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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Subdued US core inflation cheers markets; Lego sales soar; Cathay Pacific's record loss – as it happened

The Charging Bull or Wall Street Bull in the Manhattan borough of New York City.
The Charging Bull or Wall Street Bull in the Manhattan borough of New York City. Photograph: Carlo Allegri/Reuters

Closing summary

Time to recap

Stock markets in the US and Europe have rallied again as investors grip onto hopes of a strong economic recovery this year.

The Dow Jones industrial average hit a fresh all-time high over 32,000 points, and tech stocks continued to recover from their recent slide. The Nasdaq Composite has dipped a little, but is currently up 49 points or 0.4% at 13,123.

The rally came after the latest US CPI report showed that core inflation dropped last month, to 1.3%.

The headline measure of inflation rose to 1.7%, a one-year high, lifted by higher gasoline prices. But analysts said there was little sign that the US economy was overheating - an issue which had caused market ructions last month.

The US housing market also saw weaker demand last week, with mortgage approvals dipping.

But with the Biden White House pushing through a $1.9trn stimulus package, investors and economists expect US growth to recover strongly.

The Bank of Canada left interest rates at record lows, and warned that there’s plenty of spare economic capacity to be utilised, despite recent signs of recovery.

Toymaker Lego cemented its position as a pandemic winner, by reporting double-digit sales growth last year.

A tie-up with Nintendo proved particularly successful.... while Lego also grew sales strongly in China.

Video gaming platform Roblox, who also boomed last year, has made a successful debut on the New York stock exchange today - surging 43% over its reference price.

But Hong Kong’s Cathay Pacific suffered a grim year, reporting its biggest annual loss ever earlier today.

In the UK....

The Restaurant Group, the owner of the Frankie & Benny’s and Wagamama chains, is looking to raise £175m as it continues to struggle with the impact of Covid-19.

Restaurant chain Jollibee is launching a £50m expansion across the UK and Europe -- good news for fans of fried chicken....

....while takeaway operator Just Eat reported a jump in revenues and losses last year.

Royal Mail hiked its profit forecast, after seeing a jump in letters volumes in recent weeks.

Foxtons said the London rental market had made a strong start to 2021.

In the retail world, Next bought a 25% stake in the Reiss fashion brand for £33m.

And UK homebuyers are being offered the chance to fix their mortgage repayments for 40 years.....

Goodnight! GW

Roblox shares open 43% above reference price

After four hours of price discovery, Roblox shares have begun trading on the New York stock market.

And they’ve opened at $64.50 per share, sharply above the $45 reference price set for today’s direct listing, showing strong demand for the video gaming platform.

Updated

Government error shares email addresses for UK business bosses

Hundreds of email addresses for the UK’s leading business bosses have been accidentally shared due to an apparent gaffe by the Department for Business, Energy and Industrial Strategy (BEIS), my colleague Rob Davies reports.

The error, which appears to put BEIS in breach of GDPR rules governing the use of private data, occurred while the department was gathering suggestions for the 2022 new year honours list.

It shows that the chief executives of firms including Serco, which has received criticism over its £37bn test and trace contract, have been invited to nominate staff for honours.

BEIS approached more than 500 captains of industry, inviting them to submit nominations from the world of business and finance.

But instead of using the bcc (blind carbon copy) option, which disguises the recipients of a bulk email, the department used the cc option, meaning that everyone in the chain could see each other’s addresses...

Here’s the full story:

Video games retailer GameStop is having another remarkable session, which has seen its shares briefly halted.

First it surged over $300 per share, then slumped below $200, and is now back at $257 - up 4% on the day....

Updated

UK homebuyers offered first 40-year fixed-rate mortgage

UK borrowers are being given the chance to lock their mortgage repayments at the same level for up to 40 years with the launch of the longest fixed-rate deal on the market.

The lender Habito plans to launch a range of mortgages for borrowers with a 10% deposit that offers fixed-rate terms of up to four decades. The rates are based on the size of the deposit and how long the borrower wants to repay their mortgage.

Someone taking the 40-year option with a 40% deposit will fix at 4.2%, while a borrower with just 10% to put down will pay 5.35%....

Full story: Lego sales soar on back of Covid lockdowns and Nintendo tie-up

The combination of traditional plastic toy bricks with digital games such as Super Mario helped the toymaker Lego achieve double-digit growth in sales, revenue and profit in 2020.

The Danish company said its tie-up with the games company Nintendo, which spawned the unlikely link between Lego and the moustachioed plumber Super Mario, was its most successful launch.

Families spending more time together during the coronavirus pandemic sparked strong consumer demand for Lego products, pushing the business to double-digit growth for the first time since its growth spurt came to an end in 2017, when its sales and profits fell.

Consumer sales climbed by more than a fifth in 2019, while Lego’s operating profit rose by 19% to almost 13bn Danish kroner (£1.5bn).

The family-owned business grew its market share globally, including in its 12 largest markets in 2020, outpacing growth recorded for toys in general, which was about 10%, according to the market research firm NPD....

The London stock market couldn’t match the excitement on Wall Street today, with the main indices finishing the day roughly where they started.

The FTSE 100 has closed 4 points lower at 6725 points, while the mid-cap FTSE 250 gained 24 points to 21,406.

Just Eat was the top riser on the FTSE 100, after predicting it would grow its UK market share this year after a bumper 2020.

But mining companies continued to drag the index down.

European markets had a better session, with the Stoxx 600 gaining 0.4% to a new one-year high. Germany’s DAX hit a new record high, up 0.7%, extending its recent gains.

David Madden of CMC Markets sums up the day:

In a similar fashion to yesterday, the overall mood in European equity markets is positive but the FTSE 100 is underperforming in comparison with the major indices in mainland Europe.

The subdued activity in government bond yields is helping equities again. Mining stocks like BHP Group, Anglo American and Rio Tinto are weighing on the index. Financials like, Standard Chartered, Barclays, and Prudential are also hurting the UK market. The DAX 30 registered a record high, partially due to a well-received update from Adidas.

Traders are largely content to buy into equity markets as hopes circulate in regards to the US’s $1.9 trillion spending plans and the global economic recovery story.

Shares in UK broadcaster ITV have dropped 3.8% today, after Piers Morgan departed its breakfast show Good Morning Britain.

Morgan left the show last night after broadcasting regulator Ofcom received more than 41,000 complaints over his comments about the Duchess of Sussex’s mental health.

He had earlier stormed off the GMB set, after co-presenter Alex Beresford criticised him for continuing to “trash” Meghan.

Morgan was a big ratings driver for GMB, so his exit could worry investors. On the other hand, ITV yesterday reported signs of a strong recovery in advertising, after a sharp fall in profits last year.

Neil Wilson of Markets.com explains:

Investors may be a little worried about the loss of ratings for GMB – it wasn’t exactly doing that well before he joined and its primetime slot will have repercussions for ads. Love or loathe, Morgan boosted ratings. It could also be that investors are worried about an investigation over comments made by Morgan on air.

Shares were hit yesterday after it revealed the way in which lockdowns have hit ad revenues, but indicated things are picking up and Studios can drive new growth.

DB [Deutsche Bank] today calls it a buy. You cannot be owning ITV and worry about one host, can you?

Updated

Over in Ottawa, Ontario, the Bank of Canada has left interest rates on hold at their record lows of 0.25%, despite signs of economic recovery.

It also reiterated that it doesn’t expect to raise them until the economy has recovered from the pandemic and economic slack has been absorbed - which it doesn’t see happening until 2023.

That’s not a surprise, but it does illustrate that central bankers are keen not to tighten policy anytime soon.

The BoC acknowledges that Canada’s economy is proving “more resilient than anticipated” to the second wave of Covid-19. It now expects the economy to grow this quarter, having forecast a contraction in January.

However, it warns:

Despite the stronger near-term outlook, there is still considerable economic slack and a great deal of uncertainty about the evolution of the virus and the path of economic growth.

The labour market is a long way from recovery, with employment still well below pre-COVID levels. Low-wage workers, young people and women have borne the brunt of the job losses. The spread of more transmissible variants of the virus poses the largest downside risk to activity, as localized outbreaks and restrictions could restrain growth and add choppiness to the recovery.

Fried chicken chain Jollibee in £50m expansion

A range of Jollibee food

If you’ve a hunger for fried chicken, there will soon be another purveyor in central London, this time one with an Asian twist.

Restaurant chain Jollibee, founded in the Philippines in 1978, is to open a flagship branch in the capital’s Leicester Square later this year, followed by seven other outlets around the UK by the end of the year in places such as Edinburgh and Cardiff.

The expansion, expected to lead to the creation of 1,350 new jobs, is part of a £30m investment in the UK, combined with a £20m investment in Europe, including its first Spanish branch in Madrid. Jollibee, which first opened in Earl’s Court in west London in 2018, opened two new restaurants in Liverpool and Leicester during 2020.

Dennis Flores, president of international business at Jollibee, said the company is dedicated to growing the brand in the UK and Europe.

“We adapted our approach to appeal to a young British demographic which meant building a premium, inviting space with a touch of our distinctive Asian heritage.

The pandemic may have been a setback, but it will not deter us from pursuing our vision for Jollibee in the UK and the rest of Europe.”

The chain is especially targeting fast food fans in their 20s. While its most loyal customers are Filipino, Jollibee said that 70% of its customers in its Leicester and Liverpool branches are British. Jollibee is banking on a return to eating out when Covid restrictions ease.

“Community spirit and hospitality are central to both Jollibee as a brand and the Filipino culture. When restrictions are lifted, we know our customers will want to return to their normal social lives, and restaurants play a key role in that,” said Adam Parkinson, VP of Europe at Jollibee.

Every sector of the S&P 500 index (a broader index than the Dow) is up so far this session.

Energy, financials and discretionary consumer firms are the top-performing sectors.

The Dow has now hit a fresh intraday record high, and is currently up 320 points, or 1%, at 32,153 points.

Wall Street rallies as inflation worries ease

The Wall Street opening bell, March 10 2021
The Wall Street opening bell today Photograph: NYSE

Roblox have rung the opening bell.....and Wall Street has opened higher.

Stocks are rallying as February’s subdued US inflation report calms worries that rising interest rates could dent the recovery.

The Dow is being led by Walgreen Boots Alliance (+3.2%), followed by airline maker Boeing (+2.8%) and investment bank Goldman Sachs (+2%)

The Nasdaq is adding to its biggest gains in four months yesterday. Tesla has jumped 3.5%, having surged almost 20% on Tuesday.

Here’s the early prices:

  • Dow Jones Industrial Average: up 274 points or 0.85% at 32,107 points
  • S&P 500: up 28 points or 0.7% at 3,903 points
  • Nasdaq Composite: up 136 points or 1% at 13,209 points
The Wall Street open, March 10 2021

John Leiper, chief investment officer at Tavistock Wealth, suggests US inflation will push higher this year, though, which could hit the markets.

US inflation rose to its highest level in a year in February, up 0.3% from 1.4% to 1.7% annualised. That is good news for the economy but the rise in inflation won’t stop here as we are now approaching a three-month run where decade-low monthly readings drop out of the rolling calculation. The real test will come in the second half of 2021 when rising inflation expectations and the release of pent-up demand contribute to a spike in the headline rate which we believe can hit 4%. We’ve reached that level, or come close to it, several times before, in the late 1980s, 2000, 2005, 2007 and 2011 and on each occasion, inflation reversed course quite precipitously, typically alongside a fall in equities.

To summarise, today’s number is consistent with rising commodity prices and input cost inflation flagged in last week’s PMI numbers. Jerome Powell has made it clear he wants higher inflation and is willing to run the economy hot to get there. We think he will but there is a real risk the Fed has backed itself into a corner and may need to reign-in stimulus faster and quicker than expected which increases the chance of a volatile market reaction later this year.”

Today’s Wall Street opening bell is being rung by computer game platform Roblox.

Roblox is listing on the New York stock exchange today, in one should be one of the most anticipated offerings this year.

Roblox was valued at roughly $30bn in January, in its last financing round. As well as letting people play games, Roblox’s platform also allows users to create their own games.

Its popularity has soared under the lockdown, particularly with younger gamers, while developers were expected to share $250m in payouts last year.

Fast Company has a good take:

If you know a tween or teen, there’s a good chance they’re one of the many obsessed with Roblox, an MMO game platform that lets the users themselves program games that can be played by all Roblox users. The company originally launched in 2004 and saw its user base skyrocket as the pandemic and lockdowns bit last year. (It saw its share of controversy too.) The iOS version of the game alone went from $1 billion in player spending revenue in November 2019 to $2 billion by October 2020. Roblox is also available on Windows, macOS, Android, and Xbox One.

The company raised $29.5 billion in January, reports CNBC, which help set its stock price at $45 today. However, it’s important to note that today’s Roblox offering isn’t an IPO. Rather it’s a direct listing. That means no new shares in the company are being created and sold. Instead, existing shares of the company are being offered. This means there’s no guarantee that new investors can get in at $45. By the time the bell rings this morning, the shares could be much higher–or lower.

US inflation: What the experts say

Neil Birrell, chief investment officer at Premier Miton Investors, says there’s no sign of inflation pressures building...

“US CPI was in line with expectations for February. Whilst markets are fretting about inflation that might lie ahead, there is no sign of it in the present.

The prices of vehicles, clothes and transport were all lower month on month, which suggests that core inflation is not on the move yet; these are key elements of the data.”

...but Andrew Hunter of Capital Economics thinks prices will push higher as the US economy reopens.

The continued weakness of core prices is hard to square with the recent recovery in demand, as plummeting virus cases have allowed most states to begin easing restrictions. But with the high-frequency data showing that restaurant dining and air travel are now rebounding rapidly, it’s surely only a matter of time before prices in those most-affected services sectors start to pick up.

More generally, with the imminent fiscal stimulus set to turbo-charge demand, at a time when many sectors are already facing severe supply constraints, and with a variety of survey indicators pointing to rising price pressures, we still think inflation will rebound rapidly over the coming months.

US government bond prices strengthened after the inflation report hit the wires, pulling down Treasury yields.

That suggests that inflationary worries have indeed eased, following the dip in core inflation to 1.3% per year, from 1.4%.

Wall Street future also moved higher.

Economists and investors say February’s inflation report shows that the US economy isn’t overheating.

Here’s Greg Daco of Oxford Economics:

CNN’s Paul La Monica reckons this could ease inflation worries:

Macrostrategist George Pearkes concurs:

Gasoline prices push up US CPI, but core inflation subdued

Just in: inflation across the US rose to 1.7% per year in February, its highest level in a year.

That’s in line with forecasts, with consumer prices rising by 0.4% in February alone, up from 0.3% in January.

Gasoline prices pushed up the cost of living, according to the Bureau of Labor Statistics.

But core inflation remains subdued - rising by only 0.1% in February, and by 1.3% year-on-year. That’s down from 1.4% per year in January, and weaker than expected.

That could reassure markets that inflationary price pressures aren’t building yet.

The BLS explains:

The gasoline index continued to increase, rising 6.4 percent in February and accounting for over half of the seasonally adjusted increase in the all items index.

The electricity and natural gas indexes also increased, and the energy index rose 3.9 percent over the month.

The food index rose 0.2 percent in February, with the index for food at home and the index for food away from home both rising. The index for all items less food and energy rose 0.1 percent in February.

Mortgage applications in the US dropped by 1.3% last week, as rising interest rates weighed on demand.

The decline was driven by a fall in demand to refinance home loans (rather than for a new purchase), as CNBC explains:

Applications to refinance a home loan fell 5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. They were also 43% lower compared with the same week one year ago.

That is the first year-over-year drop since March 8, 2019. Last year at this time mortgage rates fell dramatically as fears of the coronavirus hit financial markets. That caused a large spike in refinance demand, hence this year’s comparison.

Markets calm ahead of US inflation

European stock markets have pushed higher, as investors await the latest US inflation data in around 15 minutes.

The Stoxx 600, which hit a one-year high yesterday, is up another 0.2% so far today, led by property companies, healthcare firms and consumer companies.

That takes it closer to the record high set in February 2020, just before the pandemic hti Europe.

But mining stocks are weakening, pulling the UK’s FTSE 100 index down by 16 points to 6714 points.

Joshua Mahony, senior market analyst at IG, explains:

“Joe Biden is expecting to finally see his $1.9 trillion stimulus package passed today, yet early European trade highlights ongoing concerns. With commodity prices on the slide, the FTSE 100 miners are providing a drag on the index.

“The FTSE is treading water in early trade today, with mainland European market marginally outperforming thus far. Yesterday’s decline in US Treasury yields caused a sharp reversal of fortunes for tech stocks, yet there is a good chance we could soon see another leg higher to the detriment of those same pumped-up growth names.

We also have another sign that major City investors are focusing on the climate crisis.

Major pension funds that own assets worth £870bn, including those of the Church of England, Lloyds Banking Group and the National Grid, have committed to cutting the carbon emissions of their portfolios to net zero by 2050 or earlier.

Pension providers Scottish Widows, Royal London and Nest and a clutch of public sector pension funds from the UK to Scandinavia and New York were also among the investors that have pledged to align their portfolios to the Paris climate goals of limiting global temperature increases to 1.5C.

The pledges were coordinated by the London-based Institutional Investors Group on Climate Change as it launched a set of tools that lays out how investors can achieve net zero portfolios following months of work.

Here’s the full story:

Back in the financial markets, Reuters has spotted that the UK has attracted record demand for an inflation-linked bond.

It indicates that investors are keen to protect themselves against rising price pressures as the global economy recovers from the pandemic.

Reuters’ David Milliken explains:

British 10-year index-linked bonds attracted record demand at a government auction on Wednesday, adding to signs of concern that inflation might rise faster than expected.

Investors submitted 2.832 billion pounds ($3.93 billion) of bids for the 800 million pounds on offer of an index-linked bond maturing in August 2031.

That gave a bid-to-cover ratio of 3.54, the highest for any index-linked bonds since such auctions began in 1998.

Inflation worries have played a big role in the sell-off of U.S. Treasuries this year, with a knock-on impact for conventional gilts, which suffered their biggest monthly drop since October 2016 in February.

British index-linked bonds pay a return linked to the retail prices index of inflation, and the 2031 bond sold with a real yield of -2.595%, giving investors an annual return 2.595 percentage points below the prevailing rate of RPI.

Annual RPI was 1.6% in January, and the 10-year index-linked gilts price in an average RPI rate of just under 3.4%, their highest since late 2019 and up from just over 3.0% at the start of the year.

More here: UK draws record demand for inflation-linked bond

Royal Mail has just hiked its profit forecasts, after seeing stronger-than-expected letter volumes and revenue trends in recent weeks.

It told the City that Advertising, Business and Stamped Mail are all performing above its previous expectations, while parcels growth is strong but broadly in line with expectations.

The postal group now expects adjusted operating profits to be around £700 million this financial year, up from the “well in excess of £500 million” it predicted last month.

Updated

Here’s Ruth Griffin, retail and leisure lawyer at law firm Gowling WLG, on Lego’s double-digit sales growth last year:

“To fly in the face of the downward trend for the toy retail market is a huge achievement and demonstrates Lego’s ability to successfully split its operations and tirelessly innovate within every revenue stream.

While there are surprises around every corner in such a competitive, aggressive space, the steadfastness of Lego’s innovation and investment in evolving their brand is a continuing guarantee against this.”

An example of fashion chain Reiss’s
An example of Reiss’s womenswear Photograph: Reiss

Next has bought a 25% stake in the Reiss fashion brand for £33m.

The group will now manage Reiss’s distribution systems and website in a bid to drive sales growth in the UK and overseas. The deal will bring former Next executive Christos Angelides, currently chief executive of Reiss, back to his alma mater after he left in 2014.

Reiss, which operates from 183 outlets in 14 countries, achieved sales of £227m last year.

All the group’s current owners - including the Reiss family and investment firm Warburg Pincus will remain in place alongside Next.

The logo of British insurer Legal & General.

Away from Lego, Legal & General has set aside a further £110m for future coronavirus mortality claims this year, saying new Covid-19 variants increased the risk of higher deaths.

My colleague Julia Kollewe explains:

New strains have been identified in the UK, South Africa, California and Brazil. Last year, the life insurance and pensions firm paid out £76m of Covid-19 related claims.

Nigel Wilson, the chief executive, said:

“The human cost of the pandemic has been high. It has impacted our own customers, including holders of life insurance policies and annuitants who have lost their lives prematurely. We continue to pay all valid claims and we have prioritised giving rapid but sensitive service to bereaved families.”

The company reported a 15% drop in profit before tax to £1.8bn in 2020, also due to the impact of lower interest rates on its business. It said the pandemic had cost it £228m in total. L&G’s housebuilding division was hit by Covid-19 shutdowns and the extra cost of safety measures. The company also sold fewer annuity and lifetime mortgage products in the UK.

Higher death rates due to the pandemic also prompted L&G to release £85m in mortality reserves, as it adjusted its assumptions about how long people might live.

Steve Clayton, manager of the Hargreaves Lansdown Select UK Income Shares fund which holds L&G shares in its portfolio, explains:

The diversity of L&G’s businesses meant that what it lost in heightened mortality claims, it recouped elsewhere leading to a robust overall performance.”

Despite the excitement of digital, traditional stores are still a key part of Lego’s strategy -- especially in China, where the toy company is growing fast:

CNBC has a good take:

While Lego has been part of the culture in other regions like the U.K. and the United States, parents in China did not grow up with the iconic colored blocks. And so, having places where kids can go and get their hands on the bricks and see the sets that can be built has been a boon to sales.

“Kids get to see what Lego is and play with it,” Christiansen said. “It’s a brand built on the physical.”

In 2020, Lego opened 134 retail locations, 91 of which were in China. The company currently has 678 Lego branded stores globally and has plans to add another 120, including 80 in China. The aim is to have around 300 Lego stores in China by the end of 2021.

Here’s a suitably-colourful breakdown of Lego’s financial results last year:

Lego’s 2020 financial results
Lego’s 2020 financial results Photograph: Lego

Lego-focused Blocks Magazine are also covering the company’s results:

Updated

Lego CEO Niels Christiansen has also told the FT that the toy company is hiring hundreds of new employees to work on digital projects, to continue to digitalisation push.

Here’s their take:

Lego recorded its strongest growth rates in five years as sets that blend physical bricks with digital Super Mario games propelled the Danish toy company to record sales and profits in 2020.

The world’s largest toymaker increased revenues by 13 per cent to DKr43.7bn ($7bn) in full-year results while operating profit jumped 19 per cent to DKr12.9bn.

The growth was well ahead of the privately held company’s two main listed rivals, Hasbro and Mattel of the US, and better than the broader toy market as Lego’s investments in boosting its online sales and broadening its product range paid off.

“I’m very keen that five or 10 years out we stay relevant,” said chief executive Niels Christiansen. “We need to do whatever it takes to stay relevant. Digitally, we start to find a formula that works, and I think we can do a lot more of this.”

Lego sales soar in the lockdown amid digital push

A toy store at the Senayan City, in Jakarta, Indonesia.
A toy store at the Senayan City, in Jakarta, Indonesia. Photograph: Tatan Syuflana/AP

Toy company Lego has reported a jump in sales last year, as the lockdown encouraged families to play together more.

The Danish firm reports that revenues rose by 13% last year to DKr43.7bn (£5bn), with sales to consumers surging by 21%.

The pandemic boosted sales around the globe, with especially strong growth in China, the Americas, Western Europe and Asia Pacific.

Niels B. Christiansen, CEO, said:

“We are very pleased with these results. They show the timeless relevance of the LEGO brick and learning through play. This performance is also a testament to the passion, creativity and resilience of our people. Despite the challenges of the pandemic, they worked tirelessly to keep the world playing.”

Christiansen adds that Lego’s ‘large-scale’ investments over the last couple of years, including online and in digital, are now paying off.

In 2020, we began to see the benefits of these, especially in e-commerce and product innovation. We will further increase investments during the coming year with a continued focus on innovating play, our brand, digitalisation and developing an omnichannel retail network.”

With umpteen millions of children being home-schooled, demand for toys jumped last year. The lockdown, and the rise in household savings, has also spurred adults into buying more expensive items - such as Lego’s Technic sets.

Lego has staged a remarkable recovery since the early 2000s, when it came close to bankruptcy.

Tie-ups with Star Wars and Harry Potter, the Lego Friends range, the ninja-focused Ninjago line, programmable robots, Lego Architecture products, and the hugely successful Lego Movie all helped to build one of the greatest turnarounds in corporate history.

It’s also moved towards the digital world, with products such as its LEGO Digital Designer (which lets you build models with virtual Lego bricks), and a new partnership with Universal Music Group to create a “playful and innovative” music video maker.

Updated

Foxtons reports strong start to 2021

The window of a Foxtons estate agents on the high Street in West Hampstead in January.
The window of a Foxtons estate agents on the high Street in West Hampstead in January. Photograph: Karwai Tang/Getty Images

London estate agent Foxtons has reported a strong start to the year, as the rental market recovers from the pandemic.

Foxtons says there’s been a flurry of activity, swelling its pipeline of work by almost a third:

The sales commission pipeline started 2021 more than 30% higher than prior year and has led to much improved revenue growth in the first two months of the year. Despite the significant increase in units sold to date, the value of the pipeline has remained stable over this period at levels last seen in early 2017.

Foxtons also reckons that a relative glut of rental options means tenancy costs are down year-on-year...

Stock levels in lettings are also well ahead of 2020 and, although a relative excess supply of rental properties in London has driven down average rents by 12% versus prior year, we have so far been able to fully mitigate the impact on average commissions through greater volumes as tenants look to take advantage of more attractive prices.

A Just Eat hot food delivery cyclist.

With so many restaurants closed, takeaway service Just Eat is seeing strong demand this year.

Just Eat told shareholders it expects a “further acceleration” in order growth this year, having swelled its revenues by 54% in 2020.

The current lockdown is certainly boosting demand at the online food order and delivery service.

So far in 2021, UK orders are up 88% compared with the first two months of 2020, with Delivery orders up more than 600%.

It says:

Given recent trading and the investment programme, management expects to increase market share in the UK in 2021.

But despite this strong growth, Just Eat made a loss last year of €151m, up from €115m million in 2019.

This was partly due to “advisory and integration costs” from the merger of Just Eat and Takeaway.com and the proposed takeover of Grubhub.

Adam Vettese, analyst at multi-asset investment platform eToro, says this rapid growth comes at a high price:

“With people having been cooped up in their homes for the best part of the year, conditions have been perfect for delivery food services such as Just Eat Takeaway.

“In 2020, the firm increased revenue 54%, active customers by 23% and the number of restaurants listed on its app by 42% in what was a hugely impressive year of growth.

“But that growth has come at a price and Just Eat has had to spend big on marketing and delivery drivers to stay ahead of the deep-pocketed Uber Eats and Deliveroo.

The Restaurant Group to raise £175m amid pandemic

The owner of the Frankie & Benny’s and Wagamama chains is looking to raise £175m from shareholders as it continues to struggle with the impact of Covid-19....and also prepares for life after the pandemic.

The Restaurant Group, will use the proceeds from the cash call to increase its financial cushion in case of any resurgence of the pandemic, to allow it to expand its Japanese-inspired Wagamama chain and its Brunning & Price pubs business, and to help it reduce its debt.

The group said it expects there to be “good and profitable opportunities” where it can open more locations.

Since the start of the Covid-19 pandemic last spring, TRG has permanently closed more than a third of its sites, reducing its number of branches to 400 from 653 at the start of 2020, which resulted in the loss of almost 4,500 jobs.

The majority of the closures affected Frankie & Benny’s and the Tex-Mex dining chain Chiquito. The group now employs about 14,000 people.

Andy Hornby, the chief executive of the Restaurant Group said:

“The Covid-19 pandemic has presented enormous challenges for our sector but the TRG team has responded decisively to restructure our business and preserve the maximum number of long-term roles for our colleagues. TRG is operationally a much stronger business than 12 months ago.”

The crisis in the airline industry is also pushing the UK government towards cutting air passenger duty on domestic flights.

Such a move would be a boost to the sector, but doesn’t exactly square with the ministers’ commitment to a target of net-zero carbon by 2050.

My colleague Gwyn Topham explains:

Air passenger duty is set to be cut on domestic flights after the prime minister signalled his support for reform to bolster air links around the UK.

Lower rates for UK internal flights or an exemption for return legs will be considered.

The news will come as some relief to the beleaguered aviation industry, whose complaints about the level of duty predate the Covid-19 crisis, but environmental groups said the move was “nonsensical” and “beggared belief” in the face of climate change.

The tax currently stands at a minimum £13 per passenger departing from a UK airport, and similar – but lower – levies only exist in a few other European countries.

The rate of APD was increased in last week’s budget by £2 for economy long-haul flights to £84 per person, but frozen for all short-haul flights (including domestic).

The UK stock market has opened lower, with the blue-chip FTSE 100 down 31 points or 0.45% at 6700 points.

Mining stocks are pulling the index down from yesterday’s three-week high, with Rio Tinto down 3.3% and BHP Group off 2.7%.

Cathay Pacific: What the papers say

The BBC says 2020 was a ‘bruising year’ for the airline:

In October, Cathay Pacific announced it would close its subsidiary Cathay Dragon, a regional carrier flying mainly to mainland China and other Asian destinations.

Cathay Pacific and its budget carrier Hong Kong Express took over Cathay Dragon’s routes.

The beleaguered carrier also announced it would cut an additional 8,500 jobs, amounting to about a quarter of its staff.

AFP points out that Cathay Pacific entered the pandemic in a ‘vulnerable position’:

When the coronavirus first emerged Hong Kong had fallen into recession and Cathay Pacific in the red as months of huge and disruptive democracy protests in 2019 led to a plunge in customers, especially from the lucrative mainland Chinese market.

The airline also found itself punished by authorities in Beijing because some of its employees joined or voiced support for the protests.

As the pandemic spread, the airline went on a cost-cutting spree, closing its Cathay Dragon subsidiary and making about 8,500 redundancies.

The South China Morning Post points out that cargo was a relative bright spot...

Only its air freight operations saved the company, one of the largest cargo airlines in the world, from recording even deeper losses, as prices soared due to the high demand for shipments and fewer planes flying during the pandemic.

...adding that Cathay is relying on a Covid-19 vaccine-led recovery:

In an internal memo detailing the financial results, CEO Augustus Tang Kin-wing urged all employees to get vaccinated, saying inoculation campaigns would help bring about the lifting of travel restrictions.

Executives would continue to receive a lower wage throughout this year, while a majority of local ground staff and overseas employees had opted to take a pay cut, the company said.

Cathay Pacific posts record annual loss

The Covid-19 pandemic has dragged Hong Kong’s flag carrier airline, Cathay Pacific, into a record annual loss.

Cathay Pacific gave a bleak illustration of the impact of the lockdowns, unveiling its worst ever financial results today.

It lost HK$21.6bn (or around £2bn) in 2020, due to the grounding of flights around the world and major restructuring costs, and said last year had been “the most challenging 12 months of its more than 70-year history”.

After an unprecedently bad year, Cathay Chairman Patrick Healy warned that the airline industry faces a long road to recovery.

“Market conditions remain challenging and dynamic,”

“All our cash preservation measures will continue unabated. Executive pay cuts will remain in place throughout 2021.”

The loss was larger than analysts had expected, and followed a profit of HK$1.69bn in 2019.

The restrictions on international air travel was particularly painful for Cathay Pacific, as the airline didn’t have a major domestic market to fall back on.

Reuters explains:

In December, Cathay’s passenger numbers fell by 98.7% compared with a year earlier, though cargo carriage was down by a smaller 32.3%.

Nearly 60% of its 2020 revenue of HK$47.9 billion was from its cargo operations, up from around 20% in 2019.

The airline said in January it would cut passenger capacity by 60% and cargo capacity by 25% as a result of new rules that required crew to quarantine for two weeks in hotels before returning to normal life in Hong Kong that took effect on February 20.

As a result, Cathay has put most crew on voluntary rosters of three weeks flying, two weeks in a hotel and two weeks off at home.

Introduction: Tech stocks back in fashion?

The front facade of the New York Stock Exchange.
The front facade of the New York Stock Exchange. Photograph: Brendan McDermid/Reuters

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The rotation out of fast growing technology companies into undervalued recovery stocks seems to have gone into reverse, with tech back in demand.

Last night the Nasdaq had its best day since November, surging by 3.7% just a day after the index fell into a correction.

Electric carmaker Tesla had a particularly sparkling day, rocketing almost 20%, as traders shrugged off concerns that inflationary pressures and rising borrowing costs could hamper the global recovery.

The rally seemed to be triggered, at least in part, by a recovery in US government bond prices - pulling yields (or interest rates) down again.

Kyle Rodda of IG explains:

A reversal in bond yields and a subsequent surge in US tech stocks turned market sentiment decidedly bullish.

It was the big-tech names that really drove the market higher, with the rotation out of 2020’s much-loved growth names, to stocks set to benefit from the uplift in global economic activity reversing on Wal Street – if only for the time being. The NYSE FANG+ Index added a remarkable 7 per cent, paced by a near 20 per cent surge in Tesla shares, with the likes of Apple, Amazon and Facebook all recording solid rallies in their own right.

But, given the recent pressure on bond yields, it’s not clear that this recovery in tech stocks really has staying power. But we shall see!

In the short term, European stock markets are heading for a more muted open, a day after hitting a one-year high.

Asia-Pacific markets have nudged higher, bouncing back from a two-month low on Tuesday,

Investors are particularly keen to see the latest US inflation data, due later today, as it will show whether price pressures were building in February.

Inflation could give policymakers a headache as economies reopen this year, although central bankers have insisted that the recovery will be a long haul....

The agenda

  • 7.45am GMT: French industrial production
  • Noon GMT: US weekly mortgage applications
  • 1.30pm GMT: US inflation for February
  • 3.30pm GMT: US weekly oil inventory figure

Updated

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