Closing summary
The big market story today was bitcoin’s new record high of more than $48,000 this morning.
The cryptocurrency extended its gains overnight after Tesla disclosed its own $1.5bn investment in bitcoin and said it is likely to start accepting it as payment for its cars in the future.
But some investors started to cash out, which pared gains and left bitcoin trading around $46,300 on Tuesday afternoon.
Brent crude was momentarily at 13-month highs and set for its longest winning streak since January 2019. However, a pull-back in midday trading could leave it shy of the seven straight days of trading needing to match that streak.
European stocks also lost their shine, with mixed trading across major indexes. The FTSE 100 and FTSE 250 were some of the only bright spots, up 0.1% and 0.2% respectively. The German DAX is down 0.3%, while the French CAC is flat and Italy’s FTSE MIB is down 0.5%.
Wall Street also opened lower.
In other news:
UK health secretary Matt Hancock announced the government was tightening hotel quarantine for arrivals, and stepping up fines and introducing prison sentences of up to 10 years for those that refuse to comply.
The lead investigator into the failed regulation of London Capital & Finance, Dame Elizabeth Gloster, has hit out at former City watchdog boss Andrew Bailey for claiming that his request to not be named in the damning report was down to a ‘misunderstanding’.
That’s all from us today. Join us from 8am tomorrow. Take care. –KM
US stocks open lower
Wall Street is open for trading. Here are the initial prints:
- Dow is down nearly 0.3% at 31,295 points
- S&P 500 is down 0.25% at 3,905 points
- Nasdaq is down 0.14% at 13,968 points
As US traders login for the Tuesday trading session, they be catching up with the overnight spike in bitcoin to fresh record highs of over $48,000 and mulling whether there’s further to go in this week’s rally.
Despite falling back from those highs, the cryptocurrency is still up 3.7% on the session at $46,371.
The EU’s Security and Markets Authority (ESMA) is to look into how clearing houses coped during the surge in trading that led to rollercoaster moves on stock markets at the start of Covid lockdowns last year.
The regulator is planning to hold a workshop for clearers on 17 February “to gather the views of our speakers and shine a light” on how they managed at the start of the pandemic.
In a release on Tuesday, ESMA said:
It will also allow participants to take stock of lessons learned and discuss possible improvements.
As Reuters reports, clearers are waiting to see if regulators will bring in tougher rules already mooted by the Bank of England.
These could include forcing users to post higher amounts of cash and collateral against trades in normal times to avoid the need for big, sudden increases in turbulent markets.
Central banks have said a “dash for cash” last March followed clearers raising margins, forcing asset managers into a “fire sale” of holdings in funds to raise extra cash.
Central banks had to inject large amounts of liquidity into markets to avoid a destabilising crunch, Reuters added.
US futures have slipped further, with less than an hour to go before Wall Street opens for Tuesday’s trading session:
- Dow futures are down 0.2%
- S&P 500 futures are down 0.15%
- Nasdaq futures are down 0.14%
Transport stocks on the FTSE 350 travel and leisure index are trading lower amid Hancock’s announcement about tighter, more expensive quarantines for UK arrivals.
The capital’s business lobby group London First is also hoping that additional business support is rolled by chancellor Rishi Sunak at next month’s budget.
Adam Tyndall, Programme Director for Connectivity at London First, said:
The short-term future of international travel will be reliant on a combination of vaccination and testing, so increasing testing requirements is an important step towards instilling confidence in passengers.
However, the Government must work with industry to boost international cooperation towards a common global approach.
There will be significant restrictions on international travel for some time to come, so it is critical that in the Chancellor’s Budget next month further support is included for directly-affected sectors.
Responding to stricter traveller quarantine rules, the Confederation of British Industry is calling for more government support for companies and staff in the UK’s aviation sector:
Matthew Fell, CBI Chief UK Policy Director, said:
Business understands the priority is to protect the health of the population, and supports measures to reduce infections and hasten the return to a normal way of life.
Yet these new quarantine rules and testing requirements are a further reminder of just how challenging the situation is for the international travel sector right now.
Further, immediate support is now essential to protect companies and jobs in the aviation sector and its supply chains in the difficult months ahead. The government should also be clear on a roadmap to relaxing restrictions when health data permits.
The UK’s world-class aviation sector – which underpins so much of our economic activity – must be supported so that it can play its full part in the country’s recovery.
UK tightens hotel quarantine for arrivals, steps up fines and punishments
UK health secretary Matt Hancock is outlining how the government is strengthening Covid restrictions for travellers, as he addresses MPs this afternoon.
He’s said new border systems will come into force from Monday and they will be setting up the hotel quarantine system for UK and Irish people arriving from red list countries.
People who need hotel quarantine will need to pay £1,750 each for the hotel, transport and testing. And arrivals will be escorted to hotels for 10 days or longer.
The government has contracted with 16 hotels, for 4,600 rooms initially. Anyone who breaks the rules faces fines of up to £10,000 and a 10 year prison sentence.
You can follow all live updates on our politics live blog with Andrew Sparrow here:
Updated
LC&F investigator hits out at Bank of England governor Andrew Bailey
The lead investigator into the failed regulation of London Capital & Finance, Dame Elizabeth Gloster, has hit out at former City watchdog boss Andrew Bailey for claiming that his request to not be named in the report was down to a ‘misunderstanding’.
Yesterday, Bailey was asked by MPs on the Treasury Committee whether he regretted asking that no single person should be singled out and made responsible in the report.
He replied that there had been a “fundamental misunderstanding” and suggested that he was only looking to clarify any questions around personal responsibility ahead of the report’s released.
Gloster has now sent a letter and supplementary evidence to the Treasury Committee after yesterday’s hearing with the now-Bank of England governor.
She explains:
As you will see, Mr Bailey’s primary assertion was that my report should “delete the reference to ‘responsibility’ resting with specific identified/identifiable individuals, whether the executive directors of supervision, or Mr Bailey.
Gloster says Bailey also wanted the report to be clear that individuals held no responsibility, even if named:
The final paragraph on this point in the representations requested that, in the event that the investigation disagreed with Mr Bailey’s primary position that references to individual responsibility should be deleted, the final report should make clear that the investigation “is not making findings that acts or omissions of Mr Bailey caused the regulatory failings”.
Oil prices have given up their gains, which could end their longest winning streak since January 2019.
Today would otherwise mark the second-straight session of rising prices.
Brent crude futures are now trading flat, but still holding above $60.
British Airways says it will operate transatlantic flights partially powered by sustainable fuels as early as next year, our transport correspondent Gwyn Topham writes.
BA will invest in a new US plant to be built in Georgia by LanzaJet producing commercial-scale volumes of sustainable aviation fuel (SAF), made from ethanol derived from agricultural and other waste.
The airline said the fuel would create 70% less carbon emissions than conventional jet fuel.
However, it is likely to only provide a tiny fraction of BA’s overall fuel needs at first.
SAF can be used to substitute for up to 50% of conventional jet fuel but so far demonstration flights – such as one conducted in 2018 by Virgin Atlantic with LanzaTech (from which LanzaJet was spun off) – have blended only about 5% of the greener fuel.
BA’s owner, IAG, which has pledged to invest almost £300m in SAF as part of its pledge to decarbonise by 2050, said it would investigate building a refinery with LanzaTech in the UK, as well as a waste-to-fuel plant in partnership with Velocys
Quick stock update: The FTSE 100 is back in negative territory along with the rest of major European indices.
The German DAX is down 0.6%, the French CAC 40 is down 0.14% and the pan-European Stoxx 600 is down 0.4%.
The FTSE 250 is still holding onto gains of around 0.4%.
Brent crude futures are still holding above $60.80, up 0.4% on the day.
All eyes are now on the next OPEC meeting on 4 March, which could raise prospects of further production cuts to help support global oil prices.
Front-month Brent crude oil hanging in there above $60/b in early European trading today, back to pre-pandemic levels. What will #OPEC+'s next move be at its meeting in 3 weeks? #OOTT pic.twitter.com/8FFRqUPMN9
— Herman Wang (@HermsTheWord) February 9, 2021
US futures are in negative territory, pointing to a less buoyant start to trading on Wall Street this afternoon after the three major indexes posted record highs at Monday’s close:
- Dow futures are down 0.1%
- S&P 500 futures are down 0.09%
- Nasdaq futures are down 0.08%
Bitcoin pares gains, hovers near $46,000
Bitcoin, which hit a record high of more than $48,000 this morning has dropped back below the $47,000-mark.
We may be seeing profit taking from some bitcoin investors who may be less optimistic about a near-term surge to $50,000.
But if Tesla’s bitcoin purchase proves to be part of a wider trend of crypto buy-ups by corporate giants looking for returns in a low interest environment, the dip may be short-lived.
Bitcoin is now trading around $46,097.
Britain’s tough new lockdown measures have dented consumer confidence and reduced spending to levels not seen since last spring, according to two separate surveys, our economics editor Larry Elliott reports.
Both the British Retail Consortium and Barclaycard said spending in January was at its weakest since May as booming online activity failed to compensate fully for the closure of stores.
Barclaycard said consumer spending last month was down by more than 16% year-on-year, while the monthly BRC/KPMP retail sales monitor showed that 63% of all non-food shopping took place online in January – a doubling from the 31% seen a year previously.
Helen Dickinson, the BRC’s chief executive, said:
January saw retail sales growth decline to its lowest level since May of last year. The current lockdown has hit non-essential retailers harder than in November, with the new variant hampering consumer confidence and leading customers to hold back on spending – especially on clothing and footwear.
Raheel Ahmed, Barclaycard’s head of consumer products, added:
As the impact of the latest lockdown start to takes its toll, we’ve seen particular sectors struggle, as physical premises across the UK were forced to close. Last month’s glimmer of hope for the travel sector also seems to have stalled as tougher border controls saw bookings drop.
Neil Wilson, chief market analyst for Markets.com, raises a number of issues around Tesla’s investment in bitcoin, including potential questions around market manipulation and using government tax breaks to invest in crypto:
There are so many elements to this story that deserve attention. First is the potential market manipulation vis-a-vis Musk’s recent tweeting.
Second, it’s interesting to note that the investment is the same as Tesla earned in regulatory tax credits from the US last year – taxpayer money being spaffed on a speculative investment in cryptocurrency is one way to look at it.
Third, given the volatility of the asset, what do investors think about absorbing this kind of risk on to the balance sheet?
Fourth, on a more positive note, does Tesla lead other large companies to make large-scale Bitcoin investments? Will Apple and Facebook follow? Corporate support of this sort is key for broader acceptance.
And finally:
If Tesla really is to accept Bitcoin as payment, will prices be dynamic - and stay pegged to dollar value - or will they take on even greater FX risk by maintains prices in bitcoin?
Pricing in Bitcoin is fine if you are selling pizzas – the most you might lose is $10. But if Bitcoin suddenly doubles, Tesla’s margins would be eroded without a matching hike in the price.
The FTSE 100 has reversed losses clocked at the start of trading, and is now higher by nearly 0.2% at 6534 points.
The blue chip index is getting a lift from energy majors like Royal Dutch Shell (RDS in the market data blow) and BP that are riding the 13-month high in oil prices.
Miners are also benefiting from a rise in metal prices, with gold currently up 0.7% at $1,843 per ounce and silver which is up 1.1% at $27.53 per ounce.
CMC Markets analyst David Madden says:
Metals rallied yesterday because of the chatter about the US spending scheme. Lately there have been creeping concerns about higher inflation being in the pipeline on account of all the money that has been injected into financial systems from central banks and governments.
Gold has traditionally been a popular inflation hedge. Dealers snapped up the yellow metal for fears that higher inflation is on the horizon. Industrial metals, like copper, silver and platinum rose too as economic activity should increase as a result of the $1.9 trillion relief programme.
Tui expects a return to foreign holidays this summer, thanks to the UK’s vaccination programme and rapid tests in other countries, our reporter Julia Kollewe reports.
The world’s biggest travel operator said it had received 2.8m bookings for summer breaks, just over half of 2019 levels, and it is offering 80% of holidays compared with 2019.
The German-based company said that more than half of bookings were made by UK-based customers.
Average holiday prices were up 20%, Tui said, partly reflecting a higher number of package holidays. Its daily bookings in January were 70% higher compared with December, and the company expects the peak booking period is still to come.
The Tui chief executive, Fritz Joussen, said:
A look at the historically high savings rate in the EU also underlines that the scope for consumer spending is high. The significant increase in spending on booked travel reflects this very clearly. Holidaymakers are catching up and are willing to pay more for their holidays.
He expressed hope that the UK would lead a recovery in travel thanks to its rapid vaccine rollout, and that other European countries would accelerate their programmes after a slower start. Tui expects three-quarters of the UK population to be vaccinated by mid-July.
Tui shares are trading flat at around 331p this morning.
Updated
While the bitcoin price surged on the back of Tesla’s $1.5bn investment, the electric carmaker has not benefited from a similar boost.
Tesla’s shares closed higher by just 1.3% last night at $863.42. They’re now down 0.5% in after hours trading, at $858.60.
While accepting bitcoin is a futuristic step, and fits the vision of its founder Elon Musk, Ipek Ozkardeskaya, a senior analyst at Swissquote says there are two important issues emerging around using bitcoin in transactions:
First, bitcoin is an extremely volatile asset and history shows that the volatility is not only one sided. If bitcoin’s price was almost multiplied by five over the past year, it doesn’t mean that it won’t come down crushing.
The high volatility in bitcoin’s value will therefore inevitably inject a certain volatility in Tesla’s revenue, and decrease the predictability of the company’s performance
Second, buying a Tesla car in exchange of bitcoin is basically betting that the Bitcoin’s price will either stabilise or fall.
No one would bury his or her bitcoins in a car predicting that its price would triple again in the next few years.
Well, the contrary could happen as well, but it’s a casino bet. Unless the price of bitcoin stabilises, either Bitcoin’s price falls drastically and you end up having won a Tesla in lottery, or its price triples and you end up paying your Tesla far too expensive.
The international team of World Health Organization experts in China investigating how the coronavirus outbreak started are due speak to the media in Wuhan shortly.
Follow our Coronavirus blog for live updates:
Ocado is the worst performing stock on the FTSE 100, falling 3.3% despite reporting booming sales as its online grocery service, which benefited from an en-masse switch to home delivery services during the pandemic.
As our retail correspondent Zoe Wood reports, retail sales at Ocado, which now delivers Marks & Spencer groceries, jumped 35% to £2.2bn in 2020.
However the overall group, which includes its important tech business, Ocado Solutions, made a small loss of £44m.That compares with a pre-tax loss of £214.5m in 2019.
Tim Steiner, Ocado’s chief executive, said coronavirus has caused a “dramatic” shift in grocery retail and the landscape was “changing for good”.
Many customers who have tried online grocery for the first time have seen the benefits and are saying they are unlikely to revert to pre-crisis shopping habits.
The health crisis has seen demand for grocery deliveries rocket to account for 14% of the market. However Ocado was limited in its ability to take advantage of the huge increase as its robot powered warehouses were soon working at full pelt.
The company said sales growth in the coming year would be “highly dependent” on length of Covid-19 restrictions.
However it would have more delivery slots available in the UK in the coming months as three new hi-tech warehouses are set to open. It also plans to pour around £700m into new projects for its technology clients.
European stocks mixed at the open
European markets are open for the trading session. Here are the initial prints:
- FTSE 100 is down nearly 0.1%
- FTSE 250 is up around 0.09%
- France’s CAC 40 is up 0.14%
- Germany’s DAX down 0.17%
- Spain’s IBEX is down 0.3%
- Italy’s FTSE MIB is down 0.1%
Oil on longest winning streak since January 2019
Oil prices are at their highest level in 13 months, and both Brent crude – the global benchmark – and WTI are on their longest winning streak since January 2019.
Brent futures are on their seventh session of gains, with prices currently up nearly 0.9% at about $61.10.
The rise has been chalked up, in part, to supply cuts by Saudi Arabia scheduled for both February and March, which is in addition to a reduction agreed by OPEC members and allies.
Both moves are restricting the amount of oil sloshing around at a time when Covid travel clampdowns are hitting demand.
But hopes around US president Joe Biden’s stimulus plans are also helping to lift prices. David Madden, a market analyst at CMC Markets UK, says:
Should the Biden-led government fast-track the spending programme that should spark higher demand for the energy in the months ahead.
Introduction: Bitcoin hits fresh record highs
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Bitcoin enthusiasts are celebrating a fresh jump in the cryptocurrency’s value. It rose further overnight after an initial surge on Monday, when Tesla disclosed its own $1.5bn investment in bitcoin and said it is likely to start accepting it as payment for its cars in the future.
Bitcoin is now comfortably trading above $47,000, and briefly hit $48,000 this morning, marking a new record high. It is now trading around $47,700.
Some analysts are now patiently waiting for the next big push above $50,000, which could be driven by other major companies looking for alternative assets that can compensate for persistently low interest rates.
Naeem Aslam, chief market analyst at AvaTrade says Tesla’s bitcoin investment may be the start of a wider corporate trend.
Companies are holding big cash piles in their bank account, which is not earning them much at all. These cash rich companies do not know what they should do with their cash. Hence a new trend could be emerging, which has been put in motion by Tesla.
It is true that Tesla’s investment in Bitcoin is tiny compared to its market cap or its balance sheet. But the important point to pay attention to here is if other cash rich companies like Apple, Microsoft, Facebook also begin to invest their cash in Bitcoin as an alternative investment.
Even less than one percent of their cash in Bitcoin is going to be a huge amount. If this strategy becomes the main street, we could see some serious cash purchasing Bitcoin, and that can knock the supply equation out of its place—after all, there is only a limited supply of Bitcoin.
In stock markets, Wall Street closed at new all-time highs on Monday, with the Nasdaq ending higher by nearly 1% and the Dow and S&P 500 up by around 0.75%.
But Asian stocks have been mixed, with Australia’s ASX down 1.2%, the Shanghai Composite rising by 2% and Japan’s Nikkei up around 0.4%.
In the absence of any major events today, European stocks are expected to open in flat-to-negative territory at the start of trading:
European Opening Calls:#FTSE 6518 -0.09%#DAX 14050 -0.07%#CAC 5687 +0.01%#AEX 657 +0.05%#MIB 23449 +0.10%#IBEX 8215 -0.05%#OMX 2003 +0.01%#STOXX 3668 +0.06%#IGOpeningCall
— IGSquawk (@IGSquawk) February 9, 2021
The agenda
- 9am GMT: Italian industrial production (December)
- 11am GMT: US NFIB small business optimism index
(Correction: The Tesla investment in bitcoin is indeed worth $1.5bn not $1.5m as initially written in this post)
Updated
