Christmas is typically the most wonderful time of the year for confectioners in Britain. But not so for Thorntons.
On a thin day for corporate news there was no hope a profits warning from the chocolatier would slip under the radar. Its shares are down 32% at 26.25p after the chain of stores said consumers are cutting back their spending and that pre-tax profits would be around break-even in the year to June, compared with £4.3m in the previous year. Its warning chimes with surveys from the retail industry suggesting shoppers are particularly bargain-hungry this year.
Before we get on to today’s news, a quick round-up of events overnight.
Ratings agencies continue to grab headlines. The UK was flagged up as one to watch last night by Moody’s. In its annual update on the UK, Moody’s said the UK’s top notch Aaa rating is “predicated on the country’s significant structural strengths” and it notes the UK “faces formidable and rising challenges.” It also stressed the UK’s dependence on the health of the eurozone, saying:
The significant increase in the UK government’s deficit and debt metrics since 2008, the weaker macroeconomic prospects and the risks emanating from the euro area crisis mean that the UK’s stable Aaa rating has a reduced ability to absorb further macroeconomic or fiscal shocks without rating implications.
… The outlook on the rating is likely to be sensitive to future developments in the euro area’s debt crisis, even though the UK is not a member of the monetary union.
Sticking in the UK, business secretary Vince Cable has served notice on the “whingeing” City that the coalition government will ignore the special pleading of bankers to make the economy less dependent on a sector that has caused “immense damage” to Britain.
Our economics editor Larry Elliott lays out Cable’s views here. You can hear Larry talking about the year in economics and his warnings for 2012 in our Business Podcast out this morning. We also interview an economics professor on the value-destroying pitfalls of gift giving – handy for anyone who is leaving their shopping till Christmas eve – and hear from our own Simon Goodley on the year in business.
In Japan overnight, local credit rating agency Rating and Investment Information Inc has cut its rating on Japan to AA+ from AAA. It highlighted inadequate social security reform and an unclear outlook for economic revitalisation. Japan has already been cut by agencies Standard & Poor’s and Moody’s but this was the first downgrade by a domestic agency.
For a full round-up of Tuesday’s eurozone crisis news, our live blog for the day gives a rolling account of market moves, the Spanish bond auction, economic indicators and Bank of England policymakers talking about recession risks.
Now the FTSE 100 has opened, here is a quick summary again of events to watch for today (all UK/GMT times):
• 9.00am Italian final estimate of Q3 GDP
• 9.30am Bank of England minutes of December meeting
• 9.30am UK public finances data for November
• 10.15am Results expected from ECB loans offer
• 3.00pm Eurozone consumer sentiment for December
The FTSE 100 has opened up around 41 points, or 0.8% at 5,460, suggesting sentiment remains positive ahead of results from the ECB loans offer.
On foreign exchange markets, the euro is managing to hold on to Tuesday’s gains of around 0.6%, also buoyed by the ECB loans and some relatively upbeat news out of the US and Germany on Tuesday as well as the unexpectedly successful Spanish bond auction.
On European government bond markets, yields on Italian 10-year debt remain well below the 7% danger level, holding the pattern of recent days, again on ECB loan optimism.
Good morning and welcome back to our live blog on the continuing eurozone crisis. There is no sign of things winding down for the Christmas break.
The agenda today is packed one, topped by the European Central Bank’s bid to ease the gridlock in markets with new three-year funds. Take-up is expected to be strong although with estimates ranging rather wildly there could well be a surprise in either direction.
We also have Italy’s latest GDP estimate and consumer confidence numbers out of the eurozone – if they are anything like the UK equivalent out overnight they will make grim reading. The GfK NOP survey of UK consumers showed confidence at its lowest since the recession.
In the UK we have public finance data out to hopefully provide some clues on how British chancellor George Osborne’s deficit reduction drive is going. Ratings agency Moody’s is hedging its bets on that one and said on Tuesday night that the UK faced “formidable and rising challenges”. It noted: “Any additional weakening in the macroeconomic outlook or a need to support the banking system could temporarily set back the government’s fiscal consolidation.”
There are also minutes due from the Bank of England’s meeting earlier this month when they left policy unchanged. City analysts will be scouring the minutes for any further signs that more quantitative easing (QE) is on the way.
Talking of QE, the ECB is offering unlimited three-year loans to banks today, something being dubbed by some as QE via the backdoor.
To sum up, the ECB is offering low-cost, three-year funds to banks for the first time. Take-up is expected to be big as banks generally see the benefits to their pressured balance sheets outweighing any stigma of taking up the offer. That in turn is hoped to oil the financial system somewhat and help keep some of those soaring European government bond yields in check.
A Reuters poll showed eurozone banks were expected to take up €250bn euros at the tender, although forecasts ranged from €50bn to €450bn euros.
Finally, after some positive US and German data on Tuesday, the FTSE 100 is seen opening around 25 points, or as much as 0.5%, higher after it added 1% on Tuesday to close at 5,419.6.
To sum-up the key events to watch out for today (all UK/GMT times):
• 9.00am Italian final estimate of Q3 GDP
• 9.30am Bank of England minutes of December meeting
• 9.30am UK public finances data for November
• 10.15am Results expected from ECB loans offer
• 3.00pm Eurozone consumer sentiment for December
