FT Opening Quote

Pearson is restructuring again as its education business continues to struggle, Royal Mail says it had a great Christmas delivering presents. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here.

Pearsonis axing 4,000 jobs, or 10 per cent of its workforce. The troubled publishing company is trying to arrest a decline in its fortunes resulting from lower educational spending and a muddled digital strategy.

Hefty restructuring charges of around £320m will be taken in 2016, depressing operating profits to between £260m to £300m from around £600m. Pearson has been reducing its geographic spread, its complexity (for example by selling the FT) and investing in online products.

This looks like the last roll of the dice for chief executive John Fallon, who has presided over a plunge in the share price. New chairman Sidney Taurel started earlier this month.

Greater cheer is emanating from Royal Mail’s kinetic boss Moya Greene. Posties delivered “a great Christmas” she says in a trading statement. UK parcel volumes were up 4 per cent in the first nine months, with addressed letter volumes (excluding elections) down 3 per cent. The group result was a 1 per cent revenue increase, underlining the maturity of the business.

St James’s Place, a wealth manager that prides itself on its old-fashioned politeness, produced net funds inflow of £1.63bn in 2015, a 17 per cent increase. Funds under management rose 13 per cent to £58.6bn. That’ll do nicely, Sir.

Barclays is getting out of cash equities in Asia. The main surprise for many of us is discovering that Barclays was in cash equities in Asia in the first place. The investment bank formerly known as BarCap is best known for its businesses in the UK and the US.

Around 230 jobs will go as a part of a broader cull as high as 1,000. The new team of chairman John McFarlane and CEO Jes Staley appears less likely to bolster the investment bank than first expected. Mr McFarlane “doesn’t like” lossmaking businesses, a view some bankers would have regarded as eccentric a few years ago.

Lloyds is stepping up commercial property lending with a £185m loan to AEG, owner of the 02 enormodome. The money will pay for a designer shopping village.

These back channels for brands to offload discounted stock have been heavily patronised by Chinese tourists in other parts of the UK. The O2 venture had better target domestic shoppers, since economic woes will depress Chinese visitor numbers.

FastFT reports Land Securities, Britain’s largest property company, has reportedrecord footfall in its shopping centres in the three months to December, bucking the national trend. The centres, which include Bluewater in Kent, saw a 1.7 per cent increase from the same period last year.

Revenue for the brewer SABMiller fell by 8 per cent in the third quarter to December 31, although this was a slight improvement on the 9 per cent drop in so-called net producer revenue (NPR) reported for the first half of the year.

Countrywide, the UK’s largest estate agency, has upgraded its operating profit forecast just a few months after issuing a profit warning.

Premier Foods, the UK company behind products such as Bisto gravy and Loyd Grossman sauces, said sales of its key branded products dropped 1 per cent in the third quarter to £208m, a marked slowdown from the 1.6 per cent growth reported in the previous three months.

Halfords saw a return to growth in sales of bicycles in the third quarter more than offsetting a small decline in parts, accessories and clothing, putting it back on trackafter a rough summer.

British defence specialist Chemring is seeking to tap shareholders for £80m as it looks to manage its growing debt pile, while at the same time unveiling a widening full year pre-tax loss and a 78 per cent decline in operating profit.

Asian markets have been volatile again this morning. UK stocks are back in familiar piggy-in-the-middle territory between the Asia and the US. Shares will surely grind lower over the next few months as companies report numbers confirming the extent of the slowdown.

Bank equities have been notably weak, even for UK-focused lenders. So there are significant fears of contagion from financial market shocks whose epicentre is a foreign loans crisis.

Back to bear market business as usual, in other words, after price earnings ratios rose resolutely above the long-run average in a typical 7-8 year bull market cycle.

Beyond the Square Mile

Rémy Cointreau’s revenue topped analysts’ estimates in the third quarter thanks to growth in the US and rebounding sales in China. Making amends for a tough first half, the French spirits maker reported sales of €298.4m in the three months ended December 31, 10.8 per cent higher than the same time a year earlier and versus an analyst consensus of €294m.

Sharp saw its shares surge by as much as 22 per cent in Tokyo following reports that Taiwan’s Hon Hai Precision Industry, a major Apple contractor, has made a $5.3bn offer for the struggling display maker.

Asian shares slide A rebound for Asian shares looked on the cards this morning, but things turned around in the afternoon. In China, the Shanghai Composite ended 3.2 per cent lower, while the tech-focused Shenzhen Composite slumped 4 per cent. Japan’s Nikkei ended 2.4 per cent lower.

In the US, after a rough morning for US markets, the S&P 500 rebounded in afternoon trading, but still ended the day down 1.17 per cent at 1,859.33. Early trading had seen 60 per cent of US stocks in bear-market territory.

Meanwhile, the banks continued their run of legal troubles: Goldman Sachs saw its bottom line stung my a $5.1bn legal settlement and Deutsche Bank said it expects to record a net loss of approximately €6.7bn in 2015 after incurring another round of litigation and restructuring charges.

Intraday

The European Central Bank makes its first announcement of the year on interest rates at 1245 GMT, with no change expected. Officials look set to wait until the spring before deciding how to react to the shaky start to the year. The ECB president Mario Draghi will hold a press conference at 1330.

In the US at 1330, initial unemployment claims for the week ended January 16 are expected to be around 280,000, down from the previous week’s 284,000, while the January Philly Fed index is expected to rise to a still weak -3.2 from a previous -10.2.

Earnings due later today include Verizon, Starbucks, American Express and Bank of New York Mellon.

Markets

Asian markets
Nikkei 225 down -398.93 (-2.43%) at 16,017
Topix down -37.48 (-2.80%) at 1,301
Hang Seng down -344.15 (-1.82%) at 18,542

US markets
S&P 500 down -22.00 (-1.17%) at 1,859
DJIA down -249.28 (-1.56%) at 15,767
Nasdaq down -5.26 (-0.12%) at 4,472

European markets
Eurofirst 300 down -37.57 (-2.87%) at 1,273
FTSE100 up +24.56 (+0.43%) at 5,698
CAC 40 up +7.21 (+0.17%) at 4,132
Dax up +15.28 (+0.16%) at 9,407

Currencies
€/$ 1.09 (1.09)
$/¥ 116.62 (116.91)
£/$ 1.42 (1.42)
€/£ 0.7696 (0.7673)

Commodities ($)
Brent Crude (ICE) down -0.09 at 27.79
Light Crude (Nymex) down -0.10 at 28.25
100 Oz Gold (Comex) down -3.50 at 1,104
Copper (Comex) unchanged 0.00 at 1.96

10-year government bond yields (%)
US 2.00%
UK 1.62%
Germany 0.49%

CDS (closing levels)
Markit iTraxx SovX Western Europe +1.99bps at 21.91bp
Markit iTraxx Europe +2.94bps at 98.76bp
Markit iTraxx Xover +17.69bps at 394.63bp
Markit CDX IG +0.59bps at 110.98bp

Sources: FT, Bloomberg, Markit

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