“We are on our knees.” That was the message from Paul Pester, the head of TSB. Since introducing a new IT system last Friday, the bank has suffered a meltdown in its online offering, leaving more than a million customers without access to internet services. The problems persisted through the week. Many of TSB’s customers have had their access to their accounts cut off, leaving them unable to withdraw cash or pay bills.
Seven days after the problems started, the bank has already begun paying compensation – with some estimates for the cost of assuaging irate customers stretching to £20 million. Shares in TSB declined steadily over the week.
This wasn’t a great week for banks whichever way you looked. Barclays announced a loss of £764 million in the first quarter of the year. This was in large part due to the fines it had to pay for mis-selling mortgages in the US and its involvement in the payment-protection scandal in the UK. Its share price suffered a prolonged slide as investors absorbed the news.
Nor were the banking blues confined to the UK. On Thursday, Deutsche Bank announced that it was withdrawing from investment banking in the US. This came after a 74% slump in its investment-banking income in the first quarter of this year. Deutsche Bank’s investment-banking arm will focus instead on its European and corporate businesses. The shift is expected to result in the loss of hundreds of jobs.
Tech stocks bounce back
The earnings season brought some brighter news for another beleaguered company, however. Facebook’s recent embroilment in data scandals appeared largely forgotten after the social-media colossus announced some suitably hefty first-quarter earnings. A 63% year-on-year rise in profits was well ahead of expectations, and a $9 billion share buyback iced the cake nicely. Facebook’s shares rocketed in response.
Other US technology stocks, which had been in the doldrums at the start of the week, sprang back into life after Facebook’s announcement. Investors began to give more credit to a generally strong results season, with earnings expectations surpassed by more than 70% of the US companies that have reported so far.
The US market’s late burst of enthusiasm came after earlier concerns about government bond yields. The 10-year Treasury yield climbed above 3% for the first time in four years on Tuesday. Although it subsequently slipped back, the rise in yields (and fall in prices) rattled investors, who worried that the economy might be showing signs of overheating.
There was particular anxiety about shorter-dated Treasuries, whose high yields have been causing the yield curve to flatten. An inverted yield curve – where short-dated bond yields are higher than longer-dated ones – is seen as a powerful portent of recession.
The push and pull between yield-curve concerns and post-results bullishness left the S&P 500 down 0.1% by Thursday’s close. The UK’s FTSE 100 did better, with a gain of 0.7%. Meanwhile, European shares were little changed over the first four days of the week. The FTSE World Europe ex UK index rose by 0.2%.
Huawei in some danger?
China’s largest smartphone-maker, Huawei Technologies, pulled out of issuing $500 million in bonds during the week. This followed rumours that the company, which also makes telecommunications equipment, is going to be investigated by the US Department of Justice in connection with espionage allegations. The cancellation of the bond deal points to low demand – suggesting that investors are nervous about the implications of any US probe.
And finally …
Readers of a certain age may remember K9, the robotic dog that appeared in Doctor Who in the 1970s and 1980s. Well, science fiction appears to be on the verge of becoming science fact.
Researchers at the University of Washington have been building a database of canine behaviour by attaching sensors and cameras to Kelp, an Alaskan Malamute. The team, led by Kiana Ehsani, are using the data thus acquired to create an artificial-intelligence system that mimics Kelp’s movements, with the aim of creating quadrupedal robots that can fulfil the roles of service dogs – helping the elderly or disabled, for example.
While this goal may be some way off, the researchers have already made progress, with the system already able to identify walkable surfaces and distinguish between indoor and outdoor environments.
We at Week in Review look forward to a cybernetic generation of four-legged friends. Cats, postmen and lampposts may be altogether less enthusiastic.
Image credit: EyeBrowz / Alamy Stock Photo