Apple downgraded over 'lacklustre' iPhone sales

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• How airplane breakthroughs may have saved 379 lives from the Japan Airlines fireball
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• Marks & Spencer crowned ‘Christmas winner’ by investors

London stocks started the year on a sombre note as they were weighed down by losses in the financial sector and as UK government bond yields climbed to two-week highs.

The blue-chip FTSE 100 fell after hitting a seven-month high earlier in the session, while the mid-cap FTSE 250 index was down 0.9pc.

Yields on the benchmark 10-year UK bond rose over 15 basis points to 3.7pc, touching a more than two-week high, tracking moves in US Treasuries as investors moved away from higher risk assets.

The investment banking and brokerage services index led the losses with a 2.2pc fall, closely followed by a 1.9pc decline in life insurance stocks.

Meanwhile, the FTSE 100 completed its 40th trading year.

Laith Khalaf, head of investment analysis at AJ Bell, said: “The headline index has made almost no progress since the start of the century, and in the last decade the Footsie has been totally eclipsed by the US stock market.”

Pharma and biotech shares were the top performer, jumping 1.7pc, supported by a 1.8pc rise in AstraZeneca after the drugmaker’s respiratory syncytial virus (RSV) immunisation for infants developed with Sanofi got approval in China.

Oil and gas shares added 0.4pc as crude prices moved higher on the prospect of Middle Eastern supply disruptions after a naval clash in the Red Sea.

The FTSE 100 fell on the first trading day of the new year as traders took profits after a rally at the end of 2023.

The UK’s blue chip index closed down 0.2pc at 7,721.52 while the FTSE 250 slumped 0.9pc to 19,511.80.

Hospitals and banks are more exposed to cyber attacks because “lazy” broadband engineers are failing to fill in crucial forms, it has been alleged.

Our media and telecoms reporter James Warrington has the details:

Industry sources warned of a “Wild West” among contractors who are not handing over information about when and where they are working on BT’s network.

This leaves companies blind to who has access to critical network infrastructure, the sources claimed, allowing saboteurs to take advantage.

In one incident in late October, a hospital and financial institution in central London were taken offline after someone gained access to the network and cut through a cable.

Another incident in August saw two people use a van to tear broadband cables out of the ground.

Read how BT figures seen by The Telegraph show compliance rates are low and are falling.

Lenders have kicked off a new year “mortgage rates war” amid hopes the Bank of England will cut borrowing costs. 

Our money reporter Ruby Hinchliffe has the latest:

One of Britain’s biggest mortgage providers, Halifax, cut the rates on some of its mortgages by as much as 0.92 percentage points Tuesday – equivalent to £162 a month on a £300,000 loan with 25 years’ of repayments left.

Leeds Building Society also cut rates by 0.49 percentage points and is now offering a two-year fix at 4.60pc, according to analyst Moneyfacts.

Other lenders, such as Kensington, have withdrawn rates with a view to re-launch cheaper loans. 

Mortgage broker Ranald Mitchell, of Charwin Private Clients, said the “unprecedented rate war is well underway” in 2024 and that “seismic moves” were to be expected compared to last year.

Read how mortgage lending is changing.

Apple shares slumped by more than 3.3pc after its stock was downgraded by analysts expecting “lacklustre” sales of iPhones.

The world’s largest company began 2024 with a blow to its share price after Barclays downgraded the iPhone maker’s stock to “underweight”.

Analysts said the stock had outperformed in 2023 despite a year when most quarterly targets were missed.

They were sceptical about the prospects for the iPhone 15, adding “we see no features or upgrades that are likely to make the iPhone 16 more compelling”.

The Silicon Valley giant’s stock rose by 54pc last year but Barclays analysts said they expect further “lacklustre” sales for iPhones.

Meanwhile, Apple is battling competition from Huawei after China banned officials from using iPhones at work in a tit-for-tat battle with the US.

Oil giant Chevron said it would take an accounting hit on part of its US assets and recognise some losses, hitting its fourth quarter results by up to $4bn (£3.2bn).

The impairment of US assets, mainly in California, was “due to continuing regulatory challenges in the state,” while the loss relates to oil and gas production assets sold in the US Gulf of Mexico, the company said.

The regulatory difficulties resulted in lower anticipated future investment levels in its business plans, Chevron said.

But it expects to keep running the assets for “many years to come”.

Meanwhile, the loss involves “abandonment and decommissioning obligations,” after companies that bought the production assets filed for protection under Chapter 11 of the US Bankruptcy Code.

The decommissioning activities are to take place over the coming decade.

The actions are, in total, estimated to result in charges of $3.5bn to $4bn in Chevron’s fourth quarter 2023 results.

Chevron shares rose 0.6pc in New York.

Government borrowing costs have leapt at their fastest pace since September today as traders trim their bets on the number of interest rate cuts this year.

Bond markets slumped steeply as money markets pulled back their expectations of rate cuts this year.

The yield on benchmark 10-year UK gilts - the return the Government promises to pay buyers of its debt - rose by more than 15 basis points to 3.69pc, its largest jump since September.

It comes as money markets have reduced bets on the level of interest rate cuts this year. 

Before today, traders had priced in cuts from their 16-year highs of 5.25pc to 3.75pc but volatile trading has seen bets cut below that level at times.

Wall Street’s main indexes fell at the open, kicking off 2024 on a dull note.

The Dow Jones Industrial Average fell 123.32 points, or 0.3pc, at the open to 37,566.22. 

The S&P 500 opened lower by 24.63 points, or 0.5pc, at 4,745.20, while the Nasdaq Composite dropped 137.65 points, or 0.9pc, to 14,873.70 at the opening bell.

The pound has dropped against the resurgent dollar as it was also hit by the latest signs of slowing inflation in Britain.

Sterling was last down 0.9pc at $1.26, as a move up in US yields sent the greenback higher. 

The pound gained more than 5pc in 2023 amid expectations the Bank of England would keep rates higher for longer.

However, a weakening economy and election uncertainty make a repeat performance unlikely.

The pound was flat against the euro at 86p.

It comes as food price inflation rose at the joint slowest pace in a year and a half in December, according to the British Retail Consortium.

Markets are fully pricing a first Bank of England rate cut by May, with trades implying rates will drop t nearly 3.75pc by the end of the year.

Tesla delivered more vehicles than expected in the last three months of 2023 but dropped behind China’s BYD in global electric car sales.

Tesla handed over 484,507 vehicles in the fourth quarter, which was ahead of analyst estimates of 483,173.

However, BYD sold 526,409 fully electric vehicles during the same period, driven by its cheaper models in China. 

It means BYD takes Tesla’s crown as the number one seller of electric vehicles in the world.

The Government does not plan to send “additional assets” to patrol the Red Sea, Downing Street said, as it condemned the “destabilising” attacks by Iran-backed Houthi rebels.

Asked whether more warships could join HMS Diamond in the region, the Prime Minister’s official spokesman said: 

You will appreciate, given the operational nature of this, I can’t get into a lot of detail.

Planning is under way for a range of scenarios. No decisions have been made. We will continue to pursue all potential routes, including diplomatic routes.

The Houthis should be under no misunderstanding, we are committed to holding malign actors accountable for unlawful seizures and attacks because the situation in the Red Sea is serious. These attacks are unacceptable, they are destabilising.

The UK is part of Operation Prosperity Guardian, which is the taskforce working in the region, and we have other assets available.

In terms of other military assets, there are not currently any plans to send additional assets over and above what we already have in the region.

Online sellers making money from second-hand goods or homeowners who let out their spare rooms are among those who could end up paying tax on their “side-hustle” earnings under a New Year tax clampdown.

From January 1, digital platforms such as eBay, Airbnb, Etsy, Amazon and Vinted must share seller information with HM Revenue & Customs (HMRC) as part of a crackdown, dubbed the side hustle tax.

This will allow tax authorities to detect and tackle tax evasion, while also levelling the playing field with how traditional businesses are treated for tax purposes, according to HMRC.

It comes amid a number of tax changes for the start of 2024, including changes to the national insurance rate that employees pay.

The threshold for earnings from so-called online side hustles is set at more than £1,000 a year - above this, online sellers must register as self-employed and file a self-assessment tax return at the end of the financial year.

Oil has continued to move higher after Iran sent a warship into the Red Sea, escalating Middle East tensions.

Brent crude has climbed more than 2pc toward $79, while US-produced West Texas Intermediate has risen above $73 a barrel. 

The deployment of an Iranian warship comes after the US Navy said it was fired upon when responding to a distress call from a vessel in the Red Sea. 

Defence and shipping stocks were also trading higher, with aerospace and defence companies across the FTSE 350 hitting a record high. 

Giovanni Staunovo, a commodity analyst at UBS Group, said: “The latest events in the Red Sea, positive sentiment in European equity markets and the new Chinese import quotas are likely pushing crude higher.”

Government borrowing costs have jumped higher on a day of thin trading, as bond traders recalibrate bets on how steep the Bank of England will cut interest rates.

Money markets are pricing in more than one and a half percentage points of interest rate cuts in Britain this year from 5.25pc to 3.75pc but bond traders are not so sure.

The yield on 10-year UK gilts has risen 14 basis points to 3.66pc in the largest lurch upward across Europe.  However, it remains down 76 basis points over the last six months.

Meanwhile, Germany’s 10-year yield, the benchmark for the eurozone, has fallen 34 basis points over the last six months, having enjoyed its largest drop since 2014 over the whole of 2023. It is up seven basis points today to 2.09pc.

Much of the sharp movement in prices has been put down to thin trading as investors return from the New Year holiday.

Wholesale gas prices have fallen despite forecasts that temperatures will drop across Europe in the coming days.

The European benchmark contract has fallen 1.5pc to less than €32 per megawatt hour, while the UK equivalent has dropped 1.3pc below 80p per therm.

It comes amid lower industrial gas consumption and high storage levels across the continent.

This has offset the impact of the impending colder weather, with temperatures forecast to fall to 5C by Sunday in London.

US stock indexes slipped in premarket trading, setting a sombre tone for the first trading day of 2024.

The three major US stock indexes notched monthly, quarterly and annual gains as traders priced in higher chances of interest rate cuts from the Federal Reserve this year on the back of cooling inflation.

For 2023, the benchmark S&P 500, the tech-heavy Nasdaq and the blue-chip Dow posted double-digit gains. The S&P 500 closed on Friday within 1pc of its record closing high reached on January 3, 2022.

However, US stock futures came under pressure today, with Apple falling 1.2pc in premarket trading after a report from thefly.com said Barclays downgraded the iPhone maker’s stock.

Meanwhile, the yield on 10-year US Treasury notes , a benchmark for global borrowing costs, ticked above 4pc to a two-week high earlier in the session before easing to 3.94pc.

Ahead of the opening bell, the Dow Jones Industrial Average was down 0.3pc, the S&P 500 had lost 0.4pc and the Nasdaq 100 was down 0.7pc.

Maersk will decide today whether to resume sending vessels through the Suez Canal via the Red Sea or redirect them around Africa following a weekend attack on one of its ships, a company spokesman said.

The container shipping giant on Sunday paused all Red Sea sailings for 48 hours following attempts by Yemen-based Houthi militants to board the Maersk Hangzhou. US military helicopters repelled the assault and killed 10 of the attackers.

Maersk had more than 30 container vessels set to sail through Suez via the Red Sea, an advisory on Monday showed, while 17 other voyages were put on hold.

A decision will be taken today regarding how to proceed, the company spokesman said.

The Iranian-backed Houthis, who control parts of Yemen after years of war, started attacking international shipping in November in support for Palestinian Islamist group Hamas in its war with Israel in the Gaza Strip.

Major shipping groups, including Maersk and Hapag-Lloyd , last month stopped using Red Sea routes, instead taking the longer journey around southern Africa via the Cape of Good Hope.

The pound has fallen slightly against the dollar to start the year as money market expect interest rate cuts from the Bank of England.

Sterling was last down 0.2pc at $1.27, having clocked its strongest performance since 2017 with a 5pc gain last year.

However, money markets are pricing in more than one and a half percentage points of interest rate cuts this year from 5.25pc to 3.75pc in an effort to avoid a recession.

Meanwhile, an expected general election is likely to add to the uncertainty in the economy.

After Britain’s manufacturing sector suffered a seventeenth consecutive monthly downturn, Dave Atkinson of Lloyds Bank said: 

Manufacturers are entering the new year with a bit of a hangover from the challenges of 2023. 

Despite this, many of those we speak to tell us they’ve become more agile at dealing with the headwinds posed by high input costs and energy bills.

They’re also excited by the potential growth prospects provided by reshoring, new technologies and the green economy, with our latest Business Barometer reporting that the majority of firms expect their activity to increase over the next 12 months, as the sector looks to move onto more robust footing as early as possible in 2024.

Aerospace and defence stocks have hit a record high across the FTSE 100 and FTSE 250.

The sector has begun 2024 with a 1.4pc jump, with Babcock International rising 1.5pc and BAE Systems gaining 1.4pc.

British manufacturing production declined for a 17th successive month in December amid declines in production and growing job losses, a closely-watched survey showed.

S&P Global UK Manufacturing purchasing managers’ index (PMI) fell back more sharply than expected to 46.2 in December - after hitting a seven-month high of 47.2 in November.

Rob Dobson, director at S&P Global Market Intelligence, said:

The downturn has hit manufacturers’ confidence, which dipped to its lowest level in a year, and encouraged renewed cost caution with further cutbacks to stock levels, purchasing and employment. 

With concerns about high interest rates and the cost-of-living crisis hurting demand, the outlook for manufacturers in the months ahead remains decidedly gloomy.

The downturn in demand is having some positive effects on supply chains, however, with suppliers reducing their prices for raw materials and vendor lead times showing a further improvement.

Manufacturing continued its slump in the eurozone at the end of last year as output fell and job losses extended for a seventh successive months, according to a closely-watched survey.

The HCOB Eurozone Manufacturing purchasing managers’ index (PMI), rose marginally in December to 44.4, from 44.2 in November. It was its best performance in seven months.

France recorded its largest worsening of business conditions in three-and-a-half years in December, although the downturns in German and Italian manufacturing eased.

Greece was the solitary area of improvement, with growth edging up to a four-month high.

The price of oil has moved higher after Iran sent a warship into the Red Sea.

Brent crude oil has risen 1.9pc in early trading toward $79 a barrel as tensions escalate in the vital shipping route.

Iran dispatched its warship in response to the US Navy’s sinking of three Houthi boats over the weekend.

The US Navy said it came under fire as it responded to a distress call in the Red Sea.

Attacks by the Houthi rebels in Yemen have forced shipping companies to send their vessels around the south of Africa rather than through the waterway linking the Arabian Sea with the Mediterranean Sea via the Suez Canal.

Iran’s Alborz destroyer entered the Red Sea on Monday, state media said.

Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova, said: “Ongoing geopolitical tensions are anticipated to provide support to prices.”

China stocks kicked off the year with their worst day since 2019 after a slowdown in manufacturing and home sales.

The CSI 300 Index fell 1.3pc in Asian trading as weak data triggered concerns about a “fragile” recovery in the world’s second largest economy.

The Hang Seng index in Hong Kong sank 1.5pc to 16,788.55 and the Shanghai Composite index dropped 0.4pc to 2,962.28.

Investors were selling property developers like debt-laden China Evergrande, which fell 6pc, and LongFor Group Holding, which lost 6.9pc. Sino-Ocean Holding declined 4.6pc.

It comes after the December survey of the official purchasing managers index, or PMI, in China fell for the third consecutive month  to 49, signalling weak demand.

That contrasted with a private-sector survey, by financial publication Caixin, which registered a slight improvement in the manufacturing PMI to 50.8, driven by increased output and new orders. However, it showed that business confidence for 2024 remained subdued.

The latest data also showed that the value of new home sales by China’s top 100 developers fell nearly 35pc from a year earlier in December despite moves by regulators to lift limits on such transactions.

Christopher Wong, a currency strategist at OCBC, said: “The divergence in manufacturing PMIs highlights how fragile the China recovery story is.”

The FTSE 100, which celebrates its 40th birthday this week, has started the year on a positive note after a boost to energy shares.

The blue-chip index was up 0.2pc, touching a seven-month high, while the midcap index FTSE 250 edged down 0.1pc.

Energy shares climbed 1pc after oil prices jumped 1.4pc as a result of potential supply disruptions in the Middle East and expectations of an economic stimulus from China, the world’s top crude importer.

Marks and Spencer gained 1.7pc to top the FTSE 100 after Exane BNP Paribas raised the retailer’s stock rating to “outperform” from “neutral”.

Shares of HSBC fell 0.4pc as its subsidiary HSBC Continental Europe completed the sale of its retail banking business in France to Crédit Commercial de France.

Drugmaker AstraZeneca slid 0.2pc even as its respiratory syncytial virus immunisation for infants, developed with Sanofi, got an approval in China.

Somalia will hold an emergency cabinet meeting today, state media said, after the breakaway region of Somaliland struck a controversial deal with Ethiopia giving it access to the Red Sea.

Monday’s surprise pact has triggered fury in Mogadishu, which considers it a violation of its sovereignty.

It was announced only days after Somalia’s central government had agreed to resume dialogue with the separatist northern region after years of stalemate.

Somaliland has been seeking full statehood since claiming independence from Somalia in 1991, a move fiercely opposed by Mogadishu and not recognised internationally.

The Addis Ababa agreement gives landlocked Ethiopia long-desired access to the Red Sea, a key waterway for global trade.

“This historic agreement ensures Ethiopia’s access to the Red Sea for their naval forces, reciprocated by formal recognition of the Republic of Somaliland, marking this as a significant diplomatic milestone for our country,” Somaliland’s foreign ministry said in a statement.

Somali National Television said on X, formerly Twitter, that there would an emergency cabinet meeting on Tuesday to discuss the agreement.

UK markets were mixed as traders returned after the New Year holiday.

The FTSE 100 began the day up 0.3pc to 7,759.21 while the FTSE 250 was down 0.1pc to 19,666.98.

Discounters Aldi and Lidl have revealed record Christmas trading as cash-strapped shoppers looked to cut costs of their festive celebrations.

German-owned Lidl claimed its best Christmas yet, reporting year-on-year UK sales growth of 12pc in the four weeks to December 24.

The supermarket said it saw 4.5m more shoppers come through its doors and cheered its busiest ever trading day on Friday December 22.

Rival Aldi said it also notched up record trading, with UK sales of more than £1.5bn for the first time in the four weeks to Christmas Eve.

The chain said sales lifted 8pc year-on-year in the four weeks to December 24.

Bitcoin stormed above $45,000 (£35,300) for the first time since April 2022 amid hopes that regulators will approve wider trading methods for the world’s largest cryptocurrency.

Bitcoin touched a 21-month peak of $45,532 (£35,737) as expectations grow that the US Securities and Exchange Commission will soon approve exchange-traded spot bitcoin funds.

Hayden Hughes, co-founder of social-trading platform Alpha Impact, said much of the rise was down to the fear of missing out, with investors “buying on January 1, first thing New Year’s morning”.

Cici Lu McCalman, founder of blockchain adviser Venn Link Partners, suggested a major correction in the price is unlikely given the broader bullish sentiment and the upcoming halving.

Halving is the process that cuts the quantity of bitcoin that miners receive in half every few years.

Asian markets started the year with little fanfare, with Hong Kong and Shanghai extending their 2023 losses.

The Hang Seng Index lost 1.9pc, having ended 2023 with a yearly loss of close to 14pc, making it one of the world’s worst performing stock markets.

Meanwhile, the Shanghai Composite closed down 0.4pc at 2,962.28, and there were also losses in Mumbai, Singapore and Taipei, although Sydney, Seoul, Manila, Bangkok and Jakarta rose.

A private-sector survey today showed China’s factory activity expanded at a quicker pace in December due to stronger gains in output and new orders, but business confidence for 2024 remained subdued.

That contrasted with official data released over the weekend, which showed China’s manufacturing activity shrank for a third straight month in December and weakened more than expected.

Christopher Wong, a currency strategist at OCBC, said:

The divergence in manufacturing PMIs highlights how fragile the China recovery story is.

We continue to monitor if Chinese data shows signs of cracks or continue to point to signs of stabilisation.

Oil prices have moved higher after Iran sent a warship into the Red Sea in response to the sinking of three ships by the US Navy.

Iran despatched its Alborz destroyer on Monday after the sinking of three Houthi boats over the weekend in the vital trade route, which is being avoided by shipping companies after a series of attacks.

5 things to start your day 

1) Hedge funds stockpile uranium as price of nuclear fuel surges | Up to 50 firms are believed to have bought ‘yellowcake’ amid huge global supply deficit

2) Britain cracks down on semiconductor sales to China | Western countries continue to restrict Beijing’s access to advanced microchips

3) Investors lose £7bn on British banks despite rising interest rates | Barclays, NatWest, Virgin Money and Metro shares all failed to make gains since January

4) Falling food inflation at risk from looming cost pressures | ‘Obstacles on the road’ threaten to stoke price rises in 2024, warn retail bosses

5) Defence company founded by Oculus creator plans to double UK presence | Anduril bets on a boom in Britain’s aerospace technology

What happened overnight 

Asian markets slipped as traders returned from the New Year break. 

Wall Street had ticked lower on the last trading day of 2023 and the Hang Seng index in Hong Kong began 2024 by sinking 1.5pc to 16,800.73.

The Shanghai Composite index dropped 0.2pc to 2,968.81. Japan’s markets were closed for a holiday.

Investors were selling property developers like debt-laden China Evergrande, which fell 6pc, and LongFor Group Holding, which lost 5.7pc.

The December survey of the official purchasing managers index, or PMI, in China fell to 49 for the third consecutive month, signalling weak demand and underscoring the challenging economic conditions in the world’s second-largest economy.

That contrasted private-sector survey, by financial publication Caixin, which registered a slight improvement in the manufacturing PMI to 50.8, driven by increased output and new orders. However, it showed that business confidence for 2024 remained subdued.

South Korea’s Kospi shed 0.2pc to 2,651.34 and the S&P/ASX 200 in Australia rose 0.5pc to 7,625.60.

Bangkok’s SET rose 0.2pc and the Sensex in Mumbai climbed less than 0.1pc.

Stocks fell Friday on Wall Street from their near all-time high amid easing inflation, a resilient economy and the prospect of lower interest rates which buoyed investors.