Wall Street and European stocks lower as Microsoft outage wreaks havoc #UKFinance

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• Fri 19 July 2024 at 9:31 am GMT-6

  Blog close and week ahead

  Well that’s all from us for today — thanks for following along.

  Be sure to join us again next week when we’ll be back for more markets news and all that’s happening across the global economy.

  Here’s what’s to look forward to as the second-quarter earnings season approaches.

  • Investors will be particularly focused on updates from some of the ‘Magnificent Seven’, which will reveal whether the artificial intelligence (AI) trend continues.

  • Tesla (TSLA) — Reports second-quarter results on Tuesday 23 July

  • Microsoft (MSFT) — Reports second-quarter results on Tuesday 23 July

  • Alphabet (GOOG) — Reports second-quarter results on Tuesday 23 July

  • Amazon (AMZN) — Reports second-quarter results on Thursday 25 July

  Read more here: Stocks to watch next week: Tesla, Microsoft, Alphabet and Amazon

• Fri 19 July 2024 at 9:13 am GMT-6

  Paydays under threat

  Workers could have their pay impacted by the global IT outages, according to Global Payroll Association.

  Businesses who pay staff on a weekly basis (to about 4.3 million UK workers) are struggling to pay on time, it has warned.

  Melanie Pizzey, chief executive and founder of the Global Payroll Association, said:

  “We’ve been contacted by numerous clients already today who have been unable to access their payroll software due to the Microsoft outage and others who have been urged to log out with immediate effect.

  “Depending on the length of this outage, it could have very serious implications for businesses across the nation, particularly those who process payroll on a weekly basis.

  “Furthermore, we could see a backlog with regard to processing payrolls for the coming month end which may delay employees from receiving their monthly wage.

  “At best, it will require those managing payroll to work overtime to rectify the issue, but the good news is that it doesn’t seem to be a cyber attack.

  “This means that the sensitive employee details held within payroll should be safe, although we’re seeing many companies understandably take action to minimise such a threat as a precaution.”

• Fri 19 July 2024 at 8:49 am GMT-6

  CrowdStrike slumps 15% in New York

  CrowdStrike shares have fallen to a two month low today, down 15% amid the global IT chaos. The decline has wiped $12.2bn (£9.5bn) off the value of the business.

  It comes after an update to one of its products appeared to trigger an outage that affected customers using Microsoft’s Windows Operating System, disrupting businesses across sectors.

  “Today, CrowdStrike become[s] a household name, but not in a good way. While the disruption will take time to settle down, it will not change the positive long-term view of CrowdStrike or [the] cybersecurity sector,” Wedbush analyst Dan Ives wrote in a note to clients Friday.

  “In a nutshell, this is [a] PR nightmare for CrowdStrike and Microsoft and others [to] get caught in this tornado along with millions of people currently stranded at airports around the globe,” he added.

  Meanwhile, Phil Blancato, chief executive of Ladenburg Thalmann Asset Management, said:

  “Any hint of bad news, because they (tech stocks) are so priced to perfection is going to hurt these stocks, both (CrowdStrike and Microsoft) are excellent companies and are worthwhile long-term holds.”

• Fri 19 July 2024 at 7:45 am GMT-6

  10 homes in converted pubs to raise a glass to

  

  The number of UK pubs has dropped by over a third since the 1970s and, according to accountancy firm Price Bailey, last year time was called on more than two a day.

  Factors such as lower footfall and rising costs are to blame and although this loss is keenly felt by local communities, the upside is that many former pubs are being given a new lease of life and converted into much-needed housing.

  They are often conveniently positioned, filled with charm and have big, sociable living spaces – like this selection, all on the market.

  Read more on Yahoo

• Fri 19 July 2024 at 7:29 am GMT-6

  CMA greenlights Nationwide’s £2.9bn swoop on Virgin Money

  A tie-up between Nationwide and Virgin Money has got the greenlight from the competition watchdog today, paving the way for the UK’s biggest banking deal to close in the final quarter of this year.

  CityAm has the details:

  The Competition and Markets Authority, which opened a probe into the deal last month, said in a statement this morning the combination of the two firms was a “relevant merger situation” that would “not give rise to a realistic prospect of a substantial lessening of competition”.

  The decision will now clear the way for the £2.9bn merger to create the country’s second biggest mortgage lender after Lloyds Banking Group, in one of the biggest shake-ups in the UK retail banking market since 2008.

  “We welcome the CMA’s decision to unconditionally clear the proposed acquisition by Nationwide following its Phase 1 investigation,” a Virgin Money spokesperson said. “The enlarged group will combine two complementary businesses that together can offer more great products and services to a larger customer base.” We continue to expect that the transaction will complete in the fourth quarter of this year.”

• Fri 19 July 2024 at 7:03 am GMT-6

  Almost 1,400 flights cancelled worldwide

  

  There were around 110,000 commercial flights scheduled across the world today, the BBC has reported, and according to aviation analytics company Cirium, 1390 have been cancelled.

  Here’s a national breakdown of flights cancelled so far:

  • US: 512

  • Germany: 92

  • India: 56

  • Italy: 45

  • Canada: 21

• Fri 19 July 2024 at 6:46 am GMT-6

  IT outage afternoon update

  The boss of CrowdStrike has said that it could take some time for systems to recover.

  George Kurtz told NBC:

  “We’re deeply sorry for the impact that we’ve caused to customers, to travellers, to anyone affected by this.

  “We know what the issue is. We are resolving and have resolved the issue now. It is recovering systems that are out there.

  “The system was sent an update and that update had a software bug in it and caused an issue with the Microsoft operating system.

  “We identified this very quickly and remediated the issue and as systems come back online and they are rebooted, they are coming up and they are working.

  “We are working with each and every customer to make sure we can bring them back online.”

• Fri 19 July 2024 at 6:28 am GMT-6

  Investors could get burned by shifts in luxury sector

  Investors need to be extra cautious about the luxury sector, but also be alive to the major emerging opportunities, the CEO of one of the world’s largest independent financial advisory and asset management firms has said.

  It comes as Hugo Boss shares recently plummeted by approximately 9% in German trading this week, highlighting the troubles confronting high-end fashion brands.

  ​The German fashion house has reduced its fiscal 2024 sales outlook to between €4.20bn and €4.35billion.

  ​Burberry, another major player in the industry, recently replaced its boss Jonathan Akeroyd, as it projected a first-half operating loss and suspended its dividend, citing waning demand for luxury goods.

  ​In an effort to attract cautious consumers, luxury brands, including Burberry and Versace, are slashing prices by up to 50% in China, according to reports.

  ​Nigel Green of deVere Group said:

  “The luxury sector is experiencing a significant pullback in consumer spending, driven largely by China’s economic growth slowdown. As one of the world’s largest markets for luxury goods, China’s economic health profoundly impacts the sector’s overall performance.

  ​“The Chinese economy is grappling with several challenges, including sluggish GDP growth, declining exports, and a real estate market slump. These factors have collectively dampened consumer confidence and reduced discretionary spending among Chinese consumers, who had previously been avid buyers of high-end products.”

  “The phenomenon of ‘luxury shame,’ where individuals are less inclined to flaunt their wealth due to the prevailing economic uncertainty, appears to be getting a major foothold. This cultural shift further exacerbates the challenges faced by luxury brands.​

  “The slowdown is not limited to fashion; it extends to luxury automobiles, jewellery, and high-end electronics, all of which are seeing reduced sales in the Chinese market.”

• Fri 19 July 2024 at 6:10 am GMT-6

  Best UK savings accounts offering above inflation rates

  

  UK households are always looking for ways to make their money go further amid the cost of living crisis and savings accounts can help.

  After years of low rates, high-yield savings accounts are having a moment as the Bank of England has kept interest rates at a 16-year high of 5.25%. While homeowners face higher mortgages, there is a silver lining in higher borrowing costs and consumers can now find UK savings accounts offering higher than inflation rates.

  The UK rate of inflation came in at 2% in May for the first time in nearly three years, according to figures from the Office for National Statistics (ONS). It was unchanged in June.

  Savers should shop around to find the best deals and check what rate they are on – as they could still be sitting on a product that does not beat inflation.

  The main factor you should be aware of when choosing a savings account is the difference between easy-access and fixed-term.

  Read the full article here

• Fri 19 July 2024 at 5:44 am GMT-6

  Netflix shares slightly lower amid mixed results

  Shares in Netflix (NFLX) were slightly lower amid mixed results that showed revenue and subscriber growth but weaker-than-expected guidance for the third quarter.

  The streaming giant delivered the growth that its high-price stock demands, thanks to better-than-expected growth in the subscribers signing up to watch its hit series Bridgerton, Baby Reindeer and The Gentlemen.

  The streamer said its ad-supported memberships grew 34% during the period compared to the same quarter last year. Netflix’s global paid memberships rose 16.5% year over year to 278 million.

  However, Netflix said it expects the pace of its subscriber additions to slow in the third quarter.

  Revenue was roughly $9.6bn, up 17% compared to the year-earlier period, driven primarily by the increase in average paid memberships.

  Netflix said it now expects full-year reported revenue growth of 14% to 15%, compared with previous guidance of 13% to 15%.

• Fri 19 July 2024 at 5:07 am GMT-6

  UK public sector borrowing higher than forecast in June

  UK public sector borrowing came in higher than expected in June, according to the Office for National Statistics (ONS) on Friday

  Borrowing came in at £14.5bn in June — £3.2bn less than in the same month a year ago, but well above the £11.6bn forecast by the government’s spending watchdog, the Office for Budget Responsibility (OBR).

  ONS chief economist Grant Fitzner said: “The reduction from last year reflected a fall in spending, thanks to lower debt interest payments and the ending of energy support schemes, as well as higher tax revenues.”

  Meanwhile, UK state debt remained at levels last seen in the early 1960s in June, the ONS said.

  Public sector net debt excluding public sector banks was provisionally estimated at 99.5% of gross domestic product (GDP) at the end of June, 2.8 percentage points more than at the end of June last year.

• Fri 19 July 2024 at 4:43 am GMT-6

  Which? responds as global IT outage hits airlines

  

  Rory Boland, Editor of Which? Travel, said:

  “Global IT systems failures of this magnitude are almost unprecedented, and anyone with flights today will naturally be deeply concerned by the potential impact to their journeys.

  “Keep an eye on communications from your airline, and you may be advised to arrive at the airport early. If you can, avoid checking in a bag as queues for check-in at the airport will be long and IT failures typically lead to lots of lost bags. If you do check-in bags, make sure you keep medication, keys and any other essentials in your hand luggage.

  “As these are extraordinary circumstances, compensation will not be payable for delayed or cancelled flights, but airlines nonetheless have a duty to look after you, including providing meals and accommodation if it becomes necessary. They should also reroute you as quickly as possible, though given the global nature of the problem, this may not be immediately possible.”

• Fri 19 July 2024 at 4:21 am GMT-6

  European stocks in the red amid IT chaos

  Stock in Europe are lower this morning as the IT outage potentially could hit companies’ bottom lines if problems persist.

  Dan Coatsworth, investment analyst at AJ Bell, said:

  “Countless industries, from airlines and trains to banks and media, face disruption to earnings if they cannot do their job.

  “Workers cannot get from A to B and that will have a knock-on effect for industries across the board if staff aren’t there to perform important functions or systems are offline.

  “The severity of the problem boils down to how long it lasts. A few hours’ disruption is unhelpful but not a catastrophe. Prolonged disruption is another matter, potentially causing damage to companies and economies.

  “Stock markets continued to function as normal despite corporate news feeds and information terminals being impacted by the tech outage.

  “Futures prices imply a small pullback when Wall Street opens later today, but so far investors have not shown any panic. Whether that remains the case as the day goes on is another matter.”

• Fri 19 July 2024 at 3:57 am GMT-6

  Inheritance tax receipts raise £2.1bn in three months

  Figures published by HM Revenue and Customs (HMRC) this morning, show that inheritance tax receipts hit £2.1bn from April to June 2024/25 tax year.

  This is £83m higher than the same period in the previous tax year, and continues the upward trajectory over the last two decades. Last full tax year it raised £7.499bn.

  Inheritance tax remains firmly at the heart of the political debate given Labour Party’s pledge not to raise most of the other major sources of tax revenue, including Income Tax, National Insurance or VAT.

  But a recent survey of Wealth Club clients, suggested that this could be an unpopular move. 42% of respondents said that if they could make cuts to any one tax, it would be inheritance tax.

  Nicholas Hyett, investment manager at Wealth Club said:

  “Inheritance tax remains a political hot potato. The new government has promised not to raise a whole host of taxes, but inevitably there are spending pledges that need to be met. That means those taxes that haven’t been officially ringfenced, including inheritance tax, are firmly in the spotlight.

  “Reforms to non-dom rules are one potential source of an inheritance tax windfall, but with an estimated £100 billion being passed on in inheritances and gifts in the UK each year, there’s probably more in play if the government is determined to raise extra cash.

  “That puts agricultural and business relief in the firing line. But, reforms need to be handled sensitively. Abolishing either completely would be devastating to family owned businesses and farms across the country, while reliefs for the AIM market, Enterprise Investment Scheme and Seed Enterprise Investment Scheme provide vital funding for Britian’s smaller companies. The optimum tax system should focus on the behaviours it encourages as well as the revenues it generates.”

• Fri 19 July 2024 at 3:34 am GMT-6

  IBM: Quantum computers could expose sensitive data within years

  Quantum computers, heralded for their unprecedented computational power, could soon possess the capability to breach the encryption systems that protect critical infrastructure, financial markets and personal bank accounts, according to a leading scientist.

  Speaking to Yahoo Finance Future Focus, director of IBM Research at Zurich, Dr Alessandro Curioni, explained that quantum computers leverage subatomic particles for calculations, enabling them to perform tasks at speeds unattainable by today’s traditional computers.

  “As a result of the development of quantum computing, all our sensitive data will be exposed,” Curioni said. The scientist then listed the types of sensitive data that could be in jeopardy, such as “healthcare data and financial data.” He also warned that even digital signatures on contracts could be forged.

  While the exact timeline remains uncertain, Curioni emphasised that once quantum computers achieve sufficient power, they will be capable of breaking current cryptographic technology. “We do know that a quantum computing machine, probably before the end of the decade, will be powerful enough to break the standard cryptographic technology that is used today,” he noted.

  Read the full article here

• Fri 19 July 2024 at 3:19 am GMT-6

  Olympics may help retail sales bounce back over summer

  After the Office for National Statistics reported retail sales figures for June, commentary is coming in on what to expect over summer…

  Charlie Huggins, manager of the quality shares portfolio at Wealth Club, said:

  “Consumers weren’t exactly splashing the cash in June – sales in every category, excluding fuel, declined. But we should remember that May sales were especially strong. Sales volumes over the last 3 and 6 months are broadly flat and suggest the consumer is in reasonable health, but not exactly feeling flush.

  “The volatility in monthly retail sales is making it even more difficult than usual to read the economic tea leaves. June was not a great month for the sector. But inflation is moderating, wages are rising and the election is now done and dusted, providing much needed certainty. This means sales could easily bounce back over summer, especially if the weather Gods start being a little more kind.”

  Meanwhile, Matt Jeffers, retail strategy and consulting managing director for Accenture in the UK & Ireland, said:

  “Sales across department stores and clothing fared particularly poorly, a concern as we enter the important summer months. The sector will hope to buck this trend in July, with the prospect of the Euros and Wimbledon finals likely to drive stronger sales.

  “While the Olympics may provide another boost in late summer, retailers should be thinking about how they can reignite sales momentum for the remainder of the year. Sharpening their product and value propositions will be crucial as consumers remain persistently discerning about what, where and when they are willing to make a purchase.”

• Fri 19 July 2024 at 3:05 am GMT-6

  Cooler weather chills UK retail sales

  

  UK retail sales fell more than expected in June as cooler weather turned away shoppers.

  According to official the Office for National Statistics on Friday, sales volumes declined 1.2% last month after a 2.9% jump in May,

  A Reuters poll of economists had on average forecast sales volumes would drop by 0.4% on the month.

  In the 12 months to June, volumes fell by 0.2% and were 1.3% below their pre-pandemic level in February 2020. Volumes fell across most sectors, except for automotive fuels, with the strongest drop seen in categories more sensitive to weather changes such as clothing.

  Lisa Hooker, PWC’s leader of industry for consumer markets, said, shoppers were still reluctant to spend despite the fall in inflation, wage increases and lower social security contributions.

  She said:

  “It appears that the cooler, wetter weather over spring and early summer, combined with longer term uncertainty in the period prior to the general election, has discouraged shoppers from both buying seasonal goods and making longer-term big ticket purchases.”

• Fri 19 July 2024 at 2:50 am GMT-6

  Crowdstrike shares plummet

  The cyber outage is believed to be related to an issue at global cybersecurity firm Crowdstrike. But who are Crowdstrike?

  CrowdStrike is a leading cybersecurity firm specialising in antivirus endpoint security solutions, threat intelligence, and cyber attack response services.

  In a recorded message, it said: “CrowdStrike is aware of reports of crashes on Windows hosts related to the Falcon Sensor.”

  Shares in the firm plunged as much as 14% in premarket trading in New York.

  BREAKING: Airports, businesses, banks and broadcasters, including Sky News, experiencing issues worldwide after mass IT outage.

  Follow the latest and find out more on what companies have been impacted: https://t.co/Vljs0MTuQW

  📺 Sky 501, Virgin 602, Freeview 233 and YouTube pic.twitter.com/LqmYO0AAYs

  — Sky News (@SkyNews) July 19, 2024

• Fri 19 July 2024 at 2:38 am GMT-6

  London Stock Exchange operating as normal

  The London Stock Exchange said it is working as normal despite the IT outage this morning, however, there are problems with its regulatory news service (RNS).

  It said:

  “RNS news service is currently experiencing a third party global technical issue, preventing news from being published on www.londonstockexchange.com.

  “Technical teams are working to restore the service. Other services across the group, including London Stock Exchange, continue to operate as normal.”

  RNS is used by companies to make regulatory news announcements.

  It hosts close to 350,000 announcements each year, with more than 75% of all regulatory and potentially price-sensitive UK company announcements posted there.

• Fri 19 July 2024 at 2:30 am GMT-6

  Ryanair flights disrupted

  Ryanair said its flights are being disrupted by the outage.

  The airline said in a statement:

  “We’re currently experiencing disruption across the network due to a global third party IT outage which is out of our control.

  “We advise all passengers to arrive at the airport at least three hours before their scheduled departure time.”

  On its website it posted: “Potential disruptions across the network due to a global 3rd party system outage.

  “Affected passengers will be notified and any passengers travelling across the network on Fri 19 July should check their Ryanair app for the latest updates on their flight.

  “We advise passengers to arrive at the airport 3 hours in advance of their flight to avoid any disruptions.

  “We regret any inconvenience caused to passengers by this 3rd party IT issue, which is outside of Ryanair’s control and affects all airlines operating across the network.”