Alphabet also missed Wall Street forecasts.
The company behind Google posted revenue of $33.74bn in the last quarter, missing estimates of $34.05 billion.
Still, Alphabet also reported net profit of $9.19 billion, or $13.06 per share, up from $9.57 per share a year ago.
eMarketer analyst Monica Peart says:
“We’re seeing a larger than expected slowdown in Google properties’ revenue, representing its core search business. This is likely related to the ramp-up in competition from Amazon, as consumers increasingly turn to the ecommerce giant for their product searches.”
That’s all for tonight! GW
Amazon has taken a bite out of Wall Street’s new-found optimism tonight, by missing analyst expectations:
Here’s Bloomberg’s take:
Amazon.com Inc. reported sales that missed analysts’ estimates, and issued a disappointing revenue forecast for the busy holiday quarter, suggesting the online marketplace may be reaching a saturation point in the U.S.
Revenue gained 29 percent to $56.6 billion in the third quarter, the e-commerce giant said Thursday in a statement. Analysts’ projected $57.1 billion. Sales will be from $66.5 billion to $72.5 billion in the current period, falling short of analysts’ average estimate of $73.8 billion. Shares declined as much as 6.5 percent in extended trading.
Ut-oh... Amazon and Alphabet have just released results as the echo of the closing bell fade. And Wall Street is NOT happy.....
Amazon drops on revenue miss https://t.co/CegFAC8UE3 pic.twitter.com/sWxZCoL6FM
— CNBC (@CNBC) October 25, 2018
EARNINGS: Alphabet Q3 EPS $13.06 vs. $10.42 Est.; Q3 Revs. $33.74B vs. $34.04B Est. • $GOOGL slides nearly 7% after-hours https://t.co/jom3i6vSEZ pic.twitter.com/uRRdEksH3Q
— CNBC Now (@CNBCnow) October 25, 2018
Intel has smashed earnings forecasts, though:
EARNINGS: Intel Q3 EPS $1.40 Adj. vs. $1.15 Est.; Q3 Revs. $19.16B vs. $18.11B Est. • $INTC up 4% after-hours https://t.co/vMmAQHBDf7 pic.twitter.com/ScL3iSzHtX
— CNBC Now (@CNBCnow) October 25, 2018
Dow jumps 400 points
Breaking: After Wipeout Wednesday, it’s Turnaround Thursday.
October has maintained its run of wild swings tonight, as Wall Street bounces back.
The Dow Jones industrial average has closed 401 points higher, a gain of 1.6%, at 24,984.
Technology, industrials companies and banks led the rally. Microsoft closed 6% higher, while Intel gained 4.8%.
With tech stocks romping ahead, the Nasdaq has posted its biggest one-day jump in seven months.
US Equity Close:
— DailyFX Team Live (@DailyFXTeam) October 25, 2018
S&P 500: +1.84%
Dow: +1.54%
NASDAQ: +2.95%
*NASDAQ 100 RALLIES 3.4% FOR BIGGEST ADVANCE SINCE MARCH
— lemasabachthani (@lemasabachthani) October 25, 2018
Updated
The Nasdaq’s recovery is even punchier than the Dow’s.
The tech-focused index has leapt by 3%, with just a few minutes to go.
Tesla, Twitter and Microsoft have all done their bit, with forecast-beating results in the last 24 hours.
The rebound has legs! With just 30 minutes to go, the Dow is up an impressive 490 points, or 2%, at 25,073.
That means its recovered a large chunk of the Wednesday wobble.
Traders in New York must be dizzy!
The Dow is holding onto its gains. With two hours to go, it’s up 380 points at 24,963, up 1.5%.
Microsoft is leading the charge, up 5.7% after impressive results last night. Intel (+5%) and VISA (+3.45%) are close behind.
Yeti spotted on Wall Street
The ongoing market turbulence hasn’t deterred US company Yeti from floating on the stock market today.
Yeti makes high end coolers and outdoor gear, popular with outdoor types like hunters and surfers, and pitmasters who spend time tending barbecues (important work!).
Their kit isn’t cheap. The Tundra 125 cooler retails at $549 -- for that, you get enough space for 73 cans or dozens of hot dogs, hamburger patties and cold cuts.
Yeti floated at $18 per share -- so far, they’ve slipped by 7% to $16.80. Not a great start - still, a yeti makes a change from all those Wall Street bears.
European markets rebound as Wall Street rallies
After tumbling in early trading, European stock markets have recovered to end the day higher.
In London, the FTSE 100 has climbed back over the 7,000 point mark, ending up 41 points at 7,004. It would be higher, but for WPP’s woes.
Italy’s FTSE MIB had a good day, gaining 1.8% after Mario Dragji said he was confident that the deadlock over Rome’s budget plans would be resolved.
The French CAC gained 1.6%, and Germany’s DAX rose 1%, as traders welcomed the rally in New York.
On Wall Street, the Dow is now up 350 points - trying to put Wednesday’s shocker behind it.
Asia’s tumble into a bear market overnight is still a concern, though, as market volatility remains high.
Fiona Cincotta of City Index says this month’s losses could be a buying opportunity......
Wall Street started on the front foot with tech stocks on the rise after falling sharply in the previous session. Upbeat results from Microsoft and Telsa have gone some way to calming investor nerves after disappointments from Caterpillar and 3M earlier in the week. Whilst a slew of risk factors have hit traders confidence hard this month, investors will be looking searching for the bottom of this recent shake out. So far market shake out’s this year have been buying opportunities and whilst we are still in a bull market, we don’t see why this one should be any different right now.
Neil MacKinnon, Global Macro Strategist at VTB Capital, says today’s governing council meeting came at a tricky time for the ECB.
The ECB’s decision to hold current interest rate levels at 0% takes place at a time of a cyclical slowdown in the Eurozone economies, as well as persistently subdued core CPI inflation. Business growth is at its slowest in two years and companies’ expectations of future growth have slipped to the lowest in four years. The Italian budget drama is also high on the agenda and the stand-off between Rome and Brussels is unlikely to be resolved. Also noteworthy is the risk of a worsening ‘doom-loop’ between Italian banks and their holdings of domestic sovereign debt.
Italy is not Greece and Rome will react badly if the ECB resorts to its ‘enforcement tools’ of closing down bond purchases and turning off the liquidity tap for the Italian banking system.”
ECB meeting: What the experts say
Here’s some expert reaction to the European Central Bank press conference today:
Anna Stupnytska, global economist at Fidelity International,
“At today’s press conference Draghi chose to strike a relatively hawkish note, while acknowledging somewhat weaker economic momentum as of late.
There has been some concern in the market about a number of disappointing data prints this month, including the flash PMIs yesterday, but evidence so far has not been strong enough to change the ECB stance.
Anthony Kurukgy, Senior Sales Trader at Foenix Partners
Mario Draghi stuck to the script again at today’s ECB Press Conference, delivering yet another ‘balanced’ assessment of the eurozone’s economy. The ECB President quelled recent concerns of weaker economic data as merely a slowdown of growth momentum, not a downturn. This aside, the ECB remain committed to ending the central bank’s bond-buying programme come December.
Transitory or not, Draghi and Co. will need to buy themselves more time to distinguish what effect trade wars, Brexit and the recent Italian budget crisis will have on its interest rate hike timeline in 2019.
Silvia Dall’Angelo, Senior Economist, Hermes Investment Management
The bottom line is that the ECB is on a gradual path of monetary policy normalisation for now, but risks from protectionism, a further slowdown in external demand, domestic political instability, Brexit and volatility in financial markets cast a dark shadow on the ECB’s plans.
Policy uncertainty has increased both externally and domestically: international trade tensions have remained high, there is no solution for the Brexit issue in sight, and the Italian government seems determined to defy the European fiscal rules. The recent turmoil in financial markets is a new addition to the list of downside risks.
Marina Mensah-Afoakwah, Senior Economist at the CEBR
Between Italy’s budget drama and the precarious nature of Brexit, there is a lot that threatens the Eurozone’s stability. For the time being these pressures haven’t risen to a level requiring ECB intervention.
Time will tell however, as latest figures suggest cracks are beginning to show in the region’s economy.”
Today’s bounceback on Wall Street means some investors may be snaffling up bargains. Or at least, what they hope are bargains.
CNBC explains why traders may be putting their toes into the water again:
“The technical picture has turned increasingly bearish this month,” said Ed Yardeni, president and chief investment strategist at Yardeni Research. “The percentage of S&P 500 companies trading above their 200-day moving averages was down to 37% after yesterday’s debacle.”
He noted, however, that prior similar declines during this bull market have “marked buying opportunities.” Yardeni added: “If this is still a bull market, as we believe it is, then the latest bearish technicals and October’s swoon should mark the latest buying opportunity.”
U.S. markets rebounded at the open after yesterday's tumble that sent the Dow and S&P 500 negative for the year. The Dow jumped 200 points at market open, with all other major indexes also rising. https://t.co/XC0cnmv4qG
— CNBC (@CNBC) October 25, 2018
New York stock market opens higher
Back in the markets, shares are rising in New York as traders return to the fray after yesterday’s alarming late sell-off.
The Dow Jones industrial average jumped by 192 points at the open, or 0.8%. That’s an encouraging start, after Wednesday’s 608-point slide.
The Nasdaq is also recovering, after slumping ingloriously into a correction yesterday, in its worst day since 2011. The strong results from Twitter today, plus Microsoft and Tesla yesterday, may be calming nerves.
Tesla has surged by over 8% in early trading, with other carmakers also up (Ford has gained almost 6%).
Twitter has leapt by 15%, after beating profit and revenue forecasts today.
But it’s early days. Investors will be watching nervously to see if Wall Street can hold onto these gains, or be dragged down again.
Draghi sees financial uneasiness dangers without Brexit deal
Mario Draghi warns that there could be ‘uneasiness’ in the financial markets, unless Britain and the EU make progress towards a Brexit deal.
Asked about Brexit at today’s press conference, the ECB president says he is confident that a “good, common sense solution” will be found.
But he also warns that time is running out - if a deal isn’t reached, banks and other businesses will be forced to trigger their contingency plans.
As Draghi puts it:
If this lack of a solution continues, and approaches the end date, the the private sector itself will have to prepare on the assumption that it will be a hard Brexit.
That’s where there will be financial uneasiness in markets.
. @ecb chief, Mario Draghi: "I should warn about another aspect: if a lack of solution will continue, the private sector itself will have to prepare at the assumption of a hard #Brexit" @eunewsit
— emanuele bonini (@emanuelebonini) October 25, 2018
Draghi: Politicians must protect 'precious' central bank independence
Boom! Mario Draghi has admonished politicians, such as Donald Trump, who put pressure on central banks to change their policy.
He’s been asked the pressure on the European Central Bank and the Fed to maintain their stimulus programmes, or do more.
Draghi tells reporters in Frankfurt that these attacks threaten central bank independence.
He says:
Central bank independence is a precious thing. It’s precious because it’s essential for the credibility of the central banks, and credibility is essential for effectiveness.
That means giving central banks the independence to deliver their mandates, and to choose which instruments are most effective.
If that is eroded, then a central bank’s effectiveness is reduced, he warns.
Earlier this week, Trump blasted the Fed for being too keen to raise interest rates, accusing it of threatening the US economy. In Europe, the ECB has faced criticism from Germany, for example, over its stimulus programme and record low interest rates.
Draghi suggests that politicians should see the big picture:
Actually the legislators themselves, who are often the very same people who are arguing for the central bank to do this or that, should be the first ones to care about monetary policy effectiveness and central banks achieving their goals.
Answering a question about mounting criticism toward central banks (i.e. Trump's complaint about higher rates in US), #Draghi says central bank independence is a precious thing because it's essential for the credibility and effectiveness of monetary policy.
— Victoria Craig (@VictoriaCraig) October 25, 2018
Q: What options do you have if the financial markets continue to fall, if economic data worsens, or if relations between Italy and the EC deteriorate further?
We still have tools in the toolbox, Draghi replies.
He reveals that two speakers at this week’s Governing Council meeting mentioned its TLTRO programme -- which provides cheap financing to eurozone banks.
Draghi: Italian government bond weakness could hurt its banks
Mario Draghi is fending off several questions about Italy, and whether he’s worried about the rise in its bond yields.
He’s arguing that the spillover impact from Italy onto other countries is limited so far.
Q: Are you worried that the spread between Italian and German bonds could continue to widen, perhaps to 400 basis points? Would that cause impairments to Italian banks’ balance sheets?
I don’t have a crystal ball, Draghi snaps back briskly. But yes, there is a linkage betweem Italian sovereign debt and its banks (which hold a lot of it).
If they lose value, they are denting into the capital position of the banks.
Mario Draghi revealed that @VDombrovskis participated in the Governing Council of the @ECB and that referring to Italy he said that rules should be respected but also there should be room for dialogue pic.twitter.com/DNbRaC8w26
— Thanasis Koukakis (@nasoskook) October 25, 2018
on #Italy: #Draghi says has been a 'fiscal discussion' & is "confident an agreement will be found". Refers to increase in interest rates as not significant YET but limits government's ability to keep expanding budget. Keeping an eye on contagion.
— Joumanna Bercetche (@CNBCJou) October 25, 2018
(@VDombrovskis was also there)
Mario Draghi adds that he is ‘confident’ that an agreement between Italy and the European Commission over its budget will be found .
[reminder, the EC rejected Italy’s plans on Tuesday, but Rome is refusing to rewrite them]
Q: What does the ECB think about the clash between Rome and Brussels over Italy’s 2019 budget?
Italy is a fiscal discussion, Draghi replies, so it wasn’t discussed much at today’s meeting.
Updated
Onto questions..
Q) Did the ECB discuss downgrading their assessment of the eurozone economy today?
Mario Draghi speaks at some length, explaining that the governing council agreed that economic momentum has weakened, but we’re not facing a downturn.
Various ‘idiosyncratic’ reasons are to blame - such as the slowdown in Germany’s car sector as manufacturers get to grips with new emission rules.
There are also a ‘bunch of uncertainties’, such as the stalemate between the US and China over trade, Brexit, and Italy’s 2019 budget.
Plus, Draghi adds, growth is returning to potential when it was clearly above potential in 2017.
These risks are not considered enough to merit changing our balance of risks, he insists firmly.
Draghi ends his statement with his traditional call for eurozone government to ‘substantially step up’ their structural reforms, to take advantage of the ECB’s stimulus measures. Eurozone states must raise their long-term growth potential, he adds.
Draghi: Protectionism and market volatility are risks
Over in Frankfurt, ECB president Mario Draghi is explaining today’s interest rate decision.
He has singled out protectionism, emerging market vulnerabilities and financial market volatility as important risks to the eurozone recovery. However, overall risks are ‘broadly balanced’, he says.
On inflation, the ECB thinks domestic cost pressures are strengthening and broadening, as wage increases feed through to prices.
Here’s Bloomberg’s take on those durable goods figures:
Orders placed with U.S. factories for business equipment declined in September for a second month — a sign momentum in capital investment has paused as global trade concerns persist https://t.co/6hmn4kBlU7 pic.twitter.com/dWhBwYzxwV
— Bloomberg Economics (@economics) October 25, 2018
Newsflash: Orders for durable goods at American firms has fallen for the second month running (if you strip out aircraft and defence sales).
Core durable goods orders shrank by 0.1% last month, new data shows, following a 0.2% decline in August. That’s only a small move, of course, but it suggests US manufacturing isn’t sizzling. Perhaps tariffs are having an effect.
Twitter’s earnings beat is going to help drive Wall Street up again, after yesterday’s late rout.
The tech-focused Nasdaq is now forecast to jump by 1.7% when trading begins. The Dow is on track to gain 220 points (or more than a third of yesterday’s slump).
Electric carmaker Tesla is also likely to surge, after surprising investors with a return to profitability last night.
Microsoft also beat forecasts last night, partly thanks to strong growth at its Azure cloud computing division.
Twitter isn’t the only company beating forecasts today.
Comcast, which recently won the battle for Britain’s Sky News, has also impressed investors.
Net income jumped by 9% in the last three months, as it attracted more broadband customers.
Comcast beats profit estimates in the third quarter, with the largest U.S. cable provider posting a big increase in broadband subscribers https://t.co/o6zeSheFf7 pic.twitter.com/ae6DquKcF6
— Bloomberg (@business) October 25, 2018
ECB leaves eurozone interest rates on hold
NEWSFLASH: The European Central Bank has (to no-one’s surprise) left eurozone interest rates at their current record lows.
That means the headline borrowing rate remains at zero, while banks face a negative interest rate of -0.4% on their deposits at the ECB (to encourage them to lend the money instead).
It also makes three important points:
- The ECB is still ‘anticipating’ it will end its bond-buying programme in December, after buying €15bn of securities each month until the end of the year.
- The ECB reiterated that it expects to leave rates on hold until at least the summer of 2019, to ensure that inflation returns sustainably to its target of just below 2%.
- It also restated its plan to reinvest the proceeds of bonds bought under its QE stimulus programme. That would avoid the risk of tightening monetary policy too quickly, even if the ECB has stopped printing any more electronic money.
Updated
Dr Ben Marder, Senior Lecturer in Marketing at University of Edinburgh Business School, is concerned that Twitter’s active user base is shrinking.
He thinks that the site’s Fake News problem is hurting:
“Donald Trump, no matter your opinion of the man, is Twitter gold. His tweets attract vast swathes of traffic to the site and he has no doubt had a positive effect on Twitter’s stock price in the past few years. This was a mutually beneficial relationship as Twitter was pivotal for Trump’s 2016 presidential election success. However, despite Twitter posting higher than expected earnings and revenue in Q3 2018, monthly active users have fallen for a second quarter in a row as the company continues to purge bots and fake accounts. It seems Trump is now biting the hand that used to feed him.
“Twitter, much like other social media giants are starting to bleed-out from the large thorn in their side which is ‘fake news’. Worsening the wound are world-wide governments, including the US who are threatening regulatory action against the tech giants for facilitating the dissemination of fake news.
Adding to the many great ironies for Trump, he is largely rumoured to be a not so secret proponent of ‘fake news’.”
Par exemple.....
A very big part of the Anger we see today in our society is caused by the purposely false and inaccurate reporting of the Mainstream Media that I refer to as Fake News. It has gotten so bad and hateful that it is beyond description. Mainstream Media must clean up its act, FAST!
— Donald J. Trump (@realDonaldTrump) October 25, 2018
Twitter is benefitting from a surge in advertising deals, explains Anthony Capano, managing director of Europe for Rakuten Marketing:
While Twitter focused its efforts earlier this year on cleaning the platform of fraudulent actors, it’s clear that the focus has returned to investing in global opportunities for advertisers.
Earlier in Q3 the platform revealed a host of content partnerships including Bloomberg, Sony Music and NBCUniversal that would bring hundreds of hours of livestreams and other videos to the platform in the Asia-Pacific region.
It’s important UK marketers see how relevant these opportunities are to their operation. In Britain alone, as many as 35% of our client transactions are now taking place overseas.
Some Silicon Valley early risers are waking up to the news that Twitter did better than expected last quarter:
It's 4:39am and Twitter shares are up more than 13%. Revenue jumped to $758.1 million, compared with average analyst projection of $701.3 million. 3Q Net income was $789 million, compared to net loss of $21 million last year. #tictocnews' pic.twitter.com/52V498UyTq
— Selina Wang (@Selina_y_wang) October 25, 2018
Updated
Twitter beats forecasts
Newsflash: Twitter has smashed Wall Street forecasts with its latest financial results.
The social network site grew its earnings to 21 cents per share in the last quarter, well ahead of estimates of 14 cents.
Revenues came in at $758, beating forecasts of $702m, thanks to a 29% leap in advertising sales.
However, Twitter also revealed that the number of monthly active users fell to 326 million; analysts expected 331.5 million.
That may be due to Twitter’s efforts to eradicate trolls, and malicious accounts created to pump out fake news and influence elections.
Twitter also warned that it expects to keep losing active users in the current quarter.
Shares are soaring in pre-market trading, as investors cheer the company’s earnings growth.
Twitter shares soar more than 10% in pre-market trading after strong earnings beat https://t.co/K6N7Y0aUSU pic.twitter.com/rSW2RZ56Aj
— CNBC Now (@CNBCnow) October 25, 2018
Updated
2018 has been a pretty rough year for the markets, with nearly $7 trillion (!) wiped off stock values since the end of January.
Ouch! Nearly $7tn wiped off world stock mkt index MSCI World since the Feb correction. pic.twitter.com/Uws5VLLraJ
— Holger Zschaepitz (@Schuldensuehner) October 25, 2018
So, the 42 trillion dollar question is whether we’re heading towards a proper, old-fashioned crash... or if these lower prices actually give value.
Neil Wilson of Markets.com suggests the long-running bull market hasn’t run out of steam yet.
Stocks could rally if the Federal Reserve decides to slow the pace of future interest rate rises - as Donald Trump has been demanding.
Wilson writes:
We’re in a period of pressure building to the downside as we get more down days than up and the breadth of the decline is important as is the volume.
However whilst the recent spike in volatility may be seen as meaning we’re past the peak, there may yet be a few breaths left in this old bull. Valuations - while not going for a song - are a lot more attractive at about 16x forward earnings. Confidence is clearly lacking however and it may require a softening tone from the Fed to assuage concerns on rates.
Softer inflation figures would help greatly and the autumn/winter may provide respite on that front. If we go back a couple of weeks we must recall that this selling started on some very hawkish jawboning by Jerome Powell on rates. This may be the start of the age of the Bears but it may equally be just a tantrum. The macro outlook is not great - China, trade, Italy are all weights but for most of 2018 US investors were able to shrug off any global worries.
Advertising giant WPP is having a torrid day, as its new boss gets to grips with the business’s problems.
Shares are down 16%, at their lowest level since December 2012, after it missed sales forecasts and slashed its guidance.
CEO Mark Read, who replaced industry veteran Sir Martin Sorrell earlier this year, was blunt about WPP’s problems, saying:
Clearly we have underperformed our competition in the third quarter. We are not going to sugarcoat the reality.”
More here:
Facebook has been buffeted by the stock market sell-off.
Its shares slid by 5% yesterday, and are down 17% this year as the social network giant faces tough questions about extremism and election interference.
In another blow, it has just been fined half a million pounds by Britain’s information commissioner for not protecting users’ data. This follows the Cambridge Analytica scandal, which exposed how third party developers had been allowed to access user information without sufficient consent.
In monetary terms, £500k is barely a mosquito bite on a mammoth company worth $421bn. But it comes with a stern rebuke from information commissioner Elizabeth Denham, who says:
Facebook failed to sufficiently protect the privacy of its users before, during and after the unlawful processing of this data. A company of its size and expertise should have known better and it should have done better.
European markets rally after Italian deputy PM speaks
After that shaky start, European stocks have now turn positive for the day!
Germany, France and Italy have all rebounded from this morning’s lows, with Italian banks are leading the rally.
Even the FTSE 100 is getting a boost, clawing its way back from that seven-month low.
One factor - Wall Street is currently expected to rally in a few hours. The Dow futures show a gain of 224 points, following Wednesday’s 608-point rout.
Another factor: One of Italy’s coalition leaders has vowed to step in if a bank or other company needs help.
Deputy PM Matteo Salvini, who also leads the right-wing Northern League party, said any help provided would be different from past interventions.
Salvini also suggested that investors are too pessimistic about Italy, having driven its bond yields higher in recent weeks.
Reuters has more details:
Salvini, who is also the leader of the ruling League party, said on the sidelines of a conference in the northern city of Verona that the Italy/Germany bond yield spread would inevitably fall if it followed the real economy.
Russ Mould, investment director at AJ Bell, says investors are nervous about the state of the world.
He explains:
The chief concerns are the potential negative impacts of higher interest rates, weaker global growth and the knock-on effects of trade tariffs.
“The FTSE 100 fell 0.7% in early trading on Thursday to 6,912 with pharmaceuticals, insurers and oil companies the biggest contributors to the index’s decline.
Japan’s Nikkei index incurred heavy losses, falling 3.7% in a single session.”
Back in Australia, insurance group AMP’s shares crashed by 25% today, as it paid the price for past misdeeds.
AMP shocked investors by revealing that its wealth management business suffered a $1.5bn asset withdrawal in the last quarter.
The company suffered badly from Australia’s Royal Commission into banking, earlier this year. That inquiry exposed that AMB had charge customers who had died, and imposed fees even if it didn’t provide a services.
More here:
Our latest Brexit dashboard shows how consumer spending slowed last month, even before the stock market turmoil hit confidence.
Two leading economists argue that the government needs to take bold action, by ending austerity and helping businesses navigate Brexit uncertainty:
Britain’s troubled retail sector is reeling from another blow this morning, as Debenhams outlines plans to shut up to 50 stores.
The closure plan puts thousands of jobs at risk, on top of tens of thousands of redundancies at fellow chains such as Toys R Us, Mothercare, Carpetright and Maplin.
Debenhams dropped the bad news as it reported a £500m annual loss, partly due the cost of writing off unwanted shop leases and IT systems.
That’s an astonishing amount, for a company only valued at £100m.
The closures will take place over the next three to five years, Debs says, as it pulls out of unprofitable stores.
Simon Underwood, business recovery partner at accountancy firm Menzies LLP, warns that the days of the traditional department store are numbered. Instead, they will become ‘experimental showrooms’, or places for meetings etc.
Underwood adds:
“The decision to focus on a ‘profitable core’ of stores is a good one. However, the question is whether closing just ten stores now, with a view to reducing store numbers further over the next three to five years will be enough in view of the speed of changes in the marketplace as consumers shift to buying online.
“The high street needs support, but some of the ideas being mooted by Government could prove counterproductive. For example, the Chairman of John Lewis, Sir Charlie Mayfield has recently spoken out against the Amazon tax and many bricks and mortar retailers fear that a blanket levy on online sales would be tantamount to hitting the high street when it’s down, as most of them sell goods online too.
German firms are also anxious about the danger that Britain leaves the EU without a deal, says IFO.
The row between Italy and the EU over its 2019 budget is another worry, it adds.
Just in: business morale in Germany has taken a tumble this month.
The German business climate index produced by the IFO institute dropped to 102.8 this month, down from 103.7 in September.
Company bosses said business conditions had deteriorated, while their expectations also become gloomier.
🇩🇪#Ifo business climate eases in Oct in line with earlier #ZEW and #PMI signals. Both expectations and current assessment remain above troughs in July. The German boom has still air to run a bit further. pic.twitter.com/iQ3XG8O4mI
— Aila Mihr (@aila_mihr) October 25, 2018
Geopolitical tensions, such as the trade wars between the US and China, seem to be hurting.
Ifo chief Clemens Fuest blamed ‘global uncertainty’ for the drop in confidence, adding:
“Firms were less satisfied with their current business situation and less optimistic about the months ahead.
Growing global uncertainty is increasingly taking its toll on the German economy.”
Why are markets tanking?
Worryingly, there doesn’t seem to be a single cause for the current sell-off (unlike in 2008, say, or in 2015 when investors fretted about China’s economy).
Instead, a cocktail of problems are being blamed, as traders worry that the long bull market in shares may be petering out.
Kerry Craig, global market strategist at JP Morgan Asset Management, says the lack of a single cause for the current volatility is “troubling”.
There are many symptoms but no one can diagnose the illness. Geopolitics, rising bond U.S. bond yields, a more hawkish looking U.S. Federal Reserve (the Fed), slowing Chinese growth, a strong U.S. dollar and the already well known problems in some emerging economies have all contributed to the market unease.
The focus for investors had been on corporate earnings. Against all the macro headwinds, the micro factor of strong U.S. corporate earnings had been enough to insulate the market. So far the U.S. earnings season has been decent, with approximately 30% of the S&P 500 companies by market capitalization having reported and 83% of those having beaten analyst’s expectations for earnings.
The anxiety now in markets stems from whether this is the peak in earnings and growth, as higher input costs from rising wages, the impact of tariffs and higher funding costs start to impinge on corporate margins. The problems in the U.S. market are having knock-on effects on global equities, and the rising U.S. dollar is exacerbating difficulties for emerging markets and Asia. However, the global economy is still growing and corporate earnings are still positive. They may not grow as fast or be as positive from here on out, but these are still reasons to favour risk assets and equities.
Markets are likely to remain jittery for the rest of the year. The upcoming G20 meeting is not likely to result in a resolution of the trade dispute between the U.S. and China. Both sides are caught in a case of political brinkmanship.
There are heavy losses in Europe too.
Germany’s DAX index has fallen by 0.8%, to its lowest level since December 2016.
France’s CAC hit its lowest level since March 2017, down another 0.4% in early trading.
Here are the best and worst performing shares on the FTSE 100 this morning. Utilities, precious metal miners, and other defensive stocks are in - most other companies are out!
Updated
FTSE 100 hits seven-month low
Boom! Britain’s FTSE 100 has hit a seven-month low at the start of trading in London.
The blue-chip index has fallen by 75 points to 6887, a drop of over 1%, its lowest level since late March.
It’s now lost around 8% of its value in the last four weeks, as the market sell-off has gathered pace.
Advertising giant WPP are leading the selloff, slumping by 18% after reporting that revenues 1.5% fell in the last quarter.
Consumer goods producers, technology companies, miners and energy firms are also in the red, as Europe picks up the sell-off baton from Asia.
Some context:
Stocks have fallen for 13 of the past 15 trading days, including a 3.3 percent drop on Oct. 10 that was the market’s worst fall in eight months. The S.&P. is now down more than 0.6 percent for the year. https://t.co/nplRRaaVnJ
— DealBook (@dealbook) October 25, 2018
Stephen Innis of foreign exchange firm OANDA fears that the US stock markets are on the “verge of crumbling”, after last night’s late rout.
If people are struggling to find a driver I suggest, they wake up and smell the coffee.
The catalysts are nothing new -- Tariffs, Italy, Brexit, Saudi Arabia.
But with the towering pillars of market strength, the US equity markets, is looking ever so fragile and on the verge of crumbling.
The air is so thick with a sense of foreboding that you can cut it with a dull butter knife. Maybe there are too many things going sideways clouding investor judgement, but things could turn nasty in a heartbeat.
With risk sentiment tanking, we could be facing “the early stages of a protracted equity market meltdown”, he adds.
Yesterday was the worst day for tech stocks on Wall Street for seven years, dragging the Nasdaq into bear-market territory and wiping out the Dow’s 2018 gains.
And today, markets were in retreat from Sydney to Shanghai, my colleague Martin Farrer reports:
In Australia the benchmark ASX200 closed down 164 points or 2.8% as it suffered its fifth straight day of losses. In Japan the Nikkei was off 3.7% and has now dropped around 13% from a 27-year peak of 24,448.07 touched in early October.
A broad indicator of shares in the region – the MSCI Asia Pacific index – has now fallen 20.3% from the year-to-date high set on 29 January, representing an official bear market. The Vix “fear” index, which measures volatility across the market, has spiked sharply this week and was up 21% overnight.
“We haven’t thought that selling would be this steep. This sell-off makes us think the market may be set for capitulation,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Center.
Introduction: Markets take another slump
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The sell-off in global stock markets is accelerating today, as stocks keep sliding across the globe.
Asian stock markets have plunged into bear market territory, meaning they’ve shed 20% of their value since their highs in January.
Fears over the health of the global economy, future US interest rate rises, Jamal Khashoggi’s murder, and America’s trade war with China are all being blamed as investors try to grab the nearest tin hat to ride out the storm.
Some disappointing corporate results this week - including from industry bellwether Caterpillar - have also dampened the mood, and raised fears that growth is slowing.
After a very bruising session, Japan’s Nikkei has tumbled by 3.7%, while Australia has lost 2.8%. China suffered fresh losses too, taking it deeper into its own bear market.
Analysts are worried that the sell-off has further to run, and could turn into a full-blown collapse.
As Greg McKenna, an independent markets strategist in Australia, put it:
“The fear is palpable in stock markets at the moment,”
“This could get much worse before it gets better. Collapses happen after falls. That’s the danger.”
That follows another rocky session on Wall Street, where the Dow slumped by another 600 points (-2.4%). That wipes out all its gains for this year, as a wave of worry swept the trading floors.
Optimism is out, and volatility is back.
Bears are prowling the trading floors this morning in Europe too. Britain’s FTSE 100 is expected to fall, and could hit a new seven-month low.
#FTSE100 called -55pts at 6907, following Asia and Wall St lower pic.twitter.com/PjP6Z7Fcqf
— Mike van Dulken (@Accendo_Mike) October 25, 2018
Other European markets are expected to slide too, as the spat between Rome and Brussels over next year’s budget continues. The EU has asked for a new version within three weeks, but Italy is refusing to rewrite its plans.
European Opening Calls:#FTSE 6905 -0.84%#DAX 11109 -0.74%#CAC 4926 -0.56%#MIB 18307 -0.96%#IBEX 8654 -0.27%
— IGSquawk (@IGSquawk) October 25, 2018
Also coming up
The European Central Bank’s governing council is meeting today to set monetary policy.
No change is expected, but Mario Draghi will be quizzed by journalists. Given the market volatility, is Draghi still happy to end the ECB’s stimulus programme in December? And how worried is he about Italy?
It’s a busy day for corporate results in London, with Lloyds Banking Group, WPP and Debenhams reporting results (and store closures, in Deb’s case).
The agenda
- 9am BST: IFO survey of German business confidence
- 12.45pm BST: European Central Bank interest rate decision
- 1.30pm BST: US durable goods orders
Updated
