Closing post
Time to wrap up…
Amazon has dropped its planned acquisition of the Roomba vacuum cleaner maker iRobot, days after it was reported the EU was preparing to block the deal.
The e-commerce company will pay a $94m break fee to iRobot, which immediately announced plans to axe 31% of its workforce – or 350 employees – and the departure of its chief executive.
The Wall Street Journal had reported on 18 January that the EU’s executive arm was preparing to block the deal and had informed Amazon of its proposed view.
Amazon and iRobot said in a joint statement the takeover had “no path to regulatory approval in the European Union, preventing Amazon and iRobot from moving forward together”.
iRobot is now planning 350 jobs cuts, or almost a third of its workforce, as it tries to cut costs.
In other news…
Online betting company Flutter is proposing moving the primary listing of its shares from London to New York, as its shares start to trade on Wall Street for the first time today.
The change is subject to shareholders’ approval at a vote in May, and would be another blow to the London Stock Exchange, even though Flutter would keep a secondary listing here.
The oil price hit its highest level since November, before dropping back, as tensions in the Middle East rose after three US troops were killed in drone strike yesterday and an oil tanker was hit by a missile on Friday night.
There were more profit warnings from UK companies last year than in 2008, during the financial crisis, as firms were hit by high interest rates, cuts to spending, and cost pressures.
More UK house sellers have been accepting offers below their asking price, as the property sector remains a buyers market, Zoopla reported.
Ryanair has lowered its profit forecast, after cutting fares after online travel agents dropped offering its flights.
The euro hit a five-month low against the pound, as traders anticipate that the European Central Bank will move faster than the Bank of England to cut interest rates this year.
As feared, shares in iRobot have tumbled at the start of trading in New York.
They’re down 17% at $14.12.
That means they have lost two-thirds of their value in the last year, having tumbled around 40% at one point last week when the Wall Street Journal reported that the EU was planning to block Amazon’s takeover.
Shares in iRobot are set to tumble when trading begins in New York in under 30 minute’s time.
They’re curently down 18% in pre-market trading….
$IRBT
— Vadim Canniff (@Vadimcanniff) January 29, 2024
iRobot, Amazon agree to terminate pending acquisition pic.twitter.com/po7T0VVpbN
iRobot deal 'has no path to regulatory approval in the EU'
Amazon and iRobot make it clear that the European Union’s competition regulators have sunk their deal.
They say:
Amazon’s proposed acquisition of iRobot has no path to regulatory approval in the European Union, preventing Amazon and iRobot from moving forward together—a loss for consumers, competition, and innovation.
IRobot to lay off 31% of staff
There’s more bad news for iRobot’s workers today.
Following the collapse of its takeover by Amazon, the robot vaccum maker is cutting 350 jobs, or over 30% of its workforce.
The cuts are part of an operational restructuring plan which includes making $80-$100m of cost savings.
IRobo also plans to cut its R&D spending by $20m year-over-year, by outsourcing more non-core engineering functions to “lower-cost regions”, and to cut marketing spending by $30m.
The company is also pausing all work related to non-floorcare innovations, including air purification, robotic lawn mowing and education.
There’s change at the top too – co-founder Colin Angle is stepping down as chairman and CEO.
Andrew Miller, the new chairman of the Board, says:
“iRobot is a pioneer of the consumer robot field and beloved by its customers around the world. With a legacy of innovation and a foundation of creativity, the Board and I believe that iRobot can – and will – grow its presence and continue to build a cutting-edge suite of robotic floorcare solutions that help consumers make their homes easier to maintain and healthier places to live.
To do this successfully, however, we must rapidly align our operating model and cost structure to our future as a standalone company. Though decisions that impact our people are difficult, we must move forward with a more sustainable business model, and a renewed focus on profitability.
Amazon's iRobot takeover collapses in face of EU opposition
Newsflash: Amazon’s takeover of robot vacuum maker iRobot has collapsed.
The teo companies have announced they have agreed to terminate the agreeement that Amazon would buy iRobot for $1.7bn, which was agreed in August 2022.
Instead, Amazon will pay iRobot a $94m termination fee.
The move follows reports that the European Union’s competition watchdog planned to block the deal, due to concerns that it could restrict competition in the market for robot vacuum cleaners.
iRobot’s gadgets include the Roomba i7, a wifi-connected vacuum cleaner that it claims maps and learns rooms and empties itself when full.
David Zapolsky, Amazon SVP and General Counsel, says the e-commerce giant is “disappointed” that the deal could not proceed, adding:
“We’re believers in the future of consumer robotics in the home and have always been fans of iRobot’s products, which delight consumers and solve problems in ways that improve their lives. Amazon and iRobot were excited to see what our teams could build together, and we’re deeply grateful to everyone who worked tirelessly to try and make this collaboration a reality.”
Zapolsky adds that customers will be denied “faster innovation and more competitive prices,” insisting:
Mergers and acquisitions like this help companies like iRobot better compete in the global marketplace, particularly against companies, and from countries, that aren’t subject to the same regulatory requirements in fast-moving technology segments like robotics.
Undue and disproportionate regulatory hurdles discourage entrepreneurs, who should be able to see acquisition as one path to success, and that hurts both consumers and competition—the very things that regulators say they’re trying to protect.”
Last June, the UK’s competition watchdog cleared the deal, after an inquiry.
Flutter could shift primary stock market listing to New York
Flutter, the gambling firm behind Betfair, Paddy Power, PokerStars and FanDuel, has revealed it is keen to move its primary stock market listing to Walll Street.
Flutter Entertainment is set to list on the New York stock exchange today as it aims to capitalize on America’s online sports betting boom.
It has hailed its landing on the New York stock exchange as a “pivotal moment” as its business continues to surge in the United States.
Flutter, which is already listed in London, told investers this morning that it cancelled its secondary listing on Euronext Dublin today.
It says listing on the NYSE will unlock long-term strategic and capital market benefits, and – worryingly for the City – it says the move gives “optionality to pursue a primary listing in the US”.
Flutter explains:
Since February 2023, management has engaged widely with US investors, existing and potential, along with existing shareholders globally. The feedback received has been very supportive of moving Flutter’s primary listing to the US.
As a result, the Board believes that the NYSE is now the optimal location for Flutter’s primary listing of its shares, and that the transition should be made as soon as practicable.
Shareholders will be asked to vote on whether to move the listing at Flutter’s AGM, on 1 May.
Flutter’s board says it intends to retain Flutter’s UK listing as a secondary listing, but losing another primary listing to New York would be a blow to the London Stock Exchange, following the exit of building materials group CRH last year.
Updated
Shares in British fashion retailer Superdry have jumped 5% today, after it confirmed it is considering a significant round of cost-cutting as it contends with slumping sales.
Superdry is drawing up plans for potential store closures and job cuts after it reported last week that sales dropped by nearly a quarter in the six months to October.
The company, which has about 3,350 staff and more than 215 stores, on Monday said it had hired “advisers to explore the feasibility of various material cost saving options.”
More here.
Elsewhere in the currency markets, the Hungarian forint has hit its lowest level since early November.
The forint is down 0.85% at 359.30 forints to the US dollar, taking its losses this year to 3.6%.
Forint now coming under more pressure https://t.co/HDB1p4EsJU pic.twitter.com/UJfni40k9N
— Mujtaba Rahman (@Mij_Europe) January 29, 2024
The slide comes after the Financial Times reported that the EU will “sabotage Hungary’s economy” if Budapest blocks €50bn of fresh aid to Ukraine at a summit this week.
The FT says:
In a document drawn up by EU officials and seen by the Financial Times, Brussels has outlined a strategy to explicitly target Hungary’s economic weaknesses, imperil its currency and drive a collapse in investor confidence in a bid to hurt “jobs and growth” if Budapest refuses to lift its veto against the aid to Kyiv.
Hungary has concemned this plan as “blackmail” and vowed to defy EU pressure.
Hungary’s prime minister, Viktor Orbán, has faced criticism from both Brussels and Washington for trying to thwart EU aid to Ukraine and slowing the ratification of Sweden’s membership of NATO.
Lloyds to scrap mobile bank branches
Lloyds Banking Group is shutting down its mobile banking service this year.
The banking van service was set up to serve rural towns and villages where the local Lloyds branch had been closed. But the bank is now planning to scrap the Lloyds Bank and Bank of Scotland mobile branches in May.
Lloyds argues that the service, which lets people cash cheques, withdraw cash, pay bills or send money abroad, are being used by fewer customers – just a handful in some cases.
A spokeswoman said:
“Customers have used our mobile branches much less over time and some locations now have as little as two customers using the service.
“We’ll be introducing more community bankers, alongside the other options customers already have for their banking, including the Post Office, online, our mobile apps, phone banking, video services and web chat.”
The move comes days after Lloyds laid out plans to 1,600 staff from its branch network as it tries to reduce costs and push customers towards digital services.
Euro hits five-month low against the pound
The euro has fallen to its lowest level against the pound in five months, as investors anticipate interest rate cuts from the European Central Bank.
The euro has dropped by almost 0.5% today, lifting sterling to €1.1740, the highest since late August.
Against the dollar, the euro has lost 0.33% to $1.082.
The ECB left its key rate on hold at a record-high 4% on Thursday, and the money markets today are fully pricing in a 25-basis-point cut in April. Nearly 1.5 percentage points of eurozone rate cuts are expected by the end of this year.
In contrast, the first rate cut by the Bank of England isn’t fully priced in until June, although many traders expect a May cut.
GBP rises against the Euro with EURGBP ahead of the BoE on Thursday with focus on divergence between ECB and BoE, as a rate cut in April fully priced in by market for the ECB. Below 0.8520 and we visit a new 5 month low
— Saxo UK (@SaxoUK) January 29, 2024
ECB Governing Council member Mario Centeno has told Reuters that the central bank should start bringing down interest rates sooner rather than later, and do it in small steps rather than abruptly.
Centeno argued that the ECB needn’t wait for updated wage data due in May, before acting, as some policymakers believe, saying:
“There is a lot more information, and (being) data-dependent is not (being) wage-data dependent...we don’t need to wait for May wage data to get an idea about the inflation trajectory.”
But another ECB policymaker, Peter Kazimir of Slovakia, argued today that the first cut is more likely to come in June than April.
Updated
Evergrande collapse: Hong Kong court orders liquidation of China property giant
Embattled Chinese development company, Evergrande, has been ordered to liquidate by a Hong Kong court after an 18-month long hearing.
Evergrande, which holds the ignominious title of the world’s most indebted property developer with about $300bn in liabilities, failed to convince the court that it had a viable restructuring plan, after having been given seven extensions since court proceedings were first brought in June 2022. However it can still appeal.
Justice Linda Chan delivered the ruling on Monday morning, saying “it is time for the court to say enough is enough”.
The liquidation petition was lodged by Top Shine in June 2022, an investor in Evergrande unit Fangchebao which said the developer had failed to honour an agreement to repurchase shares it had bought in the subsidiary.
Belgium has posted another quarter of steady growth.
Belgian GDP expanded by 0.4% in the final quarter of 2023, according to flash data from the country’s central bank, matching growth in July-September.
On a year-on-year basis, the economy was 1.6% larger.
Belgium q4 gdp up 0.4% on quarter consensus 0.2%
— alittlebirdtold.me (@alittlebirdme) January 29, 2024
Belgium q4 gdp rises 1.6% y/y vs. 1.4% in q3
— alittlebirdtold.me (@alittlebirdme) January 29, 2024
Gas prices rising
Back in the energy market, gas prices have risen as traders worry about disruption to supplies of liquefied natural gas from the US, on top of the turmoil in the Middle Esst.
The day-ahead price of natural gas in the UK has jumped 3.65% to 71 per therm, while the month-ahead contract is 2.75% higher at 71.25p/therm.
On Friday, the White House announced that it was pausing all pending export permits for liquified natural gas (LNG) due to climate concerns.
The move could threaten more than a dozen gas export terminals that have been planned for the Gulf of Mexico coast, but the Biden administration insisted the pause will have no immediate effect on US gas supplies to Europe or Asia.
The move follows a sharp increase in US gas exports to Europe and Asia since Russia’s invasion of Ukraine.
Earlier this month, QatarEnergy, the world’s second largest exporter of liquefied natural gas, has stopped sending tankers via the Red Sea – meaning it will take longer for supplies to reach Europe.
Last week, the International Energy Agency has warned gas prices will be volatile this year, with conflict in the Middle East and Ukraine creating “an unusually wide range of uncertainty” in its forecasts.
Updated
Back in London, shares in vape distributor Chill Brands are down by 25% this morning as the government prepares to announce a complete ban on disposable vapes.
The ban is set to come into force across the UK early next year – although The Times reports that several “anti-nanny state” Conservatives including former PM Liz Truss plan to oppose it.
🚬 Disposable vapes to be banned
— Henry Riley (@HenryRiley1) January 29, 2024
FOR the ban...
Rishi Sunak
Keir Starmer
Professor Chris Whitty
Children's Commissioner
Royal College of Paediatrics and Child Health
Local Government Association
Asthma + Lung UK
Cancer Research UK
AGAINST the ban...
Liz Truss
'Unnamed Tory MP'
Chill Brands told the City this morning it will accelerate its efforts to bring a “fully compliant reusable pod system vapour device” to market.
Sweden has inched its way out of recession, after returning to modest growth at the end of last year.
Swedish GDP grew by 0.1% in the fourth quarter of 2023, new data from Statistics Sweden shows, despite a 0.3% contraction in December.
Mattias Kain Wyatt, economist at Statistics Sweden, says net exports strengthened in the quarter, while the domestic economy was weaker.
Sweden’s economy has been hit hard by rising borrowing costs, which pushed up mortgage costs for many households.
Sweden had fallen into recession last autumn, after its GDP shrank in both the second and third quarters of last year.
Yesterday, Israel was warned that its sovereign credit rating could be cut if the war with Hamas expands to other fronts.
The warning came from a director at S&P Global Ratings, which in October cut the outlook on Israel’s ‘AA-’ rating to “negative” from “stable”.
Maxim Rybnikov, director of EMEA Sovereign & Public Finance Ratings at S&P, told Reuters:
“The negative outlook on the ratings implies that we currently see at least a one-in-three chance of a downgrade over the next one to two years.”
Rybnikov added that if Israel’s security and geopolitical risks were to increase due to an escalation of the conflict - a direct confrontation with Hezbollah in Lebanon or Iran - it could lead to a downgrade, explaining:
“We could also lower the ratings if the impact of the conflict on Israel’s economic growth, fiscal position, and balance of payments proves more significant than we currently project.”
UK job vacancies fall by most since 2020 as labour market cools
More gloom: the UK job market is facing one of the most difficult starts to the year in four years.
New data from job search engine Adzuna shows that vacancies fell -6.95% between November and December 2023 to 929,138, the biggest monthly fall since June 2020.
It’s the second month in a row that total vacancies have been below 1 million.
Early data also anticipates that January could be equally tough, with vacancies expected to decrease again, by between -6% and -8%, Adzuna warn.
Teaching was the only area to see a rise in vacancies, while there were large monthly falls in retail (-17.94%), manufacturing (-17.05%), hospitality & catering (-14.13%) and trade & construction (-13.56%).
Ryanair cuts profit forecast after being removed from online booking sites
Ryanair has cut its profit forecast for the year, after several online travel agents (OTAs) stopped selling its flights.
The budget airline has cut its forecast for profit after tax this financial year to between €1.85bn to €1.95bn, down from €1.85bn to €2.05bn.
It adds:
This guidance and the full year result remains heavily dependent upon avoiding unforeseen adverse events in Q4 (such as the Ukraine war, the Israel-Hamas conflict and further Boeing delivery delays).”
Ryanair reports that it cut prices after the “sudden (but welcome) removal of flights from OTA Pirate websites” in early December led to a drop in sales.
Ryanair accuses these online travel agents of using ‘screenscraping bots’ to obtain its flight information, before overcharging customers and scamming them with hidden mark-ups on air fares and services.
In the last quarter (October-December), Ryanair reported a profit after tax of €15m, down from the “bumper prior year Q3 PAT of €211m, as higher fuel costs offset revenue gains”.
Shares in Ryanair are down almost 3% this morning.
Ryanair trims annual profit forecast after online travel agents remove flights https://t.co/rRDzqKANMY
— Steelyard Capital (@SteelyardCap) January 29, 2024
Weapons maker BAE System has now risen to the top of the FTSE 100 leaderboard this morning, up 1.9%, as geopolitical tensions rise.
UK house sellers cut asking prices to spur demand
In the UK housing market, buyers are driving a harder bargain with sellers.
Zoopla’s latest House Price Index, released this morning, shows that a fifth of sellers are still accepting more than 10% below the asking price to secure a sale.
Nearly one in four buyers across London and the South-East are paying below the asking price, Zoopla reports, adding:
One key trend over 2023 was sellers cutting asking prices to attract buyer interest - this has continued into 2024….
It is evidence that while deals are being agreed, home buyers remain price-sensitive and focused on value for money.
All measures of housing market activity are up and London’s the most affordable it’s been since 2014.
— Zoopla (@Zoopla) January 29, 2024
Read more market trends in our latest report: https://t.co/XOX6au8vUR
Zoopla also reports that the fall in annual house prices has slowed, to -0.8% in December from the -1.4% low recorded in October.
Supply of homes has picked up – with 22% more properties for sale than a year ago, while the number of sales agreed are up 13% year on year.
Zoopla say:
While the start of the year has been positive for the sales market, it’s important not to get carried away by the outlook for the rest of 2024. We remain in a buyer’s market with plenty of choice for would-be movers.
Zoopla’s data shows a small but not insignificant number of sellers continue to cut asking prices to ensure homes attract sufficient interest, continuing the trend from the second half of 2023.
With a fifth of sellers accepting more than 10% below the asking price, seller’s realism has given new year sales levels a 13% year-on-year boost, says property agent Emma Fildes of Brick Weaver, adding:
In turn, bolstered by the promise of base cuts, demand and supply have increased with many buyers turning back to city living.
For those with larger deposits who’ve been trying to “time the market”, now seems a good time to pick up a bargain before any further rate cuts bring other buyers to the negotiating table.
A lot rides on inflation and global stability, but for now, hopes are high that 2024 can’t be any worse than 2023, and potentially a little better.
Bolstered by the promise of base cuts & property forecast rewrites, demand & supply have inc’d. With a 5th of sellers accepting +10% below asking. Sellers realism has given new year agreed sales levels a 13% year-on-year boost. Aiding the vol of sales over price inc’s @Zoopla pic.twitter.com/qybWHzGvv5
— Emma Fildes (@emmafildes) January 29, 2024
Updated
Shares in oil companies are rising in early trading.
BP are the top riser on the FTSE 100 index in London, up 1.8%, with Shell up 1.4%.
In Paris, TotalEnergies are up 2%.
Oil climbs as tensions escalate in Middle East
The oil price has rallied this morning after a missile attack by Houthi rebels on a fuel tanker in the Red Sea on Friday.
The energy markets are also on edge after three US soldiers were killed in a drone attack on a US service base on the border of Jordan and Syria.
Brent crude jumped 1.5% to $84.80 per barrel, the highest since early November, before slipping back to $83.73 per barrel.
#OIL Brent Crude price broke out on friday with some follow through this morning.. - $88 be the obvious first target. Might give sasol some traction in the short term pic.twitter.com/wD0UJMjZc5
— Marco Olevano, CFA (@MarcoOlevano) January 29, 2024
The attack on on oil tanker operated by commodities group Trafigura has bolstered fears of supply disruption. Trafigura says it is assessing the security risks of further Red Sea voyages while the UK government has said Britain and its allies “reserve the right to respond appropriately”.
These developments have left investors fretting that the ongoing conflict between Israel and Hamas could escalate into a more significant regional and international crisis.
Stephen Innes, managing partner at SPI Asset Management, explains:
The Houthis’ continued attacks on ships in the Red Sea, including a tanker carrying Russian fuel, have prompted ongoing U.S. airstrikes in Yemen. Iran’s actions risk inviting a more robust U.S. air campaign against its regional assets, highlighting the precariousness of the situation and the potential for further escalation.
Concerns about the risk of miscalculation are growing, as rational actors may unintentionally become entangled in an escalatory spiral. Given the inherent complexity of Middle East conflicts, achieving a stable outcome in the region appears unlikely at this stage, signalling the potential for continued instability with broad global repercussions where higher oil prices are the chief concern, especially in a severe supply disruption scenario, where maritime traffic in the Strait of Hormuz is chocked leading to significant rise in prices.
Introduction: Profit warnings from UK-listed companies exceed those issued in 2008
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
High interest rates and weakening confidence have been blamed for pushing more UK companies into issuing profit warnings.
New data from EY-Parthenon this morning show that over 18% of public firms issued warnings in 2023, which is a higher proportion than at the peak of the financial crisis in 2008
In total, 294 profit warnings were issued by businesses in 2023, which is a slight drop on the 305 in 2022 – highlighting how tough the last two years have been for companies.
Over a quarter of warnings (26%) in 2023 were attributed to delayed contracts or decisions, 19% were due to increased costs and a further 19% cited the impact of higher interest rates.
The survey showed that profit warnings blamed on rising costs fell through the year, but there was an increase in warnings blamed on corporate spending delays and higher borrowing costs.
During 2023, 39 listed companies issued their third or more consecutive profit warning in 12 months.
Jo Robinson, EY-Parthenon Partner, says:
“Pervasive uncertainty in 2023 created major challenges for businesses around earnings and forecasting, and this is reflected in the number of profit warnings issued last year. While pressure around costs eased somewhat toward the year-end, the uptick in warnings caused by delays to business decisions and weak consumer confidence indicates an ongoing reluctance to commit to discretionary spending.
Firms issuing profit warnings in 2023 included online shopping group THG, which blamed delivery disruption, contract delays and falling sales at one division, Kingfisher, the owner of B&Q and Screwfix, and drinks giant Diageo, while shoemaker Dr Martens racked up four profit warnings in the year.
And looking ahead, Robinson adds:
“In 2024, businesses will hope for a quicker-than-expected fall in inflation and interest rates, but many moving parts need to slot into place before we can be sure of an economic ‘soft landing’. We expect to see increasing disparity between businesses that are positioned to capitalise on still limited growth and those that are hampered by the impact of recent earnings pressures or their access to and the cost of capital. It is shaping up to be an easier year for many, but not all UK companies.”
The agenda
7am GMT: Sweden’s GDP report for Q4 2023
10am GMT: Belgium’s GDP report for Q4 2023
3.30pm GMT: Dallas Fed Manufacturing Index for January
