Banks face $2bn Twitter losses says report; Canary Wharf owners inject £400m – as it happened

Closing summary: Twitter debt losses, Canary Wharf investment, Alphabet shares fall

With war, uncertainty, a slowdown in the Chinese economy and – perhaps above all – rising interest rates, the signs of strain in the global economy are evident. That can affect anyone who is not careful.

The investment banks who lent Elon Musk money to buy Twitter, now renamed X, have been exposed as the tide has come out.

Canary Wharf Group has needed an injection of £400m as it tries to shift strategy after the coronavirus pandemic.

And even the mighty Alphabet, Google’s owner, is not having it all its own way. Its share price dropped 9% on Wednesday inthe first half hour of trading after it announced that its cloud business was slowing down, even as it tries to jump on the generative AI boom.

In other business news today:

You can continue to read our live coverage from around the world:

In our coverage of the Israel-Hamas war, Israel vows to ‘teach the UN a lesson’ as row over secretary general’s speech escalates

In our coverage of the Russia-Ukraine war: Russia set to withdraw from global treaty banning nuclear weapons tests

In the UK, Rishi Sunak and Keir Starmer clash over housing and the cost of living at PMQs

In the US, Mike Johnson becomes Republicans’ fourth House speaker nominee with support unclear

In our Europe coverage, Robert Fico formally appointed as Slovakia’s prime minister

Thank you for reading today. That’s all from me this week. Normal service resumes with Graeme Wearden tomorrow and Friday. JJ

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One of the biggest movers on European stock exchanges today is Paris-listed payments company Worldline. Its share price has plunged 57% after shocking investors with a cut to its full-year guidance.

Reuters reckons that the price drop has wiped $4bn from its market value today, with the struggling German economy particularly in focus.

Worldline counts Marks & Spencer, Subway and airline KLM among its customers, providing tills, online payments and cross-border payment services. However, it said there was a macroeconomic slowdown, and people were diverting spending to essentials such as food rather than discretionary spending. It also said it had ended relationships with some clients who were fraud risks.

The sell-off on Wednesday was brutal.

A chart showing Worldline shares plunged to a record low on Wednesday after warning about a worsening economy.Worldline shares plunged to a record low on Wednesday after warning about a worsening economy. Photograph: Refinitiv

Gilles Grapinet, Worldline’s chief executive, said:

After a solid start of the year, we now enter into a second semester where the macro environment deteriorates, in particular in Germany.

The company said it would cut €200m in costs as it tries to turn around.

Investors have raced to drag money out of rivals as well. Reuters listed them:

  • Italy’s Nexi down 20.4%, the second biggest faller on the STOXX 600 and set for its worst daily fall since March 2020.

  • Shares in CAB Payments shed 9.5%, having already plunged more than 70% on Tuesday after the London-listed company lowered its full-year revenue forecast.

  • Dutch payments firm Adyen’s AS shares were down more than 11% to a four year low.

  • US payments companies also fell in pre-market trading. The likes of PayPal, Block, Upstart and Affirm fell between 2.1% and 7.1% ahead of the Wall Street open.

Canary Wharf owners to inject £400m into London financial district

A view of the London skyline during sunrise looking east, including Canary Wharf, from central London.A view of the London skyline during sunrise looking east, including Canary Wharf, from central London. Photograph: Yui Mok/PA

The owners of Canary Wharf Group have said they will inject £400m into the London property development.

Brookfield and the Qatar Investment Authority have committed £400m to the company by way of a £300m equity subscription and a £100m revolving credit facility, Canary Wharf Group said.

The company said it would use the money to carry out a “strategic repositioning” for the financial district. (Its physical position is staying in London’s East End for now.)

The group has been letting in more residential buildings rather than the skyscrapers for banks that have dominated since the redevelopment project began in the 1980s. It is also hoping to address the UK’s lack of lab space for life sciences and biotechnology companies.

There are 3,500 people living in the windswept towers at Canary Wharf, and the company said there were over 54 million visitors last year.

Shobi Khan, Canary Wharf Group’s chief executive, said:

This investment underscores confidence in our business plan and the ongoing strategic repositioning of Canary Wharf. We have transformed the estate into a thriving, sustainable mixed-use neighbourhood with award-winning homes, an abundance of amenities and parks, a strong and unique retail offer, and a diverse office portfolio with an expanding life sciences offer. We are confident of the opportunities ahead.

Volkswagen, BMW, JLR among carmakers calling on EU to extend Brexit deadline

Volkswagen employees complete a quality control inspection on an ID.3 car on the electric cars production line after assembly at the Volkswagen (VW) vehicle factory in Zwickau, Germany.Volkswagen employees complete a quality control inspection on an ID.3 car on the electric cars production line after assembly at the Volkswagen (VW) vehicle factory in Zwickau, Germany. Photograph: Martin Divíšek/EPA

The bosses of Europe’s largest carmakers have urged the president of the European Commission to postpone the “cliff-edge” introduction of post-Brexit tariffs they say will harm EU electric vehicle production.

Renault, Mercedes-Benz, Volvo and Ferrari were among the 13 large manufacturers who wrote on Tuesday to Ursula von der Leyen asking for a delay to “rules of origin” that are scheduled to come into force on 1 January.

The car industries on both sides of the Channel have united in calling for the deadline to be delayed by three years until the end of 2026, to avoid 10% tariffs being imposed overnight.

The carmakers also included Toyota, Ford and Jaguar Land Rover, all of which have factories in Britain, plus BMW and Volkswagen, which own Rolls-Royce and Bentley in the UK.

They have gained the strong backing of the UK government, which wants to avoid any negative impacts from Brexit. However, senior EU officials have said they do not believe the negotiated deal should be reopened to appease the car industry.

You can read the full story by yours truly here:

Boeing shares are up by 3.5% in pre-market trading.

Investors appear to be focusing on the reaffirmation of its guidance, including on cashflows.

The supplier problems from Spirit AeroSystems have been known about for a while, so a downgrade in production output had been expected. Investors sold the rumour, bought the fact.

Boeing cuts 737 Max target after supplier problems

A Boeing 737 Max-10 performs a flying display at the 54th International Paris airshow at Le Bourget Airport near Paris, France.A Boeing 737 Max-10 performs a flying display at the 54th International Paris airshow at Le Bourget Airport near Paris, France. Photograph: Benoît Tessier/Reuters

American planemaker Boeing has cut its forecast for deliveries of its bestselling 737 Max aircraft after a major issue at a supplier.

Spirit AeroSystems, which makes fuselages, found problems in important bulkheads at the rear of the plane’s body that have slowed Boeing’s manufacturing.

Boeing said it expects to deliver between 375 and 400 planes this year, down from 400 to 450 before the problems.

Boeing is itself recovering from the biggest crisis in its history after two deadly crashes forced the grounding of its entire 737 Max fleet. The crashes were caused by faulty sensors and design flaws.

Despite the slowdown, Boeing said it still expects to generate between $3bn and $5bn of free cashflow for the year.

Dave Calhoun, Boeing’s chief executive, said:

We continue to progress in our recovery and despite near-term challenges, we remain on track to meet the financial goals we set for this year and for the long term.

We are focused on driving stability in our supply chain and improving operational performance as we steadily increase production rates to meet strong demand.

On the London Stock Exchange the FTSE 100 is back in the black, up 0.24% after dipping earlier.

Miners Rio Tinto and Antofagasta have been among the top contributors to the rise, while Lloyds Banking Group and accounting software company Sage have also gained relatively strongly.

Grocery delivery company Ocado is the biggest faller, down 7%. (This is a bit of a headscratcher for us and for some analysts. Please do tweet to me if you know what explains the move!)

Reckitt has also fallen further, down 5% for the day.

There is more interesting info in the Wall Street Journal report on the Twitter-related debt held by a clutch of big banks: they are facing a bit of a catch-22.

If they want to sell, they need to get a debt rating from a big agency such as Moody’s or S&P. But if they get a rating, they are less likely to be able to sell, because it will probably be worse than Twitter had before Musk bought it and turned it into X.

X looks very similar on the face of it to Twitter, but with some important changes: in July Musk said that cashflows were negative because of a nearly 50% drop in advertising revenue and a heavy debt load.

It looks different behind the scenes as well, with swingeing cost cuts and a whole new leadership team.

As the Journal points out, those changes are unlikely to improve the rating on the debt to investment grade, rather than the junk rating that Twitter’s debt had even before the takeover.

Banks sitting on $2bn losses after Elon Musk’s Twitter takeover – report

The banks that helped fund Elon Musk’s takeover of social network Twitter, now renamed X, are sitting on losses of as much as $2bn, the Wall Street Journal has reported.

Musk borrowed $13bn (£11bn) to fund the $44bn deal – a huge sum for an individual to take on. Yet the takeover quickly went sour, with Musk at first trying to get out of the deal after the valuation of technology companies plunged amid rising interest rates.

He then fired the company’s top leadership, and less than a month later warned Musk said it was not out of the question that the network would go bust. Since then he has struggled with falling advertiser revenues.

Usually banks who finance big deals like this would offload the debt to others, walking away with a handsome profit. That has proven much more difficult in the Twitter deal because of the bad timing, so they have hung on to the debt in the hope that its value recovers. The Journal reported:

The banks currently expect to take a hit of at least 15%, or roughly $2bn, when they sell the debt, people familiar with the matter said. That would mean hundreds of millions in losses for those holding the largest pieces, which include Morgan Stanley, Bank of America, Barclays and MUFG. BNP Paribas, Société Générale and Mizuho were also involved.

After holding the debt for a year—an eternity in the corporate-finance world—the banks, which had hoped they could sell it by Labor Day, have recently begun preparations to try to unload at least some of it, the people said.

Updated at 12.17 BST

Signage is seen for the FCA (Financial Conduct Authority), the UK's financial regulatory body, at their head offices in London.Signage is seen for the FCA (Financial Conduct Authority), the UK’s financial regulatory body, at their head offices in London. Photograph: Toby Melville/Reuters

The UK’s Financial Conduct Authority (FCA) has warned that cryptocurrency firms are not properly telling customers about the risks of their products, two weeks after new legislation gave it oversight over the sector.

In news that will not surprise anyone familiar with the wild west of crypto promotions, the City regulator said it had seen:

  • Promotions making claims about the ‘safety’, ‘security’ or ease of using cryptoasset services without highlighting the risk involved

  • Risk warnings not being visible enough due to small fonts, hard-to-read colouring or non-prominent positioning

  • Firms failing to provide customers with adequate information on the risks associated to specific products being promoted

It is another shot across the bows from the regulator, which has already restricted promotions by one crypto company, rebuildingsociety.com Ltd. It has also issued 221 alerts about illegal promotions from unauthorised firms on its “Warning List”.

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