FTSE 100 skids to two-week low on poor earnings but gold nears four-month high as European political worries persist

Education publisher Pearson enjoyed some light relief after its full-year results came in slightly better than last month’s shock preliminary results.

On January 18, the FTSE 100 company cut its 2017 profit forecast, scrapped its 2018 target and warned it would cut the dividend this year, resulting in a 30pc share price plunge.

Yesterday’s price action differed. In a rollercoaster trading session, the blue chip index swung from an intraday low of 625.5p to a high of 699.5p, after it said trading had not deteriorated any further, despite reporting a £2.6bn loss due to a writedown on the value of its North American business.

The group’s full-year operating profit tumbled 21pc to £635m, slightly ahead of January’s guidance, thanks to tight cost controls, while net debt increased to £1.1bn, better than the £1.3bn consensus estimate. Pearson also announced plans to sell its English language learning business GEDU as it grapples with deepening losses in its US business. It has already unveiled plans to offload its 47pc stake in Penguin Random House.

After a “challenging” year the company is looking ahead to operating profit of between £570m to £630m in 2017. However, Neil Campling, of Northern Trust Capital Markets, said “The high end of 2017 guidance assumes an improvement from the key channel partner inventory correction that has taken place through 2016 but given Pearson's poor execution and visibility we feel this end of guidance is likely too optimistic.” Shares climbed 11p, or 1.7pc, to 657p.

On the wider market, the FTSE 100 dipped 27.67 points, or 0.38pc, to 7,243.70, weighed down by the banking sector. Royal Bank of Scotland reported a sharp rise in losses, up from £1.98bn in 2015 to £6.96bn last year, marking its ninth consecutive annual loss. Shares dropped 11.2p to 238.2p.

Its peer Standard Chartered also faltered, down 20.5p to 730.5p, after it said it would not pay a dividend for last year due to restructuring costs. Barclays shed 3.2p to 255.9p, HSBC lost 2.5p to 650.3p, and Lloyds dipped 0.3p to 69.3p.

Elsewhere, concerns about demand for metals in China and a firmer dollar weighed on mining stocks. BHP Billiton surrendered 39.5p to £13.08, Rio Tinto lost 102.5p to £33.16, Antofagasta shed 17p to 807.5p and Glencore closed down 3.9p at 327.5p.

Hospital provider Mediclinic lost ground, 13p lower at 737.5p, after UBS cut its rating to “neutral” from “buy”, while Merlin Entertainments fell 6.2p to 498.3p on a downgraded price target by JP Morgan.

On the other side, British Airways owner IAG flew 22.5p higher to 527p, on an 8.6pc rise in full-year operating profit to €2.5bn buoyed by cost cutting and lower fuel costs. It also said it will return €500m to investors.  Low cost carrier easyJet jumped 17p to 931.5p.

Mid-cap Essentra inched up 20.5p to 530.5p as Jefferies lifted its price target to 507p from 450p.

Ahead of the Mobile World Congress next week, shares in Vodafone edged up 0.6p to 202.9p amid speculation it might announce another international joint venture. 

On Aim, shares in health and fitness-focused wearable technology specialist Cloudtag plunged 41pc to 2.9p after it announced that its nominated adviser had resigned, and that it has raised £975,000 in a subscription at 3.75p apiece.

With that, it's time to close for this week. Thanks for following our markets coverage.

It was a sea of red at the closing bell in Europe as disappointing corporate earnings weighed on bourses in the region. 

Here's a snapshot of the close: 

 Chris Beauchamp, of IG, said: "The morning sell-off has been reversed to some extent, as a surprise speech from President Donald Trump once again brings up the topics of wall-building, stimulus programmes and tax reform. US markets in particular have recovered most of the losses sustained in the immediate aftermath of the open. In Europe markets are firmly off their lows, with the FTSE 100 back above 7240 after a brief dip below 7200. However, the London market remains firmly in the red, thanks to losses for big banks and mining stocks. Risk is firmly out of favour today; with so many all long stocks, it means the risks to the downside have markedly increased, with snowball selling gathering pace. Healthy gains for IAG  have not been enough to tilt the balance in the bulls’ favour, with the shares climbing to their highest level since the Brexit vote. In a time of rising economic growth, the flag carriers look to have the advantage over their budget rivals." 

A market that has been reacting well to rising political risk has been gold, Jasper Lawler, of London Capital Group. said this afternoon. 

"The demand for gold is not a new phenomenon this year. The yellow metal has finished higher nine out of the past ten weeks. On Friday it cracked $1250 per oz for the first time since it tanked after the US election.

"The rise in stocks this year tells you investors are feeling confident about Trump’s America but the rise in gold tells you they are well aware it could all go horribly wrong. We maintain our positive view on gold and see a good chance of a re-test of $1300 per oz in the coming weeks." 

The precious metal hit a three-and-a-half month high, rising 0.29pc to $1,253.53 per ounce this afternoon, having touched its highest since Nov. 11 at $1,260.10 earlier today. 

The jobs of 4,500 Vauxhall workers thrown into doubt by Peugeot's takeover should be safe until at least 2021.

Unite union bosses met with Carlos Tavares, chief executive of Peugeot-owner PSA Groupe, on Friday morning to discover the likely fate of the car workers at Vauxhall’s plants in Ellesmere Port and Luton if a deal is secured.

Describing the talks in London as “relatively positive”, Len McCluskey, Unite general-secretary, said: “Mr Tavares gave assurances that current production commitments would be met should the takeover go ahead.”

Under current deals with GM, the Astra car is due to remain in production at Vaxuhall’s Ellesmere Port plant until 2021, while the Vivaro van, which is made in Luton, is scheduled to run there until 2025.

Read the full story here (Report by Alan Tovey)

The University of Michigan surveys of consumers sentiment recorded a final reading of 96.3 this month, beating forecasts of a 96.0 reading and above a preliminary reading of 95.7. However, it fell from January's reading of 98.5. 

Other key figures from the University of Michigan Surveys included: 

• Consumers current conditions index final February reading of 111.5, compared to forecasts of 111.2 and a preliminary reading of 111.2;
• Consumers expectations index fell to 86.5 this month, down from 90.3 in January;
• Consumers one-year inflation outlook rose to 2.7pc this month, from 2.6pc in January.

 New US single-family home sales rose less than expected in January but continued to point to a strengthening housing market despite higher prices and mortgage rates.

The Commerce Department said new home sales increased 3.7pc to a seasonally adjusted annual rate of 555,000 units last month. December's sales pace was revised down to 535,000 units from the previously reported 536,000 units.

Economists polled by Reuters had forecast single-family home sales, which account for about 9 percent of overall home sales, surging 6.3pc to a 570,000-unit rate last month.

New home sales, which are derived from building permits, are volatile on a month-to-month basis and subject to large revisions. Sales were up 5.5pc compared to January 2016.

Data this week showed sales of previously owned homes jumped 3.3pc in January to a 10-year high. House prices increased 6.2pc in December from a year ago.

The housing market strength comes even as the 30-year fixed mortgage rate has risen above 4.pc, outpacing annual wage growth that has been stuck below 3pc. The gains in housing are being driven by a strong labor market which is near full employment.

Last month, new single-family homes sales soared 15.8pc in the Northeast to their highest level since January 2008.

Report from Reuters

Financial and technology stocks dragged US stock indices into the red at the opening bell this afternoon. Investors also assessed if the 'Trump rally' had gone too far too soon. 

At the opening bell: 

• Dow Jones: -0.31pc
• Nasdaq: -0.54pc
• S&P 500: -0.4pc

The euro is behaving as a politically-driven currency. That's the view of strategists at HSBC as the Dutch election (15 March) and the French Presidential election (first round on 23 April) have come squarely into view.

So far this month, the euro has fallen by more than 2pc against the dollar as the latest bookmakers' odds show an increasing probability that Marine Le Pen could be elected as French President. 

Mark McDonald, of HSBC, said: "This EUR weakness has happened despite ongoing strength in the cyclical data: European PMIs were better than expected and the German IFO also beat expectations, for example. However, EUR-USD has ignored these releases and is still trading around its lowest levels since early January." 

The bank thinks the market will "increasingly focus on these upcoming political risks" as the elections come closer. 

The inverse correlation between the increasing probability of a Le Pen win and the euro dollar. That is, When the bookmaker-implied probability of a Le Pen victory goes up, EUR-USD tends to fall. 

As per the chart above, HSBC says the relationship between the pair suggests that the probability of Le Pen winning would have to increase by 7pp in order to lead to EUR-USD falling by 1pc. 

McDonald added: "If the probability of a Le Pen victory suddenly jumped to 100pc this simple relationship would suggest a value for EUR-USD of around 0.96. Given that we expect this relationship to become stronger as we approach the date of the election, it seems very likely that a Le Pen victory would see EUR-USD below parity. Conversely, if the probability of a Le Pen victory went to 0pc then this relationship would suggest EUR-USD moving to 1.10." 

Shares in Pearson have jumped to the top of the FTSE 100 this afternoon, up 3.6pc, after it announced plans to cut further costs and sell assets. It said trading had not deteriorated further and that its balance sheet was in better shape than feared, despite reporting a $3.3bn loss. Jillian Ambrose reports: 

Education giant Pearson is planning to sell off its 47pc stake in Penguin Random House as it battles against deepening losses in its US business which triggered a £2.55bn writedown.

The gloom surrounding Pearson deepened as pre-tax losses spiralled from £433m in 2015 to £2.6bn last year. The education giant has blamed its woes on North American Higher Education business failed to meet expectations.

Pearson’s problems emerged in the crucial fourth quarter of last year as the new academic year began and students opted to rent their textbooks rather than buy them.   

“This impairment charge is consistent with the challenging market conditions which we disclosed in January, and which resulted in an outlook for profit which is approximately £180m lower than previously anticipated,” the publisher said.

Read the full story here

Shares in Standard Life dipped 1.4pc despite posting a forecast beating 9pc rise in operating profit last year. Alan Tovey reports: 

Standard Life has beaten forecasts by posting a 9pc rise in annual profits but the insurer and asset manager’s flagship investment fund has suffered from investors pulling their money out.

Although best known for life insurance, the FTSE 100-listed business is now shifting its focus on to asset management.

Pre-tax operating profit was £723m, ahead of the £684m expected in an analyst consensus forecast.

While overall assets under management rose 16pc to £357.1bn in the year to the end of December, Standard Life’s Global Asset Return Strategies (GARS) fund suffered a £4.3bn “outflow” - people withdrawing their money.

Read the full story here

 After the latest Fed minutes indicated the US central bank would hike rates "fairly soon", here's an interesting table from Bank of America Merrill Lynch showcasing the number of rate rises by the decade: 

Michael Hewson, of CMC Markets, notes that caution is back after equities spent the last few days climbing a wall of expectation.

"Gold prices have moved higher again today, above $1,250 an ounce as falling yields in the US, and political risk in Europe drives risk aversion flows into the safe haven asset. It would appear that the receding prospects of an imminent large scale fiscal stimulus after yesterday’s comments from US Treasury Secretary Steve Mnuchin appears to have prompted some short term US dollar weakness."

The dollar index hit a one-week low this afternoon, skidding to 100.68.

Reuters has the details: 

The dollar slipped on Friday and was set for its first week of falls in three, after the new US finance chief poured a little cold water on the "Trumpflation trade" that had taken the greenback to 14-year highs earlier this year.

Treasury Secretary Steven Mnuchin said on Thursday that any steps that U.S. President Donald Trump's administration takes on policy would probably have only a limited impact this year, though he wants to see tax reform passed before by August. 

The comments -- made in his first televised interviews since taking office last week -- suggested that much work was still needed on key elements of the sweeping tax reform plan, which Mnuchin called his "No. 1 priority".

"Mnuchin's comments were less belligerently reflationary than they could have been, in a dollar strength context, and that probably did much of the damage (to the dollar)," said UBS Wealth Management currency strategist Geoffrey Yu, in London.

"But ultimately outside of the U.S. there is reflation happening and data is looking strong, so perhaps it’s time to just take some dollar longs off the table... We need additional information to sustain (the 'Trumpflation trade')."

The dollar was also knocked earlier in the week after minutes from the U.S. Federal Reserve's latest policy meeting, which were less hawkish than some investors had expected.

European shares have extended their losses and are now on track for their biggest one-day loss since early November on the back of disappointing corporate earnings. 

Just after midday: 

• FTSE 100: -0.80pc
• DAX: -1.16pc
• CAC 40: -1.22pc
• IBEX: -0.6pc

 Mike van Dulken, of Accendo Markets, said: "European equities are on the back foot into the weekend, continued profit-taking dragging indices from recent highs. This stems from more tempered optimism towards Trump tax changes; pudding wanted for proof. A weaker USD following less hawkish Fed minutes hinders Europe via reciprocal GBP and EUR strength, despite continental election risk. The UK's FTSE100 is dragged lower by banks (RBS & STAN results), Miners and Oil (strong GBP, oil prices back from highs)."

Shares in British bookmaker William Hill rose 1.9pc after it said it was set to name a new chief executive shortly and expected a stronger performance in 2017, despite posting a 10pc fall in its full-year operating profit.  Bradley Gerrard reports: 

William Hill, the UK's largest bookmaker by retail sites, did not, as some had expected announce a new chief executive, as it released results showing that profits from its online division fell by a fifth last year. the William Hill failed to announce a new chief executive as its online division suffered an adjusted operating profit fall of a fifth.

Earlier this week, reports suggested that interim chief executive Philip Bowcock would be handed the role on a full time basis. However, the gambling company did not confirm these rumours as it announced its results of the year to December 27. 

Shareholders are keen for the company to clear up its succession issue. The company's online division, which represents 34pc of sales, suffered a drop in adjusted operating profits of 20pc to £100.5m.

Online net revenue for the year dropped 3pc to £544.8m. This fall in sales was compounded by a 5pc rise in operating costs due to higher staff costs.

Read the full report here

Disappointing earnings from RBS and Standard Chartered have weighed heavily on the blue chip index this morning, dragging it to its lowest level in two weeks. 

The FTSE 100 tumbled 0.65pc to 7,224.18 in intraday trade, its lowest level since February 10. 

 Commenting on the torrid performance of banking stocks, Connor Campbell, of SpreadEx, said: "The Royal Bank of Scotland posted a typically dreadful annual report, the company’s losses since the 2008 bailout now totalling an astonishing £58bn; investors reacted as one would expect, leading the bank 3pc lower as the day went on. RBS was joined in the doghouse by Standard Chartered – despite shrinking its net loss from $2.36bn to $478bn year-on-year, an 11pc plunge in revenue displeased investors, the stock dropping nearly 5pc after the bell." 

European equities are still 7pc below their 2007 level, UBS highlighted this morning. 

The bank's strategists think there could be downside from here, in the event of a Le Pen win. 

The French elections are a key concern among investors and are driving a potential dislocation in markets, UBS notes. 

Strategists at UBS highlight that France normally trades at a 10pc P/ discount to Europe. Today, it is on a 15pc discount, which UBS thinks is perhaps a little too complacent given the political uncertainty.

Karen Olney, of UBS, said: "In our view, an unpopular outcome that starts break-up conjecture could mean 20-25pc downside (July 2012 multiples). But, given the response to the UK 'Leave' vote and Mr. Trump's victory markets could react unexpectedly.

"Perhaps they look for a currency kicker. If markets do focus on a break-up scenario, we recommend buying investments that rise 'with' periphery bond spreads and have exposure outside of the EU: Switzerland, Defensive Growth & Quality like: Danone, L'Oreal, Essilor, Remy and BIC. On the other hand, we would avoid sectors and stocks with high exposure to France and levels of debt (Banks, Utilities, Telecom & Retail)." 

It's also worth flagging that the French also elect a new parliament in June and thus a new Prime Minister. The PM is appointed by the President, but the PM needs to reflect the majority in parliament given parliamentary powers to bring down the government in a vote of no confidence.

UBS strategists add: "The key question here is whether the President and the majority of members in parliament will come from the same party – which would allow the President to push through his/her policy agenda – or whether France will end up with a so-called "cohabitation" – Prime Minister and President coming from different parties. In the case of a cohabitation, decision-making would be complicated for the President, as parliament would be able to limit his/her legislative agenda. This was the case under the last (1997- 2002) cohabitation, between Republican President Chirac and Socialist Jospin." 

Here's a great chart which outlines the process: 

Google is suing Uber for allegedly stealing the technology behind its self-driving cars. Cara McGoogan has the details: 

The search giant, which has been working on driverless vehicles since 2009, has filed a lawsuit claiming Uber stole trade secrets and is using them in its autonomous cars. 

If the Google lawsuit is successful, Uber could be blocked from using the technology powering its self-driving cars, which are currently being trialled in Arizona. 

The brains behind Uber's autonomous car fleet come from Otto, a self-driving truck startup founded by former Google employees, which Uber bought for $680 million (£543m) last year. Google is claiming that before leaving Otto's founders stole designs for its proprietary technology. 

"We're taking legal action against Otto and its parent company Uber for misappropriating Waymo trade secrets and infringing our patents," said Waymo, the driverless car division of Google's parent Alphabet. "Our parent company Alphabet has long worked with Uber in many areas and we didn't make this decision lightly.

Read the full story here

Although the pound dipped from a two-week high in early trade, it is still on track for its strongest week since January as political concerns in the US and Europe shift the focus away from Brexit. 

The local currency is up by 0.8pc this week, marking its first weekly rise in February and its best week since the week ended January 27. 

It is currently trading flat on the day at $1.2544 against the US dollar, and down 0.2pc against the euro at 0.8443p per euro. 

If you looked at the RBS share price, you would be forgiven for thinking everything was hunky dory, Joshua Mahony, of IG, points out - as the bank’s market value has risen 66pc over the past seven months.

However, he adds: "Everything is far from ok, with the firm announcing an unbelievable ninth consecutive year of losses, which trebled to £7 billion.

"Unlike Lloyds and Barclays before it, RBS seems unable to shake the shackles of legal action, with the bank setting aside £5.9bn for fines and legal costs over a mortgage-backed securities case brought by the US Department of Justice. While the British government now owns under 5pc of Lloyd’s, it looks like it could be a while until we see the government sell any of its 72pc holding  in RBS, with the current share price over 50pc lower than the £5.00 paid by labour back in  2008 and 2009." 

Shares in British Airways owner IAG jumped 2.1pc this morning after it posted an 8.6pc rise in annual operating profit in line with market expectations. Bradley Gerrard reports: 

Significant drops in fuel charges at British Airways owner International Consolidated Airlines helped push its pre-tax profits up by a third to €2.41bn (£2.03bn) in spite of a slight dip in revenue.

The company, which also owns Iberia and Aer Lingus, saw total sales drop by 1.3pc to €22.56bn, but fuel, oil costs and emissions charges plunged 19.9pc to to €4.87bn.

The profit boost comes as the company fights a bitter price war with rivals in a sector awash with excess seats. Overcapacity across the airline industry has helped contribute to a drop in air fares - good for customers but challenging for profitability.

IAG’s management said in spite of the lower fares, its operating margin improved 1.2 percentage points to 12.3pc with the benefit of a reduction in fuel costs.

Read the full story here

Back to RBS, since the financial crisis the bank has racked up £58 billion of losses in total. 

Laith Khalaf, Senior Analyst, Hargreaves Lansdown, says the bank is still paying for "the sins of the past". 

However, he adds: "The bank is now saying that 2017 is going to be its last year in purgatory, and that shareholders can look forward to a brighter, more profitable year in 2018.

"That may well be the case, there is a decent bank inside RBS struggling to get out, but it’s those “one-off items” which pop up with such alarming regularity which keep pushing the bank deep into the red.

"The bank is certainly making progress, though it has been severely hampered by mopping up the mess left by the financial crisis. There is every reason to believe RBS can be a profitable bank, returned to private hands, the question is how long it will take to get there." 

British banks' new mortgage approvals rose to a 12-month high last month and business lending showed its biggest monthly jump in a year, data from the British Bankers' Association showed this morning. 

Here are the key points:  

1. UK January mortgage approvals for home purchase rose to 44.657k, compared to 43.581k in December;
2. UK January net mortgage lending stood at £1.883bn, down from £2.013bn in December;
3. UK January net credit card lening hit £0.116bn;
4. UK January lending to non-financial companies rose to a 12-month high of £3.358bn, compared to £2.788bn in December;
5. BBA said January 2017 mortgage approvals were 2.5pc lower than the previous year;
6. BBA also said that existing home-owners are taking advantage of low interest rates to refinance home loans. 

Education publisher Pearson dropped 1.5pc this morning after it announced plans to cut costs further and sell some assets. 

The FTSE 100, which has issued five profit warnings in four years, posted a £2.6bn  pretax loss due to historical problems at its higher education business but its 2016 adjusted operating profit, debt and cash flow all came in slightly better than expected.

It said it would take further actions to make the company more efficient and continue would "realign" its cost base with its markets.

"Our priorities for 2017 are clear," said Chief Executive John Fallon. "We will continue to accelerate our digital transformation, simplify our portfolio, control our costs, and focus our investment on the biggest growth opportunities in education."

Jason Napier, of UBS, provides some insightful commentary on RBS Group's full-year results: 

Noisy numbers: Core Franchises a 13pc miss to UBSe

"RBS reported a £7bn attributable loss driven by £10bn in one-offs. Notwithstanding this, common equity tier 1 at 13.4pc was ahead of adjusted consensus expectations, we think. But with RMBS issues to finalise and an enlarged restructuring plan to come, we expect any implied excess capital to attract a heavily discounted value.

"Near term, what matters is the performance of the core Franchises. Here, the 4Q16 numbers were 13pc below our forecasts. Though only £121m short of UBSe, by division only Ulster, driven by bad debt write-backs, beat our numbers. Credibility on planned cost cuts and capital release from Capital Resolution (and Core too, now) is required to sustain investors."

Napier believes the refreshed targets for 2020 give investors a vision to hold on to: 

"RBS expect 2017 to be another year of statutory losses, with restructuring and litigation burdens tailing off so that in 2020 the firm is aiming for an unadjusted ROTE > 12pc, driven by a sub-50pc cost/income ratio and a new plan to shrink Core bank RWAs by £20bn/11pc."

Even though concerns about a Le Pen victory continue to permeate financial markets, official data showed this morning French consumer confidence held at a more than nine-year high in February for the second month in a row.

 the official INSEE statistics agency said on Friday.

The monthly consumer confidence index was unchanged from January at 100, the highest level since October 2007, data from the INSEE statistics agency found.

That was in line with forecasts. It also found respondents' outlook for the general economic situation over the next year remained at levels not seen since late 2007 before the global financial crisis.

With the labour market finally beginning to turn a corner, unemployment concerns also remained close to a nine-year low while the number of people considering that it is a good time to make big purchases rose.

Gold hit a three-and-a-half month high this morning as political worries in European continued to bubble stoking safe-haven demand the dollar weakened on uncertainties surrounding US President Donald Trump. 

Gold rose by as much as 0.4pc to $1,254.10 per ounce, its highest level since November 11. 

Political uncertainties have triggered continuous inflows into gold exchange traded funds (ETFs).

Michael Hewson, of CMC Markets, said: "It would appear that even with markets at or near their highest levels this year, and with economic data showing decent signs of resilience investors are still only too aware of the political risk of the upcoming French elections, as the polls continue to fluctuate for and against Marine Le Pen." 

RBS, which has not made an annual profit since 2007, booked £6.96bn of losses for 2016, against a £1.98 billion pound loss in the same period a year earlier, marking its ninth straight year of losses. 

Here's what the experts had to say about the bank's full-year results: 

Michael Hewson, of CMC Markets, said: "CEO Ross McEwan must feel that he is trapped in a dystopian nightmare with RBS as no sooner does he overcome one obstacle than he encounters another. On the plus side there is the prospect that the nightmare of what to do with the Williams and Glyns branches is likely to see a conclusion.

"In comments that accompanied today’s results Ross McEwan stated that “these costs are a reminder of what happens when things go wrong”, which is somewhat of an understatement. So far we’ve had nine reminders of the costs of what happens when things going wrong and Mr McEwan like the rest of us must be hoping that we don’t get a tenth.

"Management expressed optimism that the bank would return to profit in 2018, in language that has an all too familiar ring to it. Let’s hope this year’s optimism is not misplaced."

 Gary Greenwood, of Shore Capital, highlights that RBS’ shares have increased by 67pc since reaching a post EU referendum low of 149p as the UK economy has held up better than expected.

"However, there remains work to do before dividend payments can recommence and the UK government can begin selling down its remaining 72pc holding in the stock, while the adjusted group RoTE continues to languish well below the CoE .  With the shares now trading at 0.8x TNAV, a similar rating to Barclays, the valuation feels very much up with events to us, despite the progress that has been made and management optimism around medium term returns.  Ahead of the results presentation this morning, we retain our neutral stance." 

Shares RBS fell 2.2pc this morning after it reported a sharp rise in losses as higher misconduct charges and restructuring costs underscored the challenges facing the lender nine years after it was bailed out in the world's biggest bank rescue. Ben Martin reports: 

Royal Bank of Scotland has slumped to a £7bn loss and warned of further job cuts and branch closures before it is able to post its first profit since the financial crisis.

The lender, which remains 72pc owned by the taxpayer, fell to its ninth annual consecutive loss last year, taking its total losses since the credit crunch to almost £60bn, after it suffered a £5.9bn hit from litigation and conduct costs and a £2.1bn restructuring charge.

It said it aims to return to profit in 2018 but not before it suffers another loss this year, which would mean the bank has spent a decade in the red.

Boss Ross McEwan also set out a target of cutting a further £2bn in costs from RBS by 2020, which he conceded would mean more job losses and further shrinking the lender’s branch network of 1,250 sites. However, he did not give figures for job cuts or branch closures.

Read the full story here

A raft of underwhelming earnings weighed on European bourses, most notably from BASF, RBS and Saipem. 

Here's a snapshot of the current state of play: 

 Mike van Dulken, of Accendo Markets, said: "​Calls for a negative open come after a mixed close on Wall Street, the Nasdaq bucking gains for the Dow and S&P as investors appeared to reserve judgement on US tax change optimism before potential details next week, while continued conflicting comments from Trump and his administration (this time on China FX) keep investors guessing." 

Good morning and welcome to our markets coverage. 

Overnight, shares in Hong Kong fell as resource firms were hurt by weak commodities markets in China. The benchmark Hang Seng index dropped 0.6pc, while the Hong Kong China Enterprises Index lost 1pc. 

In European, bourses have slipped into the red amid a raft of corporate earnings. 

Later this morning, we'll get the UK mortgage approvals, which are expected to have fallen slightly last month. Stateside this afternoon, US house sales and the University of Michigan Consumer Sentiment will be released. 

Also on the agenda:

Full-year results: Jupiter Fund Management, Pearson, Kennedy Wilson Europe Real Estate, Rightmove, Coats Group, TBC Bank Group, IMI, Standard Chartered, William Hill, Royal Bank of Scotland, Standard Life