Global market meltdown stalled after Credit Suisse’s £44billion bailout
A GLOBAL market meltdown was stalled yesterday when Credit Suisse became the first major bank to be bailed out since the 2008 financial crisis.
In the early hours of Thursday morning the embattled lender announced it would borrow up to £44billion from the Swiss Central Bank to boost its liquidity and stop a tailspin.
News of the lifeline sent shares in the bank soaring — one day after they had plummeted 30 per cent as financial weaknesses rattled investors.
Analysts at JP Morgan said the need to tap central bank cash suggested the “status quo was no longer an option” for Credit Suisse.
Earlier in the week, the Zurich-based bank, which looks after £1.1trillion of assets, had to delay its annual report after the auditor identified “material weakness” in its financial reporting.
Its biggest investor, Saudi National Bank, refused to inject further cash.
The short-term stabilisation of Credit Suisse, which employs about 5,000 people in the UK, had a calming effect on global stock markets, including the FTSE 100 which rallied by 1 per cent after its biggest fall since the start of the pandemic.
Nervousness around Credit Suisse and last week’s collapse of Californian lender SVB had led traders to expect the European Central Bank (ECB) to halt its rate rises.
However, the ECB ploughed ahead with a 0.5 per cent rate rise to three per cent yesterday.
Analysts at S&P said the rise was needed to tackle runaway inflation across the Continent.
ECB President Christine Lagarde acknowledged market volatility and said “it is not business as usual”.
But she added that the European banking sector was stronger than before the 2008 financial crisis.
The ECB said that it stood “ready to respond” and was “monitoring current market tensions closely”.
Analysts are concerned there could be further issues in other areas of the system, such as pension funds and hedge funds, which could be caught out by higher borrowing costs and falling bond prices.
Next Thursday, the Bank of England will decide whether to raise interest rates for the 11th time in a row.
Markets are now betting the committee will pause its rate hikes due to the current volatility.
City quit fears
THE company responsible for Dunhill cigarettes and Vuse vapes has been urged to abandon its London listing and head for New York.
BRITISH AMERICAN TOBACCO (BAT), which has been listed in London since 1912, is facing pressure from a top-five shareholder to shift its main listing.
Rajiv Jain, boss of US-based GQG PARTNERS, said it “makes no sense” to remain, amid fears the London Stock Exchange is losing its heft.
BAT makes the bulk of its profits in the US but remains headquarted in London.
Waitrose axes staff bonuses
JOHN Lewis and Waitrose staff are being denied a bonus for only the second time in 70 years amid a warning of more job losses.
The employee-owned retail group, once celebrated for staff perks and its mutual model, said that it would operate with “fewer” workers.
It follows the loss of 2,500 jobs with the closure of 16 stores during the pandemic.
Chairwoman Sharon White said yesterday: “We need to become more efficient and productive — that will have an impact on our number of partners.
“The mantra for the year is cost out, margins up and customer focus.”
She blamed £230million of full year losses on rising energy, shipping, fuel and labour costs that “hit us like a hurricane”.
Despite attracting 4 per cent more shoppers, Waitrose sales fell by 3 per cent while John Lewis sales inched 0.2 per cent higher.
Roo's jumping
DELIVEROO claims it is on a “path to profitability” despite another big loss as hard-up Brits cut back on takeaways and restaurants reopened.
It was down £245.6million for the past year — 15 per cent less than the £290.1million in the previous year.
Boss Will Shu said earnings were improving “significantly ahead of expectations”.
Deliveroo now counts more supermarkets, such as CO-OP and Sainsbury’s, as clients alongside restaurants.
It now has 7.4million customers a month.
Branson orbit hits trouble
SIR Richard Branson’s Virgin Orbit has paused all its operations and furloughed staff just weeks after its recent failed rocket mission.
The billionaire’s satellite launch company is now “exploring options” as it faces a cash crunch.
The firm, which went public for £2.5billion in 2021, is worth just £189million after its shares fell yesterday.
Virgin Orbit was supposed to be Britain’s first space mission but its launch from Newquay, Cornwall in January failed after the rocket didn’t deploy.
The satellites it was carrying were lost after a rocket fuel filter became dislodged and caused an engine to overheat.
Virgin summed up the failed mission as “reaches space, falls short of orbit”.
At the time, boss Dan Hart said “Space is hard, but we are only just getting started”.
Virgin said yesterday that the investigation into the failure was “nearly complete”.
DFS profit discomfort
SOFA chain DFS lowered its profit forecast yesterday after reporting a slip in customer orders as households reined in their spending.
The furniture retailer is often seen as a barometer of consumer confidence.
It nudged expectations down from £40million to between £30million and £35million.
Sales had dropped by 2.2 per cent in the six months to the end of December to £545million.
It had performed strongly during lockdowns.