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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Wall Street slides in worst tech selloff since October as bond yields rise – as it happened

Traders on the floor of the New York Stock Exchange.
Traders on the floor of the New York Stock Exchange. Photograph: Nicole Pereira/AP

Nasdaq suffers biggest slump since October

Ding ding! Wall Street has closed, with heavy losses across the board as the jump in government bond yields give the markets a jolt.

The Dow Jones industrial average closed 559 points lower at 31,402, a drop of 1.75%. The broader S&P 500 index fell nearly 2.5%.

The Nasdaq suffered a nasty plunge, shedding 3.5%, as technology shares shares bore the brunt of the selloff.

That’s the Nasdaq’s biggest fall since last October, with investors favouring into companies that would benefit from a broad economic recovery this year (such as energy firms and miners, which rallied in London today).

Reuters explains how the jump in government bond yields worried Wall Street:

Wall Street’s main indexes ended sharply lower on Thursday, with the Nasdaq index posting its largest daily percentage fall in four months, as technology-related stocks remained under pressure following a rise in U.S. bond yields.

The benchmark 10-year Treasury yields hit a one-year high of 1.614%, prompting investors concerned about rich valuations to lock in profits on some high-flying growth stocks.

The Treasury note yield rose above S&P 500 dividend yield, wiping out the stock market yield’s strong advantage.

“Rates matter. At 1.5%, the yield is comparable to S&P 500 dividend yield,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “And there’s no capital risk with a 10-year, you’ll get your principal back. All of a sudden it’s competitive with stocks,”

CNBC agrees that the jump in US government bond yields, to a one-year high, spooked investors:

It’s “just a full on rout in the bond market. So that filters into everything else,” said Evercore ISI strategist Dennis DeBusschere. “It looks like we just had a flash move in bonds. With a puke move that drove [10-year] yields to 1.6%... We just have to wait for some form of equilibrium in bonds.”

The jump also put the benchmark rate above the S&P 500′s dividend yield, meaning that equities — which are considered riskier assets — have lost their premium over bonds. The milestone could exacerbate the move out of stocks as they become less attractive.

The speed and scale of the jump in bond yields has certainly surprised the markets and suggests that investors are positioning for US interest rates to rise sooner than thought (although the Fed has been trying to dampen such talk).

The FT says:

“This rate move has caught a lot of these accounts off guard,” Tom di Galoma, a managing director at Seaport Global Holdings, said, referring to hedge funds and buyers of mortgage-backed securities.

“We’ve had a sell-off globally. Australia, New Zealand, Canada, and most of Europe have all felt this pain. But I think it is coming mostly from hedging. I don’t think there are people bailing on positions.”

More here: Wall Street stocks sell off as government bond rout accelerates

Goodnight! GW

There’s plenty of red on the bond market too, of course, with prices dropping across the board (yields, or the rate of return on a bond, rise when prices fall).

Nearly each of the 30 stocks on the Dow Jones industrial average is down in later trading, with just Nike (+0.12%) and 3M (0.06%) showing some very modest gains.

There’s certainly plenty of red on the boards....

With less than an hour to go, Wall Street is still taking something of a bath.

Some major tech stocks are among the fallers, with Intel down 4%, Salesforce.com losing 3.8% and Apple down 3%

But other stocks are also hit - Boeing is down nearly 5%, while Disney are off 2.8%.

  • Dow Jones industrial average: down 479 points or 1.5% at 31,482
  • S&P 500: down 2.2% or 87 points at 3,837
  • Nasdaq: down 3% or 413 points at 13,185

Back in the UK, the Labour party has criticised outsourcing firm Serco’s decision to reinstate its dividend following a jump in profits last year, in which it helped run the the heavily criticised NHS Covid-19 test-and-trace programme.

My colleague Mark Sweney explains:

Rachel Reeves, the shadow Cabinet Office minister, criticised the decision to reward investors and decried the involvement of the private sector in the health service’s pandemic response.

“It will outrage taxpayers that their money, meant to fund a contact-tracing system that has never been up to scratch, is instead being paid to Serco shareholders via dividends,” she said. “[The government] should have done with contact tracing as they rightly did with the vaccine – place it in the hands of the NHS and our local communities.”

[CEO Rupert] Soames defended the test-and-trace scheme, saying that while it had endured a “bumpy start”, such a system had “never been done before in the UK”.

Labour leader Kier Starmer is also unimpressed:

The US dollar has also strengthened, in another sign that investors are getting jitterier amid the bond selloff.

Sterling has dropped by around a cent, to $1.4035 vs the dollar, having earlier this week hit a near three-year high of $1.42.

Wall Street stocks sell off as government bond rout accelerates

The government bond selloff is also a sign that investors are anticipating a strong economic recovery from the pandemic.

Here’s the Financial Times’ take:

US government bonds endured another day of heavy selling, jolting the stock market, as investors braced themselves for stronger economic growth.

The yield on the benchmark 10-year Treasury rose as much as 0.16 percentage points on Thursday to exceed the 1.5 per cent threshold for the first time in a year. The five-year yield, which is considered to be more sensitive to medium-term monetary policy shifts, jumped 0.22 points to 0.82 per cent, the second-largest one day rise seen over the past decade.

The sell-off in the bond market ricocheted into equities, pushing the broad S&P 500 down 2.3 per cent and the tech-heavy Nasdaq Composite down 3.3 per cent by afternoon on Wall Street. This week’s sharp moves in the government bond market underscore how investors are increasingly anticipating the flood of stimulus measures from the Fed and US Congress will lead to a rapid rebound in economic growth.

The rise in government bond yields is pushing down share prices, because it erodes the attractiveness of holding equities.

That’s because if investors can get a higher rate of return on bonds, they’re less willing to take the risk on holding shares.

Fawad Razaqzada, analyst at Think Markets. explains:

The dividend yield on the S&P 500 is estimated to be around 1.5%, close to what the 10-year bond is paying. So, if bond yields continue to rise, this could be bad news for stocks, as yield-seeking investors could make equally good or better returns by holding longer-dated government debt.

Obviously, banks being excluded because lenders tend to rise in share value when interest rate expectations are on the ascendency. This is because charging interest is banks’ main source of income.

But central bank heads are continuing to dismiss early taper talks and tightening cycles. Central banks are historically always behind the curve. Most tend to have a reactionary policy response rather than anticipatory one to changing market conditions.

However, could the bond yield rally continue? Well, a lot depends on how the economy evolves in the coming months. If things don’t turn out to be as rosy as the markets are currently expecting, then this could be a reason for yields to drop back.

Wall Street slides on tech selloff as bond yields rise

Wall Street’s main indexes fell on Thursday, with the Nasdaq slipping about 2.5%, as technology-related stocks remained under pressure following a rise in U.S. bond yields, Reuters reports.

The benchmark 10-year Treasury yields hit a one-year high of 1.48%, prompting investors to lock in profits on some high-flying growth stocks due to concerns over heightened valuations.

The Treasury note yield also rose above S&P 500 dividend yield, wiping out a historically strong advantage that the stock market yield has held.

Apple, Amazon.com, Microsoft, Alphabet, Facebook and Netflix were down between 1.18% and 1.46%.

“The higher the yield on bonds, the more we see this push to move out of stocks,” said Jeffrey Carbone, managing partner at Cornerstone Wealth, in Huntersville, North Carolina.

“The market is starting to get a bit frothy, so investors are taking some gains off the growth areas of stocks, which had the biggest movements and moving it to more conservative areas for higher yields in the bond market.”

More here: Wall Street slides on tech selloff as bond yields rise

Back on Wall Street, stocks are falling.... with the tech-focused Nasdaq now down 2%....

Network Rail chair says weekend engineering works may soon end

The pain of holiday weekend rail engineering works may soon be over, a top UK rail executive has signalled, as leisure passengers grow to rival the weekday commuter.

Sir Peter Hendy, the chairman of Network Rail, suggested it may be better to close tracks on weekdays for maintenance:

“A lot of leisure travel is going to be within Great Britain. Last year we saw a lot of really packed trains going to [seaside resorts] … It wouldn’t surprise me if on summer Saturdays we have more demand than in the working week.

“The railway might have to get used to that. If Saturday and Sunday get busy in summer, we should do engineering works at another time.”

He added: “We’ve got to be dextrous. There’s no point in us saying: we planned these engineering works on a Sunday 18 weeks ago. We should be prepared this summer to say: they want to come and we’ll take them.”

Goldman Sachs' boss wants bankers back to their desks ASAP

The chief executive of Goldman Sachs has signalled his determination to get his bankers back behind their office desks, calling home working an “aberration” that must be corrected “as soon as possible”.

While the bank operated successfully throughout the Covid crisis with less than 10% of its 34,000 global staff working in the bank’s offices, David Solomon dashed the hopes of any Goldman staff hoping to split their time between their homes and offices in the future, saying it did not represent “a new normal” for the firm.

He told a virtual conference run by Credit Suisse that:

“That’s a temporary thing. I do think that for a business like ours, which is an innovative, collaborative apprenticeship culture, this is not ideal for us. And it’s not a new normal. It’s an aberration that we’re going to correct as soon as possible.”

Rising bond yields weigh on markets

The early equities rally in Europe is somewhat fizzling out.

Germany’s DAX is now down over 0.3%, while in London the FTSE 100 is up a modest 10 points (+0.15%)

Michael Hewson, chief market analyst at CMC Markets, says today’s rise in government bond yields today is weighing on stocks.

European markets have once again flattered to deceive today, starting off in promising fashion, before slipping back into the close, with US markets, and rising bond yields acting as a little bit of a drag.

While rising US yields have been attracting the most attention, we’re also seeing some evidence of a tightening of financial conditions here in Europe, with sharp rises in government borrowing costs from Germany to Greece.

The European Central Bank certainly appears to be becoming concerned about just such a scenario with Chief economist Philip Lane saying that the ECB is prepared to buy bonds flexibly in order to prevent just such a fiscal tightening. The problem the ECB has is that the bond market doesn’t appear to be listening.

Updated

The interest rate on UK government bonds is also rising today, as bond prices come under pressure globally.

Ten-year gilt yields have risen to around 0.82%, up from around 0.75% on Wednesday.

That’s still low in historic terms, but looks to be the highest since the early days of the pandemic:

Eurozone bond yields are also rising...

Tech shares are coming under more pressure, with the Nasdaq now down 1.2%.

Among the major firms, Apple has dropped by 1.3%, with Amazon dipping by 0.6%, Tesla slipping by 3.4%, and chipmaker NVIDIA losing 3.3%.

The Dow has dropped from last night’s record high, currently down 177 points or 0.5% at 31,784, as investors keep an eye on those rising bond yields...

The WSJ’s Mike Bird has spotted that long-term US government bond yields have hit their highest since the pandemic began:

That shows investors are anticipating higher inflation in the long-term, and the eventual winding back of the Fed’s stimulus package (despite Jerome Powell insisting that more support is needed).

Wall Street has opened cautiously, as investors digest today’s economic data.

The fall in US unemployment and rise in durable goods orders are encouraging, but a pick-up in growth could intensify concerns about inflationary pressures.

The Dow Jones industrial average has dipped by 25 points to 31,935 (having hit a record high yesterday), while the Nasdaq is 19 points lighter at 13,578.

GameStop is flying again, though, up 40% in early trading at $129, having doubled in frenzied trading last night (it was up 85% in pre-market)

US durable goods orders jump

In another encouraging sign, US manufacturers have reported a sharp jump in demand for durable goods.

Durable goods orders (such as machinery and electronics) rose by 3.4% in January, faster than expected (economists expected a 1.1% rise).

Defense and nondefense aircraft and parts orders were strong; if you strip transportation equipment out, then durable goods orders still increased 1.4% in January.

Updated

The good news is that the number of Americans filing new jobless claims is a three-month low (710k, or 730k when seasonally adjusted).

The bad news is that there are still over one million people signing on each week, if you include freelancers and self-employed workers using the PUA programme.

Diane Swonk, chief economist at Grant Thornton, explains:

Robert Frick, corporate economist at Navy Federal Credit Union, is hopeful that the weekly US jobless total will keep falling:

“A significant drop in weekly state unemployment claims may finally be a move to break through the 700,000 barrier, which has existed for months. Once we’re below that level on a sustained basis, we can finally say real progress is being made in employing more Americans after the terrible rise in COVID-19 cases this winter.

Also, strength in manufacturing and housing this week show the economy, outside the weak service industry, continues to improve, and that should soon be reflected in employment numbers.”

More reaction to the US weekly jobless report:

Updated

The big picture, though, is that over 19m Americans were receiving some sort of unemployment support at the start of February - nearly a year into the pandemic.

Heidi Shierholz, Director of Policy at EconomicPolicy, points out that this is 17m more than a year ago, showing the impact of Covid-19.

The drop in new US unemployment claims last week is good news, says Neil Birrell, Chief Investment Officer at Premier Miton Investors.

He reckons today’s jobs report shows the economy is improving,

“After a surprisingly high number last week, the initial jobless claims fell sharply this week, by nearly 100,000 more than the consensus expectation. The data is being impacted by seasonal factors, but this is clearly good news.

The long term unemployed number was lower than expected as well. Those long of the reflation trade will be happy, but more importantly than that it shows that the economy is improving and that should continue over coming weeks.”

The number of Americans on jobless support for at least two weeks has also fallen, a little.

The number of continuing claims dropped by 143,320 to 4,828m.

Daniel Zhao, economist at Glassdoor, says the data show an improvement, but there’s a long way to go.

US jobless claims fall

Just in: The number of Americans filing new claims for unemployment benefits has fallen, but still remains worryingly elevated.

Around 710,000 ‘initial claims’ for jobless support were made last week, down from 842,000 in the previous seven days. That’s a bigger fall than expected.

In addition, another 451,402 self-employed people sought help under the Pandemic Unemployment Assistance programme.

Although an improvement, it’s still sharply above pre-pandemic levels (a year ago, there were under 200k claims).

On a seasonally adjusted basis, the initial claims total fell to 730k.

Falling jobless claims could signal an improvement in the labor market.

But the winter storms that hit the southern US states last week could confuse the picture, as many offices were forced to close.

Updated

Coinbase’s SEC filing also includes a rather comprehensive glossary of crypto terms.

They include “HODL”, the motto of many a bitcoin enthusiast (“A term used in the crypto community for holding a crypto asset through ups and downs, rather than selling it.”)...

...and DeFi (Decentralized Finance. Peer-to-peer software-based network of protocols that can be used to facilitate traditional financial services like borrowing, lending, trading derivatives, insurance, and more through smart contracts”)

The filing also includes a long list of risk factors -- including the identification of Satoshi Nakamoto, the creator of Bitcoin, or the transfer of the bitcoins held by Satoshi.

Coinbase files plan for Nasdaq listing

In the cryptocurrency world, digital currency exchange Coinbase has filed its plans to list directly on the Nasdaq.

Coinbase, which lets people buy and sell crypto assets such as bitcoin and ethereum, says in an SEC filing that it generated nearly $1,28bn of revenue last year, and a net profit of $322m.

The company says it “powers the cryptoeconomy”, with 2.8m ‘monthly transacting users’, 43 million “verified users’, 7,000 institutions on its platform, and 115,000 ecosystem partners, and insists that crypto will expand into the mainstream.

In the filing, Coinbase says:

Crypto has the potential to be as revolutionary and widely adopted as the internet. The unique properties of crypto assets naturally position them as digital alternatives to store of value analogs such as gold, enable the creation of an internet-based financial system, and provide a development platform for applications that are unimaginable today. These markets and asset classes collectively represent hundreds of trillions of dollars of value today.

Similar to the early days of the internet, this evolution will take time, but we expect the cryptoeconomy to expand into the mainstream and touch every individual and business around the world in the coming decades. While we are still in the early stages of adoption, the market value of exchange-traded crypto assets was already approximately $782 billion as of December 31, 2020.

Our objective is to drive the growth of the overall cryptoeconomy by serving the needs of all consumers who manage their financial lives on a mobile device, and every institution – large or small – that embraces the emerging internet of value. We expect our customer base to grow alongside the ecosystem we serve as we continue to support more asset classes and add more products to our platform. Our objective is to bring crypto-based financial services to anyone with a smartphone, a population of approximately 3.5 billion people today.

Updated

Back in the City, the FTSE 100 is holding earlier gains - up around 27 points at 6686.

Miners are continuing to push the index up, following the rise in commodity prices.

But in the bond market, yields (or interest rates) are rising, as investors continue to digest inflation risks, and the prospect of interest rate rises down the line.

Laith Khalaf, financial analyst at AJ Bell, explains:

“Bond investors have had a pretty rocky start to 2021, and if the global vaccine roll-out prompts a sharp economic recovery, price falls clocked up this year could be just the beginning. This is of course on the back of a tremendous run of performance, stoked by low interest rates, and quantitative easing. Yields have fallen to such record low levels that the bond market is like a coiled spring, ready to twitch into action at the first sign of inflation or interest rate rises.

“That trend looks to be taking root in the bond market at the moment. Vaccines are literally a lifesaver, but for the bond market they spell trouble. A recovering economy means central banks don’t have to offer as much stimulus and at some point this year they might even start gently whispering about when to withdraw QE or raise rates. Given how much the bond market has been propped up by central bank activity, kicking away this crutch will inevitably lead to a fall in prices. Markets will look to pre-empt central bankers and that’s probably why we’re seeing yields rising now.

More UK workers on furlough in January, as cost hits £53.8bn

The number of people on the UK’s furlough scheme has risen, highlighting the need for government support to protect jobs during the lockdown.

Provisional estimates from HMRC show that there were 4.7 million jobs furloughed at 31 January, up from 4 million on 31 December, and 3.9m on 30 November.

HMRC also reports that:

  • cumulatively,11.2 million jobs have been supported by the CJRS [Coronavirus Job Retention Scheme] since the start of the scheme

  • the accommodation and food services sector had the highest take-up rate on 31 December at 65% of employers, provisional estimates show this increased to 68% of employers on 31 January. 1.12 million employments were furloughed in this sector on 31 December. Provisional estimates show the number of employments furloughed increased to 1.15 million on 31 January, the highest of all sectors

In total, HMRC says £53.8bn of wages have now been covered by the scheme (which lets companies temporarily furlough staff, with 80% of their pay covered by the government).

Separate figures from the Office for National Statistics today also show that more companies put staff onto furlough under the latest lockdown.

The ONS estimates that the proportion of businesses’ workforce on furlough leave increased from 11% in early December 2020 to 20% in early February 2021.

This is considerably lower than during the first national lockdown, where 30% of businesses’ workforce were on furlough leave in early June 2020.

The ONS’s estimate is that 6.5m workers were furloughed in February, from 6m in January, with the increase driven by “businesses in retail sales in non-specialised stores with food, beverages or tobacco”.

Updated

Jobs at risk at Asda launches online transformation

Asda has announced a major shake up of its operations that puts thousands of back office jobs at risk, and also creates thousands more in its stores to assemble online orders.

The proposals are a response to the shift towards online shopping due to the pandemic. They include simplifying ‘back office’ store functions, which will affect around 3,000 workers.

Under the plan, cash office, administration, people and training tasks would be covered by one “multi-skilled back office colleague”.

The proposals include training colleagues so they could complete multiple back office tasks using new technology and processes that are more relevant due to a reduction in cash handling.

Asda, which has launched a “collective consultation” with staff, says it is responding to the structural shift towards online. Delivery volumes have doubled to reach levels that were expected to take nine years to achieve.

Asda has already increased its online capacity by 90% since last March to 850,000 weekly slots, and is on course to fulfil one million orders per week by the end of the year.

To handle rising for online demand, Asda is expanding its ‘in store pick’ model – creating 4,500 new roles in store-based online operations across the country.

It is proposing to close its Dartford and Heston home shopping centres, impacting around 800 colleagues, with future online orders in the South picked from local stores to deliver improved levels of availability, capacity and service.

It also plans to change about 1,100 store management roles, replacing deputy store manager and section leader roles with two new roles – Operations Manager and Online Trading Manager.

Asda says it hopes to move as many colleagues as possible into alternative roles, with redundancy the last option.

Roger Burnley, Asda CEO and President, said:

“The pandemic has accelerated change across the retail sector especially the shift towards grocery home shopping and our priority is to serve customers in the way they want to shop with us. The last 12 months have shown us that businesses have to be prepared to adapt quickly to change and I am incredibly proud of the way we demonstrated our agility and resilience through the pandemic. As customer habits continue to change we have to evolve our business to meet these demands and ensure our business is strong and sustainable for the long term.

“We know that these proposed changes will be unsettling for colleagues and our priority is to support them during this consultation process. Our plans to transform the business will result in more roles being created than those we propose to remove and our absolute aim is to ensure as many colleagues as possible stay with us, as well as creating the opportunity to welcome new people to our business.”

Updated

Serco resumes dividend as profits rise

Outsourcing firm Serco is restoring its dividend for the first time in seven years, after a “very strong year” that included a role in UK government’s Covid-19 test-and-trace programme.

Serco reported a 20% jump in revenues in 2020, with underlying profits up 36% and pre-tax profits rising to £153m from £81m in 2019.

It has also raised its profit guidance for 2021 by 6%.

Chief executive Rupert Soames said “the board has thought carefully” about reinstating the dividend in current circumstances. He also points out that Serco has repaid financial support received from governments, including furlough money in the UK, and is giving frontline staff a £100 bonus.

Soames says that Covid-19, overall, hasn’t created a material proportion of profits in the year (net, it’s around 1% of underlying trading profit, with losses on some businesses balanced by revenues on Covid work).

He also insists that operationally, Serco has performed really well during the crisis, pointing to:

...quarantine hotels in Australia mobilised in a matter of days; 10,500 call handlers mobilised in four weeks for the UK Tracing programme, then reduced three months later to 5,000, then expanded two months later to approaching 10,000.

A network of test centres set up and operated which between May and December tested more than 5 million people. Critical ship repairs performed under lock-down; train and metro services maintained transport services to move critical workers; multiple crews on rotating isolation to help support Navy movements; prisons adapted to 23-hour-day lockdowns and no visitors; hospital staff delivering cleaning, catering and portering with sickness absence rates of up to 25% in some contracts.

But, Serco’s results do also show that Test and Trace made a ‘material contribution’ to the company, saying:

And we benefitted from an entirely new source of business - NHS Test & Trace where we have provided more than 25% of the testing sites and half the Tier 3 tracing capacity; although these contracts are at lower margins than we would normally accept for this type of work, they generated nearly £350m of revenue, so made a material contribution and helped to reduce the impact of losses in Transport, Health and Leisure.

It adds:

Our assistance with the UK testing programme, NHS Test and Trace, and Immigration contracts in AsPac and the UK have resulted in positive contributions to the Group’s profit.

Labour MP Jon Trickett isn’t too impressed:

Here’s some of our recent coverage of the test-and-trace system:

Updated

Primark faces £1.5bn sales hit from Covid-19

The Covid-19 pandemic has wiped out more than a billion pounds of sales at clothing retailer Primark, with more to come.

Parent company Associated British Foods estimates that it lost £1.1bn in sales as coronavirus-induced restrictions forced stores to close.

ABF reports that reports that Primark’s sales for the half year of the financial year (to 27 February 2021) are estimated to be some £2.2bn, down from £3.7bn a year ago.

With stores closed during the various UK and European lockdowns, and no online presence, Primark has been badly hurt by Covid-19 - and sees further pain in the months ahead until economies reopen.

ABF told the City:

This period has been characterised by the impact on our trading of the restrictions on the movement of people put in place by UK and European governments to limit the spread of COVID-19. The extent and timing of restrictions have varied by market, with different approaches taken by each government and during this first half, unlike the first lockdown, all of our stores have not been closed at the same time.

However, the majority of our stores were closed during November and from the end of December and we estimate the loss of sales while stores were closed to be some £1.1bn.

On top of this, ABF also estimates Primark will lose around £480m of sales during the second half of its financial year (March-August) due to ongoing store closures.

More optimistically, ABF says Primark has an “exciting seasonal range” for the spring and summer, and expects the period after reopening to be “very cash generative”.

(perhaps remembering that eager customers queued outside some Primark stores at midnight when they reopened in December...)

Updated

In the energy world, environmental groups have forced Drax to ditch a plan to build a major new gas-fired power plant in Yorkshire.

My colleague Jillian Ambrose has the details:

Drax has scrapped its controversial plans to build Europe’s largest gas power plant at its site in North Yorkshire following fierce opposition from climate groups.

The electricity generator confirmed that it would drop plans to build two combined cycle gas turbines (CCGTs) in place of two old coal burning units at the Drax site, weeks after completing the sale of four other gas plants to a subsidiary of Vitol last month.

The decision to cancel the plans draws a line under three years of opposition from green groups who argued they were inconsistent with the UK’s ambitions to lead the world in reducing greenhouse gas emissions.

Ikea’s UK business dived nearly £33m into the red last year after it was forced to close stores for nearly three months during the pandemic.

The world’s largest furniture retailer said UK sales fell more than 10% to £1.9bn in the year to 31 August, even though online sales increased by nearly a third.

Ikea admitted that it had struggled to meet demand for home deliveries despite turning stores into distribution centres for online orders during the high street lockdowns....

An Aston Martin DBX SUV on display during the 18th Guangzhou International Automobile Exhibition last November.
An Aston Martin DBX SUV on display during the 18th Guangzhou International Automobile Exhibition last November. Photograph: VCG/Getty Images

The Covid-19 pandemic has left a nasty dent in Aston Martin’s turnaround plans - with losses at the luxury carmaker nearly quadrupling last year.

My colleague Jasper Jolly reports:

The carmaker on Thursday reported a £466m loss before tax for the year, compared with a £120m loss in 2019, as sales slumped and it wrote off nearly £100m of investments in now-abandoned products such as the Rapide electric car.

It also missed out on its usual marketing boost from being featured in the James Bond film franchise, after the release of No Time to Die was repeatedly delayed by the pandemic. The carmaker’s revenues slumped by 38% year-on-year to £611m for 2020.

However, the company did highlight glimmers of hope in an improved final quarter of 2020 thanks to sales of its new DBX SUV, with revenues 3% higher than the same period in 2019, before the pandemic.

But, shares in Aston Martin have jumped 10% this morning, as it also predicted it would “see the first steps towards improved profitability” in 2021.

The Reddit trading frenzy returned to the markets yesterday, with shares in GameStop more than doubling -- and then jumping another 83% in pre-market trading.

The excitement also lifted cinema operator AMC by 18%, in a revival of the wild swings that gripped the markets a few weeks ago.

It wasn’t clear exactly why GameStop was back in demand -- weeks after its share price soared, then plunged amid the short-squeeze drama.

One possible cause: GameStop chief financial officer, Jim Bell, resigned this week - possibly showing the company is intensifying its shift to online retail.

Another, more intriguing possibility, is that activist investor Ryan Cohen, a major shareholder of GameStop and founder of Chewy.com, triggered the excitement by tweeting a picture of a McDonald’s ice cream cone with a frog emoji:

A sign that Cohen is pledging to fix GameStop’s business, like the fast-food chain tackled its broken ice cream machines?....

DS Smith shares jump after reports of potential bid

DS Smith’s Kemsley paper recycling mill, near Sittingbourne.
DS Smith’s Kemsley paper recycling mill, near Sittingbourne. Photograph: Graeme Robertson/The Guardian

Shares in DS Smith, the FTSE 100-listed recycled packaging business, have jumped 8% on reports that rival Mondi is exploring a possible takeover.

Bloomberg reported last night that:

Mondi Plc, the packaging and paper group, is exploring a potential takeover of British rival DS Smith Plc, according to people familiar with the matter.

Mondi has been speaking with advisers as it considers the merits of a possible transaction, the people said, asking not to be identified because the discussions are private.

The cardboard box sector has seen huge demand during the lockdown - but also faces rising prices in the scramble to get hold of enough materials to recycle.

Shares in DS Smith are up 31p at 415p, valuing the firm - Europe’s largest recycler of paper and cardboard - at around £5.7bn.

European stock markets have also opened higher.

Germany’s DAX gained 0.5% and the wider Stoxx 600 picked up 0.3%.

This follows gains in Asia, where Japan’s Nikkei gained 1.7% and Hong Kong’s Hang Seng jumped 1.3%.

The promise of continued loose US monetary policy is having its usual effect, as Stephen Innes of AXI explains:

Risk assets are enjoying one of their best days in some time as Fed Chair Powell continued to dispel inflation fears while signalling that the central bank would keep policy accommodative for some time to come.

Asia markets took the Wall Street lead and painted the ticker tape green.

The UK’s FTSE 100 index has touched a one-week high at the start of trading.

The blue-chip index is 33 points higher at 6692 points, a gain of 0.5%.

Jet-engine maker Rolls-Royce is among the risers, up 5%, with airline IAG rising 1.2%.

Mining giant Anglo American is up 3.2%, after it hiked its dividend this morning following the jump in commodity prices.

Other mining stocks are also rallying, along with oil producer BP (+1%), with oil at 13-month highs today.

Updated

The Codelco Ventanas copper smelter in Ventanas, Chile.
The Codelco Ventanas copper smelter in Ventanas, Chile. Photograph: Rodrigo Garrido/Reuters

Copper prices have jumped to their highest levels in almost a decade today, lifted by economic optimism and Jerome Powell’s dovish comments to Congress this week.

Reuters has the details:

The most-traded April copper contract on the Shanghai Futures Exchange rose as much as 4.5% to 70,740 yuan ($10,964.04) a tonne, a level unseen since March 2011, before easing to close at 70,150 yuan a tonne, still up 3.6%.

Three-month copper on the London Metal Exchange rose 2.3% to $9,518.50 a tonne by 0714 GMT.

Powell’s suggestion that the Fed might not meet its inflation goals for three years is a sign that US interest rates will remain at record low for a while, which should support demand for commodities.

Introduction: Markets rise as Powell calms nerves

The New York Stock Exchange yesterday
The New York Stock Exchange yesterday Photograph: Nicole Pereira/AP

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

Markets are bouncing back today as anxiety about rising inflation fades, and after encouraging news about Johnson & Johnson’s one-shot Covid vaccine.

Last night, the Dow Jones closed at a record level, after America’s top central banker insisted that the US economy needed a lot more help -- and that he would provide it.

Significantly, Fed chair Jerome Powell suggested it could take three years to get inflation back to target -- a clear signal that stimulus measures won’t be removed soon.

He also didn’t appear alarmed about the boom in asset prices in recent months, or the recent rise in government bond yields -- or the inflationary impact of a $1.9trn stimulus package.

This all helped to boost sentiment, and calm worries that the Fed could whip away the punch bowl too early, Deutsche Bank’s Jim Reid explains:

Risk appetite showed signs of returning to global markets over the last 24 hours as Fed Chair Powell stuck to his reassuring tone and continued to signal that the central bank would keep policy accommodative for some time to come.

With oil also at 13-month highs, and travel and hospitality stocks rallying hard this week, investors are anticipating brighter times - as Covid-19 vaccination programmes help the world economy to return to more normal times.

US traders also hailed the news that Johnson & Johnson’s one-shot coronavirus vaccine appeared safe and effective in trials, according to a report by US Food and Drug Administration (FDA) staff.

An advisory panel of independent experts decide on Friday to decide whether to recommend the vaccine be authorized. While the FDA is not bound to follow the advice of its experts, the agency did so when authorizing the Pfizer and Moderna vaccines late last year.

Edward Moya of OANDA says:

Expectations are high for the J&J vaccine to be distributed in the US over the next month.

Basic refrigeration and the fact that it is a single dose vaccine could be a gamechanger in the global fight against COVID.

European markets are expected to open higher, with Wall Street on track for further gains too.

The agenda

  • 10am GMT: Eurozone business and consumer confidence figures
  • 1.30pm GMT: US weekly jobless figures
  • 1.30pm GMT: US durable goods orders
  • 1.30pm GMT: Second estimate of US GDP in Q4 2020

Updated

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