The City View: Musk on cusp of Twitter buy, and global markets down
Today Andy Silvester talks to Jack Barnett, Morning Wire’s Economics and Markets reporter. They go through the global market dip and why China’s zero-Covid lockdowns are concerning investors; bank earnings for Q1; and new ONS data showing that 9 in 10 households have recorded an uptick in their cost of living.
And in the news, Tesla and SpaceX CEO Elon Musk is on the verge of taking over Twitter; and research by investment firm Charles Schwab has revealed that two thirds of UK retail investors are unconcerned if their investments are sustainable.
Episode transcript (auto-generated)
Andy Silvester 0:08 Good afternoon and welcome to the City View podcasts on a rainy Monday afternoon. I’m Andy Sylvester editor at City M in a minute, I’ll be joined by Jack Barnett, our economics and markets correspondent here to talk through a pretty miserable start to the week on the globe’s stock markets. Firstly, the corporate headlines and Twitter is in the final stretch of negotiations and its sale to Elon Musk, with a deal potentially being reached as early as today. As reported across the piece by Reuters and Bloomberg, amongst others, the social media firms hammering out the terms of a transaction. According to those familiar with the matter. Last week, the eccentric billionaire announced an offer to buy the social media platform for just around 43 billion US dollars. That’s 33 and a half billion pounds, but did not say at the time how he would finance the acquisition that led people to be sceptical about his intentions. However, last week, he said in documents filed with us securities regulators that the money will come from Morgan Stanley and other banks as well as from his own personal wealth, Twitter yet comment on the matter. Musk has said he wants to buy Twitter because he does not feel it’s living up to its potential as a platform for free speech. And in all that might mean in recent weeks, he’s voiced a number of proposed changes for the company from relaxing its content restrictions, such as the rules suspended former President Donald Trump to ridding the platform, this province of fake and automated accounts. Elsewhere McCall’s the convenience store has acknowledged softer trading as customers hold back on spending. While the chain continues to try and secure a financial lifeline from partners. Shares tumbled 50%. Again nearly trading on Monday morning after the retailer gave an update on his rescue deal talks. In a trading update on Monday. The convenience store chain said it’s a mixed trading over the last few weeks. Meanwhile, UK retail investors are willing to shrug off the environmental damage of investments as long as they delivered bumper returns. New research has revealed some two thirds of UK return investors say they are unconcerned if their investments are sustainable, are focused solely on maximising the return on their cash research from investment firm Charles Schwab has revealed analysts at the firm’s that investors are failing to vote with their wallets despite 67% Considering ethical stocks, a good investment and some good news even if not corporate news. Portugal has confirmed it plans to ignore a year also require British nationals to be treated as third country citizens border checks. That means the Southern European nation will become the first EU member states will our UK passport holders to be fast tracked through electronic passport gates, thereby receiving the same treatment as Portuguese citizens and nationals from other EU member states. And that’s all the corporate and non corporate holiday news for today. I’m now joined by Jack Barnett, our economics and markets correspondent thanks for stopping by. I think it’s fair to say that it’s it’s not been a brilliant Monday so far on on global markets. And really, the news sort of started started bad and it got worse, but it started bad in Asia. And that’s really where this contagion is spread from no pun intended considering the context.
Jack Barnett 2:59 Yeah, so heavy, heavy risk off session to kick off the week. One of the worst we’ve seen in a while markets have been pretty, pretty tame for the last couple of weeks, when they were really, really volatile when Russia sent troops into Ukraine, I’ll just give you some of the figures of the first 100 down about 1.4% to 50 done about 1.3% sell off is kind of bleeding into the continent. So the stock 600 which tracks all the big European stocks is down over 1% the DAX is down over 1% as well. And the US has also opened sharply lower. And as you mentioned there, the initial setup began in Asia highly concentrated in China so that CSI, which is their equivalent, the footsie 100 was down nearly 5% and in Hong Kong, it was down the Hang Seng was down at nearly 4%. Most of this has all been driven on the fact that China doesn’t seem to be letting up and it’s zero COVID tolerance policy and is actually talking potentially Beijing being plunged into a lockdown similar to what we’ve seen in Shanghai over the last couple of weeks. The concern of that is that’s just going to weigh on global growth and a good indication as to whether or not how hard that’s hitting stocks. You break it down by sector. The industrial sector sort of includes your miners, commodity giants, oil giants as well, that they are suffering really severe losses at the moment. So last time I checked. BP shell Glencore ratings are all leading losses in the sector. And oil prices off the back of those concerns about China, the China slowdown which brings leads to a slowdown in oil consumption as well that’s that’s pushed the WTI and Brent crude down around about 4% as well. So yeah, very heavy risk of session. So to kick off the week Andy Silvester 4:44 and just explain why these COVID-19 Zero COVID lockdowns in China are concerning investors right across the world because Is it Is it as simple as China as an economic powerhouse that That is also at the centre of global supply chains. Jack Barnett 5:02 Yeah, so I think it’s two prong is demand and supply. So if you look on the demand side, just by virtue of the fact that most of you know, you’ve got these huge industrial cities, which are massive consumers of domestic goods, and also massive consumers of, well, they’re massive exporters as well. So if you lock down those cities, you’re gonna have a slowdown in domestic consumption in China, which is going to weigh on their growth, and you’re also gonna have a slow, a slow down export as well, which then gums up supply chains, and then exports inflation to other countries, particularly the UK, as well. So that that’s on the demand side. And then on the supply side, you’ve already got these massive of these huge logistic chains in China, which they support like goods across all the world, they just not functioning normally, they then can’t get all the cargo out which they need to from the ports, which then results in trade flows across the world being gummed up, which then results in higher inflation. And, you know, it’s kind of adding to that narrative that we’ve got at the moment that inflation in the western world is kind of being stoked on every single angle at the moment. So you had all the headwinds that we had prior to the war, then you had the war. Now you’ve got these, you know, these these, these more lockdowns in China as well. So it’s just it’s adding to that narrative that inflation is only going to stick trend higher in the in the Western world. Andy Silvester 6:15 Yeah, more to come on that front. I have no doubt. Let’s look ahead to the rest of the week. Because we are entering the most exciting time of the year. It comes about four times a year Jack bank earnings season, we got reports from a host of the bigger lenders this week, or so HSBC tomorrow, I imagine most interesting there will probably not necessarily be the numbers, but the commentary around exactly this around China, and when and if the Chinese economy is going to start firing in full form again. Jack Barnett 6:46 Yeah, so obviously HSBC is hugely reliant on Asia to generate income and profits. And it’s really reliant on China to generate profits as well. Most people will obviously be expected whether or not they’re taking a bit of a hit from the expected slowdown in the Chinese economy, and by virtue of that slowdown in the Hong Kong economy. And then we’ve got all the other big lenders across the week as well. So NatWest, Lloyds, Barclays, all reported across the week. I think a couple of things to pick out there is that Lloyds is obviously the country’s biggest mortgage lender, we’ll be interested to see whether or not the continued resilience of the housing market and you know, in the UK economy, despite the fact that interest rates are going up, and we’re having this cost of living squeezed, it’d be interesting to see whether or not they are still being boosted by the Red Hot housing market and then on Barclays as well. There’s been quite sharp pullback in dealmaking activity as a result of greater geopolitical risk as a result of the Russian invasion in the Ukraine to be interesting to see whether or not their investment banking revenue is slow. Now, they are the only lender in the UK which still has quite a big presence in the investment banking sector financial crisis, and they were like what heavier on it for to sort of generate profits. So be be interesting to see whether or not they’ve taken a hit from that sort of risk of attitude we’re now seeing. Andy Silvester 8:01 Yeah, absolutely. Risk off attitude is now starting to filter down. We talked about it for a long time on this podcast and in the paper, but people are now starting to feel it. Just before you leave us millionaire status today, which I think probably rings true. That the feeling that things are going a bit I was gonna go feeling things are going south by as a result of prices going north and starting to become fairly universal. Jack Barnett 8:23 Yeah, so we had well, probably the the support the bleakest assessment we’ve had of the cost of living crisis at the moment, from the ons that they’ve got nearly nine in 10 households have experienced an uptick in their cost of living over the last, I think, four months or so that is it’s 25 percentage point increase from when the last recent survey, which is the back end of of November. So it just speaks to the fact of how quickly this cost of living crisis has actually crept up on us and how severe it is. And another thing to note is that survey didn’t actually take into account 54% uplift to the energy price cap we saw in April. So the next time that surveys released, I imagine it’s going to be even bleaker. Andy Silvester 9:03 Well, always good to have you on Monday to cheer on it or economics and markets correspondent That’s all from us city new podcast. today. We’ll be back tomorrow who knows we may need to find a different way to tweak the podcast once Elon Musk is in charge. That’s all from us. We’ll see you guys tomorrow.