Images

Budget airline easyJet says it “faces summer 2022 with optimism”, after narrowing its losses because of sturdy bookings regardless of the price of dwelling squeeze.

Easyjet advised shareholders that bookings within the final 10 weeks have been constantly above the identical interval in 2019, as demand after journey restrictions have been lifted.

It experiences:

  • · Forward bookings for the third quarter are 76% bought and 36% bought for the fourth quarter.
  • · In the final 10 weeks, bookings have been 6% above the identical interval in 2019
  • · Easter holidays noticed load elements of 90%

The disruption attributable to Omicron pushed easyJet right into a pre-tax lack of £545m within the six months to the tip of March, in contrast with a £701m loss a year earlier.

EasyJet was hit by workers illness this year, resulting in a wave of flight cancellations within the Easter interval.

And regardless of the pick-up in bookings, easyJet says it nonetheless faces short-term uncertainty, so received’t present any additional monetary steerage for the 2022 monetary year.

Customers are reserving nearer to departure and visibility stays restricted.

Johan Lundgren, easyJet chief government mentioned the airline had ‘transformed’ in the course of the pandemic:

“easyJet has diminished its losses year on year, on the higher finish of steerage. The pent-up demand and elimination of journey restrictions offered for a robust and sustained recovery in buying and selling which has been additional boosted as results of our actions.

These embrace the unconventional reallocation of plane which has seen greater than 1.5m seats moved to one of the best performing markets and the step-change in our ancillary merchandise delivering elevated income – each of which have contributed to our complete yield rising by 9% in comparison with the identical interval in FY19. All of this isn’t solely delivering now however with extra to come back sooner or later as much more passengers take to the skies.

Shares have opened virtually 1% increased.

US wheat costs have continued to rise at present, which is able to add to inflationary pressures within the meals sector.

The transfer comes after India unexpectedly banned wheat exports final week, and the Russia-Ukraine warfare stored underpinning international grains markets – elevating issues of a world meals disaster.

Reuters has the small print:

The most-active wheat contract on the Chicago Board of Trade (CBOT) was up 0.89% at $12.41-3/4 a bushel.

CBOT wheat had climbed greater than 8% over the previous two days, following India’s wheat ban and experiences displaying dangerous situation of U.S. winter crop.

CBOT soybeans edged up 0.95% to $16.78-1/2 bushel, extending positive factors, whereas corn rose 0.48% to $7.85-1/4 a bushel.

Ukraine invasion may trigger international meals disaster, UN warns

Martin Farrer

Martin Farrer

The United Nations has warned that the warfare in Ukraine has helped to stoke a world meals disaster that would final years if it goes unchecked, as the World Bank introduced an extra $12bn in funding to mitigate its “devastating effects”.

UN secretary common António Guterres mentioned shortages of grain and fertiliser attributable to the warfare, warming temperatures and pandemic-driven provide issues threaten to “tip tens of millions of people over the edge into food insecurity”, as monetary markets noticed share costs fall closely once more on fears of inflation and a worldwide recession.

Speaking at a UN meeting in New York on international meals safety, he mentioned what may comply with could be “malnutrition, mass hunger and famine, in a crisis that could last for years”, as he and others urged Russia to launch Ukrainian grain exports.

He mentioned he was in “intense contact” with Russia and different nations to attempt to discover a answer.

“The complex security, economic and financial implications require goodwill on all sides for a package deal to be reached,” he mentioned of his discussions with Moscow, Ukraine, Turkey, the US, the European Union and others.

“I will not go into details because public statements could undermine the chances of success.”

The foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea.
The overseas trade dealing room of the KEB Hana Bank headquarters in Seoul, South Korea. Photograph: Ahn Young-joon/AP

Asia-Pacific markets have dropped, following final night time’s heavy losses on Wall Street.

Hong Kong’s Hang Seng is main the selloff, down 2.4% in afternooon buying and selling, with South Koria’s KOSPI dropping 1.5% and Japan’s Nikkei off 1.9%.

Technology shares slid, with Tencent Holdings dropping 6.6% after reporting its slowest income development on document following China’s crackdown on expertise corporations.

Stephen Innes of SPI Asset Management says Target’s weak quarterly earnings added gasoline to the recession danger narrative, on prime of fears over rising rates of interest:

Equities proceed to be on the mercy of broader macro themes, with extra hawkish feedback from Fed Chair Jay Powell resulting in an additional transfer increased in front-end charges, which continues to show problematic for danger.

Medium-term, the Fed is probably going to answer any easing in monetary circumstances by ratcheting up the hawkish noises and, in impact, performing as a lid on the markets. And this could preserve energetic money on the sidelines.

Dominic Rushe

Dominic Rushe

The wild journey on the US stock markets continued on Wednesday with the Dow Jones Industrial Average sinking greater than 1,100 factors as traders apprehensive a few looming recession.

All of the foremost US markets fell sharply, with the S&P closing down 4%, its largest fall since June 2020, and the tech-heavy Nasdaq dropping 4.7%.

On Tuesday markets had rallied following optimistic information about client spending and indicators that China was enjoyable its strict Covid-19 lockdowns. Just a day later issues about an financial slowdown triggered a wide-ranging sell-off.

The sell-off started after Target mentioned provide chain prices and inflationary pressures had reduce into its earnings and prospects have been shopping for fewer higher-margin gadgets such as kitchen home equipment, televisions and furnishings. More right here:

Introduction: US shares worst day since 2020 amid recession worries

Trading updates on monitors on the trading floor at the New York Stock Exchange yesterday
Trading updates on screens on the buying and selling flooring on the New York Stock Exchange yesterday Photograph: Andrew Kelly/Reuters

Good morning, and welcome to our rolling protection of business, the world economic system and the monetary markets.

Recession fears are swirling via the markets once more, as rising inflation and snarled provide chains hit economies, driving up the price of dwelling and hitting some company earnings.

Last night time, US shares posted the most important each day drop in virtually two years, on issues that financial development will falter as central bankers look to boost rates of interest to stem the surge in inflation.

Fed chair Jerome Powell’s dedication to maintain lifting borrowing prices till inflation falls meaningfully has rattled Wall Street, and is more likely to push European markets decrease at present too.

The S&P500 fell greater than 4% decrease yesterday, Nasdaq slumped greater than 5% and the Dow slid greater than 3.5%.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, explains:

Powell mentioned this week that the Federal Reserve would transcend what may very well be a impartial rate to tame inflation.

But at this level, nobody is aware of the place the impartial rate is, even the central bankers don’t have a clue.

The principal catalyzers behind the transfer are all the time the identical: the concern of excessive inflation, tighter Fed to battle the sky-high inflation, and the worry of recession.

Tech shares, which had benefitted from ultra-loose financial coverage in 2020 and 2021, have been hammered once more – sending the Nasdaq Composite down practically 28% thus far this year. Apple lost 5%, whereas Amazon shed 7%.

Last Nasdaq ATH was Nov 19 2021 and at present we’re precisely 6 months into the thirteenth bear market over the previous 50 years. Still some option to go if we use historical past as a information…

— Johan Javeus (@JohanJaveus) May 19, 2022


Last Nasdaq ATH was Nov 19 2021 and at present we’re precisely 6 months into the thirteenth bear market over the previous 50 years. Still some option to go if we use historical past as a information…

— Johan Javeus (@JohanJaveus) May 19, 2022

The benchmark S&P 500 share index noticed its largest loss since June 2020 too, with merchants spooked by retailer Target. Its stock plunged 27% after it reduce its revenue forecast and warned prices have been mounting.

Walmart had made an identical warning on Tuesday, as it grappled with surging inflation on meals and gasoline.

Data displaying a drop in US housing begins, and constructing permits, added to issues that the US economic system may very well be slowing.

Jim Reid of Deutsche Bank explains:

There wasn’t a single catalyst behind the hunch, however weak housing information out of the US together with Target’s transfer to chop its revenue outlook helped feed investor concern that the patron won’t be in as sturdy a position as beforehand thought.

And that’s on prime of all the opposite worries of late that the worldwide economic system is heading in a stagflationary course amidst numerous supply-chain points, alongside the prospect that tighter central financial institution coverage goes to additional dent development and dangers tipping numerous economies into recession.

That may embrace the UK, which appears to be like weak to a downturn after inflation hit a 40-year excessive of 9% yesterday.

European Opening Calls:#FTSE 7395 -0.58%#DAX 13915 -0.66%#CAC 6310 -0.68%#AEX 686 -1.03%#MIB 23944 -0.59%#IBEX 8437 -0.47%#OMX 1995 -0.39%#SMI 11525 -0.46%#STOXX 3662 -0.79%#IGOpeningCall

— IGSquawk (@IGSquawk) May 19, 2022


The agenda

  • 9.30am BST: Latest UK financial and business exercise report from the ONS
  • 11am BST: CBI industrial tendencies report
  • 12.30pm BST: ECB Monetary Policy Meeting Accounts
  • 1.30pm BST: US weekly jobless figures
  • 3pm BST: US residence gross sales

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