Shenzhen: economic heavyweight
Charlie Robertson, chief economist at Renaissance Capital, has another way of looking at the Shenzhen shutdown that really drives home how important the city is:
It’s worth nothing that such a list should probably also include other cities, which would make Shenzhen somewhat lower than 30th… but let’s not get too hung up – the important takeaway is that it’s big and important.
Zero marques: EU mulls export ban on luxury cars
The European Union is discussing a plan to ban exports of luxury vehicles worth more than €50,000 to Russia as part of new sanctions.
The proposed ban, which is set to be approved as early as Monday and could still change, would apply to models from several European car brands, including Audi, BMW, Mercedes, Ferrari and Porsche. The EU measure would also include boats and planes, as well as chairlifts and motorbikes worth more than €5,000.
It may be a moot point for some car makers that have already suspended sales to Russia – but potentially bad news if you’re an oligarch who has been diligently saving up for a nice new Ferrari.
Petrol surge pain
Bert Colijn, from Dutch bank ING, has one way of looking at Europe’s soaring petrol prices (I think this is a ‘laugh-or-you’ll-cry moment):
Round-up: Our top business stories right now
If you’re just joining us, here are some of the business news stories you should be reading:
Here are some key reads on Ukraine:
Bloomberg’s Joe Weisenthal has a chart that puts Tencent’s slump today in perspective: shares are the lowest since March 2020, amid a combination of risk-off sentiment towards China and reports the company faces a fine over anti-money laundering failings.
European gas prices fall on talk hopes
European gas prices have fallen sharply today amid growing hopes that talks over stopping the war in Ukraine may actually get somewhere.
Talks will take place over video link today.
Here’s a chart of the Dutch gas futures benchmark, which has fallen as much as 16pc today.
It’s a similar story in the UK, where gas futures have fallen as much as 12.1pc this morning.
Musk: I’m keeping my crypto
Tesla boss Elon Musk, the world’s richest man, has said this morning that he doesn’t plan to sell his crypto holdings, so that’s that.
Javid: Johnson is trying to convince Saudis to raise oil output
Boris Johnson is trying to convince Saudi Arabia to raise its oil output, health secretary Sajid Javid has said in an interview this morning.
The Prime Minister is reportedly travelling to meet with Saudi officials this week – although Downing Street has so far declined to confirm plans.
Speaking to Times Radio, Mr Javid said:
At a time of a major global energy crisis that has been caused by this war in Europe, it is right for the prime minister and other world leaders to engage with Saudi Arabia and try to work together where that makes sense.
Pressed on whether it is right to seek to do more business with Saudi Arabia – which executed 81 men just days ago – the health secretary said: it is “important to recognise, whether we like it or not, that Saudi Arabia is one of the world’s largest oil producers”.
Why Shenzhen matters
The lockdown of Shenzhen is a big deal: the city is a major producer of electronic and automotive components, so prolonged disruption could mean a fresh wave of disruptions to global supply.
It’s the country’s largest lockdown since Wuhan, in the early days of the pandemic.
In the past hour, Beijing has also announced a lockdown across Jilin province, in the country’s north-east.
Hang Seng China drop worst since 2008
The pain is only getting worse: the Hang Seng China stock index – a Hong Kong-listed gauge of mainland stocks – is now off 7.2pc, its biggest fall since November 2008.
Tencent drop passes 10pc
The rout across Chinese stocks is showing few signs of abating, with video gaming giant Tencent falling more than 10pc.
Adding to the company’s headaches, the Wall Street Journal is reporting that Tencent faces a record fine after China’s central bank found its popular WeChat app has violated anti-money laundering rules.
In Hong Kong, the Hang Seng index is now off 5.3pc:
More broadly, today’s drop builds on a wider crash that has taken the total losses on Chinese tech stocks to around 72pc since their peak last year – a dotcom crash-scale wipeout.
The shock of Shenzhen going into lockdown is compounding growing concern that Beijing is damaging its international standing by continuing to align itself with Russia despite recent events.
FTSE 100 poised to open higher
London’s top stock index is poised to start the week on the front foot, with equity futures trading indicating a rise of about 0.6pc at the open in a minute’s time.
Rio Tinto makes $2.7bn bid for Turquoise Hill
London-listed miner Rio Tinto has tabled a $2.7bn to by Turquoise Hill, which is developing a giant gold mine in Mongolia.
Rio already owns 51pc of the company, which had a two-thirds stakes in Oyu Tolgoi project.
It’s a flagship project for Rio – and a key growth hope – but has been plagued by disputes with Turquoise and the Mongolian government.
The all-cash offer price is $26.60 per share, a 32pc premium to Friday’s close. There are several hurdles facing the takeover, including the requirement of support from two-thirds of Turquoise shareholders.
Rio chief executive Jakob Stausholm said:
Rio Tinto strongly believes in the long-term success of Oyu Tolgoi and Mongolia, and delivering for all stakeholders over the long-term. That is why we want to increase our interest in Oyu Tolgoi, simplify the ownership structure, and further strengthen Rio Tinto’s copper portfolio. We believe the terms of proposal are compelling for Turquoise Hill shareholders.
FTSE to delete Russian groups including Evraz from indexes
FTSE Russell, the subsidiary of the London Stock Exchange that puts together the UK’s top stock indexes, plans to delete a slew of Russian companies from its lists.
The deletions are:
Evraz, the FTSE 100 mining company in which Roman Abramovich holds a 29pc stake
Polymetal, the FTSE 100 Anglo-Russian miner
Petropavlosk, the FTSE 250 gold miner
Raven Property, a small-cap property investment group focused on Russia
In a statement, FTSE Russell said:
FTSE Russell has received feedback from FTSE Russell’s External Advisory Committees and a range of market participants that the ability to buy or sell shares of the index constituents below is severely restricted due to major international brokerage firms no longer supporting trading of these securities and therefore there is insufficient institutional liquidity and market depth. Consequently, this will prevent index trackers from replicating the ongoing inclusion of these names within the FTSE Russell indices.
As a result, it continued, the members will be removed to ensure the index calculations can be “readily understood and followed by index users”.
Evraz’s shares were suspended last week after Mr Abramovich was sanctioned.
FCA tells banks to open up about oligarchs – FT
In the UK, the City watchdog has told banks they need to help out with the crackdown on Russian oligarchs by sharing information on how Vladimir Putin’s allies move money around the world.
The Financial Conduct Authority has instructed lenders that it is not enough to just sever ties – they have to offer information as well, the Financial Times reports.
Bond drop ‘worst since financial crisis’
The drawdown on global bonds is now the worst since the height of the financial crisis in 2008, in a sign of the damage being done across markets.
A aggregate index of government and corporate debt compiled by Bloomberg is off about 9.9pc from highs at the start of this year, with Asian bonds suffering especially.
The fall reflects growing inflationary pressures and rising geopolitical tensions.
Agenda: Chinese stocks plunge
Good morning. Chinese stocks have dropped sharply overnight after Beijing placed the 17.5m residents of tech hub Shenzhen into a lockdown.
The Hang Seng Tech Index, in Hong Kong, fell more than 9pc, while the city’s broader gauge fell 4.7pc.
The lockdown comes after virus cases in China doubled to 3,400, and shows the long tail of the country’s strict zero-Covid policy.
Elsewhere, the German subsidiary of the Russian energy company Rosneft has reported a hacker attack, according to Die Welt newspaper, which said there has not been any impact on Rosneft’s business. Businesses around the world have been on high alert for cyber assaults ever since Russia invaded Ukraine.
5 things to start your day
1) More guided munitions and fighter jets: what higher spending will mean for Britain’s armed forces: Expanding armoured cavalry and artillery will need to be matched with logistical support in the form of supplies, ammunition and engineers
2) Grant Shapps takes aim at Russian aviation and shipping: Vladimir Putin’s decision to shut out foreign airlines costs Kremlin billions in lost fees
3) End of Russian wood pellets mean soaring bills for biomass boiler owners: Suppliers are scrambling to find alternative supplies for homes and businesses that depend on the fuel for heating
4) Don’t blame every Russian for Putin’s barbaric invasion: Companies are right to boycott Russia – now they must ensure their penalties don’t validate anger at a nation.
5) Ofgem urged to prepare for Gazprom sanctions: Existing regulations do not allow for measures against licenced operators, energy regulator is warned
What happened overnight
Asian stocks fell Monday on a rout in Chinese technology shares, while Treasuries slid as elevated commodity prices stoke concerns that the U.S. may need aggressive monetary-policy tightening to tame inflation.
The 8pc plunge in a gauge of Chinese tech firms reverberated around the region, leaving an Asia-Pacific equity index in the red for a second session. A Covid lockdown in Shenzhen, a tech hub, added to the geopolitical and regulatory risks facing the sector in part from strained ties between the US and China.
A climb in Japanese shares amid a weaker yen and gains for S&P 500, Nasdaq 100 and European futures eased some of the gloom. Investors were parsing efforts at diplomacy as Russia continues its war in Ukraine, as well as comments from a U.S. official that Moscow asked China for military assistance.
Coming up today
Corporate: Bodycote, Phoenix Group (full year results)
Economics: Foreign direct investment (China)