The Hut Group soared to its highest level in almost a month, marking its best trading day on record after raising more than $1bn (£706m) in new equity.
Gains came after Softbank, the Japanese technology powerhouse, was revealed late on Monday as the cornerstone backer of a $1bn (£710m) fund raising intended to fuel the retailer’s growth. The deal gives Softbank the right to buy a 19.9pc stake in THG Ingenuity for $1.6bn.
“THG Ingenuity is a technology and operating platform which is used by big blue chip corporate brands like Nestle, Procter and Gamble and Johnson and Johnson for their ecommerce operations. It is here that the real growth potential lies with an operation that operates across 5 continents, and what appears to have prompted the big investment from Softbank,” said CMC Markets’ Michael Hewson.
Chief executive Matt Moulding said the funds would allow him to “invest aggressively” and unlock partnerships with other Softbank companies. THG also announced the acquisition of American beauty brand Bentley Laboratories for $255m, which is expected to boost full year revenues by $77m when completed.
Shares gained as much as 17pc in early trading before closing the day up 11.9pc, or 71p, to 667p - the highest level since April 16.
It was a rare bright spot for London’s markets, with just one blue-chip company - London Stock Exchange - and 10 mid-cap firms ending the day in the green. British stocks joined a global sell-off to clock their worst day since late October after a sudden crumble in big US tech stocks overnight due to inflation concerns.
The benchmark fell back below the 7,000 level, losing 175.69 points by the end of the day to close at 6,947.99. The FTSE 250 shed 530.05 points to 22,167.14 - its lowest level in almost three weeks.
Investors are growing anxious about a surge in inflation that could mean central banks will withdraw their ultra-loose monetary policies earlier than forecast.
Among companies, Scottish Mortgage Investment Trust - known for backing technology stocks - shed 54.5p to £10.84, its lowest level since early March, following the sell-off on Wall Street overnight.
British Airways’ owner IAG was the biggest loser on the top flight after raising another €825m (£709m) in seven-year debt in a bid to shore up its finances. It said it is burning through about €175m each week while most of its flights remain grounded. Shares closed 15.53p lower at 194.32p, joined in the red by other airline rivals.
It was followed by engineering firm Renishaw after struggling to attract takeover interest due to what is being considered a high price tag. Shares dropped 405p to £56.52.
That is all for today - here are some of our top stories:
Thank you for following along and see you again tomorrow!
Future acquires Marie Claire US
British media company Future has acquires Marie Claire US, previously a joint venture between Hearst Magazines and MC International. It adds to Future's ownership of Marie Claire UK.
The acquisition expands Future's North American reach. Marie Claire US has an audience of almost 17.5m monthly unique users.
Zillah Byng-Thorne, chief executive of Future, said: "With nearly 17.5 million visitors a month, this is a flagship women's lifestyle brand and I'm delighted that we are adding it to our already strong Women's Lifestyle Vertical.
"Our continued growth and success is proof of our strategy in action. We've had fantastic results expanding the Marie Claire UK brand and we believe that with our expertise in terms of audience, ecom and platform, we can develop the offering to grow the Marie Claire US audience significantly."
Nissan narrows annual loss
Nissan has narrowed its annual loss despite the impact of the pandemic and the chaos being caused in the global car industry by the semi-conductor shortages which are hampering production of cars.
My colleague Alan Tovey reports:
The Japanese automotive giant posted a full-year loss of 449bn yen (£2.9bn) on revenues down by a fifth at 7.86 trillion yen.
In the year to the end of March the company sold 4.052m vehicles, a drop of 850,000 on the previous year and the third successive annual decline.
The performance was ahead of Nissan’s own forecast, and the company expects a rebound in the coming year with sales rising to 4.4m cars, though it warned there is a “continued business risk due to the semiconductor supply shortage and raw material price hike”.
A turnaround plan has begun to deliver results, with the “Nissan Next” strategy generating 350bn yen in fixed cost savings, drove the company to pencil in a 60bn yen loss in the coming year.
£850m boost to British life sciences industry
US pharmaceutical titan Eli Lilly has struck a $1.2bn (£850m) development deal with UK RNA start-up Mina Therapeutics in a boost to the British life sciences industry.
My colleague Julia Bradshaw reports:
Mina, which is based at Imperial College’s White City campus in London, is pioneering a new class of medication called small-activating RNA, or saRNA, which triggers cells to produce more proteins by targeting specific genes.
“That matters because disease is pretty much caused by an imbalance of protein, too much or too little,” said chief executive Robert Habib. Only a small fraction of conventional medicines can treat diseases by targeting their proteins. RNA, by contrast, can work at the genetic level and get into areas that are currently ‘undrugable’.
Mina’s saRNA technology is the only one in the world that is currently in clinical trials. The company has received a $25m upfront payment from Eli Lilly with the potential for further milestone payments that together amount to $1.2bn. Its focus is on treating cancer and rare genetic diseases.
Just Eat Takeaway CEO goes on a Twitter rant
Jitse Groen, the chief executive of Deliveroo-rival Just Eat Takeaway.com, has gone on a Twitter rant against analysts:
It is unclear what caused the founder’s tweets, which followed an upgrade of Just Eat Takeaway’s stock to neutral from underperform by Exane earlier today. One question in reply, about whether he was reacting to positive sell-side notes initiating coverage of Deliveroo, went unanswered.
He later apologised for his tone...though carried on:
Mr Groen then finished it off, pointing out a trend line comparison of Just Eat, Deliveroo and UberEats. His company's Amsterdam-listed stock is down around 14pc since the beginning of the year, while Deliveroo shares have fallen about 36pc since its UK listing in late March:
FTSE stays below 7,000 as inflation fears linger
At 4.20pm, the FTSE 100 was down 2.6pc, hovering around 6,936 points.
McVities owner announces Glasgow factory closure
McVities owner has announced plans to close its factory in the east end of Glasgow, putting nearly 500 jobs at risk.
British food company Pladis has put forward proposals to close its Tollcross site in the second half of 2022 with production moved to other factories, subject to a "full and meaningful consultation with employees".
The news puts 468 roles at risk of redundancy with the company highlighting "excess capacity" across its UK sites.
David Murray, Pladis UK and Ireland managing director, announced the consultation to employees at meetings earlier today.
He said: "This overcapacity limits our ability to make the right investments in future capabilities to meet the very big changes in our industry."
Greensill founder, Lex Greensill, to appear in front of Treasury Committee at 4pm
Ahead of the committee meeting, David Cameron published the text messages he sent to senior treasury officials, revealing the extent of the former PM's lobbying for the now-collapsed firm.
Follow The Telegraph's politics live blog for more updates on this.
Deliveroo ordered to give its riders a staff job by Spanish court in further blow for takeaway firm
Food delivery companies are facing a 90-day deadline in Spain to transfer their riders from freelance roles and onto staff under new “gig economy” rules announced by Madrid, reports my colleague Matthew Field.
Deliveroo and Uber Eats will have until mid August to comply with regulations agreed between ministers and trade unions.
The move will stoke pressure on both companies, which are among food delivery companies facing fines of 733m in Italy over their working arrangements.
Riders for Deliveroo and Uber Eats are normally freelance couriers, paid a fee per delivery. Unions have been calling for more protections, including minimum wage and holiday pay for riders.
In Spain, however, some riders took to the streets to protest against the planned law change. Spain’s delivery Riders Association said: “A new regulation that does not represent the majority of riders is coming to light. But most of us want to continue to be freelancers and not lose the benefits of self-employment.”
On Tuesday, Bank of America, Jefferies and Numis issued “buy” ratings on Deliveroo stock. Meanwhile, the New York hedge fund ExodusPoint was revealed to have taken out a £26m short position against the food delivery company, according to Financial News.
Deliveroo’s shares traded flat at 248p.
Airbus braces for jet production increase
Airbus is preparing to boost production of its bestselling A320 family of airliners by a fifth, as the pan-European aerospace giant pencils in a return to skies as the pandemic eases, reports my colleague Alan Tovey.
The company has warned suppliers to brace for an 18pc increase in output of the jet to 53 planes a month in 2022, according to Reuters, though the higher number is described as an “informal” target.
This increase is on top of an already planned production ramp up from the current rate of 40 jets per month to 45 by the end of the year.
Airbus slashed the speed at which it builds the single-aisle A320 family of airliners as the pandemic struck last year. Some 60 of the jets were turned out every month by Airbus factories before the rate was cut in April 2020 as the impact of coronavirus became clear.
Chief executive Guillaume Faury has predicted that short-haul air travel - the type of routes A320s are used on - will recover first, while Airbus’s larger airliners such as the A350 will remain at lower production rates for much longer.
Airbus said it “did not comment on speculation regarding the longer-term trajectory. We see the market recovering to pre-Covid levels in the 2023-2025 timeframe, with single-aisle recovering first.”
Ambrose Evans-Pritchard: This time the US really is heading into a serious inflation storm
In The Telegraph's weekly Economic Intelligence newsletter, my colleague Ambrose Evans-Pritchard writes:
The US labour market is as tight as a drum. Small firms cannot find workers, and hourly wages are suddenly surging. It screams incipient inflation.
The National Federation of Independent Businesses said 45pc of its members are struggling to fill positions, the highest since the modern series began in the early 1970s.
It may soon be time to ask whether the US is in the foothills of an inflationary wage-price spiral, compounding the commodity price spiral that has been underway for several months.
One might equally ask whether it is tenable for the US Federal Reserve to keep purchasing $120bn of bonds each month after the output gap has already closed, and at a time when the federal government is running a post-pandemic “war economy” deficit of 13pc of GDP.
Read more of the extract here or receive the newsletter in your inbox every Tuesday by clicking below.
Return to office beckons for JP Morgan's UK staff
JPMorgan has told its British-based staff to prepare to adopt a “consistent schedule” which combines both home and office working, as the country begins to relax its coronavirus restrictions.
The American bank, which employs around 19,000 people in the UK, said in a memo that more workers should expect to come into its London and Bournemouth sites from June 21.
However in Scotland, which is not following the same reopening schedule in England, JPMorgan said the timetable for its offices in Glasgow and Edinburgh may vary.
British offices will operate at maximum 50pc of capacity, the bank said, adding vaccinations would not be a prerequisite for returning.
The UK plans echo US proposals for workers to follow an office rotation which is expected to be introduced by early July.
Wall Street rival Goldman Sachs has also told UK staff to be prepared to work from offices again from June 21, when the UK government's roadmap plans to end all legal limits on social contact. US staff have been told to prepare to return from June 14.
European banks, however, are taking a more flexible approach. Societe Generale SA said French staff can keep working from home for up to three days a week, while Barclays' Chief Executive Jes Staley said in April he will likely avoid a strict mandate on time in the office.
Inflation alarm bells ring
If you're just joining us now, here's a bit of context as to why markets are experiencing such a sharp downturn today.
In a word, the problem appears to be inflation. Or at least the fear it will rise sharply. While inflation has been subdued throughout the pandemic, huge government stimulus, particularly in the US, has led to fears that all this extra money will send prices surging as economies recover from coronavirus and demand returns.
That in turn could lead central bankers the world over to hike interest rates from their current pandemic lows, making it more expensive for companies to borrow. One reason we have seen such huge spikes in some stock valuations (notably in tech) is because it has been incredibly cheap for them to borrow in order to fuel growth.
This is not a new fear but matters appear to be coming to a head, with eurozone bond yields rising again on Tuesday and US breakeven rates (which factor in inflation) hitting multi-year peaks.
Meanwhile a clutch of Federal Reserve and European Central Bank officials are set to make speeches this week that will be closely followed by markets, and the US Labor Department is due to release its consumer price index report on Wednesday.
"Inflation's shadow looms large and we do think that there is a limit to the Fed's tolerance of inflation," DBS Bank said in a note seen by Reuters.
Wall Street opens deep in the red
So much for being bullish. Investors have taken a decidedly risk-averse stance today, cementing US stocks' downward trend with over 1pc declines as trading opened today.
The S&P 500 sank 1.25pc shortly after the bell, while the Dow Jones was down 1.12pc and the tech-heavy Nasdaq 1.48pc lower. The latter's Big Tech listings meant it suffered most as the rising risk of inflation pushes traders away from so-called growth stocks (where future promise is greater than current profits) and into stocks that deliver more reliable returns.
Tech stocks enjoyed a remarkably lucrative pandemic as traders piled into them over 2020 and into this year, but that has led to concerns they are now overvalued, meaning today brought some painful declines for most of the big-hitters, as you can see below:
Alphabet (Google owner): -1.35pc
And here's a staggering set of figures courtesy of Reuters:
Amazon has lost close to $140 billion so far this month, Tesla over $77 billion and the whole FANG gang combined more that $440 billion.
No FTSE 100 risers
There are no risers on the FTSE 100. Yes, you read that correctly - none at all. Every single company on the UK's top index is mired in the red to one degree or another as markets continue to crumble. The FTSE 100 is now 2.96pc down. Renishaw, Scottish Mortgage and Melrose are the biggest fallers with respective drops of 7.55pc, 6.9pc and 6.85pc.
In Europe it's a similar story. Germany's Dax has sunk 2.4pc while France's Cac is down 2.3pc. The pan-European Euro Stoxx 600 has lost 2.5pc so far today.
Analysts are pointing towards rising fears of a sharp rise in inflation for the sharp downturn today, prompting traders to dump growth stocks such as US tech companies not turning regular profits for value stocks that offer more reliable returns.
"The underlying driver is that there is still a rotation out of duration (higher interest rate) sensitive parts of the market and this is why tech stocks are coming under pressure now," said Mizuho's head of multi-asset strategy Peter Chatwell.
"Given the rise in the earnings power of these firms different governments will also seek to raise more tax revenue from them in the coming years."
Sell off accelerates, pushing FTSE 100 down further
The entire FTSE 100 is in the red and the index as a whole has dropped 2.6pc, as markets brace for Wall Street to open in half an hour.
Nick Hyett, Equity Analyst at Hargreaves Lansdown, says:
A 2pc fall in the UK stock market follows a 1pc slide in the US last night – when it comes to stocks and shares, if the US sneezes the world catches a cold. But it should be no surprise that today’s inflation driven market sell-off started across the pond.
All things being equal higher inflation implies higher interest rates, and higher interest rates are particularly toxic for companies that promise little in the way of profits today, but rapid growth in the years to come. That’s a pretty accurate description of many tech stocks, and the US market is increasingly dominated by US tech names.
A temporary boost in inflation was inevitable. What matters is whether inflationary pressure is sustained – there’s no convincing evidence that’s the case yet.
Britain's financial watchdog investigating Greensill
Britain's financial watchdog said it is investigating matters related to Greensill Capital, the lender which collapsed into insolvency in March.
“I would also like to take this opportunity to inform the Committee that the FCA is formally investigating matters relating to Greensill Capital UK” the FCA's chief executive Nikhil Rathi said in a letter to the chair of the Treasury Select Committee, Mel Stride, today.
"We are also cooperating with counterparts in other UK enforcement and regulatory agencies, as well as authorities in a number of overseas jurisdictions".
Investor confidence rockets in Germany
German investor confidence has rocketed to the highest level in 21 years as the third wave of Covid cases begins to be reined in Europe’s biggest economy, reports my colleague Tom Rees.
The ZEW economic sentiment index, a closely-watched gauge of investor expectations, jumped from 70.7 points to 84.4 in May, the strongest reading since the pandemic struck. The current assessment tracker also improved to a 15-month high of minus 40.1 points as an end to the Covid crisis nears.
“The slowing down of the third COVID-19 wave has made financial market experts even more optimistic,” said Achim Wambach, ZEW President.
“The experts expect a significant economic upswing in the coming six months. The economic outlook for the euro area and the United States has improved considerably as well.”
Investor Legal & General backs activist in Exxon proxy battle
British insurer Legal & General Group Plc became the largest-yet Exxon Mobil investor to support an activist campaign to overhaul the oil giant’s board and make its climate goals more ambitious.
Bloomberg has more details:
Just two weeks before a shareholders vote, the insurer’s asset management division will back Engine No. 1’s proposal to add four new directors and overhaul Exxon’s strategy to become more climate friendly.
Legal & General Investment Management will also vote against re-electing Chairman and Chief Executive Officer Darren Woods, as well as lead director Kenneth Frazier.
The decision is a major boost to Engine No. 1’s high-profile campaign, whose biggest public backers to date have been state pension funds in New York and California, all of which have much smaller holdings in Exxon than than Legal & General, one of Europe’s biggest passive investors.
The London-based insurer and fund manager has a $1.5 billion stake in Exxon, making it the company’s 17th largest shareholder, according to data compiled by Bloomberg. It opposed the re-election of Woods at last year’s annual meeting and some of its funds began divesting from Exxon stock a year earlier.
Exxon has roundly rebuffed the activist’s proposals, recently appointing three new directors of its own, introducing new emissions targets and cutting spending to protect the S&P 500 Index’s third-largest dividend, worth $15 billion a year. It says Engine No. 1’s proposals will threaten the payout, ongoing cash flow and its role in the energy transition.
Chipmaker Agile Analog wins $20m injection from Canadian investors
A Cambridge semiconductor designer has raised $19m (£13.5m) from Canadian venture fund Omers for technology that could help streamline the process of building new silicon amid a global shortage of chips, reports my colleague Matthew Field.
Agile Analog, which was founded four years ago, said it planned to use the funds to double the size of its team to more than 100 people and open an office in Taiwan.
The company designs chip technology that is used to measure "real world" signals, such as sensing for changes in electrical current or temperature.
Its technology makes it easier for chip makers to quickly change and customise their designs, speeding up the manufacturing process.
Tim Ramsdale, chief executive of Agile Analog, said designing components for chips was "one of the key limitations to scaling chip development".
"The US and Europe are keen to bring chip manufacturing back to their geographies, our technology enables that," he said.
City Pub Group eyes further acquisitions as it predicts trading will recover to 2019 levels over summer
The City Pub Group has said it is on the hunt for new premises as easing Covid-19 restrictions look set to send trading ahead of pre-pandemic levels this summer, reports my colleague Hannah Boland.
The City Pub Group, which operates 45 pubs across London, the south of England and Wales, said it was currently "assessing investment opportunities on a very selective basis", coming after other pub chains signalled they were looking to swoop on sites which have been hard hit by the pandemic.
Wetherspoon's and RedCat Pub Company, run by ex-Greene King boss Rooney Anand, have both said they are embarking on an M&A spree.
Clive Watson, executive chairman of The City Pub Group, said the company was weighing up potential acquisitions ahead of a strong uptick in trading, expected later this year.
The company has 24 pubs which are currently open and which are trading at 77pc of 2019 levels, showing "high levels of demand".
He said bookings of private function rooms were likely to "turbo charge sales" as weddings and conferences were once again able to be scheduled, and that he was hopeful staff shortages in the front-of-house teams would end once the furlough scheme came to an end.
"I think there's a lot of people who quite like being on furlough. And I think, once that runs out, they'll drift back to hospitality."
Inflation concerns hit Nasdaq futures
Futures tracking the Nasdaq dropped more than 1pc today, indicating another day of losses ahead for highly-valued tech stocks which investors believe would suffer most as a result of inflation.
Shares of Apple, Facebook, Amazon, Netflix and Google-parent Alphabet all dropped between 1pc and 2pc in premarket trading, while Tesla fell nearly 4pc.
City watchdog to oppose controversial Amigo plan to slash compensation for borrowers
The City watchdog has told Amigo Holdings it intends to oppose a controversial plan to slash compensation for customers at a court hearing next week, saying it was not satisfied that the current proposal was fair, reports my colleague Simon Foy.
The subprime lender said it was notified by the Financial Conduct Authority that the regulator was concerned customers’ compensation claims would be significantly reduced by the proposal while shareholders were not being asked to contribute.
Shares in Amigo plunged by almost a fifth to 24.3p in morning trading, valuing the company at just £115m.
It came after 95pc of current and former customers voted in favour of the plan to pay them lower compensation ahead of a creditors’ meeting on Wednesday.
The proposed scheme of arrangement would cap total claims at £35m, plus a 15pc portion of profits over the next four years. Amigo has said that if the scheme is not approved, the company will likely fall into administration without paying up at all.
The court hearing to sanction the scheme will be held on May 19, where the watchdog will oppose it even if creditors back the proposal.
More news from the aviation industry:
Heathrow lost 6.2 million passengers in April, down 92.1pc compared to pre-pandemic figures from 2019 as the company described the government's travel destination green list as "over cautious".
Chief executive John Holland-Kaye said:
The Government's green list is very welcome, but they need to expand it massively in the next few weeks to include other low risk markets such as the United States, and remove the need for fully vaccinated passengers to take two expensive PCR tests.
Border Force's claims that "long queues in immigration are inevitable" smack of complacency - they are completely avoidable if Ministers ensure that all desks are staffed at peak times."
British Airways owner to raise €800m in bond sale
British Airways’ owner is tapping investors for €800m (£690m) to capitalise on a global easing of travel restrictions in the coming months, reports my colleague Oliver Gill.
IAG, the FTSE 100 group that also owns Aer Lingus and Spain’s Iberia, is to raise the money by selling convertible bonds. The money will be used to “take advantage of a recovery in demand” and bolster cash reserves.
IAG has tapped taxpayers and investors for support during the pandemic to ensure that the UK flag carrier stays afloat during the crisis.
It had €10.5bn of cash at the end of March, which included €3.5bn in UK Government-backed loans and guarantees.
British Airways, which generates almost two-thirds of IAG’s profits, is pushing to re-open the skies above the Atlantic Ocean. Services between Britain and the US have typically been the airline’s most lucrative.
But Gerald Khoo of stock broker Liberum said the Government’s cautious approach to reopening the borders could continue to cause the airlines group difficulties.
He said: “The timing of a meaningful restart to European air travel continues to slip. IAG’s key markets have some of the tightest restrictions on international travel worldwide. The recent UK Green List announcement did not point to a rapid change in direction.”
Farrow & Ball sold to Danish group for £500m
The upmarket paint company Farrow & Ball has been sold to Danish manufacturer Hempel in a £500m deal, after the company reported a 30pc boost in revenue in the year to March 2021.
Farrow & Ball has been owned by Ares, a Los Angeles private equity firm since 2014.
“We had the privilege of stewarding an iconic consumer brand,” said Jordan Smith, Principal in Ares.
“This sale culminates another successful partnership where our sponsorship helped catalyze transformational growth.”
Extinction Rebellion co-founder arrested
British climate activist Gail Bradbrook, 49, was arrested at home today for conspiracy to cause criminal damage and fraud in connection to protests directed at banks such as HSBC and Barclays last month.
The Extinction Rebellion group, which Bradbrook co-founded, smashed the window frontage of HSBC and Barclays in Canary Wharf and have targeted Lloyd's of London as part of what the activists called a "Money Rebellion".
"Gail has been arrested for conspiracy to cause criminal damage and fraud in relation to @money_rebellion's debt disobedience. She faces a potential sentence of 10 years in prison," Extinction Rebellion said on Twitter.
The fraud allegation is related to a campaign to use personal credit card debt to make donations to groups allegedly damaged by banks - and then refusing to pay off the debt, Reuters reported.
Musk Tweet prompts Dogecoin to jump
Dogecoin, the cryptocurrency started as a joke, jumped on Tuesday after billionaire Elon Musk tweeted about whether Tesla Inc. should accept it for payments.
The token jumped from around 46 cents to as high as 54 cents after Musk’s tweet, according to Coinmarketcap.com.
Plans for Scotland's first power station that captures carbon revealed
Energy giants SSE and Equinor are planning to build the first power station in Scotland to use carbon capture technology, reports my colleague Louise Moon.
The gas-fired power station at Peterhead, Aberdeenshire, could capture up to 1.5m tonnes of carbon dioxide from its emissions each year.
The development, which is still dependent on securing sufficient investment, is hoped to be ready by 2026.
SSE and Equinor are also developing two low-carbon power stations in North Lincolnshire, announced last month.
The Peterhead power station would achieve 15pc of the Government’s target to capture 10m tonnes of CO2 annually by 2030, according to major Scottish energy supplier SSE.
Read her full story here.
Apple faces London lawsuit over App store charges
Apple is facing a London lawsuit over claims it overcharged 20m UK customers for App store purchases.
The claimants said the 30pc fee Apple charges developers is “excessive” and “unlawful”.
“Apple is abusing its dominance in the app store market, which in turn impacts U.K. consumers,” Rachael Kent, the lead claimant who is also a digital-economy lecturer at King’s College London.
Apple described the lawsuit as "meritless".
The company said the 30pc fee is "very much in the mainstream of those charged by all other digital marketplaces" and added 84pc of apps on its App Store were free so developers pay no commission.
European stocks fall from all time highs
The FTSE 100 was not alone in responding to inflation concerns this morning. European stocks also fell from all time highs today, after inflation worries prompted investors to ditch expensive stocks leading to a technology-led selloff that started on Wall Street and gained pace in Asia.
The pan-European STOXX 600 index fell 1.9pc and was on track for its biggest percentage decline in three weeks. The main indexes in Frankfurt and Paris also lost close to 2pc.
Surging commodity prices 'canary in the coal mine for inflation'
AJ Bell investment director Russ Mould responds to growing inflation concerns today, as the FTSE remains down 2pc, trading at around 6,971 points.
The market just can’t shake the inflation fears which are clouding the recovery from Covid.
Some days investors appear relaxed about inflation risks and the possibility of central banks having to lift rates and withdraw stimulus. Today is not one of those days as, after last night’s big sell-off on Nasdaq, the FTSE 100 finds itself undoing much of its recent progress and trading below 7,000.
Surging commodity prices are acting as a canary in the coal mine for inflation – with the huge infrastructure and stimulus packages in the US a key contributing factor.
The valuations of the tech-based growth companies in the US are harder to justify in an inflationary and rising interest rate environment – where lower risk assets typically offer higher returns – hence the big fall in the Nasdaq yesterday.
However Mould sees a bright-spot in The Hut Group's (THG) surging shares, which remain up 10pc. He says:
THG is raising a large amount of money, some of which is coming from Japanese investor Softbank which has also struck a deal giving it the option to invest in THG’s Ingenuity division.
The Ingenuity platform is already used by Nestle, Nintendo and Homebase, and has been compared to Ocado’s out of the box web-based groceries solution for global supermarkets.
China's factory-gate prices fuel inflation concerns
Inflation concerns are weighing down European markets after China's factory-gate prices surged more than expected in April, seeing their fastest growth since 2017 and revealing cost pressures are growing.
Bloomberg has more details about why that's important:
China’s factory-gate prices surged more than expected in April, supported by gains in commodity prices and a low base of comparison from last year, while consumer inflation remained relatively subdued.
The producer price index (PPI) rose 6.8pc from a year earlier, its fastest pace since October 2017, following a 4.4pc gain in March, the National Bureau of Statistics said Tuesday. The median forecast was for a 6.5pc increase. Consumer prices increased 0.9pc on year, slightly below the 1pc gain projected by economists.
The commodities boom, fuelled by rising global demand and supply shortages, has stoked concerns about inflation around the world. With China the world’s biggest exporter, its rising PPI is another risk to global inflation as manufacturers start passing on higher prices to retailers.
High streets have 'long way to go on path to recovery'
Britons snapped up shoes, accessories and jewellery as non-essential retailers re-opened their doors last month, reports my colleague Louis Ashworth.
The categories all registered three-figure sales growth compared with the same month in 2019, according to the latest retail sales monitor from the British Retail Consortium and KPMG.
Total sales across the month were 7.3pc higher than two years before, though slightly weaker than the 8.3pc climb in March – driven in part by the timing of Easter.
Like-for-like sales were 46.3pc higher, a jump analysts attributed to partial reopenings that meant sales were concentrated into a smaller number of stores.
But Helen Dickinson, chief executive of the BRC, warned the situation remains fragile for retailers.
“While the boost in sales is positive as the industry continues to invest in safety and the online offer, high streets still have a long way to go on the path to recovery,” she said, noting that 530,000 retail workers are still on furlough.
Joules upgrades profit forecasts
Clothing company Joules has released an upbeat trading update, saying full-year revenue and profit before tax will exceed analyst expectations of £187m and £4m.
The company reported strong growth from e-commerce, with demand on Joules' websites growing around 50pc over the past 12 months, compared to the previous year.
Stores have performed ahead of expectations since lockdown restrictions lifted the company said, with sales for the four weeks since reopening ahead of the comparable period two years ago.
Recent acquisition, homeware brand Garden Trading was also performing ahead of expectations, with sales up 85pc against the previous year.
"Our digital proposition continues to go from strength to strength and we have been very pleased with the performance of our retail stores since their re-opening," said Nick Jones, CEO.
"Although the past 12 months have been incredibly challenging for the retail sector, I truly believe that Joules is now in an even stronger position than ever before. We have an increasingly digital-led business, more diversified income streams and a broader product proposition that is highly relevant to our customers' lifestyles."
Also leading losses today on the FTSE 100 is:
Renishaw is down 5.7pc, after the British engineering firm was struggling to attract takeover interest due to what is considered to be a high price tag.
British Airways parent, International Consolidated Airlines Group, was down 4.7pc after last week reporting a £1bn loss for the first three months of the year.
Scottish Mortgage Investment Trust, known for backing technology stocks, also dipped 4.5pc following tech sell-offs in the US and Asia overnight as fears of inflation mounted.
NatWest Group drops over 3pc after government sells another chunk
Shares in the NatWest Group have dropped more than 3pc, following news the government has sold off another chunk of its stake.
NatWest - formerly Royal Bank of Scotland (RBS) - has been majority owned by the taxpayer since it was bailed out for £45.8bn in 2008 at the height of the financial crisis.
But the latest stake sale takes the Government a step closer to ending its status as majority owner of the bank and its commitment to return NatWest to the private sector by 2025.
According to the latest estimates from the Office for Budget Responsibility, (OBR) of the £45.8bn spent to prop up the bank during the crisis, the taxpayer is expected to make a loss of £38.8bn.
More on this story here.
The Hut Group shares surge after Softbank backing
Shares in The Hut Group (THG) were up more than 17pc this morning after it was revealed yesterday that Japanese technology powerhouse Softbank is the cornerstone backer of a $1bn (£710m) fundraising intended to fuel the retailer's growth.
My colleauge, Laura Onita, has more on this story here.
FTSE dips below 7,000 points
The FTSE 100 was down 1.79pc this morning, after Asian tech stocks fell overnight and Wall Street also saw steep losses.
Investors are growing anxious about a surge in inflation that could mean central banks will withdraw their ultra-loose monetary policies earlier than forecast.
Investment fund plans to build 3,000 "smart" rental homes
An investment fund plans to build 3,000 "smart" homes for rent in Oxford and Cambridge aimed at families who cannot afford to buy houses, reports my colleague Ben Gartside.
Apache Capital Partners is launching Present Made, a £1.6bn build-to-rent venture targeting rental properties for single families in a move that has proved popular in the US.
Planning law and low margins mean similar ventures have struggled to take off in the UK. Only 12pc of build-to-rent properties are in the suburbs in Britain rather than city centres.
However, Savills said in a report in December that suburban build-to-rent was an attractive proposition for investors seeking secure, long-term income streams.
Richard Jackson, managing director and co-founder of Apache Capital and chief executive at Present Made, said:
Despite record numbers of families renting, no purpose-built single-family rental housing exists in the UK. Present Made will cater to this growing but under-served segment of the rental market by providing high quality smart homes designed and built specifically for rent.
Morrisons sales boost
Morrisons has revealed sales continued to grow at its supermarkets and through its wholesale business as the last lockdown benefited the group.
Total sales including fuel were up 5.3pc in the 14 weeks to May 9 compared with a year earlier, including 113pc growth in online sales.
However, bosses said the surge in Covid-19 cases earlier this year cost the supermarket £27m during the period to cover staff absences and extra store marshalls.
It added it now expects "another year of meaningful profit growth in 2022/23".
Treasury sells NatWest stake
The government has sold off another tranche of NatWest, it revealed this morning.
The Treasury said it had sold 580 million shares in NatWest at 190p each.
The total value of the sale was £1.1bn, and its shareholding has fallen from 59.8pc to 54.8pc. Read more here.
Good morning. The FTSE 100 is tipped to follow Asian and US markets by opening sharply lower this morning.
The benchmark index fell yesterday after the pound jumped following the results of last week's local elections.
5 things to start your day
1) SoftBank gives Hut Group £1.6bn boost: Boss Matt Moulding said fresh funds would allow him to 'invest aggressively' and unlock partnerships with other Softbank firms globally.
2) Doorstep lending reaches end of the road as Provident Financial pulls plug: The decision to walk away from the sector after 140 years collecting debts is part of a plan to become a "broader banking group".
3) Formula 1 design legend Gordon Murray reveals £250m expansion: The money will in part be used to create a division focused on design and engineering for environmentally friendly electric vehicles.
4) Plans for Scotland's first power station that captures carbon revealed: The gas-fired power station at Peterhead, Aberdeenshire, could capture up to 1.5m tonnes of carbon dioxide from its emissions each year.
5) Branson's Virgin Galactic faces new space flight delay: The firm is “currently re-evaluating launch timing” for its next test flight after discovering a possible “wear and tear” issue.
What happened overnight
Shares dropped in Asia on Tuesday after selling of several Big Tech companies pulled US benchmarks lower.
Japan's Nikkei 225 sank 2.8pc and Hong Kong lost 2.4pc early on Tuesday.
Despite reassurances from the Federal Reserve and a much weaker than expected US jobs reading last week, investors have refocused on the potential for surging prices to pressure central banks into tapering off on their massive stimulus and ultra-low interest rates, analysts said.
Markets are watching for US and Chinese consumer and producer prices due out this week.
Tokyo's Nikkei 225 slipped to 28,705.95 while the Hang Seng in Hong Kong was at 27,928.11. The Shanghai Composite index shed 0.3pc to 3,417.80. In Seoul, the Kospi dropped 1.3pc to 3,206.80.
Coming up today
Corporate: Morrisons (Trading statement)
Economics: Consumer and producer price index (China), economic sentiment (EU)