UK profit warnings higher than in 2008 crisis; oil rises as Middle East tensions escalate – business live

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.

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.

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.

Evergrande collapse: Hong Kong court orders liquidation of China property giant

Helen Davidson

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.

More here.

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.

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 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.

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.

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.

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.

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.

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