The chief executive of JP Morgan has warned of gathering “storm clouds” in the wake of the recent banking crisis, after the Wall Street giant was boosted by depositors pulling funds from smaller rivals.
Jamie Dimon said: “The storm clouds that we have been monitoring for the past year remain on the horizon, and the banking industry turmoil adds to these risks.”
It comes after the failure of Silicon Valley Bank (SVB) and the emergency rescue of Credit Suisse last month sent shockwaves through the global financial system.
However, JP Morgan benefited from the crisis, with deposits growing by $37bn (£29.7bn) during the first three months of the year amid a flight to safety.
The unexpected rise in deposits and a strong performance in its consumer division boosted the bank’s profits by 52pc in the first quarter to $12.6bn.
Analysts at Oppenheimer said that JP Morgan “solidly trounced” its own guidance and investor expectations in the first quarter. Shares in the bank were around 6pc higher in pre-market trading in New York.
Read the latest updates below.
03:09 PM
ChatGPT can beat the stock market, professor claims
Artificial intelligence (AI) chatbots may be able to correctly predict the movement of stock prices by instantly analysing news headlines, research has claimed.
My colleague Matthew Field has more:
Experts from the University of Florida analysed the accuracy of ChatGPT, an AI algorithm, at guessing whether a news item would send the price of a share higher or lower.
The researchers found the bot was, in many cases, better at gauging whether a story might move the price than other “sentiment analysis” tools used by financial analysts.
The research, which has not been peer reviewed, compared ChatGPT’s answers about various headlines to real share price movements from historical data.
The bot, which has been developed by Silicon Valley start-up OpenAI, appeared to show “statistically significant predictive power on daily stock market returns”.
Read the full story here
02:48 PM
City bosses accused of bonus ‘greenwashing’
City executives have been accused of greenwashing their bonuses by introducing sham renewable energy targets that are easy to hit, writes Simon Foy.
A report by PIRC, a shareholder advice company, found that large businesses are increasingly employing climate metrics in their pay schemes for executives – but the use of vague targets means that performance is not properly linked to earnings.
The report said that climate metrics for bosses are often bundled in as part of broader ethical investing targets, “making them of questionable value even if they were more challenging than is the case currently”.
It also warned that given the adoption of climate metrics that pay out too easily by boards, investors may become distracted by engaging over pay rather than focusing on transition plans and emissions reductions.
Conor Constable, stewardship manager at PIRC, said: “We question the view that a performance metric representing a fraction of the total opportunity available to executives is a credible tool to drive more desirable climate outputs. These metrics are neither easily measurable nor sensitive to the decision making of executives.
“If stakeholders are serious about holding decision makers accountable on issues such as climate change, it is necessary to pivot away from highly complex and opaque compensation structures to a renewed focus on the duties of directors and their legal obligation to be responsible for the impact of a company’s operations on the community and the environment.”
02:16 PM
Civil servants reject ‘insulting’ pay offer
Civil servants have rejected a government pay offer, raising the prospect of a further wave of strikes and dialling up the pressure on Rishi Sunak to resolve the dispute.
The Cabinet Office said government departments will be able to make average pay awards of 4.5pc, with additional flexibility to raise remuneration for the lowest-paid workers by 5pc.
But the PCS, which represents civil servants, issued a furious response over the below-inflation increase. The FDA, a second union representing managers, accused the government of shooting itself in the foot and threatened to ballot members over potential strike action.
PCS General Secretary Mark Serwotka said: “This insulting proposal will serve only to anger PCS members. We were given no opportunity to negotiate – it’s the most deplorable way to treat their own staff.”
More than 120,000 PCS members plan to strike on April 28, and the union is re-balloting its members to extend a mandate for industrial action beyond May.
Mr Serwotka said the government offer will “stiffen” the resolve of civil servants “and increase the likelihood of a new wave of sustained strike action.”
01:50 PM
US retail sales fall more than expected
US retail sales fell by more than expected in March as consumers cut back on purchases of cars and other big-ticket items, suggesting that the economy was losing steam at the end of the first quarter because of higher interest rates.
Retail sales dropped 1pc last month to $691.7bn, according to figures from the Commerce Department said on Friday. Data for February was revised up to show retail sales falling 0.2pc instead of 0.4pc as previously reported.
Retail sales are mostly goods, which are typically bought on credit, and are not adjusted for inflation. The second straight monthly decrease followed a sharp surge in January.
Economists said shifts in spending patterns at the end and start of the year as well as higher prices had made it harder to get a clear read of the data.
01:25 PM
Rail unions to be blocked from bringing country to a halt under pay deal
Militant rail strikers will be blocked from bringing the country to a halt under a new pay deal being considered by union chiefs.
Oliver Gill has the story:
New proposals put to the Rail, Maritime and Transport workers union (RMT) would see responsibility for industrial agreements devolved to local train operators and union branches.
The localised decision making means any future disputes would be held at a local rather than nationwide level, significantly reducing the possibility of a nationwide shutdown of the railways.
A series of national strikes has wreaked havoc over the last year in the worst campaign of industrial action since the privatisation of the railways in the 1990s under John Major.
Country wide strikes have hit the British economy and walkouts in other sectors continue to weigh on activity.
The new railway deal is being considered by the national executive of the RMT, raising fresh hopes of breaking the deadlock after a year-long dispute.
Read Ollie’s story here
12:39 PM
Wells Fargo cashes in on interest rate rises
It’s also a positive set of results from Wells Fargo, which saw its profit jump 32pc in the first quarter as it earned more from interest rate payments.
The bank, however, set aside $1.2bn in the quarter to cover for potential loan losses, compared to a release of $787m a year earlier.
The provision included a $643m rise in the allowance for credit losses reflecting an increase for commercial real estate loans, primarily office loans, as well as an increase for credit card and auto loans, Wells Fargo said.
Banks are building up rainy day funds as fears of an economic slowdown mount from the US Federal Reserve’s aggressive interest rates hikes to tame inflation, as well as the recent turmoil in the banking sector.
12:25 PM
JP Morgan profit surges despite banking crisis
JPMorgan’s profit climbed in the first quarter as higher interest rates boosted its consumer business in a period that saw two of the biggest banking failures in US history.
The bank’s profit increased 52pc to $12.6bn, or $4.10 per share, in the first three months of the year.
JPMorgan’s solid performance follows the high-profile shutdowns of three US lenders last month in the worst banking turmoil since the global financial crisis of 2008.
Regulators took control of Silicon Valley Bank and Signature Bank as depositors yanked their funds, marking the second and third largest collapses in US history.
12:08 PM
US futures slip ahead of bank results
Wall Street futures slipped this morning as investors await earnings from big US banks for signs of stress in the sector and the economy after the failure of two mid-sized lenders last month sparked concerns about a potential recession.
Shares of JPMorgan, Wells Fargo and Citigroup were muted in premarket trading ahead of their quarterly results.
The S&P 500 fell 0.2, while the Dow Jones and tech-heavy Nasdaq were both down 0.3pc.
Most Wall Street banks are likely to report lower quarterly earnings and face a dour outlook for the rest of the year, with last month’s regional banking crisis and a slowing economy expected to hurt profitability.
11:49 AM
Pound edges back from 10-month high
The pound has edged lower this morning but is still close to a 10-month high against the dollar, supported by improving appetite for risk ahead of a big week of data that could provide clues on the outlook for monetary policy.
The pound briefly hit its highest level since June 2022 at $1.254 earlier today before easing back. It was last down 0.1pc at $1.251.
“The catalyst is positive global risk sentiment and broad-based dollar weakness as markets position for a Fed pause,” said George Vessey, FX and macro strategist at Convera.
Inflation data released next Wednesday will be closely watched for clues on the outlook for monetary policy, while labour market data, retail sales and the flash PMI could also drive movement in the pound.
11:28 AM
Dr Martens cuts profit forecast amid warehouse woes
Bootmaker Dr Martens has seen its sales step up but cut its profit expectations after forking out to tackle problems at its Los Angeles warehouse.
The shoe brand downgraded its outlook after taking about a £15m hit from supply delays at the distribution centre.
It now expects to make about £245m in earnings this financial year, which ended on March 31, due to higher costs and lower wholesale revenue.
But the British business recorded a 10pc jump in revenues over the full year with particularly strong consumer sales in Europe, the Middle East and Africa.
Direct to consumer retail sales – those from its own stores – surged by more than a third in the fourth quarter of its financial year.
Yet sales in America have remained “soft” and wholesale revenue was down, which helped drag on total revenues.
The company was plagued by operational problems at its warehouse earlier this year, with stock building up after other US wholesalers used it to store some of their shipments.
10:58 AM
AO World raises profit forecast for fourth time
AO World has lifted its profit outlook again as it continued to benefit from recent cost-cutting efforts.
The online white goods retailer saw shares lift by more than a tenth in early trading after the fourth upgrade since last summer.
However, the recent improvements in outlook followed a sharp slump in its share price from the start of 2021 as pandemic-boosted growth slowed down.
AO said it has now witnessed “positive traction” from initiatives to reduce costs and improve margins which it launched last year to drive its turnaround.
The retailer added that worries over a negative effect from continued global economic uncertainty and the tough consumer backdrop “have not materialised to the extent envisaged”.
As a result, the group now expects to reach the top end of previous profit guidance, while revenues are due to have hit £1.1bn for the year to March.
10:31 AM
How video games became the greatest intelligence threat to the West
As tales of espionage go, the story of how 300 highly classified US intelligence documents were discovered being freely passed around on a chat app used by online gamers may appear wholly implausible.
Yet the leak, dubbed by some as the Pentagon Files, shines a spotlight on the real threat that the multi-billion pound online games industry poses to Western countries’ military and political security.
Gareth Corfield reports on how gaming poses a threat to our security. Read his story here.
10:05 AM
Germany expected to avoid recession
Germany is expected to narrowly escape recession and post modest growth in the first quarter of the year, according to an economy ministry report published today.
“A technical recession of two negative quarters in a row appears to have been averted,” the ministry said.
Current forecasts also predict a slight year-on-year increase in gross domestic product (GDP) for 2023 as a whole, it added. For 2023 as a whole, leading economic institutes expect the German economy to grow 0.3pc.
Economic indicators point to a noticeable pickup in value added in the first quarter, with industrial and construction output driving growth, benefiting from a further easing of material bottlenecks, significantly declining energy prices and favourable weather conditions, the report said.
“Consumer sentiment is expected to continue its recovery in the coming months, although inflation-related losses in purchasing power continue to weigh on the economy,” the report said.
09:31 AM
Britain’s heat pump rollout branded an ‘embarrassment’
Britain’s flagship heat pump scheme has been branded an “embarrassment” after badly missing its target of 30,000 annual installations and spending just 40pc of its budget.
Matt Oliver reports:
Fewer than 10,000 heat pumps were installed in the first year of the grant programme, which gives households money to pay for them as part of net zero efforts to wean Britain off gas.
Mike Foster, chief executive of the Energy and Utilities Alliance trade body, which represents boiler manufacturers, said: “It takes a certain type of genius to fail to give away £150m of taxpayers’ money and this wretched scheme looks like it has done just that.
“When will the Government actually listen to the people, the majority of whom simply cannot afford a heat pump, subsidised or not?
“The scheme is simply a taxpayer handout to those who don’t need it. It does little for carbon saving compared to investment on insulation. It does not help people keep bills low. It takes from the poor to give to the wealthy and it is an embarrassment of a policy.”
Read Matt’s full story here
09:15 AM
Tesla to steer clear of Shanghai automotive show
Tesla will not occupy a booth at China’s largest annual automotive show, which is being held next week in Shanghai, according to plans published by the event’s organisers.
The financial hub is set to host Auto Shanghai between April 18-27. It is Asia’s largest auto show where brands from BYD to Volkswagen are expected to show off their latest models and technologies.
Tesla, which has a large electric vehicle factory in Shanghai, has attended the show in past years. The event was cancelled last year due to China’s Covid curbs.
In 2021, the company’s stage at the auto show made headlines when an unhappy customer clambered atop a Tesla being displayed to protest its handling of her complaints about malfunctioning brakes.
The incident led to fierce criticism of Tesla in state media and the company eventually issued a rare apology for not addressing customer complaints in a timely manner.
09:02 AM
Hermes sales jump on strong demand from China
Hermes has reported a jump in quarterly sales as the maker of the luxurious Kelly bag cashed in on strong demand from Chinese customers.
Revenue rose 23pc in the first quarter, outstripping analysts’ expectations. Shares rose 2pc in early trading in Paris.
Chief financial officer Eric du Halgouet said: “After a very good fourth quarter, we had robust traffic, even slightly higher in early 2023”.
The company said sales during the Chinese New Year were “very good.”
The strong first-quarter results come in the wake of a stellar fourth-quarter performance that was better than most of the company’s rivals.
Hermes has succeeded in growing sales in China at a time rivals such as Gucci were still suffering from Covid-related disruptions.
Hermes’ sales for Asia Pacific excluding Japan were up 22.5pc for the first three months. The luxury label, known for its silk carre scarves, also saw 19pc growth in the Americas, confounded concerns of a potential growth slowdown.
08:50 AM
FTSE risers and fallers
The FTSE 100 is on track for its fourth straight weekly gain, boosted pharmaceutical stocks and consumer staples.
The blue-chip index gained 0.2pc in early trading, while the domestically-focused FTSE 250 was up 0.8pc.
Healthcare stocks added 0.8pc, while consumer staples like British American Tobacco and Diageo pushed higher.
Dechra was by far the biggest rise as investors welcomed talks over a £4.6bn takeover by EQT.
Gains in copper prices helped industrial miners rise 0.4pc.
It’s looking less cheery for Superdry, though, which tumbled 16pc after the struggling fashion brand said a potential equity raise of up to 20pc was among funding options being considered.
08:37 AM
Dechra Pharmaceuticals surges on £4.6bn takeover talks
Veterinary pharmaceuticals giant Dechra is leading shares higher this morning after revealing it’s in talks over a potential £4.6bn takeover.
Dechra said it was in talks over a possible bid from Swedish private equity firm EQT in a deal backed by the Abu Dhabi Investment Authority.
Shares surged 37pc in early trading on the FTSE 250.
EQT now has until 5pm on May 11 to make a bid for the Cheshire-based company.
08:31 AM
RMT considers new pay offer
Rail union the RMT has said it’s considering a new pay offer, raising hopes of an end to disruptive strike action.
An RMT spokesperson said: “We have received an updated offer from the RDG and our NEC is considering its contents. No decision on any next steps has been taken.”
The union called off strikes planned for March 30 and April 1 amid a long-running dispute over pay, jobs and conditions for staff working across 14 rail operators.
Union members at Network Rail have voted to accept a revised pay offer in a similar dispute.
However, hundreds of cleaners working on trains across the country are walking out today and tomorrow.
08:24 AM
Gambling crackdown dents 888
Around £1 in every £6 made by betting giant 888 online was wiped out last year amid a crackdown on problem gambling.
The company, which bought William Hill last year, reported a 3pc fall in total revenue to £1.9bn in 2022. Online revenue slumped 15pc, “driven by proactive investment in enhanced player safety measures” in the UK, as well as the closure of its business in the Netherlands.
However, the online hit was largely offset by improved performance in its retail shops. The deal to buy William Hill’s non-US operations included around 1,400 betting shops in Britain.
888 reported a £115.7m pre-tax loss due to one-off costs, including some of those linked to the nearly £2bn acquisition.
But when stripping out one-off charges, 888 said it had made an adjusted pre-tax profit of £80.5m, down 10pc compared to the year before due to increased interest costs that the business had taken on after buying William Hill.
In January, the company said that it had investigated shortfalls in how it treated Middle Eastern VIP customers. It expects to take a hit of around £25m to £30m to revenue this year as a result.
Executive chairman Lord Mendelsohn said:
The group’s financial performance in the period primarily reflected the extensive actions being taken to drive higher standards of player protection.
While recent compliance issues in the Middle East were very disappointing, they have underlined the importance of our enhanced and proactive risk management framework.
08:12 AM
Twitter to let users put up a paywall
Here’s the tweet from Elon Musk announcing Twitter’s new paywall option:
08:01 AM
FTSE 100 opens higher
The FTSE 100 has nudged higher at the open as markets look ahead to US retail sales and bank earnings.
The blue-chip index gained 0.2pc as markets opened to 7,858 points.
07:55 AM
YouGov taps former Meta executive as new boss
YouGov has appointed former Meta executive Steve Hatch as its new chief executive.
The London-listed polling company said Mr Hatch will take the top job at the start of August. It comes six months after the company said founder and chief executive Stephen Shakespeare will take up the role of non-executive chairman.
Mr Hatch has served as Meta’s head of northern European operations since 2016. Prior to this he spent 15 years at advertising giant WPP.
The leadership overhaul will also see Roger Parry step down as non-executive chairman, while Nick Prettejohn will take over as senior independent director.
Stephan Shakespeare said:
It is a pleasure to welcome Steve to YouGov. I am confident that I will be handing over the reins with YouGov in its strongest ever position and with a clear strategy to realising our vision of building the world’s leading marketing data and research platform.
It will be an honour to step into the role of Non-Executive Chair in August and continue my journey with the Company. I am hugely excited for what the future holds for YouGov.
07:47 AM
Superdry to cut £35m in costs as sales dry up
Fashion chain Superdry has unveiled plans to cut costs by more than £35m as it slashed its sales outlook on the back on weak consumer spending.
The retailer blamed issues “outside the company’s control” – including cost-of-living pressures and poor weather weakening demand for spring and summer collections – for a downturn in sales in February and March.
Superdry said it’s decided to withdraw its previous profit guidance, which stated it would broadly break even in the 2023 financial year.
The company said it plans to make the cost savings through “estate optimisation”, suggesting it will close stores. It also plans to reduce its clothing ranges.
Julian Dunkerton, Superdry’s founder and chief executive, said:
The Superdry brand continues to evolve but there is no doubt that the market conditions we face are challenging, compounded by the issues we have previously disclosed and are working to address in wholesale.
As a result, while we continue to deliver like-for-like growth in retail sales, we need to ensure our business is in the right shape to navigate these difficult times, which is why we are looking hard at our cost base.
My belief in the Superdry brand is stronger than ever which is why I’m prepared to provide material support to any equity raise undertaken.
I am confident that we have the right plan and, working together as a team, the business will emerge from the current turbulence stronger than ever.
07:37 AM
Elon Musk signs deal to let people trade stocks on Twitter
Elon Musk has inked a deal to allow users to trade stocks and cryptocurrencies on Twitter.
The social media firm has launched a partnership with eToro that will enable users to view market charts on an expanded range of financial instruments and buy and sell stocks and other assets, CNBC reported.
Twitter users can already see some real-time financial data on indices such as the S&P 500 and stocks including Tesla, using the platforms so-called “cashtags” feature.
But the new partnership will extend the service, while users will also be able to click through to eToro’s site.
It marks a rare business deal for Mr Musk since his troubled $44bn takeover of Twitter last year.
07:24 AM
Good morning
5 things to start your day
1) Britain’s heat pump rollout branded an ‘embarrassment’ | Flagship net zero scheme flops as installations fall far short of target
2) Pensioners should get better returns on their investment, Hunt warns | Britain’s diffuse and risk averse pensions industry may be holding back growth and stifling returns
3) EY’s UK chief warns of wave of resignations after split plan falls apart | Firm to shift focus toward addressing inefficiencies built up in advance of planned split
4) We will defeat strikers even if it means short-term pain, vows Hunt | Government prepares to face down pay demands to combat inflation
5) Holiday landlords fear fees of up to £1,000 a year under Gove’s ‘anti-business’ crackdown | Proposed changes draw criticism from former housing secretary and industry leaders
What happened overnight
Wall Street stocks advanced as new inflation data showed an unexpected reduction in producer prices and new claims for unemployment benefits, signalling a near-end to the Federal Reserve’s hawkish monetary stance.
The Dow Jones Industrial Average ended 1.1pc higher at 34,029.69, while the broad-based S&P 500 jumped 1.3pc to 4,146.22. The tech-heavy Nasdaq Composite surged 2.0pc to 12,166.27.
The rally came ahead of the release of earnings reports from large Wall Street banks on Friday, which are expected to face heavy scrutiny following the collapse of Silicon Valley Bank and other lenders last month.
Treasury yields fell immediately after Thursday’s weaker-than-expected inflation reports, but later reversed these losses. The yield on the benchmark 10-year Treasury rose to 3.44pc, while the rate-sensitive two-year Treasury held steady at 3.97pc.
Source: https://finance.yahoo.com/news/amazon-launches-chatgpt-rival-bedrock-062432998.html