Money blog: US shares plunge as Trump refuses to rule out recession

'Very rough patch' for Wall Street as markets fall to five-month lows

A little earlier, Sky News' business and economics reporter James Sillars gave a bleak analysis of the US economy, with one economic indicator suggesting it was shrinking at its fastest pace since the pandemic.

Things are hardly looking up after markets opened a short while ago, with Wall Street's main indexes falling amid fears a trade war could spark an economic slowdown.

The tech-heavy Nasdaq and the benchmark S&P 500 were at near five-month lows after falling 1.3% and 2.03%, respectively.

The Dow Jones Industrial Average fell 0.72%.

"It's been a very rough patch for markets and all of that centres around uncertainty over tariffs," said Art Hogan, chief market strategist at B. Riley Wealth.

Nvidia was down 2.2%, Meta and Amazon.com were down more than 3% each and Tesla was down 7%.

JPMorgan Chase and Goldman Sachs declined more than 3% each.

Trump declined to predict whether the US could face a recession yesterday, at a time when investors are concerned that his fluctuating trade policies on Mexico, Canada and China could dampen consumer demand and corporate investment.

Chinese retaliatory tariffs on a wide range of US agricultural products take effect today.

A Reuters poll showed 91% of economists see higher recession risks due to Trump's shifting trade policies.

Tesla takes a hammering - and the unpleasant cocktail could get worse

Amid the market volatility sparked by Donald Trump's on-off tariff plans - during which the benchmark S&P 500 index fell by 3.1% last week and the Nasdaq entered "correction" territory - no stock has been more badly hit than Tesla.

Shares of Elon Musk's electric vehicle maker have fallen for seven straight weeks, the longest losing streak since the company floated on the stock market 15 years ago, wiping out more or less all the gains it enjoyed after Trump was elected president in November last year.

Since Tesla shares peaked at $479.86 each on 17 December, they have fallen by 45%, wiping more than $800bn from the company's stock market value.

To put it in context, that sum is roughly equivalent to Poland's annual economic output.

And there may be worse to come. 

Wall Street analysts have been rushing to downgrade Tesla stock. 

A quarter of the 40 brokerages covering the stock currently rate it a "strong sell", with one of them - Guggenheim Securities - suggesting the shares could fall another 30% from here.

There are a number of reasons behind the fall.

Trump's orbit

Those who deplore Musk's political views and his close proximity to the Trump administration will doubtless cite this as the key factor.

It has certainly played a part. Musk's recent antics, such as wielding a chainsaw on stage at a political conference and making a gesture on stage that some interpreted as a Nazi salute, have not endeared him or his companies to a swathe of the public both in the US and beyond.

There have been protests and outbreaks of vandalism at Tesla dealerships and EV charging points across the US while, in both Europe and China, Tesla orders in January were down 45% year-on-year.

Admittedly, a lot of the people staging protests at Tesla properties are unlikely to have been would-be buyers of the company's products, but the bigger problem is that Musk now appears to be alienating customers who were previously loyal to the brand - as shown by the popularity, in the US, of Tesla bumper stickers with messages such as "I bought this before Elon went crazy" and "Anti-Elon Tesla Club".

Distractions

Conversely, some investors who wholly approve of the work Musk is doing for the Trump administration may also have concerns - notably that it is proving too much of a distraction from the day job of running Tesla.

Even before Musk took the wheel at the US Department Of Government Efficiency (DOGE), there were already fears that he was being too distracted by his private companies, including the social media platform X (formerly Twitter), the aerospace and defence contractor SpaceX and his artificial intelligence business xAI.

X, on which lies peddled by the Kremlin about Ukraine are regularly amplified, may also be adding to the damage being done to the Tesla brand.

But Musk's association with the Trump administration is only part of the reason for the recent declines.

Inflated prices?

Another key factor is that shares of Tesla were arguably over-priced to begin with.

In the two weeks following the US presidential election, Tesla shares shot up by 32%, adding $250bn to its stock market value.

To put that into context, that gain was equal to the entire stock market value of Toyota, the world's next biggest carmaker after Tesla.

At the time its shares peaked, Tesla shares were trading at 112 times expected earnings, compared with the 25 times or so that the S&P 500 was trading at and higher even than the company's average over the last five years of 93.

Again, to put things in context, Ford shares are valued at just eight times prospective earnings.

That exotic rating reflected the superlative growth prospects previously accorded to Tesla, in particular Musk's pledges to launch a new cut-price electric vehicle and a fully autonomous ride-hailing service.

Wrong priorities?

But investors are now reappraising those growth prospects as Tesla loses share of the electric vehicle market to rivals, such as China's BYD, which is also seen as outpacing the company on self-driving vehicle technology.

News on Tesla's planned new low-cost model remains elusive and, until it is launched, critics believe it has little hope of building share in burgeoning markets such as India.

Musk always wanted Tesla to be seen as an AI and robotics company rather than an electric vehicle maker and that was part of the bull case for the stock.

Yet there are now fears that the company is investing too much in such projects and on its much-criticised Cybertrucks.

Another concern is that Tesla's core operations may be misfiring.

Results published at the end of January revealed that operating profits for the final three months of 2024 were down 23% on the same period a year earlier - which Tesla blamed on lower average selling prices on each of its Model 3, Model Y, Model X and Model S lines.

For the full year, deliveries of new vehicles were down on 2023, the first year-on-year fall the company has suffered.

And the operating margin, partly reflecting the sums Tesla is investing, were also lower.

It all adds up to an unpleasant cocktail for investors.

Overpaying your mortgage - the dos, the don'ts and the why

Overpaying even a little amount on your mortgage could shave years off your term and save you thousands of pounds in interest - and could be an alternative to sticking spare cash in a low-paying ISA.

The first question is: Should you do it?

This is hugely dependent on your financial circumstances but ask yourself:

• Have you got an emergency fund (three months of bills and living expenses) saved?
• Does it make sense financially?
• Does your mortgage even allow it - and are there any extra charges?
• Are there any tax implications?

Let's talk interest...

Compare the cost of your savings interest with the amount you would be paying in interest on your mortgage.

David Hollingworth, an associate director at L&C Mortgages, says some borrowers may still be on really low rates of 1% or 2%.

"You may well earn more by saving that money," he says - though you need to take into account that any interest you earn could be subject to income tax

But more typically, if you've got a higher mortgage rate, you'll save more by putting it towards your mortgage.

Okay, but what does that mean in numbers...

If you overpay a mortgage at a rate of 4.5%, to get the same effective return where you,re paying tax on savings, David says you would need to earn the following gross savings rate:

Basic rate: 5.63%

Higher rate: 7.50%

Additional rate: 8.18%

For example, a borrower with a £200,000 repayment mortgage over 25 years at a rate of 4.50% would pay £1,111.66 a month.

But overpaying by £50 a month would cut the total interest by £11,534 and the mortgage would be repaid one year and nine months early.

And £100 a month would cut the total interest by £21,142 and the mortgage would be repaid three years and five months early.

What about an offset mortgage?

These link your current and savings accounts to your mortgage. The balance of the two is offset, so you pay interest on a lower balance.

So let's say you have a mortgage balance of £100,000 and £20,000 in savings. You will only be charged interest on £80,000.

"The main benefit," David says, "is you can keep cash in savings and withdraw them if you need them."

What are the drawbacks?

Of course, it feels a bit like sending money into a vast black hole (there's nothing more humbling than transferring £20 towards a six-figure balance) so create a spreadsheet to help yourself keep track and stay motivated.

The other drawback is any money you send towards your mortgage, you won't have in easy access savings. So make sure that emergency fund is available. The last thing you want to do is end up reborrowing from your mortgage if the roof caves in.

"Paying everything off the mortgage, while it may look great because you're reducing your mortgage more quickly, the danger is that you need some of that cash for a later date," David says.

While he says this can work really well, "you need to look at the margin in the range".

"You need to be realistic about how big a proportion of the mortgage you are likely to have in the savings account," he says. 

"So the bigger the margin in mortgage rate, the more you're going to need in savings to make up that difference."

How do you actually do it?

This question confused me for about two years after getting my mortgage, until I realised, it's actually just another bank account.

I looked up the account details with my lender and set them up as a payee on my current account. Now, whenever we have extra money I want to put towards it, I can just send the money the same way I would any other payment.

This can vary from lender to lender, but they should have all the details on their website.

If you like things being automated, there are now companies out there who can help.

Sprive is an app that helps you earn cashback that can be deposited towards your mortgage - you buy digital cards for your shopping and the money back is then paid directly to your lender.

People living near new pylons could get £250 off energy bills

Residents who live near newly installed pylons will get £250-a-year off their energy bills, a minister has said.

Housing and planning minister Alex Norris told Wilfred Frost on Sky News Breakfast that communities "need to share the benefits" of the government's tilt towards clean energy.

"If you're making that sacrifice of having some of the infrastructure in your community, you should get some of the money back," he said.

"So we're making that commitment - £250 a year if you are near those pylons.

"We think that's a fair balance between people who are making that commitment to the country... they should be rewarded for that."

Ministers are pushing through an overhaul of the planning system - long seen as a brake on housebuilding and vital infrastructure projects - to stimulate growth in the economy.

Overnight, it was announced parts of the planning system could be stripped away as part of the government's attempts to speed up house building.

Matcha: Why is the viral drink so expensive?

If you've visited a coffee shop or found yourself on the drink side of TikTok, you will have come across matcha.

The Japanese tea has surged in popularity and can cost as much as £5.60 a cup from a high-street cafe. 

Making it at home is also an option but the powder you need can cost you up to £35. 

But why is it so much more expensive that a classic English Breakfast or a peppermint tea? 

HSBC downgrades its rating for US stocks

HSBC has downgraded its rating for US stocks to "neutral", citing uncertainty around tariffs.

The brokerage had previously advised traders to be "overweight" on US equities.

Read our 8.08am post for the wider context on the US economy, with fears growing a recession could be on the horizon.

At the same time as downgrading US guidance, HSBC turned bullish on European stocks (excluding UK) from "underweight" to "overweight".

This follows Germany loosening its fiscal reforms, including a €500bn fund for defence and infrastructure.

HSBC strategist Alastair Pinder said: "It is important to stress that we are not turning negative on US equities – but tactically, we see better opportunities elsewhere for now."

'Am I at border control or f****** Tesco?' Giant trolley scales anger shoppers

Shoppers have been left confused and annoyed after Tesco introduced giant trolley scales at the checkout of a store in Gateshead.

The system, thought to be aimed at tackling shoplifting, weighs the trolleys before customers pay. 

For those customers who have used Scan As You Shop, it will identify any of the items that have been missed or accidentally scanned twice.

If there is a discrepancy, a staff member will rescan every item in the trolley. 

It is hoped the system will reduce the number of manual service checks done by staff, keep queuing times down and streamline the checkout process. 

Customers fumed at the new technology, with many taking to X and Reddit to post their reactions. 

"Am I at border control or f****** Tesco?" one user wrote. 

"No clubcard? Deported," joked another. 

Others questioned if the system would actually take off. 

"This is all going too far now. Can we not go back to mainly staffed tills and just have the odd couple of self service for 10 items or less?" said one Reddit user. 

"I doubt these will properly take off. Apparently they're quite successful in South Korea but this shop is the first one in the UK to get them," said another. 

Money has contacted Tesco for comment. 

Shoplifting offences have hit the highest level since 2003, according to the Office for National Statistics, with more than 492,000 crimes reported to police in England and Wales. 

We have seen several retailers implement several techniques to try to tackle the problem, including staff wearing body-worn cameras, undercover officers placed in stores and goods locked away in plastic, security-tagged boxes. 

First-time buyers could spend 20% less on mortgage than rent - but they need £50,000

First-time buyers could pay around 20% less in monthly mortgage payments than rent - as long as they have a £50,000 deposit, analysis has suggested.

The average mortgage payments for first-time buyers could work out at £1,028 a month, more than £200 less than the typical £1,248 paid in rent, Zoopla found.

The analysis was based on people having a 20% deposit to put down. 

Looking at average house prices, that means they would need a deposit of around £50,740. 

But this does vary across different regions, with a 20% deposit ranging from £27,700 in the North East of England to £83,440 in London.

Looking across Britain, the East of England bucks the general trend of buying being cheaper than renting. 

-SKY NEWS