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  • Today's business and finance round up 25th January 2022

Today's business and finance round up 25th January 2022

Stock markets tumble amid Russia/Ukraine tensions

25th January 2022

Bite-sized business news from the UK and beyond

Good morning We start the day with some good news – the government said from 11 February travellers arriving in England from abroad will no longer have to take Covid tests if they are fully vaccinated. Rules have also been eased for unvaccinated travellers, who will no longer have to take a day eight test.

Today's stories

  • Red Monday – Stock markets tumble amid Russia/Ukraine tensions

  • Cooling off – UK economic activity hits 11-month low

STOCK MARKETStock markets tumble amid Russia/Ukraine tensions

What’s going on?Yesterday major stock markets around the world slid as fears over a conflict between Russia and Ukraine grew. European shares suffered their worst day since June 2020 with the UK FTSE 100 down 2.6%, the French CAC down 4.0% and the German DAX 3.8% lower.In the US, both major indices the Nasdaq and S&P 500 – down 7.6% and 5.7% respectively last week, the worst since March 2020 – lurched lower in a busy day of trading.

Why is this important?

Anyone who checked their stock portfolio yesterday would have been greeted with a sea of red.Markets were rattled by NATO’s decision to put military forces on stand-by for a potential attack by Russia on Ukraine. The US ordered family members at its embassy in Kyiv to leave “due to the continued threat of Russian military action”. As major gas producers, any instability in Ukraine and Russia leads to concerns over energy supplies so wholesale gas prices also rose sharply.  Ukraine aside, markets were already nervous ahead of the Federal Reserve’s first policy meeting of 2022. Tomorrow, the US central bank is widely expected to signal a first interest rate rise since 2018 in March. Economists expect there to be four increases this year alone. Murmurings over interest rates hikes are good news for banks who can charge more for loans, but bad news for tech stocks whose future earnings are less attractive with higher interest rates.

Zooming outTurbulence in the stock market leads to investors rebalancing their portfolios in favour of less risky/defensive stocks like supermarkets and telecoms and abandoning riskier/cyclical stocks like tech.Tech heavyweights including Apple, Microsoft and Tesla are all reporting earnings results this week and if they fail to live up to expectations then it’s likely there’ll be even more of a selloff in the stock market

ECONOMYUK economic activity hits 11-month low

New data released yesterday showed that a slowdown in the service sector held back the UK economy at the start of 2022. IHS Markit’s services purchasing managers’ index (PMI) fell more than expected to an 11-month low of 53.3.The PMI is a monthly survey to managers across different areas of business, designed to give a picture of how busy the economy is. A score of over 50 indicates the economy is growing whereas below this suggests the opposite.The latest number shows that although the economy is expanding, growth has slowed to the lowest since February 2021 with some sectors hit more than others.Customer-facing parts of the economy such as hospitality, leisure and travel struggled because of Omicron restrictions. Manufacturers also reported a weakening of order book growth. But in better news growth in business and financial services was strong.So what’s the outlook for the rest of the year? With the government’s Plan B restrictions now easing, the downturn in leisure and hospitality should hopefully be brief.

Stat of the day

The average first-time buyer in 2021 was 32 years old and put down a £53,935 deposit on a first property costing £264,140

Other stories to keep you in the loop

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  • Banknote printer De La Rue in profit warning over Covid impact

  • Unilever to cut thousands of jobs worldwide

  • Netflix could lose 750,000 UK subscribers as Disney takes control of hit shows

  • Treasury minister resigns over government's handling of Covid loan fraud

  • Amigo Loans shares plunge 40% as lender issues ‘this or nothing’ survival plan

  • White applicants to civil service scheme accepted at far higher rate

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