Closing summary
On Wall Street, the Dow Jones is 174 points higher at 33,85, a gain of 0.5%, while the Nasdaq and S&P are flat, after hitting record highs yesterday. Euroepan stock markets are still pushing cautiously higher.
- UK’s FTSE 100 up 32 points, or 0.47%, at 6,923
- Germany’s Dax flat at 15,226
- France’s CAC up 21 points, or 0.37%, at 6,207
- Italy’s FTSE MiB down 100 points, or 0.4%, at 24,500
Sterling hit a one-week high of $1.38 against the dollar earlier and is now trading at $1.3786, up 0.27%. Oil prices climbed more than 2%, with Brent crude rising to $65 a barrel and US light crude hitting $61.43.
Goldman Sachs and JPMorgan have smashed Wall Street forecasts with their first-quarter profits after a boom in deal-making and equity trading.
News just in that Bernard Madoff, the US financier who pleaded guilty to orchestrating the largest Ponzi scheme in history, has died in a federal prison aged 82, apparently from natural causes.
Our other main stories: Tesco’s profits for 2020 fell nearly 20% as the cost of hiring extra staff and safeguarding measures wiped out “exceptionally strong” sales growth.
EasyJet has said it is ready to “ramp up” its operations during the summer holiday season as it prepares to offer more flights to passengers from late May, once Covid travel restrictions are eased.
A loophole in the ministers’ code of conduct has allowed officials to keep the lobbying of companies like Greensill Capital off of public records, according to an ex-civil servant, who says ministers are not bound to report unofficial calls, texts and emails.
Foxtons is facing a shareholder backlash over a decision to award a near-£1m bonus to its chief executive while refusing to pay back millions of pounds in taxpayer-funded government support to weather the Covid-19 pandemic.
Thank you for reading. We’ll be back tomorrow. Bye! - JK
Updated
The 82-year-old financier appears to have died from natural causes. He admitted swindling thousands of clients out of billions of dollars in investments over decades. Here is the full AP story:
Reuters is also reporting it, quoting the Federal Bureau of Prisons.
Ponzi scheme operator Bernie Madoff has died in prison, says the Federal Bureau of Prisons pic.twitter.com/JMN8gi0nRR
— Reuters (@Reuters) April 14, 2021
Madoff dies in prison, AP reports
BREAKING: Bernie Madoff, the financier who pleaded guilty to orchestrating the largest Ponzi scheme in history, has died in a federal prison, AP reports, quoting a source.
BREAKING: Bernie Madoff, the financier who pleaded guilty to orchestrating the largest Ponzi scheme in history, has died in a federal prison, AP source says. https://t.co/pfJvAcltxZ
— The Associated Press (@AP) April 14, 2021
Wall Street has opened flat to slightly higher, as the investment banks Goldman Sachs and JPMorgan kicked off the bank earnings season.
The Dow Jones fell 8 points at the open but is now 106 points ahead at 33,783, up 0.3%. The S&P was initially flat and has edged up 5 points, or 0.1%, to 4,146 and the Nasdaq also inched 0.1% higher to 14,014, a gain of 18 points.
Pubs and restaurants in England that opened on Monday for outdoor drinking/dining sold twice as many drinks as they did before the coronavirus pandemic struck, according to figures charting Britain’s rush for the first socially distanced pints of spring, writes my colleague Rob Davies.
While the majority of venues remain closed due to a ban on indoor service, those that did welcome guests appear to have prospered from pent-up thirst.
One pub boss spoke of “Christmas trading” as venues with beer gardens and outdoor terraces enjoyed higher-than-average sales for a Monday in April, despite snowy weather across parts of the country.
Here is our story on British Land looking to acquire more out-of-town retail parks, as it expects consumers will still want to shop at open-air locations that are accessible by car even after pandemic lockdown measures are eased.
Ruth Griffin, retail director at the law firm Gowling WLG, says:
While this welcome decision is a tactical one, it also symbolises a realistic commitment to investing in re-establishing a strong retail portfolio that more accurately meets customer needs – facilitated of course by the legal framework now in place for gradual reopening. The supply chain and warehouse related capabilities needed to support this retail refresh are not to be underestimated though, and may well prove to be a deal breaker where competitive edge is concerned.
JP Morgan reports bumper profits
JP Morgan Chase has also reported bumper profits, despite a weaker performance from its consumer banking division, as it released more than $5bn in reserves it had set aside to cover coronavirus-driven loan defaults. It also recorded a 57% jump in investment banking revenues.
The bank’s net income leapt to $14.3bn, or $4.50 per share, in the quarter to the end of March, from $2.9bn, or 78 cents per share, a year earlier. Analysts on average had expected earnings of $3.10 per share. Revenues climbed 14% to $33.1bn.
Chief executive Jamie Dimon said:
We believe that the economy has the potential to have extremely robust, multi-year growth. Our credit reserves of $26 billion are appropriate and prudent, all things considered.
Octavio Marenzi, chief executive of the consultancy Opimas, has sent us his thoughts:
JP Morgan’s results were breathtakingly good, with the bank’s earnings surging to achieve a 23% return on equity. The bank’s corporate and investment banking arm had another very strong quarter, with equities growing at 47%. There was some softness in consumer banking, which lost 6% in revenues as loans faltered, despite consumers depositing ever larger amounts of cash with the bank.
A one-time effect is all the money that JP Morgan squirrelled away last year during the beginnings of the Covid crisis. It is now increasingly clear that the bank over-reserved, and that money is now flowing back into its earnings, concealing some of the weakness in consumer banking. But overall this was a great quarter for JP Morgan.
Updated
Goldman Sachs cashes in on another roaring period for its traders and investment bankers, with revenue and earnings rising to a record https://t.co/zqf4UrtFtq
— Bloomberg (@business) April 14, 2021
Goldman Sachs smashes forecasts for Q1 profits
Goldman Sachs has smashed Wall Street forecasts for first-quarter profits. The US investment bank has benefited from record levels of global dealmaking, and a boom in stock market trading.
The bank posted earnings per share of $18.60, far ahead of the $10.22 estimate of analysts polled by Refinitiv, and up 498% from a year earlier. Revenues of $17.7bn easily beat expectations of $12.6bn.
Overall investment banking revenues leapt 73% to $3.77bn, the highest since 2010, while equities trading revenues surged 68%, as more small investors piled in and contributed to stock market volatility, for example the GameStop mania.
Goldman held on to the top spot for worldwide mergers & acquisitions advisory services in a Refinitiv ranking that also found that global investment banking fees hit an all-time record of $39.4bn during the quarter to March. A boom in private firms that are going public by merging with listed shell companies (Spacs) helped the bank earn hefty fees.
Unlike rivals JP Morgan and Bank of America, Goldman has a relatively small consumer business, and has been far less exposed to loan defaults.
David Solomon, the chief executive, said:
We have been working hard alongside our clients in preparation for a world beyond the pandemic and a more stable economic environment. Our businesses remain very well positioned to help our clients reposition for the recovery, and that strength is reflected in the record revenues and earnings achieved this quarter.
Here is our full story on Foxtons.
And here is our story on easyJet preparing to fly more from late May:
Foxtons has sent us this response, regarding the shareholder backlash over bonuses awarded to its chief executive Nic Budden for a year in which the estate agent took government support.
Like many businesses, Foxtons was forced to close for months over the past year. We were very grateful for Government support which we used for as short a period as possible but entirely as it was intended - to keep people in jobs during a lengthy closure.
We did trade for a large part of the year, having stopped using the furlough scheme, and worked hard to support home moves and keep our tenants’ properties safe and secure. Our executive directors’ bonuses were cut by half compared to their entitlement and the CEO’s overall cash compensation was down more than a quarter compared to the year before. This is because his basic pay is the same as it was five years ago, whilst his pension and other benefits have reduced.
The vast majority of reward in the property sector is dependent on performance, and we believe it’s right to reward hard work and results in a year when the business did well in very tough circumstances. Our aim has been to strike the right balance in recognising the situation while also acting in the best long term interests of all our stakeholders.
Market summary
Oil prices are up 1.8% at the moment, with Brent crude trading at $64.85 a barrel, while US light crude is at $61.27. European stock markets are cautiously pushing higher.
- UK’s FTSE 100 up 0.2%, or 15 points, at 6,905
- Germany’s Dax flat at 15,234
- France’s CAC up 0.39% at 6,208
- Italy’s FTSE MiB flat at 24,581
Mining shares are up in London, tracking higher metal prices, and AstraZeneca shares rose 1.2% after its lung cancer treatment Tagrisso for people with early-stage lung cancer was approved in China. However, a stronger pound weighed on large companies that report their earnings in dollars.
Sterling hit a one-week high of $1.38 against the dollar after a dip yesterday when the Bank of England’s chief economist Andy Haldane resigned. The pound has been among the best-performing G-10 currencies this year, and enjoyed its best quarter since 2015 against the euro.
Tesco was the biggest faller on the FTSE 100, with its shares dropping 2.4%, as the cost of adapting its business to the pandemic wiped out “exceptionally strong” sales and led to a 20% fall in 2020 profits.
The FTSE 100 has advanced 6.5% so far this year as investors have been cheered by the vaccine rollout and government stimulus measures, although gains have been capped by fears of a third wave of Covid-19 infections and further lockdowns.
Updated
We’ve also had some figures on UK productivity from the Office for National Statistics this morning. Economic output per hour worked rose by 0.4% last year – although total output slumped nearly 10% because of the pandemic.
In the final quarter of 2020, output per hour was 0.7% lower than a year earlier, a smaller decline than the flash estimate of 1.1%.
The ONS said:
Although there was substantial volatility during the year, this contrasts with a slow and steady decline in productivity during the 2008-09 economic downturn.
Eurozone industrial output falls
Industrial production in the eurozone declined as expected in February – the biggest fall since April 2020 – dampening prospects for economic growth in the first quarter after a solid end to 2020 for manufacturers.
Output in the 19 countries sharing the euro fell 1% month on month in February and by 1.6% year on year, according to Eurostat. In January, production rose 0.8% on the month and 0.1% year on year.
Production fell most in France, Malta and Greece, and also declined in Germany, the eurozone’s largest economy. Hungary and Ireland reported the biggest increases in output.
The first estimate for eurozone GDP growth in the first quarter is due on 19 April.
Updated
IEA lifts oil demand forecast
The International Energy Agency (IEA) has lifted its oil demand forecasts for the year amid rising hopes for the global economy in the wake of the Covid-19 pandemic, writes Jillian Ambrose, our energy correspondent.
The energy watchdog nudged its demand predictions up by 230k barrels of oil a day to reach 96.7 million barrels a day on average this year after the International Monetary Fund’s decision to raise its forecasts for global GDP growth. The new demand figure is 5.7 m barrels a day higher than the average in 2020 when the Covid-19 pandemic sapped demand for transport fuels.
However, the energy watchdog warned that the oil market’s recovery remains “fragile” due to “lingering concerns” over Covid-19, which could scupper early signs of economic recovery.
There are still lingering concerns over the strength of the recovery in demand growth, however, with the number of Covid cases surging in Europe and some major oil consuming countries such as India and Brazil.
Global oil prices rose by around $3.35 a barrel last month, and stand at around $64 a barrel (Brent crude). This is around $32 a barrel higher than the average price last year in ‘Black April’, a term coined by the IEA to describe one of the worst months in the oil market’s history when the price of Brent crude tumbled to 21 year lows and US oil prices fell negative for the first time.
Updated
British Land to buy more retail parks
Also on the property front, the developer British Land said it is looking at buying more retail parks because “shoppers are more confident visiting open-air locations they can access by car and where social distancing can be more easily managed”.
The company, which owns the Meadowhall shopping centre in Sheffield and Drake Circus in Plymouth, is also investing more in “urban logistics” (i.e. warehouses) to tap into the online shopping boom, and expects to submit planning applications for urban logistics schemes in Teesside and Meadowhall in coming months.
British Land has received 82% of rents due so far this year, representing 99% of office rents and 70% of retail. Last year it slashed the value of its portfolio by almost £1bn after the Covid-19 pandemic led to a sharp fall in rental income. It said today:
We expect market rents for covered shopping centres to take longer to stabilise than at retail parks due to generally higher occupancy cost ratios for this format and lower visitor numbers during Covid.
We are exploring further opportunities to acquire high quality, well located retail parks.
William Ryder, equity analyst at Hargreaves Lansdown, said:
Rent collection is down almost a fifth on last year, although management expects some further improvement in the coming weeks. Overall the story hasn’t changed much – the vast majority of office space is paying rent while sections of the retail estate is struggling.
Clearly, the reopening of society will be hugely important and should herald a recovery. However, we still don’t know how much habits have permanently been altered by the pandemic. It’s not yet clear that physical retail will ever fully recover, or that everyone will return to the office. We suspect the worst fears will be unfounded, but we’d be surprised if there were no enduring behaviour shifts.
For now, British Land is continuing to focus on high quality developments and campuses, and we think this approach makes some sense. But the next few quarters will be crucial, as that’s when we’ll find out just how many of our lockdown habits become permanent.
Foxtons in row over CEO bonuses
The London estate agent Foxtons faces a backlash from investors and shareholder groups over its decision to pay its chief executive almost £1m in bonuses despite a poor year for the company, when it took £7m in government support and was forced to raise more funds as it struggled through the pandemic.
Nicholas Budden, Foxton’s chief executive, is to receive an annual bonus of £389,300 for 2020 to “reward hard work” in a year the business did “well in very tough circumstances”. In addition, Budden has also been awarded shares worth £569,000 under a long-term incentive scheme which will vest in five years.
Two of the world’s biggest investor advisory groups, Institutional Shareholder Services and Glass Lewis, have flagged concerns over Foxtons’ plans at a time when its share price has fallen sharply, the Financial Times reported. Glass Lewis said:
In our view, there is no reason as to why the company could not reduce the bonus to nil, a common practice among [its] FTSE listed peers.
ISS argued there was a “material disconnect between bonus outcomes and company performance for the year”.
Some investors may question the appropriateness of awarding bonus payments to the executive directors before paying back the government support received.
This came as Foxtons reported a 24% rise in revenues to £28.5m in the quarter to 31 March. Sales revenues jumped 60% to £11.4m. The company points out that while it took government money from the furlough scheme and business rates relief, it also cut its costs by £9m through pay cuts and reducing spending.
Updated
Corporate news round-up
Here’s a round-up of today’s other corporate news.
EasyJet has said it is ready to “ramp up” its operations during the summer holiday season as it prepares to offer more flights to passengers from late May, once Covid travel restrictions are eased. Its boss, Johan Lundgren, said he expects to see most European countries on the UK’s green travel list.
Tesco’s profits fell by almost 20% to £825m during the past year, despite growing sales and winning customers from its rivals, because of the increasing cost of operating during the coronavirus pandemic.
The UK’s competition watchdog has provisionally cleared the £31bn merger of Virgin Media and O2, paving the way for the creation of a “national champion” to challenge BT.
Hundreds of British Gas engineers will lose their jobs by midday on Wednesday after refusing to sign up to tougher employment terms imposed by the company’s controversial “fire and rehire” scheme.
W Galen Weston, the patriarch of one of Canada’s wealthiest families and a retail titan, has died aged 80. Weston was the third generation of his family to lead George Weston Limited, an already-prosperous retail empire founded by his grandfather, which he expanded significantly.
Updated
Sainsbury’s could be taken private, as it emerged this morning that a billionaire investor known as the “Czech sphinx” has launched a raid on Britain’s second-biggest supermarket.
Daniel Kretinsky’s firm Vesa Equity Investments has increased its stake in the grocer to almost 10% by buying shares worth more than £300m from Qatar’s sovereign wealth fund.
The move makes the activist investor one of Sainsbury’s biggest shareholders alongside its founding family and Qatar. Analysts suggested it could be the precursor to a full-blown takeover bid.
Mr Kretinsky also owns 40% of German wholesaler Metro and attempted to take it private in 2019, but the plan was snubbed by the company’s board.
The investor’s empire spans energy, media and retail. He was nicknamed the “Czech sphinx” for his inscrutable nature after making a series of shrewd investments.
Updated
The French finance minister, Bruno Le Maire, has said that the government could wipe out the debts of certain French companies as part of a series of measures to help the French economy get through the coronavirus crisis, according to Reuters.
He also told BMF TV that the economy should grow by 5% this year (this forecast was reduced from 6% earlier this month amid a third wave of Covid infections) and reiterated that financial aid measures would remain in place until the end of the pandemic.
EasyJet CEO: most European countries should be on UK's green list
More from easyJet. The chief executive, Johan Lundgren, expects that by the time travel restarts in the latter half of May, most European countries should be on the UK’s green list for travel. He told reporters:
I will struggle to see that there will be, unless something happens between now and then, that there would be many [European] countries who wouldn’t be in that green category.
He said customers were mainly asking which countries would be on the green list, and urged the government to announce details as soon as possible.
Updated
European stock markets have opened flat to slightly higher.
- UK’s FTSE 100 index flat
- Germany’s Dax flat
- France’s CAC up 0.4%
- Italy’s FTSE MiB flat
The UK recruitment firm Robert Walters expects annual profit to beat market expectations, amid signs of a pick-up in hiring in its key markets.
Rivals Hays and PageGroup have also voiced optimism in the past few days, after demand for new recruits surged last month.
Robert Walters said recruitment activity rose in Japan, its most profitable business. France and Spain returned to growth during the latest quarter. In the UK,
despite a hard lockdown spanning the entire quarter, there were early signs of an improvement in client and candidate confidence, particularly in London and across the legal and technology disciplines.
The company made £77.3m in fees in the three months to 31 March, down 11% from a year earlier, with UK fees falling 12% to £17.3m.The large majority of the firm’s offices remain open, and it hired 74 more people.
Robert Walters, the chief executive, said:
As a reflection of the improving market sentiment, we increased headcount during the quarter, with hiring focused in those geographies and disciplines showing the strongest signs of growth.
Whilst it is still difficult to be certain that there will be no further globally disruptive events ahead, the board is currently confident that profit for the year is likely to be comfortably ahead of market expectations.
EasyJet said today that it expects to fly more from late May, despite worries about a third wave of Covid-19 infections in Europe. The airline said that most countries are planning to resume flying at scale next month. Overall, it expects to operate up to 20% of 2019 levels of flights between April and June.
The comments came as easyJet forecast a loss before tax of £690m to £730m for the six months to March. It said:
We maintain significant flexibility to ramp capacity up or down quickly depending upon the unwinding of travel restrictions and expected demand across our European network.
It is still unclear when people can get back to travelling. The UK government disappointed the industry last week when it failed to announce a start date for travel or list which countries will be open for travel.
Meanwhile, Norwegian Air plans to raise more money than planned – up to £6bn rather than £4.5bn – before it emerges from bankruptcy protection next month. Chief executive Jacob Schram said:
We want to take a conservative approach at a time when the pandemic and travel restrictions continue to create unpredictability in the travel sector.
Updated
Michael Hewson, chief market analyst at CMC markets, has looked at the Tesco results.
Tesco share price is still well below the pre-pandemic levels that we saw in February 2020 despite performing very well in the face of some very difficult circumstances.
After an initially shaky start as supply chains creaked and groaned under the strain of the initial lockdown the entire supermarket sector has been one of the unsung heroes of the pandemic, with management and staff straining every sinew to keep the country fed.
To recognise this Tesco paid all front-line staff a 10% Christmas bonus, which on the face of it was the least they could do given the payment of a special dividend to its shareholders from the proceeds of the sale of their businesses in Thailand and Malaysia for £8.2bn...
Today’s full year numbers showed that these higher costs, as well as investment in extra capacity, have not only impacted profits, but in facing up to the challenges presented by the likes of Aldi and Lidl revenues, and its “Aldi Price Match” campaign, have also impacted revenues which have come in lower, despite the higher demand due to the pandemic.
While group like for like sales rose by 6.3%, with the UK and Ireland accounting for 6.8%, revenues including fuel were 0.4% lower from a year ago at £57.9bn.
In terms of the outlook Tesco said it expects sales volumes to decline as lockdown restrictions ease, however costs are also expected to decline as well. This should translate into better margins, and an increase in profits, which should head back to the levels seen last year.
My colleague Jo Partridge reports on Tesco:
Tesco has said that its profits fell by nearly 20% to £825m during the last year, despite it growing sales and winning customers from its rivals, because of the increasing cost of operating during the coronavirus pandemic.
The retailer’s group sales rose by 8.8% to £53.4bn during the 52 weeks to 27 February, surpassing analysts’ expectations, while its UK sales rose by 7%.
The supermarket’s online sales soared by 77% during the year to £6.3bn, as it doubled its capacity for online deliveries to 1.5m million slots per week.
However Tesco incurred £892m of extra costs in UK for doing business during the pandemic, including hiring more staff to cover workers who were off work because of Covid-19 or while they were self-isolating.
Tesco hired almost 50,000 temporary workers during the pandemic, around 20,000 of whom have joined the retailer permanently.
Tesco announced in December that it would repay in full £535m in business rate relief which it had accepted from the UK government. It had come under pressure to return the cash after paying out a £315m dividend to investors in October.
The group anticipates that it will continue to face around a quarter of the extra costs associated with Covid during the coming year, but has pledged to continue to forgo any available business rates relief.
Ken Murphy, Tesco’s chief executive, said the retailer had shown “incredible strength and agility” during the pandemic.
“We have strengthened our brand, increased customer satisfaction and improved value perception. We have doubled the size of our online business and through Clubcard, we’re building a digital customer platform,” Murphy said.
Introduction: World stocks hit fresh peak
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Global stock markets have climbed to a new record as government bond yields eased, despite a rise in US inflation. Consumer prices rose by 0.6% in March from the month before, pushing the annual rate of inflation up to 2.6% from 1.7%.
But markets took the data, released yesterday, in their stride. Analysts reckon that they are unlikely to change the US Federal Reserve chair Jerome Powell’s view that higher inflation in coming months, as the economy reopens, will prove transitory. We will hear from Powell later today.
US Treasury bond yields continued to fall, to a fresh three-week low. They have eased to 1.6217% since hitting a 14-month high off 1.776% on 30 March.
The MSCI gauge of equities in 50 countries advanced 0.34% to hit a fresh peak. In Asia, Hong Kong’s Hang Seng rose 1.4% and the Australian stock market advanced 0.7%, while Japan’s Nikkei slid 0.4%. European markets are expected to open higher, too.
US stocks rose to new record highs yesterday, with the S&P 500 closing 0.33% higher and the Nasdaq adding 1%, while the Dow Jones slipped 0.2%.
Michael McCarthy, chief markets strategist at CMC Markets, told Reuters:
Once again, markets are looking on the the bright side, and despite that higher-than-expected inflation read, it’s been interpreted as a sign of better growth. We’ve seen support for those high-growth tech stocks, and other sectors exposed to economic growth, including financials.
His colleague Michael Hewson at CMC says:
It will take a few more months of 2.6% CPI reads before markets become too concerned, however there are still plenty of warning signs, with supply chain disruptions putting upward pressure on prices, while recent prices paid data has also seen sharp moves to the upside. If these start to become sustained then we could well see further upward pressure on yields. For now, yields seem contained, hence the lack of dip in equity markets.
Britain’s biggest retailer Tesco has reported a near-20% slide in 2020 pre-tax profits to £825m, despite enjoying “exceptionally strong sales” of £53.4bn during the pandemic. But the increased cost of doing business due to coronavirus restrictions ate into profits.
The Agenda
- 9am BST: IEA Oil market report
- 9.30am BST: UK Labour productivity final for Q4
- 10am BST: Eurozone Industrial production for February (forecast: -1.1% m/m)
- 12pm BST: US MBA Mortgage applications for the week of 9 April
- 3pm BST: ECB president Christine Lagarde speech
- 3.30pm BST: Bank of England policymaker Jonathan Haskel speech
- 5pm BST: US Federal Reserve chair Jerome Powell speech
- 7pm BST: Fed Beige Book
Updated
