Wall Street mixed and European stocks slump as Bank of America profits drop

Well that's all from us today, thanks for following along. Be sure to tune in tomorrow for inflation day.

Here's a quick recap of some of today's top stories...

• UK unemployment climbs to 4.2%

• IMF: UK inflation to fall faster than expected

• Wall Street opens flat as Bank of America profits drop

• Oil rises as Israel looks to respond to Iran attack

• Long-term sickness hits record high

• Superdry slumps amid plans to delist from London Stock Exchange

• Dr Martens issues profit warning and announces new boss

Have a good evening!

UK consumer confidence has fallen for the first time in seven months, according to YouGov. Brits are g less optimistic about the economic outlook.

Its confidence index has fallen for the first time since July 2023, due to decreases in household finance, business activity, and job security metrics.

The state pension went up 8.5% in April – hitting £11,502 per year for someone on a full new state pension. This is great news for people’s beleaguered budgets, after the cost of living crisis laid waste to their finances. With inflation finally on the wane, this increase introduces some much-needed breathing space.

However, many pensioners won’t be getting as much of this blockbusting increase as they first thought, because frozen tax thresholds threaten to claw back a bigger chunk of their income.

The personal allowance and higher rate thresholds have been frozen for some time and this looks set to continue until 2028. This, along with a reduction in the additional rate threshold, means pensioners will be paying more tax.

With the full new state pension currently only a whisper under the personal allowance of £12,570, it doesn’t take much extra income from a private pension or self-invested personal pension (SIPP) to tip people into tax-paying territory.

If the threshold remains as it is until 2028 then we don’t need to see particularly big annual increases before someone only in receipt of a full new state pension gets landed with a bill. According to the Liberal Democrats, by 2027-28, 1.6 million additional pensioners will be paying income tax compared to if the personal allowance had been increased in line with inflation.

Full the full article here

Britain is set to be one of the slowest growing major economies this year — projected to come in sixth in the G7 for 2024, and for 2025 in third place.

Newly revised forecasts indicate that UK gross domestic product (GDP) is forecast to rise just 0.5% this year, a slight downgrade from previous estimates in January, before increasing to 1.5% next year.

When looked at per head, with output split across the UK's population, GDP flatlines, with no growth at all for 2024 and 1.1% in 2025.

Germany, Europe's largest economy, will be even slower, with GDP set to rise just 0.2% in 2024, and 1.3% in 2025.

Meanwhile, the overall global economy is set to grow by 3.2% in both this year and next year, matching its expansion in 2023. The US will lead the way with an expected expansion of 2.7% and then 1.9%.

UK inflation is forecast to fall faster than initially expected, the International Monetary Fund (IMF) revealed on Tuesday.

Compared to their October World Economic Outlook, inflation is now set fall 1.2 percentage points to 2.5% this year, and to 2% in 2025, hitting Threadneedle Street's target.

Official figures are due to be released on Wednesday and are expected to show a fall in the UK’s annual inflation rate to around 3%.

The IMF believes the Bank of England (BoE) will be cautious about cutting interest rates, and has pencilled in only two 0.25 percentage point cuts in official borrowing costs this year.

Wall Street stocks have opened flat as the Bank of America (BAC) said first-quarter profits dropped 18% from a year ago as a key revenue source weakened.

The news comes as the latest example of how even the biggest banks are increasingly challenged by high interest rates.

Net interest income at Bank of America fell 3% from the year-earlier period "as higher deposit costs more than offset higher asset yields and modest loan growth," the bank said in a release.

Provision for credit losses have risen to $1.3bn, up from $1.1bn in Q4 2023 and $931m a year ago.

Meanwhile, revenue for investment banking, trading and wealth management all rose from a year ago and the previous quarter, outperforming analyst expectations.

Trading and wealth management rose more than 2% and 5% while investment banking revenue of $1.57 billion was 35% higher compared with last year.

Fintech company Wise (WISE.L) saw its stock plunge on Tuesday following a full-year earnings report that missed analyst expectations.

Its fourth-quarter revenue came in at £277.2m, bringing its full-year figure to $1.1bn — 1% below consensus estimates.

Its Q4 income of £381.2m also fell short of expectations, according to Jeffries.

The stock was trading 8% lower in London on the back of the news.

See what other tickers are trending here

UN Trade and Development, the United Nations trade body, predicts that global growth will slow to 2.6% this year, down from 2.7% in 2023.

It comes as falling investment and subdued trade dynamics continue to hit the world economy.

It said:

EasyJet is suspending all flights to and from Tel Aviv until 27 October following the Iranian missile and drone strike on Israel over the weekend.

In a statement on Tuesday, the airline said:

The benchmark index for emerging-market equities has erased its 2024 gain, and the gauge for currencies posted a new low for the year, Bloomberg has reported.

This comes amid signals global monetary easing will be delayed and China’s economic recovery remains weak.

The MSCI Emerging Markets Index fell 1.7% — its biggest drop since 17 January. It now trades 1% lower for the year.

Its currency counterpart lost 0.3% on Tuesday, taking its 2024 decline to 1.8%.

Meanwhile, the Indian rupee fell to a record low, while South Africa’s rand fell for a third day, its longest losing streak in four weeks.

The newly appointed Bank of England (BoE) deputy governor Clare Lombardelli has warned that the fall in inflation is likely to be bumpy in the coming months.

She said:

The UK inflation report for March is due tomorrow morning. CPI inflation is expected to have fallen to 3.1%, down from 3.4% in February.

Housing platform Rightmove ran the numbers on the priciest streets to rent and buy in the UK.

A rental squeeze and high mortgage rates have led to an affordability crisis in the market over the last year. But these houses represent the top end of that — and some of the most coveted locations in Britain.

London has been split out from the rest of the country due to its higher than average property prices, otherwise it would dominate the top 10 list.

"Although the possibility of buying one of these homes is limited to a very lucky few, there’s clearly a fascination with these prestigious homes as we find they’re often among our most viewed properties on Rightmove," said Rightmove's Tim Bannister.

Rightmove's analysis found that sales searches for prestigious London boroughs are up, with areas such as Mayfair (up 35% year-on-year), St John’s Wood (up 15% year-on-year) and Holland Park (up 11% year on year) all seeing an increase in sales searches.

Click here to discover the homes currently on the market in the most expensive streets

Wholesale gas prices have gone up amid fears that an Israeli retaliation to the attack by Iran at the weekend could spark wider conflict.

Europe’s benchmark contract rose as much as 6.6% on Tuesday. It comes as prices had recently fallen by 30% since the start of the year after a mild winter meant that stockpiles were left relatively full.

The UK equivalent contract jumped almost 7% today.

UK packaging firm DS Smith is set to be taken over by US rival International Paper after the companies agreed a £5.8bn all-share deal.

Memphis-based International Paper will own around 66.3% of the combined group, with London-listed DS Smith owning the remainder.

International Paper said it would seek a secondary listing on the London stock market, and set up a European headquarters at DS Smith’s base in London.

DS Smith boss Miles Roberts is to act as a consultant to the combined company and Richard Pike, the UK company’s financial director, will be paid a retention award of £550,000 to stay on at the new business.

The companies did not say how many jobs were likely to go in the UK or specifically across DS Smith’s operations.

The cost of rent has outpaced salary growth by 5.2% over the past 10 years, leaving renters significantly worse-off today than they were a decade ago

Data from Zero Deposit has revealed that in the past decade the average price of rent in England has grown from £742 a month in 2014, to £994 in 2023. This marks an increase of £252 per month or £3,024 per year. In percentage terms, this is a decade increase of 34%.

Meanwhile, the average annual salary in England has grown from £27,919 in 2014 to £35,955 in 2023. This is a cash increase of £8,036 over a decade, equivalent to 28.8%.

• In the East of England, the average salary has grown by 27% since 2014 while the price of rent has grown by 43.1%, meaning renters in the regions are now 16.1% worse off than they were ten years ago.

• In the South West, the gap between rent and salary has widened by 9.7% while the East Midlands (9.6%), South East (9%), North West (6.9%), and West Midlands (3.3%).

• In London, the average salary has increased by 29.8% since 2014, while the price of rent has grown by 22.4%, meaning renters in the capital are, in theory, 7.4% better off today than they were a decade ago.

• In Yorkshire & Humber, renters are 1.4% better off, while in the North East, salaries have outgrown rent increases by 1.1%.

Sam Reynolds, CEO of Zero Deposit said:

Dr Martens shares plunged almost a third on Tuesday, to a record low, after the British boot maker warned of another tough year in its key US market.

The firm said was anticipating a double-digit percentage decline in American wholesale revenues, which would impact overall profits.

It added that it did not expect to hike prices further this year, which had previously enabled it to offset cost inflation.

It also revealed that Kenny Wilson has decided this will be his final year at the helm. As part of a succession plan, Ije Nwokorie, currently chief brand officer, will succeed Kenny as CEO before the end of the current financial year.

A new study from Juniper Research, found that by 2028, the Buy Now, Pay Later (BNPL) userbase will increase by 107%, from 380 million users in 2024.

It comes as banks and apps are leveraging their positions to underrepresented demographics; incentivising BNPL through offerings tailored to consumers, such as integrated eCommerce platforms.

Superdry shares (SDRY.L) fell out of fashion with investors, slumping more than 34%, as it announced it plans to delist from the London Stock Exchange.

The beleaguered chain said it would be forced to enter into administration if it did not go ahead with the move.

It is looking to raise up to £10m through an equity raise that would take the firm private.

Delving back into the ONS data from this morning, the number of people out of work due to long-term sickness has hit a fresh high.

The figures show that there were 9.4 million people economically inactive in the three months to February — the highest since 2012.

Of those, 2.83 million said long-term sickness is the reason they are out of work.

Brent crude oil rose towards $91 a barrel this morning, before paring back some gains, after Israel said it would be forced to respond to Iran’s attack that took place over the weekend.

It comes despite Europe and the US urging restraint after deeming Tehran’s attack on Saturday a “failure”.

Israeli military officials said their country had no choice but to respond to Tehran’s barrage of more than 300 missiles.

Warren Patterson, head of commodities strategy for ING, said the possibility of a direct response from Israel “means that this uncertainty and tension will linger for quite some time”.

“The more escalation we see, the more likely we are to see oil supply from the region impacted.”

Chancellor Jeremy Hunt has focused on the boost to workers’ pockets from rising real wages.

He said: “It’s great that real wages have now risen for nine months in a row, and, together with our national insurance cuts worth £900 to the average worker, people should start to feel the difference.”

However, acting shadow work and pensions secretary Alison McGovern took aim at the British government.

She said: "Tory failure is laid bare by the reality that we are now the only country in the G7 with an employment rate stuck below pre-pandemic levels.”

Asian shares slipped into the red overnight, following a slump on Wall Street as higher yields in the US bond market pressured stocks.

The Nikkei (^N225) slumped 1.9% on the day in Japan, as the dollar continued to gain against the yen, hitting fresh 34-year highs.

Meanwhile the Hang Seng (^HSI) fell 2.1% in Hong Kong, and the Shanghai Composite (000001.SS) was 1.7% down by the end of the session.

It came despite the Chinese economy growing at a faster-than-forecast annual rate of 5.3% in the first quarter of the year. In quarterly terms it expanded by 1.6%

China’s National Bureau of Statistics said:

Across the pond, Wall Street closed sharply lower as simmering tensions in the Middle East curbed investor risk appetite.

The three major US stock indexes reversed initial gains to extend Friday’s sell-off. The Dow Jones (^DJI) fell 0.7% to 37,735.11, the S&P 500 (^GSPC) lost 1.2%, to 5,061.82, and the tech-heavy Nasdaq (^IXIC) was down 1.8%, ending at 15,885.02.

The UK unemployment rate has risen to an estimated 4.2% in the three months to February, the Office for National Statistics (ONS) revealed on Tuesday.

There are now around 850,000 additional working-age people out of work, who are no longer seeking work or are unable to start work, than before the pandemic began.

The unemployment-to-vacancies ratio, a key measure for the Bank of England, ticked up to 1.6 as unemployment increased and vacancies fell further.

Meanwhile, pay growth was still stubbornly high — at 6% — but continues to fall to more reasonable levels.

Liz McKeown, ONS director of economic statistics, said:

Good morning, and welcome back to our live markets blog. Follow along to stay updated with what's moving markets and happening across the global economy.

Here's a quick look at what's on the agenda for today:

• 7am: Trading updates: Dr Martens, Petra Diamonds, Qinetiq

• 7am: UK unemployment report

• 10am: ZEW index of eurozone economic sentiment

• 10.15am: Treasury Committee hearing with Clare Lombardelli, deputy governor at the Bank of England

• 1.30pm: US building permits and housing starts data for March

• 2pm: IMF latest World Economic Outlook

• 3.15pm: IMF latest Global Financial Stability Report