Closing post
Time to recap….
Shares in Boeing have tumbled 9% at the opening bell on Wall Street, as the airline manufacturer is shaken by the fallout from in-flight blowout on a 737 Max last Friday.
Fuselage manufacturer Spirit AeroSystems dropped 12% in early trading, but have now recovered to a loss of 8%.
Investors gave their first reaction to the news that the plug door on an Alaska Airways flight tore away from the plane soon after it took off from Portland airport for Ontario, California.
The door plug is a panel fitted to replace an emergency door in some versions of the 737 Max 9 plane. US regulators ordered the temporary grounding of all Max 9 models with door plugs pending inspections after Friday’s incident.
In other news…
The oil price has fallen almost 4% today after Saudi Arabia cut the cost of its crude exports.
The move is being interpreted as a sign that demand is easing, and that Opec+’s voluntary output cuts are not preventing gobal supplies building up.
Channel 4’s chief executive has confirmed to its 1,200 staff that a round of major job cuts is looming, as the broadcaster seeks to hasten its shift to streaming amid the worst TV advertising downturn in 15 years.
Gambling group Bet365 is facing criticism after paying its billionaire boss more than £270m last year, even though it made a loss.
Three UK energy companies have been given permission to begin force-fitting prepayment meters in customers’ homes again if they adhere to strict new rules, ending a near year-long moratorium on the practice.
Industry bosses across UK manufacturing are more confident about the sector’s prospects, but also fear that “headwinds of sustained economic challenges” still remain.
A Russian oligarch will this week accuse Sotheby’s of helping an art dealer to trick him into overpaying for art masterpieces including Leonardo da Vinci’s Salvator Mundi, which went on to become the most expensive artwork ever sold.
U.S. consumers’ inflation expectations have dropped to their lowest level in almost three years – news which may cheer America’s central bankers.
The New York Federal Reserve has reported that inflation one year from now is expected to be at 3%, the lowest reading since January 2021.
That’s down on a forecast of 3.4% in November.
Looking further ahead, inflation in three years time is forecast to be 2.6%, compared to 3% in November, while price pressures five years ahead were at 2.5% versus 2.7% in November.
German farmers block roads with tractors in subsidy row
Over in Germany, farmers kicked off a week of nationwide protests against subsidy cuts today, blocking roads with tractors.
The demonstrations pile misery on Chancellor Olaf Scholz’s coalition as it struggles to fix a budget mess and contain rising far-right forces.
Reuters has the details::
Convoys of tractors and trucks gathered on roads in sub-zero temperatures in nearly all 16 federal states, while protesters clashed with police and leading politicians warned that the unrest could be co-opted by extremists.
The protests have forced Scholz’s unpopular government into a tricky balancing act, trying to keep a lid on the unrest while sticking to fiscal discipline after a constitutional
court ruling in November threw its spending plans into disarray.“No beer without farmers,” read one protest banner, while another tractor had a poster from the far-right Alternative for Germany (AfD) party that read “Our farmers come first.”
Vice Chancellor Robert Habeck, whose return from holiday last week was disrupted by furious farmers trying to storm the ferry he was on, warned in a video message on Monday that farmers’ right to protest could be exploited by fringe groups.
“Calls are circulating with coup fantasies, extremist groups are forming and ethnic-nationalist symbols are being openly displayed,” said Habeck.
Farmers called the protests in response to the government’s decision to phase out a tax break on agricultural diesel as it tries to bring its 2024 budget over the finish line while complying with the constitutional court ruling.
“For a farm like mine, I would lose about 10,000 euros,” said a farmer from Bavaria, Ralf Huber. “For our businesses, it’s a catastrophe.”
Bonds issued by Boeing and also by Spirit AeroSystem are both falling in value today.
Bloomberg has the details:
The spread on Boeing’s 5.15% notes due 2030 widened 18 basis points to 113 basis points as of 9:53 a.m. New York time, on track for the biggest one-day increase since Jan. 13, 2023, according to Trace bond trading data.
The cost to protect the company’s debt against default for five years in the credit derivatives market jumped 16 basis points to 82 basis points, according to ICE Data Services.
Spirit AeroSystems — which makes the fuselage for the 737 — also saw its bonds weaken and was one the biggest losers in the US high-yield secondary market Monday morning. Its 4.6% note due 2028 fell about 4.6 cents on the dollar to 83 cents, the biggest drop since April.
Updated
Dow Jones industrial average pulled down by Boeing
Boeing (-9%) are the largest faller on the Dow Jones industrial average index.
They’re followed by energy producer Chevron (-2.4%), which has been hit by the drop in the oil price today after Saudi Arabia cut the price of its crude exports.
Tech firms are rallying, though, with both Intel and Salesforce gaining 1.9%.
But overall, the Dow Jones industrial average has lost 193 points or 0.5%, to 37,272 points in early trading.
Dow opens lower as Boeing weighs; megacaps lift S&P 500, Nasdaqhttps://t.co/rZAeZ3FdjU
— ETMarkets (@ETMarkets) January 8, 2024
Boeing shares fall 9% at the open
Shares in Boeing have fallen by 9% at the start of trading in New York.
Wall Street traders are clearly alarmed by last Friday’s mid-air accident on an Alaska Airlines aircraft, in which a door plug on a Boeing 737 Max 9 blew out during the flight.
Spirit Aerosystems, which manufacturers fuselages for 737 Max, is also under pressures – its shares are down over 12% in early trading.
Alaska Airlines’ shares are down 5.6%. Alaska cancelled hundreds of 737 Max 9 flights last weekend after the accident.
As covered earlier, the US Federal Aviation Administration regulator ordered the temporary grounding of some 737 Max 9s operated by US airlines or in US territory last weekend, while it investigates what went wrong.
Updated
In the retail sector, clothing retailer Abercrombie & Fitch has raised its forecast for fourth-quarter and annual net sales, after seeing strong demand for its apparel brands.
CEO Fran Horowitz says:
“The Abercrombie & Fitch women’s business is expected to achieve its highest-ever fourth quarter sales complemented by an acceleration in men’s growth.”
Athletic clothing maker Lululemon Athletica has also raised its sales forecast for the Christmas period today.
With under 25 minutes to go until Wall Street trading begins, Boeing’s shares are on track to fall almost 8% to $230.
Back in Europe, investor morale has picked up.
Sentix’s latest investor confidence index for the eurozone has risen to -15.8 this month, up from December’s -16.8.
Sentix cautioned, though, that this increase is “is unlikely to be a turnaround”, citing the downturn in Europe’s largest economy.
It says:
This is partly due to Germany, whose economy is still in recession and therefore in crisis.
Investor morale in the euro zone improved for the third consecutive month in January to its highest level since May, but a turnaround for the 20-country currency bloc is not a done deal, the latest Sentix's index shows today. https://t.co/TdcGazThwY
— RTÉ Business (@RTEbusiness) January 8, 2024
Billionaire Bet365 boss's £270m pay packet is 'neither fair or proportionate'
The billionaire boss of Bet365 is facing some criticism after being paid more than £270m last year.
Denise Coates, who set up Bet365 in a portable building in Stoke-on-Trent in 2000, received the bumper payout despite the firm making a £60m loss in the last financial year.
Coates was paid a salary of £220.6m in the year to 26 March 2023, a £7m increase on her pay the year before, according to Bet365’s latest accounts filed at Companies House on Monday. As its controlling shareholder she is also entitled to at least 50% of the £100m dividend that was also paid for the year.
The High Pay Centre, a thinktank, argue that such a pay package is neither fair or proportionate.
Luke Hildyard, executive director of the High Pay Centre, says:
“People deserve to be rewarded for innovation and success but there’s a question of what’s sensible and proportionate. Nobody becomes a multi-billionaire in isolation from wider society. In this case, the wealth depends on money coming out of gamblers’ pockets, the efforts of thousands of staff, plus wider factors like people having some disposable income, a secure and reliable internet network or all the infrastructure that goes into staging sports events.
Ultimately, Britain’s prosperity depends on how the wealth our economy generates is shared. Pouring hundreds of millions of pounds more on top of billionaire fortunes every year isn’t a good way to maximise living standards and it over-values the contribution that the super-rich have made.”
Elsewhere in the markets, the oil price has extended its earlier falls (see opening post) after Saudi Arabia cut the price of its crude exports.
Brent crude is now down 2.5% at $76.77 per barrel, towards the six-month low of $72.29 touched last month.
Saudi’s price cuts may be a sign that demand is weakening, or that strong supplies from rival producers such as the US could create a production glut.
Bjarne Schieldrop, chief commodity analyst at SEB, says:
This is probably not a signal that Saudi Arabia is suddenly shifting strategy from ‘price’ to ‘volume’.
But, it could be taken as a warning that Saudi Arabia won’t be the only oil producing nation to travel this road alone forever.
If OPEC+ requires additional cuts to sustain the oil price within the USD 80-90/b range, and the organisation hesitates to support these necessary cuts, the likelihood of Saudi Arabia implementing further unilateral cuts is uncertain.
Boeing shares slide 7.8% in premarket trading after FAA grounds dozens of 737 Max 9s#NiftyBank #Nifty50 #banknifty #niftybank #Dow #SP500 #Nasdaq #stockmarket #stocks #zerodha #Bitcoin pic.twitter.com/Cq3FdfICdk
— Nifty speak loud (@Niftyspeakloud) January 8, 2024
Stock index futures signal a lower Monday opening after the weekly winning streak ends.
— Nifty speak loud (@Niftyspeakloud) January 8, 2024
Dow futures down 0.43%, impacted by Boeing's 737 Max 9 grounding.
S&P futures down 0.08%, Nasdaq 100 futures down 0.02%.
#Dow #SP500 #Nasdaq #stockmarket #stocks #zerodha #Bitcoin pic.twitter.com/i6Xky0rmEu
In London, shares in engineering firm Senior, which produces components and systems for aeroplane manufacturers including Boeing, have dropped 4.7%.
That puts Senior at the bottom of the FTSE 250, the index of medium-sized firms listed on the UK market.
It indicates the City suspects demand for Boeing jets could be hit by last Friday’s blowout of the door plug on Alaska Airlines’ 737 Max, leading to fewer orders for its suppliers.
Boeing is likely to weigh on the Dow Jones Industrial Average share index today.
The Dow is currently on track to drop by 152 points, or 0.4%, according to the futures markets. Boeing is one of the 30 members of the Dow.
US traders are also jittery about how soon the Federal Reserve will feel able to cut interest rates, after a stronger-than-expected American jobs report last Friday.
Ahead of the opening bell, US stock markets experienced a decline, led by a significant drop in Boeing shares due to the grounding of over 170 jets after an in-flight incident. In premarket activity, the Dow Jones Industrial Average saw a decrease of 0.6%, while both the S&P 500… https://t.co/nOIPObSliG pic.twitter.com/aFFhol65Q3
— Share_Talk ™ (@Share_Talk) January 8, 2024
Updated
Boeing CEO’s comeback plan takes a hit
The Alaska Air blowout is another blow to the efforts of Boeing CEO Dave Calhoun to stabilize the company after half a decade of upheaval, says Bloomberg.
The incident comes just a few days into a new year which Calhoun heralded as crucial to a turnaround.
Bloomberg reports:
Boeing is still feeling the reverberations of two deadly 737 Max crashes almost five years ago that shook confidence in the company. Now Boeing’s fraught relationship with Spirit, its biggest supplier, stands to face fresh scrutiny.
As the crisis in confidence deepened over the weekend, Calhoun canceled Boeing’s annual senior leadership retreat, which was to have begun Monday outside of San Diego. And he summoned employees to an all-hands meeting to be webcast from Boeing’s 737 factory on Tuesday, where he and other senior executives will address the near-tragedy and reinforce Boeing’s commitment to safety, quality, integrity and transparency.
While Boeing has made progress in recent years, “situations like this are a reminder that we must remain focused on continuing to improve every day,” Calhoun told employees in a company-wide message on Sunday.
Boeing CEO’s Comeback Plan for 2024 Takes a Hit Five Days In https://t.co/5g6M66Zcez
— Eric M. Johnson (@byEricMJohnson) January 8, 2024
Updated
Boeing’s reputation has been “shattered” after the incident last Friday involving one of its 737 Max planes flown by Alaska Airlines, says AJ Bell investment director Russ Mould.
He explains:
It is the latest in a string of problems for the company, which include the grounding of 737 Max plans in 2019 after two crashes and subsequent delivery delays and production issues.
Safety is of paramount importance in the aviation sector and airlines using 737 Max planes will be thinking long and hard about their future aircraft requirements and how Boeing might play a smaller role, or none at all. That might explain why Airbus shares jumped on Monday as investors are betting it could take even more market share from Boeing.
There is no room for error building planes and cutting corners in the production stage could have catastrophic consequences. There are naturally questions being asked about the quality checks and whether Boeing is trying to do too much too fast.
Boeing’s management will be under considerable pressure from the regulators and customers to explain what’s going on, which means considerable headwinds ahead for the business. It’s no wonder investors have raced to sell the shares as the risks to the investment case have just shot up.”
Boeing shares listed in Frankfurt have already dropped sharply, down by 7.5% on the German exchange.
Its European aerospace rival, Airbus, are up 1.8% this morning.
Why European planes haven't been grounded
European safety regulators yesterday followed the US FAA in taking action against the Boeing 737 Max 9, after the Alaska Airlines panel blowout.
However, while the European Union Aviation Safety Agency has formally adopted the FAA directive, it believes no operators in EASA member states are actually affected.
EASA’s understanding is that no European airline operate the aircraft in the “relevant configuration”, in which the mid-cabin exit is replaced by a ”plug-in panel”.
EASA explains:
This configuration is typically adopted by airlines flying lower-density operations (with lower passenger capacity) where this additional exit is not required to meet evacuation safety requirements.
The 737-9 aircraft operating in Europe do not have this configuration and are therefore not grounded by the EAD and can continue to operate normally.
Updated
The UK Civil Aviation Authority said on Saturday there are no UK-registered planes affected.
The CAA will require any 737 MAX 9 operators entering its airspace to comply with the FAA directive.
Fuselage maker Spirit AeroSystems shares tumble 16%
Shares in aerospace supplier Spirit AeroSystems, which builds the fuselage for Boeing’s 737 Max, have fallen by over 16% in pre-market trading.
Reuters has reported that Spirit manufactured and initially installed the fuselage part on the Boeing 737 Max 9 jet that suffered a blowout on Friday, but that Boeing also has a key role in the usual completion process.
Because of a “complex, two-tier installation process”, investigators are expected to examine whether any flaws occurred at Spirit’s giant fuselage plant in Wichita, Kansas, or at the Boeing factory outside Seattle, sources said.
Updated
Some airline shares are also weakening following last weekend’s in-flight blowout at a 737 Max 9 plane.
United Airlines are down 3% in premarket trading, while Alaska Airlines are down 4.6%.
Both airlines grounded all of their Boeing 737 Max 9 jetliners last weekend as they waited to be told how to inspect the planes to prevent another in-flight blowout like the one that damaged an Alaska jet.
Alaska cancelled more than one-fifth of its flights on Sunday, while United scrubbed nearly 200 flights, according to Marketwatch.
Boeing shares fall 8% in premarket trading after 737 Max 9 grounding
Shares in Boeing are set to fall sharply when Wall Street opens, after US federal regulators temporarily grounded some 737 Max planes.
Boeing’s shares have dropped by over 8% in pre-market trading, falling from $249 to $228.50.
Boeing shares drop 8% in premarket following midair window panel blowout https://t.co/19JJ4qBA1b
— MarketWatch (@MarketWatch) January 8, 2024
Investors are reacting to the news that an Alaska Airlines Boeing 737 Max 9 aircraft suffered a blowout that left a gaping hole in the side of the fuselage.
The plug door tore off the left side of the jet on Friday after it took off at Portland, Oregon, en route to Ontario, California, depressurising the plane and forcing the pilots to turn back and land.
The chunk of fuselage has now been found in a teacher’s back yard, the US’s transportation safety board (NTSB) reported.
On Saturday, the US Federal Aviation Administration ordered the temporary grounding of certain Boeing 737 MAX 9 aircraft operated by U.S. airlines or in U.S. territory.
FAA Administrator Mike Whitaker said:
“The FAA is requiring immediate inspections of certain Boeing 737 MAX 9 planes before they can return to flight.
Safety will continue to drive our decision-making as we assist the NTSB’s investigation into Alaska Airlines Flight 1282.”
The FAA’s ruling means 171 Boeing 737 Max 9 aircraft are temporarily grounded.
No one was seriously injured during Friday’s incident, after which 171 passengers and six crew landed safely. But the incident has raised fresh safety concerns about Boeing planes.
Five years ago, two fatal crashes in 2018 and 2019 involving its Boeing 737 Max 8 aircraft left 346 people dead.
Updated
Three energy firms allowed to force-fit prepayment meters again
UK energy regulator Ofgem has announced that three suppliers are now allowed to install prepayment meters in people’s homes again without their permission, to recover unpaid debts.
Scottish Power, EDF and Octopus have all been given the green light to install prepayment meters with a warrant, or to switch a smart meter to prepayment meter mode.
This practice was suspended last year, after an investigation by the Times found that debt agents working for British Gas had ignored signs of vulnerability and broken into customers’ homes to force fit pay-as-you-go meters.
Scottish Power, EDF and Octopus have met Ofgem’s conditions to restart installing prepayment meters in the homes of customers who have fallen behind on their bills.
But they must make at least 10 attempts to contact a customer before a prepayment meter is installed, and carry out a site welfare visit first.
They are also banned from installing pay-as-you-go meters in homes where an occupant is 75 or older, or where there are children under 2, or where there are residents with severe health issues, or where no-one has the physical and mental capacity to top up the meter.
Channel 4 confirms round of major job cuts is looming
Newsflash: Channel 4’s chief executive has confirmed to its 1,200 staff that a round of major job cuts is looming, as the broadcaster seeks to hasten its shift to streaming amid the worst TV advertising downturn in 15 years.
Alex Mahon told the workforce in an internal email on Monday morning that the broadcaster needed to “accelerate” plans to become a “genuinely digital-first public service broadcaster” following the worst slump in traditional TV advertising since the financial crisis in 2008.
“Given all the market change and complexity that we need to adapt to, there will be an impact on jobs at Channel 4,” wrote Mahon, the day after the Guardian revealed the broadcaster was planning its biggest cuts to jobs in more than 15 years.
Channel 4 plans deepest job cuts in over 15 years after TV ad slump
In the media industry, Channel 4 is drawing up plans to cut potentially as many as 200 jobs in its biggest round of layoffs in more than 15 years.
The cuts, reported by my colleague Mark Sweney this morning, come as Channel 4 seeks to make savings to weather the worst TV advertising downturn since 2008.
The broadcaster, which has undergone a rapid expansion in recent years with staff numbers swelling to a record level of more than 1,200, aims to dramatically reduce a wage bill that now stands at more than £108m a year.
It said the restructure, which management began working on late last year, was intended to focus on accelerating its digital streaming strategy while limiting the extent to which it must make deep cuts to its £700m-plus content budget.
The London stock market has opened in the red, with the FTSE 100 index down 20 points in early trading.
Shell is leading the fallers, down 2.3%, after it reported impairment charges of up to $4.5bn this morning.
BP are also in the fallers, down 1.1%, following the drop in the oil price.
Shell flags Q4 writedown of up to $4.5bn
Elsewhere in the energy sector, Shell is taking impairment charges of up to $4.5bn on its assets.
Shell reported this morning that it will cut the value of its assets by between $2.5bn and $4.5bn in the last quarter.
These impairments are partly related to Shell’s Singapore refining and chemicals hub, which it is looking to sell, but are also due to “macro & external developments”, Shell adds.
But Shell also predicted that earnings at its integrated gas division are likely to be significantly higher in the last quarter of 2023 than in the third quarter.
The announcement comes ahead of Shell’s fourth-quarter earnings, due on 1 February.
Victoria Scholar, head of investment at interactive investor, says,
“Shell reported a mixed trading statement – it is expecting quarterly integrated gas trading to be significantly higher than the third quarter thanks to seasonal factors and increased optimisation opportunities.
However, it said profits from oil and chemicals would be lower resulting in a loss in that division. It is also facing an impairment charge of $2.5bn-$4.5bn in the fourth quarter, relating to its Singapore refining and chemicals hub.
Shell has been facing some price target cuts from the analyst community so far this year including from Morgan Stanley and Bernstein ahead of today’s update. Over the last six months, shares in Shell are up by around 10% thanks to higher underlying oil prices since last summer and better-than-expected third quarter earnings. But strong supply in the United States and a sluggish demand outlook could keep a lid of oil price gains this year. However offsetting this are Opec+ supply cuts and possible interest rate cuts this year and the potential for China’s economy to improve.
Updated
Wariness has returned to the financial markets at the start of the week, reports Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Investors are assessing the risks of geopolitical conflict, she says, amid fresh signs of global economic slowdown and uncertainty about the trajectory of inflation.
And on oil, she says:
Oil prices have been fluctuating, as fresh concerns about the Middle East have been brewing, amid worries about supply issues in the region, particularly given the attacks on tankers in the Red Sea.
For now, focus has switched to signs of a dwindling appetite for oil globally, which have pushed down a barrel of Brent Crude to below $78. Saudi Arabia has flagged that it is seeing softening demand, prompting it to cut crude prices for buyers in all regions in February.
Updated
Introduction: Oil dips as Saudi Arabia cuts Feb Arab Light crude price
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Oil is weakening this morning after Saudi Arabia cut the prices charged to its customers.
The Middle Eastern energy powerhouse’s producer, Saudi Aramco, lowered its flagship Arab Light price to Asia by $2 per barrel, to $1.50 a barrel above the benchmark.
That’s a larger reduction than many in the industry expected, and is the biggest price cut in 13 months.
It lowers the February official selling price (OSP) of Saudi Arabia’s Arab Light crude to Asia to the lowest level in 27 months.
Aramco also cut all prices for February delivery to Northwest Europe, Mediterranean and North America.
The move indicates that concerns a slowing economy will hurt demand for oil are trumping fears that geopolitical tensions in the Red Sea will cause supply disruption.
The news has knocked Brent crude, the oil benchmark, down by 1.2% at the start of the week to $77.80 per barrel.
Oil dropped after Saudi Arabia cut official selling prices for all regions, underscoring a worsening global outlook and outweighing concern over Red Sea tensions and supply disruptions in Libya.https://t.co/QmLlEgZ5vJ
— Piotr Mieczkowski (@piotrmiecz) January 8, 2024
Late last year Saudi Arabia led the Opec+ group’s decision to make voluntary output cuts, to prevent a buildup of unsold oil. But those production cuts didn’t prevent oil posting its first annual fall since 2020 last year.
Geopolitical tensions are still heightened this morning, with US secretary of state, Antony Blinken, warning yesterdat that Israel’s war against Hamas risked spreading throughout the region.
IG analyst Tony Sycamore says those concerns will support the oil price:
“If we were just to focus on the fundamentals including, higher inventories, higher Opec/non-Opec production, and a lower-than-expected Saudi OSP, it would be impossible to be anything other than bearish crude oil.
However, that doesn’t take into account the fact that geopolitical tensions in the Middle East are undeniably rising again which will mean limited downside.”
Also coming up today
Financial markets remain edgy, as doubts creep in about how quickly central banks will be able to lower interest rates this year.
In the UK travel sector, a strike that threatened to halt all London Underground services for the next four days was called off last night, in a relief to commuters.
And there are signs of optimism in the UK factory sector, where manufacturers are more bullish about the sector’s prospects than they were 12 months ago.
A survey released this morning by industry body Make UK and PwC found that over 44% of companies see a moderate to significant improvement in industry conditions in 2024, while just a fifth expect conditions to worsen.
The agenda
7am GMT: German trade balance for November
10am GMT: Eurozone consumer and economic confidence data
1pm GMT: Israel business confidence report for December
4pm GMT: US consumer inflation expectations for December
Updated
