Introduction: UK house prices rise in April after seven consecutive falls
Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.
UK house price growth picked up in April, building society Nationwide reports this morning, with the first monthly increase in seven month.
Average house prices rose by 0.5% last month, Nationwide’s data shows, following seven consecutive falls going back to last September.
The average price increased to £260,441, up from £257,122 in March.
This has lifted the annual rate of house price growth to -2.7%, from -3.1% in March (the biggest fall since 2009), as calm returned to the markets after the chaos of last autumn’s min-budget.
Robert Gardner, Nationwide’s chief economist, reports there were “tentative signs of a recovery” in the market last month, although this still leaves prices 4% below their August 2022 peak.
Gardner explains:
“Recent Bank of England data suggests that housing market activity remained subdued in the opening months of 2023, with the number of mortgages approved for house purchase in February nearly 40% below the level prevailing a year ago, and around a third lower than pre-pandemic levels.
However, in recent months industry data on mortgage applications point to signs of a pickup.
Last month, Rightmove reported that asking prices were at record levels:
Gardner says the recent pick-up in UK consumer confidence may be helping the housing market, but cautions that….
….any upturn is likely to remain fairly pedestrian, as it will take time for household finances to recover, since average earnings have been failing to keep pace with inflation, and by a wide margin over the last few years.
Mortgage interest rates are also likely to act as a headwind. While they are well below the highs seen in the wake of the mini-Budget last year, rates are still more than double the level prevailing a year ago.
Photograph: Nationwide
Also coming up today
Britain’s biggest supermarkets are facing calls for the UK’s competition watchdog to investigate claims of profiteering amid the cost of living crisis, as food price inflation soared to a record high in April.
Overnight, Australia’s central bank has surprised investors by raising interest rates again.
The RBA board raised its cash rate 25 basis points to 3.85% at its monthly meeting on Tuesday, defying investors who had bet the central bank would extend its pause for a second month.
Higher interest rates lift profits at banks….. such as HSBC, which has reported a three-fold jump in earnings in the last quarter, On a constant currency basis, HSBC’s profit before tax increased by $9.0bn to $12.9bn, leading the bank to launch up to $2bn of share buybacks and a 10 cent-per-share dividend.
BP has defied an easing in energy prices to post one of the largest first-quarter profits in its history, reigniting a debate over windfall gains by oil and gas firms.
The energy giant said its underlying profits hit $5bn (£4bn) in the first three months of the year, outstripping analysts’ forecasts. More on this shortly…
The latest factory PMI reports will show how manufacturers in the UK and the eurozone fared in April. That follows a surprise contraction in China’s factory output, reported on Sunday.
We get the latest eurozone inflation report this morning, with prices expected to have risen by 7% in the 12 months to April, up from 6.9%. Core inflation could stick at 5.7%, worryingly high for the European Central Bank.
Shares in online learning service Chegg have plummeted by almost half in early New York trading, after it warned last night that artificial intelligence chatbot ChatGPT is hurting its finances from school children seeking homework help.
Digital education provider Pearson continues to be hit in London, down over 13% in late trading.
Food safety news: Six Cadbury-branded desserts including Flake and Crunchie chocolate desserts have been recalled by their manufacturer over fears they could be contaminated with listeria.
The dairy company Müller, which produces the desserts, said it was recalling various batches as a precaution, all of which have a use-by date of either 17 or 18 May.
The company is asking consumers not to eat the products and to return them to the store where they were bought.
The affected products include: Cadbury Daim chocolate dessert 75g (use by 18 May); Cadbury Crunchie chocolate dessert 75g (use by 17 May); Cadbury Flake chocolate dessert 75g (use by 17 May); Cadbury Dairy Milk Buttons chocolate dessert75g (use by 18 May); Cadbury Dairy Milk Chunks chocolate dessert 75g (use by 18 May); Cadbury Heroes chocolate dessert six x 75g (use by 18 May).
The total of vacancies at US companies has fallen, a sign that the labor market is cooling following the string of interest rate increases.
The number of job openings fell to 9.6m on the last business day of March, the US Bureau of Labor Statistics reports, down from 9.97m at the end of February.
US JOLTs report for March has dovish implications for Fed's decision as vacancies at US employers fell by more than forecast. Job openings in March sank to 9.59mln, down from 9.93mln in Feb. Number was at 11.2mln as recently as Dec 2022. (via US) pic.twitter.com/LO0xzsN9pk
— Holger Zschaepitz (@Schuldensuehner) May 2, 2023
This 384,000 fall means the number of vacancies was 1.6m lower than in December, the JOLTS report shows.
The number of people quitting their job dropped to 3.9m, from 4m, while the total number of hires and total separations were little changed, and layoffs and discharges increased to 1.8m.
Job openings continued to fall in March 2023 as #hires held steady. Total separations were mostly unchanged while its components were offsetting: #quits softened while #layoffs increased.
The most concerning figure from the #JOLTS report is the jump in layoffs & discharges, rising to 1,805,000 in March, near the pre-pandemic level after spending much of the last 2 years well below, amidst a historically hot job market.
Job openings fell most sharply in some of the service sectors that have driven much of the recent jobs recovery:
Transportation, warehousing & utilities: -144,000 Professional & business services: -135,000 Retail trade: -84,000 Health care & social assistance: -71,000#JOLTS 2/ pic.twitter.com/coUVylwkQm
Just in: US factory orders were weaker than expected at the end of the last quarter.
Factory orders rose by 0.9% in March, below the 1.1% increase that was forecast.
Excluding the volatile transportation sector, and factory orders were down by 0.7% for the second month running, an indication that US manufacturing is weakening.
Horrific March Factory orders. Negative Excluding transportation.
inflation is yesterdays story, focus is on how severe the economic slowdown would be.$TSLAhttps://t.co/cmT7Z2kMxC
Wall Street has opened in the red, as investors worry about the debt ceiling crisis.
The Dow Jones industrial average has shed 171 points, or 0.5%, to 33,880 points, while the broader S&P 500 index has lost 0.4%.
Jitters over a potential US default have risen, after treasury secretary Janet Yellen warned Congress that the US government could run out of money as soon as June 1 unless the debt ceiling was raised. That’s sooner than expected.
Joe Biden has now scheduled a 9 May meeting with congressional leaders, in the hope of breaking the current stalemate.
If the debt ceiling isn’t raised, the US risks an unprecedented default that would shake the global economy.
Shares in educational publisher Pearson have tumbled over 10% today, on fears that artificial intelligence is hitting the sector.
Last night, shares in US rival Chegg tumbled 40% after it revealed that its finances were being hit by the popularity of ChatGPT, the
California-based Chegg, which provides homework help for students, said on Monday that ChatGPT was hitting the number of students signing up to its services.
The impact has been so pronounced that the company withdrew its guidance for the full year and warned that second-quarter revenue will be significantly lower than what Wall Street analysts expected.
Chegg chief executive Dan Rosensweig explained:
“In the first part of the year, we saw no noticeable impact from ChatGPT on our new account growth and we were meeting expectations on new sign-ups.
“However, since March we saw a significant spike in student interest in ChatGPT. We now believe it’s having an impact on our new customer growth rate.”
Whoa... Is Chegg the first publicly-traded company to say that ChatGPT is clobbering its business?
Pandemic-era graduates struggle with teamwork, accountants say
Jasper Jolly
Two of the UK’s big four accounting firms are giving extra training to younger recruits after finding that those who spent large parts of their education remote working during Covid lockdowns struggled with communication and teamwork tasks.
Deloitte and PwC said they were offering newer recruits training on skills that may have been neglected during the pandemic such as giving face-to-face presentations and participating in in-person meetings.
Recent university graduates had years of their tuition affected by coronavirus lockdowns, which for long periods prevented face-to-face learning and socialising. The negative effects on students’ mental health at the time were well documented, and some researchers have expressed concerns that young people have been left with skills gaps.
The big four accounting firms, also including EY and KPMG, run some of the largest graduate recruitment schemes that together hire thousands of university leavers every year.
PwC said it was increasing coaching for junior staff, including allowing senior managers to coach full-time on a secondment basis. The feedback from initial trials in some parts of the business “has been really positive”, so the firm is planning to roll it out more broadly, it said.
Uber has delivered a rare earnings beat today, thanks to strong ride and delivery demand, says Adam Vettese, analyst at social investing network eToro.
Vettese explains:
This stock is perennially underwhelming for investors, especially when you consider the consistent lack of actual profits. But executives at the firm will be pointing gladly to their surprise EBITDA numbers as a sign that profitability is just a couple of stops away.
“Shrinking losses from $5.93 billion to just $157 million is no mean feat but there are some one-off outliers in the difference as the firm saw heavy investment losses in Q1 last year that flatter to deceive with these figures. That being said, the firm has greatly improved free cash flow, now a record $549 million, a key determinant of underlying health.
“In terms of its core businesses, demand has been sustained despite worries over consumers curtailing spending – something we’re beginning to see across travel and transport stocks. It also says it has dealt with some of the crippling driver shortages of recent months. The next signpost for wary investors is whether a potential recession and ensuing job losses will flag down demand where zooming inflation failed to stop it.”
Declining sales of Pfizer’s Covid-19 vaccine have knocked its revenues this year.
Pfizer has reported a 29% drop in revenues in the first quarter of 2023, to $18.282bn from $25.661bn.
Revenues from Comirnaty, its Covid-19 vaccine, fell by 75% to $3.06bn from $13.227bn in Q1 2022.
Pfizer says the fall in Comirnaty sales was largely due to lower contracted deliveries and demand in international markets, as well as lower US government contracted deliveries.
But sales of Paxlovid, its Covid-19 antiviral treatment, rose to $4.07bn from $1.47bn a year earlier.
Dr. Albert Bourla, Pfizer’s chairman and chief executive officer, said an “unprecedented number” of new product launches were being planned, with most due in the second half of 2023.
Bourla says:
We have made excellent progress toward this goal already this year with the U.S. approvals for Zavzpret, Cibinqo for adolescents and Prevnar 20 in pediatric patients, and regulatory filing acceptances for a Braftovi + Mektovi sNDA, sNDA for the Talzenna and Xtandi combination, elranatamab BLA and our RSV maternal vaccine candidate — which, if approved, would be the first vaccine for administration to pregnant individuals to help protect against the complications of RSV disease in infants from birth up to six months of age.
“Uber reported first quarter revenue of $8.82 billion, ahead of expectations for $8.72 billion. Quarterly gross bookings grew 19% to $31.4 billion or 22% on a constant currency basis. The ride hailing app reported a quarterly loss per share of $0.08, beating forecasts for a loss of $0.09.
Uber Eats has been successfully broadening its offering, shifting more towards alcohol and groceries to help navigate the economic storm clouds as the softening consumer looks to make cutbacks on non-essential spending like takeaways amid cost-of-living pressures.
Like a company that sells ice creams and umbrellas, Uber has a very well diversified business model with its taxi and food delivery offering. This helped Uber to navigate the pandemic much better than ride hailing rivals, thanks to its food delivery business Uber Eats which was a stay-at-home covid-proof winner while travel ground to a halt.
Nonetheless both taxi services and food delivery are likely to face headwinds from the challenging macroeconomic backdrop with slowing economic growth, cost inflation pressures and weak real wage growth. However, this has boosted demand for jobs in the gig economy with a greater supply of potential workers looking for supplementary income willing to take on roles at Uber.
For investors, shares had a tough time from the peak in April 2021 to the trough in July 2022 caught up in the US ‘tech wreck’ on the back of rising inflation and the Fed’s aggressive rate hiking path. As a result, Uber has been focusing on cutting costs. Off the lows, Uber has been rebounding with gains extending pre-market. The stock is up over 29% in 2023 until yesterday’s close and up a further 8% this morning. The read across is also providing a boost to shares in ride-hailing rival Lyft.”
Uber( $UBER ) just released their earnings report ♨️
Uber, the ride hire and food delivery group, has grown its revenues by around a third, helping it to narrow its net loss.
Uber’s gross bookings grew 19% year-over-year to $31.4bn in January-March, including a 40% rise in mobility gross bookings and 8% in gross bookings for deliveries.
Trips during the quarter grew by 24% year-on-year to 2.1bn, or approximately 24 million trips per day on average. That lifted revenues to $8.8bn, up 29% compared with the first quarter of 2022 when the Covid-19 pandemic was hitting demand for journeys.
On an adjusted EBITDA basis, earnings rose 350% to $761m.
But the firm made a net loss of $157m in the quarter, a sharp improvement on the $5.9bn loss in Q1 2022, and a smaller loss than expected.
- Revenue grew 29% YoY to $8.8 billion, or 33% on a constant currency basis - GAAP EPS of -$0.08 - Net loss attributable to Uber Technologies, Inc. was $157 million, which includes a $320 million net benefit (pre-tax) primarily due to net unrealized gains related… pic.twitter.com/EnO7PwvT06
“We significantly accelerated Q1 trip growth to 24% from 19% last quarter, with Mobility trip growth of 32%, as a result of improved earner and consumer engagement.
“Looking ahead, we are focused on extending our product, scale and platform advantages to sustain market-leading top and bottom-line growth beyond 2023.
Last summer, the Uber Files showed how the company broke the law, duped police and regulators, exploited violence against drivers and secretly lobbied governments across the world as it expanded rapidly.
Vice Media Group, the company behind popular media websites such as Vice and Motherboard, is preparing to file for bankruptcy, the New York Times reported on Monday, citing people with knowledge of its operations.
Vice has received interest from five companies and might consider a sale to avoid bankruptcy, the Times report said, adding that in the event of a bankruptcy, which could happen in the coming weeks, Vice’s debt holder Fortress Investment Group could end up controlling the company.
Nicky Stevenson, managing director at estate agent group Fine & Country, said:
“This boost in activity is also coinciding with growing stock levels and, with property transactions starting to tick up, these are great signs of increasing confidence in the property market.”
Chris Barry, director at Gloucester-based conveyancer ThomasLegal, said:
“Yes, there is a long way to go and the potential for turbulence ahead but April’s Nationwide house price data is encouraging.”
Iain McKenzie, chief executive of the GuildofPropertyProfessionals, said:
“The threat of an aggressive fall in property sales has failed to materialise and we are starting to see more mortgage applications being approved.”
ING: More rate rises likely as eurozone inflation rises
The rise in eurozone inflation in April, to 7%, shows that price pressures remain sticky in the euro area, says Carsten Brzeski, global head of macro at ING.
This underlines the need for further rate hikes, albeit at a slower pace and smaller magnitude than before, Brzeski predicts.
— Financial Networking Group (@FngFinancial) May 2, 2023
He expects the ECB to raise interest rates again, on Thursday, by another quarter-of-one-percent, or 25 basis points.
Over the last year, inflation in the eurozone, which started as a supply-side issue, has become a demand-side issue. This is a clear invitation for the ECB to continue hiking interest rates. While there is very little a central bank can do to lower oil prices or to stop a war, there’s a lot a central bank can do to stop too much money chasing too few goods: bring down demand. And this is exactly what the ECB will continue doing on Thursday. Even if headline inflation has come down and will come down further, this is not yet the moment of relief. The ECB doesn’t want to repeat the previous mistake of underestimating inflation and will therefore be willing to go too far, even if this eventually turns out to be a policy mistake.
The only open question is whether the ECB will go for 25bp or 50bp. Out in the open, only Austrian central bank governor Robert Holzmann has been advocating 50bp. The other hawks, like Isabel Schnabel, recently left the option of 50bp open but didn’t officially subscribe to it.
