US stock markets hit new record highs amid trade deal optimism –as it happened
Rolling coverage of the latest economic and financial news
- Latest: Trade optimism lifts markets
- US optimistic of partial deal soon
- UK construction slump continues
- Civil engineering shrinks at fastest pace since 2009
- Gambling firms shares slide as MPs demand crackdown
Earlier:
3.09pm GMT
Britain's construction sector has suffered another contraction, as Brexit uncertainty hits builders.
3.07pm GMT
US stock markets have retreated slightly from previous highs after the factory data.
Investors face a tricky balancing act, with a darkening economic picture on the one hand and an unpredictable political environment on the other.
3.05pm GMT
On the other side of the coin, data just in on US factories makes for less optimistic reading.
US factory orders fell by 0.6% in September, according to the US Census Bureau. That was worse than the 0.1% fall in August, and also lower than the 0.5% decline expected by economists.
2.55pm GMT
A fun graph: the Dow Jones industrial average from its inception to its latest record high.
Be slightly wary though: the nature of the index means that the Great Depression (around the 1929 mark) registers as barely a blip on this scale - when in fact it was a traumatic period for the world.
Dow Jones Industrial Average rises to an ALL-TIME high: pic.twitter.com/3DDYrut113
2.41pm GMT
US President Donald Trump has (perhaps predictably) welcomed the record highs on stock markets.
Perhaps slightly more surprisingly, he tweeted it before markets opened - presumably gambling that futures markets were accurate.
Stock Market hits RECORD HIGH. Spend your money well!
2.36pm GMT
The opening bell in New York has delivered some noteworthy new records.
2.12pm GMT
Wall Street is expected to open at record highs in just a few minutes, as optimism about the likelihood of a US-China trade deal spreads. Stock futures are pointing to a rise of 178 points on the Dax, up 0.65%, while the S&P 500 is expected to open 19 points higher, or 0.63%, and the Nasdaq is seen rising 65 points, or 0.8%.
1.41pm GMT
MPs reiterated their concerns over potential conflicts of interest at the accounting firms, and called for a clear separation between the audit and non-audit parts of thier businesses. PwC earned 4m from providing "recruitment and remuneration" advice to Thomas Cook while also auditing its accounts.
1.39pm GMT
Turning to the audit of Thomas Cook's accounts, which was initially carried out by PwC and later EY, MPs said they had found a large amount of goodwill that was not written down until this year - similar to the collapsed construction contractor Carillion. Goodwill is an accounting concept that refers to the intangible asset of an acquired company which measures things like reputation, customer base and brand value.
We are therefore very disappointed to find yet another corporate collapse in which goodwill has played a major part.
Both PwC and EY told us that they asked the right questions and challenged Thomas Cook's management. EY said that they had followed accountancy standards and procedures in this respect.
Related: Accountancy profession 'complicit in Thomas Cook failure'
1.25pm GMT
MPs said they were "shocked to learn" that Fankhauser, who ran Thomas Cook from 2014 until his collapse, received an annual cash allowance worth 30% of his base salary for his pension contribution. The committee's recommendation is:
As with executive pay, changes to executive pension contributions are needed in order to create a fairer system. We expect the FRC's replacement to have a role here, alongside pressure from investors, stakeholders and remuneration committees.
1.23pm GMT
And here are the BEIS committee's recommendations to the government, to prevent another massive corporate failure like Thomas Cook.
MPs have recommended that executive bonus schemes set by companies' remuneration committees are "not only robust, but the measured data on which they are based is too". They flagged up that the performance measures at Thomas Cook in 2018 did not directly address high levels of debt - highlighted by the former CEO Peter Fankhauser himself as a key cause of the group's ultimate demise.
1.19pm GMT
You can read the full letter from Reeves to Leadsom here.
12.59pm GMT
My colleague Rob Davies reported at the time that the business secretary, Andrea Leadsom, did not speak to Thomas Cook executives during increasingly frantic talks between the company and the government leading up to its collapse. He wrote:
Records of telephone calls and meetings, seen by the Guardian, indicate government ministers were aware the 178-year-old tour operator's finances had been deteriorating for months.
But the documents show Leadsom and ministers and officials from the Department for Business, Energy and Industrial Strategy had little to no discussion with the company about its ailing balance sheet until after it had entered liquidation.
Related: Andrea Leadsom under fire over lack of talks with Thomas Cook
12.53pm GMT
The business, energy and industrial strategy committee has called on the UK government to push ahead with measures to help avoid the next corporate business failure, following the collapse of Thomas Cook, the world's oldest travel company, in September.
It has written to business secretary, Andrea Leadsom, to express disappointment that the government did not press ahed with audit reforms and and bring forward legislation to replace the Financial Reporting Council with a more effective body, the Audit, Reporting and Governance Authority. The committee recommended a new government push by including the legislation in the first Queen's Speech of the new Parliament.
Our inquiry has been cut short by the election but it's clear that a series of misjudgements at Thomas Cook led to its collapse. The piling up of debt, confused business plans, lack of challenge in the board room and by auditors, and aggressive accounting practices all contributed to the failure of the business.
During our inquiry, we've witnessed buck-passing and blame-shifting but precious little humility or reflection from those at the top of the business. Directors and senior management pocketed hefty sums in annual salaries and bonuses that Thomas Cook staff will only have dreamed of earning throughout their entire careers. Mr Fankhauser [the former CEO] told us he would reflect on the huge salaries he has earned. Given the riches which Thomas Cook poured into his pockets I hope that Mr Fankhauser will realise that now is the time to put right the wrong he has done.
The failure at Thomas Cook has been also been notable for the extraordinary lack of interest shown by the Business Department and its Secretary of State in the days and weeks leading up to the collapse.
12.29pm GMT
Time for a recap:
Britain's construction sector has suffered another contraction, as Brexit uncertainty hits builders. Civil engineering activity fell at the fastest pace in a decade in October, with large projects on hold.
Yikes.
Gambling firms' shares dominate the FTSE fallers today. Traders citing our exclusive on MPs' calls for new curbs on online gambling.https://t.co/d3IS78jadQ pic.twitter.com/AFQuD4kHZd
12.17pm GMT
The oil price is also rising today, on hopes that a US-China trade deal would boost growth - and demand for energy.
Brent crude has gained 1.5% to $62.58 per barrel.
12.10pm GMT
Rupert Thompson, Head of Research at Kingswood, says investors are hopeful that the global economy is picking up, after some weak months:
Following a couple of failed attempts in July and September, global equities finally last week broke clear of their January 2018 high. Importantly however, at least for UK investors, the break higher is only in local currency terms. The recent bounce in the pound means global equities, in sterling terms, are still languishing some 4% below their July high. The break higher has been fuelled by increased hopes that global growth is bottoming out. Growth was higher than expected in both the US and Europe in the third quarter and little changed from the previous quarter.
US employment gains also beat expectations. They are an important source of support for consumer spending which remains robust and is compensating for falls in business investment. Even so, signs of an actual pick up in global growth are still very tentative.
11.54am GMT
Here's our news story on the UK construction sector's malaise:
Related: Major infrastructural projects stall amid Brexit uncertainty
11.51am GMT
The Boeing 737 Max crisis continue to loom over the airline industry.
Ryanair has warned today there is "a real risk" it will have no Boeing 737 Max planes flying next summer, if the grounded aircraft doesn't return to service soon.
Europe's biggest carrier is sticking to its plans to cut bases and pilot and cabin crew jobs and said it expected to receive its first 737 Max planes in March or April 2020, two months later than expected. The 737 Max remains grounded worldwide after two crashes in Indonesia and Ethiopia killed 346 people.
Ryanair's chief executive, Michael O'Leary, said: "We have now reduced our expectation of 30 Max aircraft being delivered to us in advance of peak summer 2020 down to 20 aircraft and there is a real risk of none."
Related: Ryanair hit by further delay to Boeing 737 Max deliveries
11.44am GMT
European stock markets are pushing higher, despite the weak eurozone factory data and ongoing slump in UK construction.
Investors are clinging onto hopes of a breakthrough in the US-China trade talks, following hints that Donald Trump and Xi Jinping could sign a 'Phase One' deal this month.
Goldman: Trump to cancel December scheduled tariff hikes
Investors welcomed the significant recent progress on intellectual property theft issues, even though this topic hasn't been entirely solved yet (some issues may slip to the phase 2 of the deal). A new venue is still to be agreed for a November US-China meeting with President Trump wanting the interim deal to be signed somewhere on US territory.....
We believe optimism surrounding the trade dispute is likely to keep on supporting stock prices around the globe this week, especially if US and Chinese data is in line with or continues to beat expectations like last week's solid non-farm payroll reports.
In case you missed it. #India's benchmark stock index Sensex closed at fresh record. https://t.co/mQTPDA6QKi pic.twitter.com/5BoEJuvZj7
11.10am GMT
Shares in Britain's gambling companies have also fallen heavily this morning, as parliament pushes for a radical overhaul of the online betting industry.
Related: Call for radical overhaul of online casinos after far-reaching inquiry
11.02am GMT
Back in the City, shares in Mothercare have now sunk 30% to a new alltime low after it decided to put its UK operations into administration:
Andy Brian, partner and retail expert at law firm Gordons, says supermarket chains helped to destroy its business model.
"The reality is that Mothercare operates in an increasingly competitive sector in the UK, where price-driven customers can easily compare the price of big ticket items online and buy smaller items such as children's clothing in their local supermarket. It tried, and failed, to make its stores more appealing to young mums in particular, and is yet another stark example of a retail brand to which many feel a nostalgic affinity without actually feeling the need to regularly shop there.
Mothercare is the latest in a long line of businesses struggling to adjust to the rapidly changing retail landscape. The insolvency regime in the UK provides a robust and flexible framework, through CVAs and other procedures, to enable businesses like Mothercare to reshape their liabilities and retail footprint, but often this isn't enough.
Reducing the rent roll and business rates can help a lot, and may also help landlords avoid having empty properties in key locations. In order to survive however, retail businesses may need to go further and look for a radical re-positioning of their business structures and offerings, if they are to survive in the longer term in the face of structural shifts in buying habits and competitor offerings. It's in the interest of all stakeholders, including employees, suppliers, landlords and customers that such efforts are successful.
10.38am GMT
The UK construction PMI report is online here.
UK Construction PMI ai to 44.2 in October (Sep - 43.3) pointing to a sustained deterioration in the construction sector, with civil engineering output falling at the quickest pace in 10 years. More: https://t.co/IDL7Eme22K pic.twitter.com/h2DQGTqzKT
10.33am GMT
Jan Crosby, UK head of infrastructure, building and construction at KPMG, warns that confidence across Britain's building industry is weak.
Here's his take on today's weak construction PMI report.
"There had been pockets of optimism in the run up to October 31, largely because people were looking forward to some form of clarity around the future of the sector, but Brexit uncertainty has returned once more, coupled with a general election to boot.
"There is widespread evidence of a sluggish housing market, which is likely causing some housebuilders to slow build rates on sites - particularly those not benefiting from Help to Buy. Meanwhile, the commercial sector also appears to be struggling, with investment in the likes of grade-A office space drying up amid the uncertainty. Many clients are likely to hold off until next year before committing to any large-scale projects in the hope they can make more informed decisions. For now, it's a case of sitting tight."
Investor appetite remains deeply fragile and many contractors are being pummelled on three fronts. Just as their order books get thinner and erode their confidence, they are being forced to bid low for the shallow pool of new work available - while at the same time input costs go up and slice into their margins.
"No wonder many construction firms are trying to cut costs where they can, and staffing levels have fallen every month since April.
"Today's data paints an even gloomier picture for construction bosses after an already difficult year. Construction firms are continuing to be knocked from both sides as new work continues to decrease and prices soften. SMEs in particular will be feeling the squeeze, as staffing levels drop and companies race to the bottom to secure the limited amount of contracts that are being pushed forward.
"British building has largely been put on hold while government gets its ducks in a row, but as our EU exit date continues to be pushed back we cannot continue to stand by and watch the industry shrink
9.58am GMT
The construction industry is always vulnerable to political and economic uncertainty, as today's PMI report proves.
When growth is weakening, it's hard to persuade clients to invest in major projects - such as a new house or office block. If politicians are caught up in one crisis, they can't focus on other priorities such as transport infrastructure.
"The construction sector's distressing decline continued in October in spite of a small improvement in the headline index as a resolution to the political impasse seemed close. However with a fall in civil engineering not seen for a decade and the biggest drop in housebuilding since 2016, it appears that strength in the sector is seeping away.
"Jobs hiring suffered as businesses unsure of the Government's next steps held back on their development plans, which were weakened further by stronger competition for fewer opportunities. Future optimism remained at 2012 levels as the deep-seated Brexit gloom dampened down expectations.
9.57am GMT
More gloomy news from UK construction industry via @ihsmarkit:
- 3rd lowest PMI since 2009
- Biggest fall in housing activity since 2016
- Civil engineering weakest since 2009
https://t.co/BX2KJPTgek
9.49am GMT
Some instant reaction to the latest slide in UK construction:
Not a pretty picture being painted by the UK construction PMIs for October. 44.2 up from September's 43.3. House building, commercial & civil engineering all well below the 50 mark. Rough indicator of official stats. pic.twitter.com/V0xCSguLIy
Still poor news on #UK #construction sector as purchasing managers report activity contracted for 6th month running in October & sharply despite limited pick-up from September. #PMI up to 44.2 (43.3 in Sep). House building, civil engineering & commercial activity all contracted
9.46am GMT
Tim Moore, economics associate director at IHS Markit, says UK construction is enduring its worst slump in several years.
He blames the political uncertainty, and growing doubts over some major construction projects (perhaps the HS2 railway scheme which is now being reviewed?)
"UK construction companies experienced a downturn in business performance during October as political uncertainty and subdued economic conditions again combined to hold back sales. New orders have fallen in each month since April, which is the most prolonged period of decline recorded for more than six years.
"Civil engineering was the worst-performing area of activity in October, with business activity dropping at the fastest pace in ten years. Construction companies also voiced concerns about the uncertain outlook for large-scale infrastructure projects upon which growth is expected to rest in the coming years.
9.46am GMT
Worryingly, business optimism among construction firms is languishing at its lowest levels since 2012.
9.38am GMT
Newsflash: Britain's construction sector has suffered another sharp drop in activity last month, as Brexit uncertainty hits the building industry.
Firms have reported they suffered another drop in work, for the sixth month in a row. New orders fell too, forcing construction firms to cut jobs.
New orders dropped for the seventh month in a row during October, but the rate of decline was the least marked since July.
Construction companies noted that clients continued to defer decision-making on new projects in response to political uncertainty and concerns about the economic outlook. Survey respondents also suggested that intense competition for new work had resulted in more widespread price discounting to secure contract awards.
9.29am GMT
Germany's slump has helped to drag the wider eurozone factory sector down again.
The Eurozone Manufacturing PMI, which tracks activity across the euro area, has come in at 45.9 in October. That shows another sharp fall in activity and output, although slightly better than the seven-year low of 45.7 recorded last month.
9.14am GMT
Germany's manufacturing sector remained firmly in contraction territory in October (42.1; Sep - 41.7), amid the sharpest reduction in employment since January 2010. Factory gate charges continued to fall as demand weakened. More: https://t.co/HzBdMSqFVT pic.twitter.com/qV1YW0qHkl
9.12am GMT
Phil Smith, Principal Economist at IHS Markit, says Germany's factory sector is enduring its worst slump since the financial crisis:
"The German manufacturing sector remains in recession and continues to pose a threat to the domestic economy through a rising number of factory job losses.
Employment across the goods-producing sector is now falling at the fastest rate for the best part of ten years, though it should be said that the decline is nothing like that seen during the depths of the global financial crisis, and is so far mainly restricted to contractors.
"The survey's more forward-looking indicators offer some glimmers of hope. Latest data for new orders and output expectations were still very weak in October, but nevertheless the best seen in four months.
It remains to be seen if the downturn in the German manufacturing has finally reached a nadir - much of course depends on developments in global trade, with the US set to decide next week whether to impose new tariffs on automotive imports from the EU."
9.08am GMT
Germany's manufacturing sector has endured another torrid month, raising concerns that the country is in recession.
Surveyed businesses reported a backdrop of uncertainty weighing on investment and leading to a general reluctance among clients. New orders fell markedly and for the thirteenth month in a row in October.
8.55am GMT
France's factory sector shrugged off the wider malaise, by posting modest growth last month.
The French manufacturing PMI has risen to 50.7, from 50.5 in September.
France Manufacturing PMI Oct F 50.7 (est 50.5; prev 50.5)https://t.co/gSxQSxk65e pic.twitter.com/9lDUSM7CUE
8.51am GMT
Italy's factory sector also had a bad October, shrinking for the 13th month running:
Italy Manufacturing PMI Oct 47.7 (est 47.7; prev 47.8)
No good news for the economy of Italy from this morning's manufacturing PMI update. https://t.co/q7BxugN1je
8.45am GMT
Oh dear. Spain's factory sector contracted at a faster rate last month.
The Spanish manufacturing PMI has dropped to 46.8, down from 47.7 in September, showing another drop in activity.
Spain Manufacturing PMI Oct 46.8 (est 47.5; prev 47.7)
The deterioration in the PMI was led in the main by a sharp and accelerated drop in new orders.
Against a backdrop of elevated economic and political uncertainty, both at home and abroad, there were widespread reports of underwhelming market demand and clients adopting a cautious approach to their buying and investment activities.
8.40am GMT
Back in the markets, stocks are rising across Europe in early trading.
Investors are taking their cue from Asia, and the optimism over US-China trade talks.
8.36am GMT
Here's our news story on Mothercare UK's administration:
Related: Mothercare to appoint administrators for UK chain, putting 2,500 jobs at risk
8.36am GMT
Shares in Mothercare have fallen 15%, to a record low of 9p. That values the company at just 33m.
Investors have been almost wiped out over the last decade -- the shares were trading at 450p in January 2010.
8.22am GMT
Mothercare UK's slide into administration is a sad moment, and a real blow to its staff.
But it's not a shock.
"Years of underinvestment in the online business and its inability to differentiate itself as a specialist for young families and expectant parents as been the root of its seemingly inevitable downfall. As competition has become fiercer they have been beaten on price, convenience and the overall customer experience.
"Put simply, they have been left behind in today's rapidly evolving market and the board has been unable to restructure the business fast enough to cope with a new retail paradigm that has emerged."
8.09am GMT
Newsflash: The UK arm of maternity and baby retailer Mothercare is to be put into administration.
Since May 2018, we have undertaken a root and branch review of the Group and Mothercare UK within it, including a number of discussions over the summer with potential partners regarding our UK Retail business.
Through this process, it has become clear that the UK Retail operations of the Group, which today includes 79 stores, are not capable of returning to a level of structural profitability and returns that are sustainable for the Group as it currently stands and/or attractive enough for a third party partner to operate on an arm's length basis. Furthermore, the Company is unable to continue to satisfy the ongoing cash needs of Mothercare UK.
8.01am GMT
The main Asian stock markets are all comfortably higher today (except Japan, which is closed for a holiday).
The upbeat mood was enhanced by comments from Chinese Vice Premier Liu He that indicated trade talks with Washington were on track.
Liu said he had spoken on Friday to US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, with both sides saying the talks were "constructive".
7.48am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
"You won't have a deal on anything until you have a deal on everything....But we are quite optimistic that the remaining issues for the phase one can be closed out."
European Opening Calls:#FTSE 7322 +0.26%#DAX 13020 +0.46%#CAC 5783 +0.37%#MIB 23034 +0.43%#IBEX 9355 +0.29%#STOXX 3640 +0.44%#SA40 50530 +0.20%
It was another positive week for equities with data on balance more positive, trade talks seemingly going in the right direction, a U.K. election finally called and a Fed rate cut.
The S&P 500 advanced +1.5% (+0.97% Friday and a new record high) with semiconductors leading gains, up +2.5% on the week.
The Spanish, Italian, French, and German manufacturing reports will be posted, and economists are expecting 47.5, 47.5, 50.5, and 41.9 respectively.
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