Get all your news in one place.
100's of premium titles.
One app.
Start reading
The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

UK manufacturing optimism highest since 1973; ECB presses on with bond purchases – as it happened

Workers on the production line at Nissan’s factory in Sunderland.
Workers on the production line at Nissan’s factory in Sunderland. Photograph: Owen Humphreys/PA

Closing summary

Time for a recap

UK factory bosses are their most optimistic in almost 50 years, as confidence about the recovery grows.

The CBI reported that optimism, hiring intentions and output growth expectations all surged.

The European Central Bank has pressed on with its bond-buying stimulus, insisting it’s too early to consider slowing the pace of the PEPP programme.

ECB president Christine Lagarde said the economy is still “on crutches” and in need of support from both the central bank and government spending, as the 19 countries that use the euro limp through extended lockdowns in a third wave of the COVID-19 pandemic.

Lagarde said the eurozone probably contracted in the first quarter of 2021, warning uncertainty was clouding the recovery:

While the recovery in global demand, and the sizeable fiscal stimulus, are supporting global and euroarea activity, the near-term economic outlook remain clouded by uncertainty about the resurgence of the pandemic and the rollout of vaccination campaigns.

Persistently high rates of coronavirus infection, and the associated extension and tightening of containment measures, continue to constrain economic activity in the short term.

Jaguar Land Rover is to temporarily shut down production at two of its main UK factories because of a shortage of computer chips.

It’s the latest sign of the difficulties facing the global car industry during the pandemic.

Credit Suisse has posted a 757m Swiss franc loss (£592m) in the first quarter as the bank reeled from the collapse of US hedge fund Archegos.

Archegos wiped out what would have otherwise been its best quarterly performances in at least a decade, with CEO Thomas Gottstein saying the loss was unacceptable.

Credit Suisse also expects to lose another 600m Swiss francs (£470m) in the current quarter, as regulators start a probe into the issue.

On the economic front, US jobless claims have hit a pandemic low as vaccine programmes and stimulus spending boost the recovery...

...while eurozone consumer confidence is at the highest since the first lockdowns.

Activists have broken windows at HSBC’s London HQ, to highlight the financial industry’s involvement in the climate emergency on Earth Day.

Nestlé has reported a jump in sales, due to demand for coffee, home-baking and petfood in the pandemic.

Dominos has also seen strong sales during the latest lockdown, although pizza collections are lagging behind home deliveries.

European stock markets have closed higher, as investors again favour companies who should benefit when lockdowns ease.

But Deliveroo fell again, after a report that Odey Asset Management had shorted Deliveroo’s shares.

Here are more of today’s stories:

Goodnight. GW

Updated

Eurozone consumer confidence at pandemic high

Another piece of encouraging data from earlier - eurozone consumer confidence has hit its highest level since the pandemic began.

The index rose to -8.1 this month, up from -10.8, suggesting that Europeans are more upbeat about prospects for 2021.

Bert Colijn of ING says:

The surprising jump in consumer confidence is actually more noteworthy than any action at the ECB meeting this afternoon.

The increase from -10.8 to -8.1 in April reveals an optimistic consumer that finally sees light at the end of the tunnel. This is the highest reading since February last year, marking the best reading since the start of the pandemic. It far surpasses the levels seen in the summer of last year when reopenings led to only modest improvements in confidence, indicating that consumers really feel close to the end of things.

European stock markets have ended the day higher.

In London, the FTSE 100 index gained 42 points, or 0.6%, to finish at 6938.

Investors seem to have put their worries about the pandemic on the back burner again. Travel companies rose, with airline group IAG up 3.3%, as it recovers from Tuesday’s selloff. Property website Rightmove, retailer JD Sports and car website AutoTrader also gained around 3%.

The smaller, more UK-focused FTSE 250 gained 1.2%, with budget airline easyJet and cruise operator Carnival both rising 4.7%.

Danni Hewson, financial analyst at AJ Bell, says companies who will benefit from a speedy return to “normal life” are gaining ground.

Falling infection rates in Europe, a vaccination take-up in over 50’s of 95% in England and signs consumers here have remembered how to spend on the high street won’t harm that sentiment at all.

“But there have been other factors at play today. The global shortage of microchips is having a tangible impact on the automotive sector and Wall Street will be paying close attention when Intel updates markets later, hoping for further guidance on how quickly manufacturers can adapt.

On the chip shortage at JLR, Dominic Tribe, director and automotive sector specialist at management consultancy, Vendigital, says:

“Jaguar Land Rover is no means the only car manufacturer to be affected by the global shortage of semiconductors. Most other major car manufacturers have already announced production slowdowns.

“The main reason for the shortage is a significant increase in demand for semiconductors during the pandemic, partly due to increased sales of consumer tech, such as tablets and gaming hardware as well as the growing requirement for battery electric vehicles. The global market for semiconductors is now estimated to have a value of $433bn, and further growth of 8.4% is forecast this year.

“For the major car manufacturers, the situation is incredibly challenging and competition for supplies is intense. Normally, if a component is at risk of short supply, this is communicated upwards through the supply chain, so the OEM [Original equipment manufacturer] can plan ahead to meet capacity demands. However, in this case, car manufacturers are competing with strong demand from OEMs in other industry sectors.”

US jobless claims at pandemic low

Over in the US, the number of people filing new unemployment claims have dropped to their lowest level since the pandemic began.

Initial unemployment claims dropped to 547,000 for last week, the lowest since the week of March 14, 2020 (figures released earlier today show).

That suggests America fast vaccine rollout, stimulus packages and loose monetary policy are all boosting the recovery (although it’s still much higher than before the pandemic).

Continuing claims, which run a week behind the headline data, also fell, dropping 34,000 to 3.67 million. That’s also a pandemic low, suggesting a stronger labour market.

Shares in Deliveroo have closed at a new low tonight, as it continues to struggle after the “worst IPO in London’s history” last month.

Deliveroo ended the day at just over 230p, down 1% today, or over 40% down on the 390p which investors (including some of its own customers) bought shares.

Deliveroo’s share price since flotation
Deliveroo’s share price since flotation Photograph: Refinitiv

People close to the deal had blamed short sellers for Deliveroo’s plunge on its first day of conditional trading on 31 March (although concerns about working conditions and growth prospects after the pandemic also put off investors).

And earlier today, the FT reported that Odey Asset Management had shorted Deliveroo’s shares, meaning the hedge fund will profit from a falling share price.

Odey Asset Management has revealed to clients that it took a short position against Deliveroo, the first sign that hedge funds are targeting the food delivery company after last month’s disastrous initial public offering.

The bet against Deliveroo’s share price was taken by James Hanbury and Jamie Grimston, fund managers at London-based Odey, according to investor documents seen by the Financial Times. The position appears to have been taken on March 31, the day of Deliveroo’s listing.

The future of a landmark deal to improve safety at clothing factories in Bangladesh is in doubt, unions have said, in the run-up to the eighth anniversary of the collapse of the Rana Plaza building in which more than 1,100 garment workers died.

More than 200 brands, including Primark, Marks & Spencer and H&M, signed up to the Bangladesh accord on fire and building safety after the 2013 disaster at the factory in the outskirts of Dhaka. That deal, agreed with the international clothing workers’ unions UNI Global and IndustriALL, is due to expire next month.

It will be superseded by the Bangladesh-government backed Ready-Made Garment Sustainability Council (RSC), which brands and factory owners have already signed up to.

Gig economy workers have won another victory in the battle for employment rights - this time against cab and courier company Addison Lee.

My colleague Sarah Butler explains:

Thousands of Addison Lee drivers could be entitled to an average £10,000 each in compensation after the court of appeal found they were “workers” entitled to the national minimum wage and paid holiday.

Lord Justice Bean dismissed an appeal by Addison Lee against a 2017 employment tribunal that found that three drivers for the company were entitled to the minimum wage from the time they logged on as ready to take passengers to the time they logged off. That decision was also upheld by the employment appeal tribunal in 2018.

The ruling is the latest victory for gig economy workers after the UK supreme court dismissed Uber’s appeal against a landmark employment tribunal, which found that its drivers should be classed as workers with access to the minimum wage and paid holidays.

The pandemic has been a difficult and stressful time for many workers.

And at Swiss bank UBS, they’re introducing a new promotion bonus as part of a drive to keep young dealmakers healthy and engaged.

Financial News reports that UBS are also boosting recruitment to help lessen the workload for junior staff and adding programmes focused on physical and mental health. More here.

Banker burnout hit the headlines last month, when a leaked presentation by 13 aggrieved first-year Goldman bankers highlighted tough working conditions, including long hours, and abuse from co-workers.

Informa, the world’s biggest exhibitions group, has highlighted the economic disruption that is being caused by the pandemic.

Informa reported a loss of £1.1bn for 2020 as the coronavirus pandemic prevented gatherings around the world, sending its revenues plunging.

Stephen Carter, Informa’s chief executive, said 2021 would be “the year of transition” for the company as it seeks to recover. But it’s notable that Informa says its recovery will start in China and the US.

My colleague Jasper Jolly explains:

In the US, the first Informa event took place in February in Florida, which has had looser coronavirus restrictions than some other states. It has since run two large boat shows there.

Informa is planning to draw corporate crowds to Las Vegas from June for events such as the World of Concrete show, the International Surface Event and WasteExpo.

Prospects for the UK and Europe reopening remained more distant, but Carter said he hoped for “revitalisation and growth through 2022-2024”.

Also today, the chairman of funeral provider Dignity has been ousted in a coup led by the company’s biggest shareholder.

Clive Whiley lost an investor vote, with 55% of votes cast in favour of a motion to remove him. It follows growing pressure from Phoenix Asset Management over the handling of a strategic review at Dignity (which runs around 800 funeral locations and 46 crematoria in the UK).

It’s quite a shake-up: two non-executive directors have also resigned along with acting chair, while Phoenix’s chief investment officer Gary Channon is joining as an executive director. He’s favourite to become the next chair, says the Evening Standard.

Phoenix (which owns nearly 30% of shares) says it’s delighted with the result, and will get straight to work to show itself worthy of it.

But shareholders are concerned about disruption, as the FT points out:

Norway’s oil fund, the world’s largest sovereign wealth fund, voted against the proposal to oust Whiley and replace him with Channon, while a top-20 shareholder said he was extremely worried about the outcome.

He said: “We are very concerned there is going to be complete vacuum and chaos. Phoenix are acting extremely irresponsibly. “For the company, the stakeholders, the bereaved customer, it is potentially a disaster for everyone.”

Dignity made a pre-tax loss of £19.6m for 2020, while the Competition and Markets Authority said in December that Dignity and rival Co-operative Group charge much more for a typical funeral than many of the small, often family-owned, businesses.

John Lewis hands founder’s great grandson £1.5m payoff

Back in the UK, John Lewis is handing a £1.5m payoff to Patrick Lewis, the great grandson of the retailer’s founder and the only remaining family member of the business, who is to exit in June.

Lewis, who spent more than 26 years at the group, stepped down as a finance director in December and has since been on leave after being replaced by Bérangère Michel, formerly John Lewis’s director of customer service.

His payoff includes a payment for loss of office and contributions towards legal fees as well as cash in lieu of salary, car, pension and other benefits for the remainder of his contractual notice period.

The payment comes only a year after the group underwent a board restructure that led it to spend close to £2m on paying off the former bosses of its department stores and Waitrose supermarkets – Paula Nickolds and Rob Collins – only for them to be replaced within months.

Lagarde welcomes Annalena Baerbock as Green's nominee for German chancellorship

Christine Lagarde has welcomed the news that Germany’s Green party has nominated Annalena Baerbock as their candidate to succeed Angela Merkel as chancellor.

She was asked for her views on the possibility of Baerbock, who is 40 and a former trampoline champion who hasn’t held a government role, leading Europe’s largest economy.

Lagarde replies that competitive sport gives important skills that are useful for politics, before pointing to Baerbock’s commitment to the climate issue.

Lagarde (who competed in synchronised swimming national championships in her youth) explains that a competitive sport background gives you “a little spirit of competition”, “hard skin”, and the desire to excel in your sport - but also politics if you choose go that way.

That clearly seems to be the case with Baerbock, says Lagarde.

Her success shows you don’t need to be a seasoned, grey haired, or white haired, person to enter politics and see your talents recognised, Lagarde adds (pointing to herself at this point).

Christine Lagarde
Christine Lagarde Photograph: ECB

Lagarde says:

I very much welcome an athlete, a young women, and certainly one who has a very high concern for climate issues and protection of the environment, which as you know on a personal basis I care for.

Lagarde adds that it also shows that chancellor Merkel has not discouraged younger women from entering politics, proving the value of role models.

The Greens are currently performing well in the polls, meaning Baerbock has a realistic chance of becoming chancellor.

My colleague Kate Connolly explained this week:

Baerbock, 40, viewed as a tenacious, down-to earth centrist with an eye for detail, and an expert on climate change and how to tackle it, told a small party gathering she aimed to “make politics for society at large”.

She described her candidacy as “an offer, an invitation to lead our diverse, prosperous, strong country into a good future”.

The Greens’ strongest ever standing in the polls – it is in second place behind the CDU-CSU alliance with between 21 and 23% of the vote – means it has a realistic chance of forming a new government. This is the first time since its formation that it has nominated a candidate for chancellor.

Updated

Lagarde: eurozone is on crutches

Lagarde then explains that the euro economy is “on crutches” - one fiscal crutch (government support), and one monetary crutch (central bank support).

There is a long way to go until we’ve crossed the bridge of the pandemic and the recovery is sustainable and solid, Lagarde explains.

The economies of the euro area have to go across the bridge of the pandemic, and have to be on solid and sustainable ground... to walk on a self-sustained basis.

She also used this ‘crutches’ analogy last week - in a signal that it is too early to take away either fiscal or monetary support.

On the issue of bond tapering..... Dutch central bank chief Klaas Knot predicted earlier this month that the euro zone economy is on course for a robust recovery in the second half of the year, that could allow the ECB to start phasing out PEPP purchases in the third quarter.

Christine Lagarde is insisting today that any change to the pace of the programme is “data-dependent”, rather than linked to a specific timeframe. So it’s premature to discuss phasing it out.

Updated

Asked whether the ECB could slow its bond-purchase programe later this year, ECB president Lagarde points to the uncertainty in the near-term outlook.

The service sector may be bottoming out, but there are plenty of short-term risks, she says.

So the focus is to ensure favourable financing conditions.

The ECB “significantly increased” the pace of its PEPP programme back in March when it saw financial conditions tightening, Lagarde expains.

We have continued “without any wavering”, and it will continue, she adds.

She also says the governing council didn’t discuss any phasing out of PEPP purchases, as it is simply premature.

Any change to the pace of the programme is “data-dependent” and not linked to a particular time frame, she added.

And on the euro (which has strengthened during April), she says the ECB is ‘very attentive’ to the impact of a stronger currency on inflation.

Updated

ECB president Lagarde also warned that the eurozone may have shrunk in the first three months of 2021 (which would put the region into a double-dip recession).

She adds that growth appears to be resumed in this quarter:

Euro area real GDP declined by 0.7 per cent in the fourth quarter of 2020 to stand 4.9 per cent below its pre-pandemic level one year earlier.

Incoming economic data, surveys and high-frequency indicators suggest that economic activity may have contracted again in the first quarter of this year, but point to a resumption of growth in the second quarter.

Lagarde: Uncertainty over pandemic and vaccinations clouds outlook

ECB president Christine Lagarde has warned that uncertainty over the latest wave of Covid-19 infections, and Europe’s vaccine rollout, are casting a cloud of uncertainty over the eurozone.

Speaking at a press conference in Frankfurt, she says that the current restrictions imposed to fight the pandemic are hitting economic actitity:

While the recovery in global demand, and the sizeable fiscal stimulus, are supporting global and euroarea activity, the near-term economic outlook remain clouded by uncertainty about the resurgence of the pandemic and the rollout of vaccination campaigns.

Persistently high rates of coronavirus infection, and the associated extension and tightening of containment measures, continue to constrain economic activity in the short term.

Looking ahead, Lagarde adds the ECB expect a “firm rebound” in economic activity in the course of 2021. due to progress with vaccination campaigns and the envisaged gradual relaxation of containment measures.

Earlier this month, data showed that vaccine rollouts in France and Germany had speeded up after a slow start:

But, delays to supplies from vaccine makers, and the temporary suspension of the rollout of the AstraZeneca vaccine, have hit Europe’s vaccine programme.

Updated

Melissa Davies, chief economist at Redburn, is concerned that the ECB is short of firepower, if the eurozone economy weakens:

“The ECB confirmed its current policy stance today, with rates on hold and QE asset purchases temporarily boosted during this quarter. But with Eurozone credit conditions tightening and governments’ grip on the virus in question, observers may wonder whether the ECB has anything left in the cupboard to deal with negative risks to growth and inflation.

Any increased Covid restrictions and the risk of winter lockdowns point to the need for the ECB to do more, rather than less, in the coming months. As things stand, ECB growth estimates are far too bullish for this year and the central bank risks falling behind the curve as Eurozone deflation pressures build in H2.”

ECB presses on with faster pandemic bond purchases

The European Central Bank has vowed to continue its stimulus measures to help the eurozone economy through the pandemic.

The ECB has voted to leave interest rates unchanged at record lows at today’s meeting.

It has also pledged to continue to buy up government bonds through its €1.85trn pandemic emergency purchase programme (PEPP) at the current faster pace to support the recovery.

It says:

Since the incoming information confirmed the joint assessment of financing conditions and the inflation outlook carried out at the March monetary policy meeting, the Governing Council expects purchases under the PEPP over the current quarter to continue to be conducted at a significantly higher pace than during the first months of the year.

The ECB stepped up the pace in March, in an attempt to keep borrowing costs low, and counter the recent sell-off in eurozone debt markets.

Today, the ECB also explains that it will adjust its purchases, as required, to counter the economic shock caused by Covid-19.

The Governing Council will purchase flexibly according to market conditions and with a view to preventing a tightening of financing conditions that is inconsistent with countering the downward impact of the pandemic on the projected path of inflation. In addition, the flexibility of purchases over time, across asset classes and among jurisdictions will continue to support the smooth transmission of monetary policy.

If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full. Equally, the envelope can be recalibrated if required to maintain favourable financing conditions to help counter the negative pandemic shock to the path of inflation.

The jump in UK manufacturers’ confidence to its highest since 1973 bodes well for growth this quarter, says Howard Archer of EY Item Club.

He adds:

Investment plans were healthier across all categories, adding to hope that business investment will contribute significantly to the UK’s recovery.

Updated

1973, incidentally, was the year in which Edward Heath took the UK into the EEC (in January, having signed the accession treaty in 1972).

It was also the era of the Barber Boom, when chancellor Anthony Barber slashed taxes and boosted borrowing in an expansionary, but unsuccessful, “dash for growth”. And it was the year of the oil crisis.

Our economics editor Larry Elliott wrote about it, back in 2014 (when manufacturing confidence also hit a post-1973 high)

Cast your mind to 1973. It was the year the Yom Kippur war brought the long postwar boom to a shuddering halt. Sunderland brought off one of the great FA Cup shocks by beating Leeds at Wembley. Britain joined the European Economic Community; Ted Heath was prime minister; the miners went on strike; the charts were full of songs by Sweet, Slade and Donny Osmond.

Here’s some more historical context...

Updated

UK manufacturing optimism highest since 1973

Optimism among UK manufacturers is rising at the fastest rate in 48 years, as hopes of an economic rebound are lifted by the Covid-19 vaccination programmes.

The CBI’s latest industrial trends survey shows that manufacturing optimism has jumped at its quickest pace since April 1973, with firms anticipating a surge in output and new orders in the next quarter.

This probably reflects an improved demand outlook amid the continued success of the vaccine rollout, says the CBI.

Sentiment in the manufacturing sector improved at its quickest rate since 1973, likely reflecting an improved outlook for demand conditions.

Indeed, new orders last quarter grew at their fastest pace since April 2019, and output volumes are expected to grow rapidly next quarter after being flat in the three months to April.

This pushed CBI’s quarterly business optimism gauge up to +38, its highest since April 1973, up from -22 in January.

Expectations for output growth in the next quarter were the strongest on record.

Export sentiment grew at the fastest rate since April 2018, amid rising optimism about the prospects for the global recovery this year.

The survey of 288 manufacturers found that firms expect to boost their investment - spending more on buildings, machinery, product process innovation, and training retraining.

Plans to invest in plant and machinery were the strongest since July 1997 -- with the CBI citing “anecdotes” that manufacturers were taking advantage of the temporary ‘super-deduction’ tax break announced by finance minister Rishi Sunak in March’s budget.

Uk manufacturing optimism and business intentions

In another boost, manufacturers are planning to take on more staff -- with hiring intentions at their strongest in 47 years.

The CBI says:

Numbers employed in the quarter to April grew at their quickest pace since July 2018 – this marked the first growth in employment in two years.

Firms expect headcount growth to accelerate further next quarter, with expectations at their strongest since April 1974.

Rain Newton-Smith, CBI Chief Economist, explains that the plan to reopen the economy from the lockdown has cheered manufacturers.... but inflationary pressures are a growing worry:

“Manufacturers have reported the biggest increase in optimism in nearly 50 years in this month’s quarterly survey. Phased reopening has lifted the mood among firms, notably driving orders, employment, and investment plans.

“However, rising costs are an increasing concern for many businesses, and seem to be putting upward pressure on prices as firms try to protect their margins.

“Continuing to support firms while they get on a steadier footing as restrictions ease will be crucial to recovery. The Government should continue to work closely with business to ensure reopening is a success, while boosting competitiveness over the long-term.”

That HSBC quote was via Reuters, by the way. Here’s their story:

Climate activists shatter 19 windows at HSBC HQ in London’s Canary Wharf

Updated

HSBC: cannot condone vandalism

An HSBC spokesman has responded to the protest at its Canary Wharf HQ this morning, saying (via Reuters):

We welcome meaningful dialogue on our climate strategy, however, we cannot condone vandalism or actions that put people and property at risk.

We have an ambition to be net zero by 2030 and to bring our financed emissions to net zero by 2050.”

“We have also committed to set out short and medium term transition targets, and to phase out the financing of coal-fired power and thermal coal mining by 2040 globally. We remain committed to supporting our customers in their transition to net zero.

Updated

Climate activists break windows at HSBC HQ

Activists from the Extinction Rebellion, a global environmental movement, sit in front of a broken window during a direct action protest as a police officer waits to detain them, outside HSBC headquarters in Canary Wharf today
Activists from the Extinction Rebellion, a global environmental movement, sit in front of a broken window during a direct action protest as a police officer waits to detain them, outside HSBC headquarters in Canary Wharf today Photograph: John Sibley/Reuters

A group of activists from Extinction Rebellion protesters have broken windows at HSBC’s headquarters in Canary Wharf today.

It’s part of a campaign to highlight the role of the financial sector in the climate emergency, which saw ‘fake oil’ splashed over the Bank of England at the start of the month.

A group of women used hammers to crack the windows before staging a sitdown protest at around 7am, and waiting to be arrested.

The activists wore patches that read “better broken windows than broken promises”, in reference to the suffragettes acts of civil disobedience to win women the right to vote.

In a statement, Extinction Rebellion, pointed to research from the Rainforest Action Network showing that HSBC is Europe’s second-largest financier of fossil fuels after Barclays.

Last October, HSBC announced a target of net zero carbon emissions across its entire customer base by 2050 at the latest, and is aiming for net zero emissions across its own business by 2030.

Extinction Rebellion says it’s not enough:

Despite HSBC’s pledge to shrink its carbon footprint to net zero by 2050, their current climate plan still allows the bank to finance coal power, and provides no basis to turn away clients or cancel contracts based on links to the fossil fuel industry.

The women argue that commitments to reaching net zero carbon emissions in 30 years’ time are largely meaningless without immediate action to put banks on course to avoid an increase in global temperature in excess of 1.5° Celsius.

One activists, Susan Reid from Preston says:

I shouldn’t be having to do this but I think we owe it to our children and grandchildren to act in whatever way we can. I would like to enjoy my retirement with my grandchildren, but instead I have to spend it fighting for their future because banks like HSBC are happy to keep making money from fossil fuels no matter the risk.

“We’re in a planetary emergency and people are dying right now. Just because it’s not on our doorstep doesn’t mean it’s not already happening in the global south. What we are doing today is an act of care.”

A delivery rider outside a Domino’s Pizza store
A delivery rider outside a Domino’s Pizza store Photograph: Domino’s/PA

Pizza delivery firm Dominos is still seeing high demand for home deliveries in the lockdown.

Dominos reports that trading from 28 December 2020 to 28 March 2021 was strong, including “exceptional trading over the new year period” (when the pandemic meant usual celebrations were cancelled).

Like-for-like system sales in the UK & Ireland in Q1 were up 18.5% compared with a year ago (when there was limited impact from Covid-19).

But while the delivery business was busy, the pizza collection business is still being impacted by lockdown restrictions.

Dominos says:

At an order count level, we have seen delivery growth of 6.8% in the quarter with collection reporting some recovery, now trading at 65% of 2019 levels.

Shares have dipped this morning, as the Press Association explains:

Shares in Domino’s fell 2% after its update as analysts said the update signalled ongoing declines in order numbers at the chain.

Wayne Brown, at Jefferies, said: “Order count decline has improved slightly, but still remains mid-single digits negative.”

Full story: Credit Suisse records almost £600m loss on Archegos collapse

Credit Suisse swung to a 757m Swiss franc loss (£592m) in the first quarter, as the bank reeled from the collapse of US hedge fund Archegos that wiped out what would have otherwise been its best quarterly performances in at least a decade.

The bank has taken the biggest hit from the Archegos collapse among its peers, logging a SFr4.4bn charge in the first quarter. It comes after one of its prime brokerage clients Archegos was forced to liquidate almost $20bn (£14bn) in assets last month, in a fire sale that reverberated across global markets.

The pre-tax loss, which Credit Suisse executives called “unacceptable”, compares with a SFr1.2bn profit during the same period last year.

Credit Suisse said that, excluding Archegos, it would have made a SFr3.6m profit in the first three months of the year. It would have been one of the lender’s best quarterly financial results in at least a decade.

More here:

JLR to suspend work at major UK car plants amid computer chip shortage

Jaguar Land Rover (JLR) is to temporarily shut down production at two of its main UK factories because of a shortage of computer chips, in the latest sign of the difficulties facing the global car industry during the pandemic.

The company, which has the UK’s largest automotive manufacturing operation, confirmed to the Guardian it would have a “limited period of non-production” at its plants in Castle Bromwich in the West Midlands and Halewood on Merseyside starting on Monday.

It is understood the shutdown is scheduled to last at least a week, although the company will continue to monitor its chip supply before committing to a reopening date.

The shutdown underlines the struggles of carmakers across the world to secure a supply of computer chips, also known as semiconductors, amid a global shortage that has affected companies from Microsoft and Sony, the makers of the Xbox and PlayStation games consoles, to the phone manufacturer Samsung and cryptocurrency “miners” who need computer chips to solve puzzles that earn them bitcoin and other digital assets.

Nestlé boosted by pandemic coffee demand, plus home-baking and pet food

A Nespresso store in Hong Kong.
A Nespresso store in Hong Kong. Photograph: Budrul Chukrut/SOPA Images/REX/Shutterstock

A surge in demand for home-drunk coffee during the pandemic has boosted sales at Nestlé.

The world’s largest foodmaker says coffee was the largest contributor to its growth in the first quarter of this year, as customers flocked to buy its Nespresso pods, as well as jars of Nescafe instant coffee, and its Starbucks-branded products.

Sales of Nespresso products leapt by 17.1% in January-March -- a quarter in which many people were still working from home, rather than getting their caffeine hits in the office.

Nestlé has also benefitted from the resurgence in home baking under the lockdown, which boosted demand for items like powdered milk, carnation (evaporated milk) and confectionary.

It says:

Dairy grew at a double-digit rate, based on elevated demand for home-baking products and fortified milks.

Demand for pet food was also strong -- with premium brands Purina Pro Plan, Purina ONE and Felix all selling well.

That’s probably also a pandemic effect. With dog ownership surging since the first lockdowns, all those growing puppies need feeding....

Overall, Nestlé beat forecasts with 7.7% organic growth in Q1 - which Reuters says is its strongest quarterly sales growth in 10 years.

That was partly due to higher prices: Nestlé said higher pricing related to increasing raw materials costs pushed up sales by 1.2%.

In terms of categories, petcare revenues was up 8.7%, powdered and liquid beverages including coffee rose 9.9%, milk products & ice cream increased 15.7%, and confec-tionery was up 10.3%.

Last December, Nestlé was named one of the world’s top plastic polluters, based on the amount of its packaging found around the world:

All those single-use coffee pods are just one part of the wider problem, with far too many ending up in landfill -- prompting a new recycling scheme in the UK.

European markets have opened higher this morning, with the Stoxx 600 index up around 0.4%.

European stock markets, early trading, April 22 2021
European stock markets this morning Photograph: Refinitiv

The FTSE 100’s a little higher too, up 15 points at 6910, ahead of this afternoon’s ECB interest rate decision.

Connor Campbell of SpreadEx says:

The European Central Bank isn’t expected to ruffle any feathers this Thursday, with analysts predicting that it will be another steady session from Christine Lagarde and co.

But with a while until the next meeting – the central bank skips May – the ECB could use this opportunity to sharpen its forward guidance. There are also hawks lurking among the doves, meaning the get-together may not go as smoothly as forecast.

Tom Kinmonth, senior fixed income strategist at ABN Amro, says Credit Suisse has taken a huge hit from Archegos’s collapse:

It is a quarter that is likely wanted to be forgotten by the bank. The fall-out from the hedge fund Archegos has been severe. The bank posted a CHF 4.4bn charge in the first quarter and expects a further impact of CHF 600mn from the failure in the second quarter.

Press reports indicate that Credit Suisse built-up a position of over $20bn on Achegos.

The bank has confirmed regulatory (FINMA) investigations into both the Archegos and the Greensill activities, as the regulator examines indications of deficiencies in risk management on both issues. Naturally, the huge charges and potential fines are the main talking points from its Q1 results. However, on a brighter note, wealth management inflows were good and trading revenue was exceptionally strong, which should bring some positivity to other European banks.

Ovenight, the Wall Street Journal reported that Credit Suisse’s exposure to Archegos Capital Management had reached $20bn, before its collapse.

The WSJ says CS was struggling to monitor this exposure, as the value of Archegos’s assets changed rapidly.

The U.S. family investment firm’s bets on a collection of stocks swelled in the lead-up to its March collapse, but parts of the investment bank hadn’t fully implemented systems to keep pace with Archegos’s fast growth, the people said.

Updated

FINMA statement: Archegos proceedings begin, confirms Greensill probe

Here’s the statement from Swiss financial watchdog FINMA, announcing it has begun an investigation into Credit Suisse over its Archegos losses, and confirming it is investigating its involvement with now-collapsed Greensill Capital.

The Swiss Financial Market Supervisory Authority FINMA has opened enforcement proceedings against Credit Suisse after the bank suffered significant losses in connection with a US hedge fund (“Archegos”).

Furthermore, FINMA announces that it opened proceedings against the bank in the context of the “Greensill” case in March 2021. Supplementing measures taken by the bank, FINMA has in addition required various risk-reducing measures.

FINMA has opened enforcement proceedings against Credit Suisse in the context of the significant losses resulting from the business relationship with the US hedge fund “Archegos”. FINMA will investigate in particular possible shortcomings in risk management. FINMA will appoint a third-party agent to investigate the matter at the bank. In addition, FINMA will continue to exchange information with the competent authorities in the UK and the USA.

Ongoing proceedings in the “Greensill” case

FINMA opened in March 2021 proceedings against Credit Suisse in the context of the “Greensill” case and the corresponding supply chain finance funds. An investigating agent has already been appointed here. The proceedings against the bank will also focus on issues of risk management.

FINMA will inform the public about the conclusion of the enforcement proceedings. It will not comment further on the content while the proceedings are ongoing. Typically such proceedings can be expected to take several months, particularly where complex international matters are involved.

Various short-term measures

As a result of these two cases, FINMA has in recent weeks ordered various short-term measures to be put in place. These include organisational and risk-reducing measures and capital surcharges as well as reductions in or suspensions of variable remuneration components. These precautionary and temporary measures are intended to complement and reinforce steps already taken by the bank.

Updated

Shares in Credit Suisse have dropped 5% in early trading, and are at their lowest since last November:

Credit Suisse’s share price over the last year
Credit Suisse’s share price over the last year Photograph: Refinitiv

Credit Suisse’s Archegos pain isn’t over, either.

It expects to lose another 600m Swiss francs (£470m) in the current quarter from the ‘US-based hedge fund matter’ (rather like superstitious actors and Macbeth, bankers seem reluctant to name Archegos!)

In its outlook statement, Credit Suisse explains:

Overall, we would expect market volumes to return to lower, and more normal, levels in the coming quarters.

We expect a residual impact of approximately CHF 0.6 bn from the US-based hedge fund matter in 2Q21, as we have now exited 97% of the related positions.

Credit Suisse was one of several prime brokers to Archegos, the family office which took huge leveraged positions on tech and media stocks.

Archegos collapsed when it couldn’t meet margin calls, amid a rush to close positions in which fellow prime brokers Goldman Sachs suffered little damage and Morgan Stanley (who also moved fast) lost over $900m.

Introduction: Credit Suisse posts 'unacceptable' loss

The logo of Swiss bank Credit Suisse is seen at its headquarters in Zurich.
The logo of Swiss bank Credit Suisse is seen at its headquarters in Zurich. Photograph: Arnd Wiegmann/Reuters

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

The collapse of US hedge fund Archegos has dragged Credit Suisse into the red, as the Swiss bank outlines plans to raise more capital.... and Switzerland’s financial regulator, Finma, launches an investigation over the matter.

Credit Suisse has reported a pre-tax loss of 757m Swiss francs (£593m) for the first quarter of this year this morning, after suffering a 4.4bn Swiss franc loss from the imposion of Archegos.

Thomas Gottstein, Chief Executive Officer of Credit Suisse Group AG, says the loss is ‘unacceptable’.

“Our results for the first quarter of 2021 have been significantly impacted by a CHF 4.4 bn charge related to a US-based hedge fund. The loss we report this quarter, because of this matter, is unacceptable.

Gottstein adds that the bank has taken ‘significant steps’ to address this, and its involvement with Lex Greensill’s failed supply chain finance empire:

Together with the Board of Directors, we have taken significant steps to address this situation as well as the supply chain finance funds matter.

Among other decisive actions, we have made changes in our senior business and control functions; we have enhanced our risk review across the bank; we have launched independent investigations into these matters by external advisors, supervised by a special committee of the Board; and we have taken several capital-related actions.

Without Archegos’s collapse, Credit Suisse would have made a pre-tax profit of around 3.6 billion francs, its best in years, thanks to strong investment banking and wealth management work.

But following the mult-billion hit, the bank is raising around $2 billion to bolster its capital position, by issuing bonds that will convert to stock.

As Reuters explains:

Alongside announcing its earnings, the bank said it will issue mandatory convertible notes (MCN) convertible into 203 million shares, which should net the bank more than 1.8 billion Swiss francs. That would boost its core capital level to around 13% from 12.2%.

Separately, Switzerland’s financial regulator, Finma, said it opened enforcement proceedings against the bank over how it handled the risks around Archegos.

It was already looking into Credit Suisse’s involvement in Greensill Capital.

Also coming up today

The European Central Bank meets to set monetary policy today, but isn’t expected to make any changes to its stimulus packages.

Given the lockdowns in place in many eurozone countries, amid the third wave of Covid-19, the ECB is likely to maintain its ultraloose monetary policy for some time - until vaccinations allow economies to reopen.

Vladimir Potapov of VTB Bank explains:

“We believe that lockdowns increase the probability of prolonged dovish ECB policy. Restrictions put pressure on European economic activity, especially in the services sector, limiting the aggregate demand.

As long as economic activity remains subdued, the ECB will probably keep the key rate at historical lows and will continue to purchase bonds as they try to preserve favorable financing conditions. The ECB has already increased the pace of bond purchases at one of the latest meetings, so changes to the current monetary policy look very unlikely at the upcoming meeting. The economy will likely gather pace in the second half of 2021 amid a better epidemic situation, massive vaccination, and global economic recovery.

European markets are set for a higher open, after a rally on Wall Street last night.

Oil is dipping, though, after a rise in US crude inventories yesterday - and worries that demand will be hit by the pandemic, as cases in India hit a global record.

The agenda

  • 7.45am BST: French business confidence for April
  • 11am BST: CBI industrial trends survey
  • 12.45pm BST: ECB interest rate decision
  • 1.30pm BST: ECB press conference
  • 1.30pm BST: US weekly jobless figures
  • 3pm BST: Eurozone consumer confidence survey for April

Updated

Sign up to read this article
Read news from 100's of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
David Bowie Trailblazed the 'Everyday Exhibits' Trend in His '70s Living Room With A Retro Twist on Curated Clutter – It's Playful, Practical, and Replicable
A photo from 1971 shows that the musician was tapping into personality-led interiors long before they were a trend – experts say his look is the blueprint
Homes & Gardens
Homes & Gardens
McDonald’s burger prices vary a whopping 74% depending on where you live. Here is the cheapest state
The Big Arch burger contains 1,020 calories and 53 grams of protein and varies in price across the country
The Independent UK
The Independent UK
How to shop at the farmers’ market like a pro
Tips from experts on where to find the freshest fruits and veggies
The Guardian - US
The Guardian - US
‘The lyrics to Lola by the Kinks are gross – I was really taken aback’: Moby’s honest playlist
The DJ and multi-instrumentalist thinks Donna Summer still sounds like the future, but which ‘unevolved’ Kinks staple can he no longer stomach?
The Guardian - UK
The Guardian - UK
Watch lyric video for new Foo Fighters single Caught In The Echo
Caught In The Echo is the third track to be released from upcoming 12th Foo Fighters album Your Favorite Toy
Metal Hammer
Metal Hammer
30 years later, we're still quoting these iconic 'Happy Gilmore' lines
Adam Sandler’s golf classic remains the ultimate proof that the Sandman is a comedy god
Tom’s Guide
Tom’s Guide
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.
Download on the AppStore Get it on Google Play