UK house prices fall as Covid-19 job losses surge, but US employment rises - as it happened

Graeme Wearden

from on 2020-07-01 14:46 (#557W2)

Rolling coverage of the latest economic and financial news

3.46pm BST

Time for a recap, after a day of grim job losses....and encouraging economic data.

The Covid-19 pandemic has hammered Britain's travel industry and retail sector today, with thousands of jobs at risk.

Grim UK job news coming almost every hour at the moment. Here's a running list:

SSP (Upper Crust etc): 5,000
Royal Mail: 2,000
EasyJet: 1,900
Airbus: 1,700
Harrods: 680
TM Lewin: 600
Arcadia (TopShop etc): 500
Harveys: 240

3.23pm BST

In another encouraging sign, the Institute for Supply Management has reported that US factories returned to growth last month.

Its PMI index has jumped to 52.6 for June, strongly back into growth, from just 43.1 in May. ISM's New Orders index surged, suggesting a significant turnaround in fortunes last month.

US ISM Manufacturing PMI Actual 52.6 (Forecast 49.5, Previous 43.1) pic.twitter.com/BqIbstCxD3

Considerable US economic data beat:
At 52.6, June #ISM factory index is highest in over a year and well above May's 43.1 and consensus expectation's 49.8.
Re internals, v sharp jump in new orders.
Less encouraging: jobs metric lagged and, per prior tweets, extrapolation is tricky pic.twitter.com/ZSHXUHSMXU

We showed these charts when the April Manufacturing @ISM(R) Report On Business(R) data fell off a cliff, so to provide equal time, a look at the rebounds of (clockwise, from top left) the PMI(R) and New Orders, Production and Employment indexes. https://t.co/R2n1A5dSve #ISMROB #economy pic.twitter.com/NEwGWN2gCH

2.59pm BST

America's factories have also reported that the Covid-19 slump has bottomed out.

The US manufacturing PMI, which tracks activity in the sector, has surged to 49.8 in June from 39.8 in May. That's the biggest jump on record, showing a major improvement.

U.S. manufacturing conditions deteriorated only fractionally in June. The #PMI registered a record 10-point rise to post 49.8, as the contraction in output slowed and new orders stabilised amid looser #COVID19 restrictions. Read more: https://t.co/2vn5fZUqfV pic.twitter.com/CfsfSLgLvU

US manufacturers have reported a marked turnaround in business conditions through the second quarter, with collapsing production and demand in April at the height of the COVID-19 lockdown turning rapidly to stabilisation by June. The PMI posted a record 10-point rise in June amid unprecedented gains in the survey's output, employment and order book gauges.

The record rise in the New Orders Index, coupled with low inventory holdings, bodes well for a further improvement in production momentum in July. A record upturn in business sentiment about the year ahead likewise hints that business spending and employment will start to revive.

2.51pm BST

Over in Brazil, the manufacturing slump has bottomed out.

Brazil's factories have reported a pick-up in output and new orders last month, lifting its manufacturing PMI back over 50 points, and into growth.

The IHS Markit Brazil Manufacturing #PMI posted 51.6 in June, up from 38.3 in May, to signal the first improvement in the health of the sector since February. Both output and new orders registered growth, with sentiment strengthening notably. Read more: https://t.co/ulJ4Qgv9md pic.twitter.com/vP06EVO0UN

2.39pm BST

Wall Street has opened higher, as traders welcome the encouraging early stage results from the Pfizer/BioNTech Covid-19 vaccine tests.

Fresh from its best quarter in over 20 years, the Dow Jones industrial average has gained 163 points, or 0.6%, to 25,976. The S&P 500 is 0.3% higher.

BREAKING:

*COVID-19 VACCINE FROM PFIZER AND BIONTECH SHOWS POSITIVE RESULTS - STAT$PFE pic.twitter.com/GahDZCVEwD

2.15pm BST

Vaccine news: German biotech firm BioNtech and pharmaceuticals giant Pfizer have reported some promising results from their early trial of a Covid-19 vaccine.

The two firms report that the early-stage drug had shown potential -- human trialists who received the drug developed antibodies against Covid-19, at higher levels than often seen in patients who caught the virus.

Pfizer, Biontech shares surge in pre-market trading after vaccine from the companies shows positive results https://t.co/Uyu94zmCFS pic.twitter.com/M2zUljRRGZ

1.34pm BST

Economists are welcoming today's ADP Payroll report, and the news that 2.4 new jobs were created in June:

In addition to what is now a 3.1M rise in May (prev. a drop), an encouraging 2.4M rise in June ADP payrolls, however still a long way to go -- only 28% of jobs have been recovered of the total 19.7M in losses. pic.twitter.com/gD4WyFCPnC

This must be one of the largest revisions in economic key figures ever. The originally reported May decline of 2760k, the second largest drop ever recorded, in the US ADP employment report was revised to a gain of 3065k, the largest increase ever. These are exceptional times.

Everything I need to know about the ADP report: pic.twitter.com/3CksEXHwER

ADP revises its May numbers by basically turning the "-" to a "+"

1.29pm BST

Just in: US companies hired nearly 2.4m extra staff in June, as America's economy emerged from lockdown.

Payroll company ADP has reported that the labor market strengthened last month, with private sector employment up by 2.369m.

As the economy slowly continues to recover, we are seeing a significant rebound in industries that once experienced the greatest job losses.

In fact, 70 percent of the jobs added this month were in the leisure and hospitality, trade and construction industries."

More signs of economic growth. @ADP reports 2.37million jobs added to economy in June & May was revised from a decline of 2.7mln to a gain of 3-million. @MorningsMaria @FoxBusiness

1.01pm BST

The job cuts announced today by John Lewis and Harrods show that department store are reeling from the pandemic, writes my colleague Sarah Butler here:

12.35pm BST

European stock markets have all lost ground this morning. Germany's DAX has shed 1.5%, after Deutsche Bourse fixed the technical problems which hampered trading earlier today.

12.33pm BST

Back in the markets, anxiety about the Covid-19 pandemic is pushing shares down.

The FTSE 100 has shed 63 points, or 1%, to 6106, which would be its lowest closing level in two weeks.

11.54am BST

Sir Philip Green is also wielding the jobs axe, according to fashion trade magazine Drapers.

It reports that Green's Arcadia group is cutting 500 head office jobs, or one in five positions. And again, the Covid-19 lockdown is responsible, with Arcadia anticipating weak retail sales for some time.

In the email to staff, seen by Drapers, chief executive Ian Grabiner said:

We are continuing to live through an unprecedented global crisis and, as you know, our stores and head office temporarily closed on 20 March. Although our digital platforms provided us with some much-needed sales whilst our stores were closed, it certainly didn't make up for the loss of sales from our stores and franchise partners.

Exclusive: Arcadia Group to cut 500 roles as part of head office restructuring https://t.co/3ksFfd8YH4

11.24am BST

Ratings agency S&P has warned that the UK could be heading into a perfect storm' of economic misery.

In a new report, S&P says that Britain is vulnerable to a second-wave of coronavirus infections, followed by an economic jolt if it can't agree a free trade deal with the EU before 2021.

A second, bigger wave of (coronavirus) infections in autumn, then followed by a switch to WTO trade rules in January would be a perfect storm."

11.15am BST

Even Harrods isn't immune to the economic cost of Covid-19.

Harrods CEO Michael Ward told employees about the cuts in a memo early on Tuesday, June 30.

With a heavy-heart, today I need to confirm that due to the ongoing impacts of this pandemic, we as a business will need to make reductions to our workforce," Ward said, adding that 14% of its 4,800 staff would be impacted.

Harrods, the iconic luxury department store, is cutting nearly 700 jobs after struggling during the COVID-19 pandemic https://t.co/dSDQfAAsUV

11.03am BST

The Covid-19 pandemic is also forcing job cuts at retail group John Lewis, according to reports this morning.

The Evening Standard says Sharon White, its new chair, has warned staff that some stores will close permanently, resulting in job losses. The blow comes as John Lewis also announces another raft of store reopenings.

In a bombshell letter to staff, Sharon White this week told 80,000 staff at the mutual, which also includes Waitrose, that its prized bonus will likely be ditched next year as the company wrestles to improve profitability.

At the start of the Covid crisis, sources at the group warned it was unlikely all 50 of its department stores would reopen after the lockdown. White confirmed plans to close a several unnamed shops, with staff informed in mid-July. Around 20 stores have reopened since non-essential retailers were given the green light to reopen on June 15 with distancing measures in place. Plans to open a further 10 were announced today, including Oxford Street on July 16.

Exclusive!! John Lewis takes axe to stores, bonus and HQ. Tough times for a mutual that can't easily tap the City for emergency funds like M&S and other stock market rivals https://t.co/XFitVOX5Jx

10.21am BST

European stock markets have made a lacklustre start to the third quarter of 2020.

The UK's FTSE 100 has gained 12 points, or 0.2%. Surgical devices maker Smith & Nephew is the top riser (+5%) after reporting that its sales slump eased in June.

Trading issues on the Eurex Exchange, one of the main platforms for futures products, hampered bond sales in Europe. Prices for German bund futures hadn't updated since 7:47 a.m. in London, while Denmark postponed a bond auction due to the technical difficulties.

Stock trading in Vienna, Prague, Budapest, Ljubljana and Zagreb was also down, as these venues share Deutsche Boerse's T7 trading infrastructure. As recently as mid-April, another outage of the T7 system hobbled trading across the same set of Central and Eastern European stock markets.

Deutsche Boerse Expects All Systems Are In Operation Again By 1120 CEST (0920 GMT)

EUREX planned reopening:

10:00 London Time / 11:00 Frankfurt Time - Pre-Trading

10:25 London Time / 11:25 Frankfurt Time - Opening auction with a minimum duration of 5 minutes

10:30 London Time / 11:30 Frankfurt Time - Continuous Trading

9.56am BST

Dave Atkinson, UK head of manufacturing at Lloyds Bank, also fears a flood of job losses at UK factories -- even if the economy returns to growth.

Manufacturers are now bracing themselves for the second half of the year in the knowledge that a reckoning looms. The winding down of the furlough scheme by the autumn, and lower business levels in a number of subsectors, means more redundancies are likely.

History shows that, sadly, more firms tend to face the risk of failure coming out of recession due to cashflow challenges than going into one. This is compounded by many manufacturers having to manage higher debt levels that they would normally operate with. Understanding and managing the risks of overtrading for businesses of all sizes will be critical.

9.42am BST

The pandemic is forcing Britain's manufacturers to keep slashing jobs.

Data firm IHS Market reports that employment at UK factories fell for the fifth consecutive month in June.

Although the rate of decline eased further from April's record it remained among the steepest registered in the 28-year survey history. There were reports of redundancies, cost control efforts, workforce restructuring and the non-replacement of leavers.

The main focus is now shifting towards the labour market. Concerns are rising about the potential for marked job losses, especially once the phase out of government support schemes begins. The news on that footing is less positive, with June seeing a further reduction in staffing levels and, although easing sharply since April's record, the rate of job loss remains among the steepest in the 29-year survey history.

Economic conditions will need to improve markedly across the UK, or some support retained, if the labour market downturn is to avoid becoming more entrenched through the remainder of the year."

9.33am BST

Here's our news story on the downturn in UK property prices:

9.26am BST

UK supermarket chain Sainsbury has reported a surge in sales during the pandemic....and a big jump in costs too.

Grocery sales rose by 10.5% in the last 16 weeks, as consumers stocked up on food supplies when the lockdown began. Online sales doubled, amid the scramble to secure a precious home delivery slot.

We believe it is appropriate to remain cautious about the sales trajectory through the remainder of the year given the weather benefit to date and a likely further weakening of consumer spending.It remains impossible to predict the full nature, extent and duration of the impact of COVID-19 on sales and costs.

Our base case scenario continues to underpin an expectation of broadly unchanged Group underlying profit before tax for the full year.

9.13am BST

The Covid-19 pandemic has driven unemployment up in Germany, although not by as much as feared.

The Labour Office has reported that an extra 69,000 people were out of work last month. That drives the German jobless rate up to 6.4% in June, from 6.3% in May.

German Unemployment Change (000s) Jun: 69.0K (est 120K; prevR 237.0K; prev 238K)
German Unemployment Claims Rate SA Jun: 6.4% (est 6.5%; prev 6.3%)

8.55am BST

Italy's factory sector slump also seems to be easing.

Firms reported that output actually rose in June compared to May, as plants were able to reopen. However, new orders kept falling, highlighting the slump in global demand.

Italian Markit Manufacturing PMI June Report - Markithttps://t.co/l8s3iAzjpc pic.twitter.com/IY16lHO4Tt

8.38am BST

Over in Spain, the factory slump appears to be bottoming out.

The latest Spanish manufacturing PMI, which measures activity in the sector, has jumped to 49 for June from 38.3. That's close to stabilisation.

Spain Manufacturing #PMI up sharply to 49.0 in June (38.3 - May) as the decline in goods production slows markedly. Challenges conditions remain, however, as plants operate below capacity and new workflows remain weak. Read more: https://t.co/OSQRjxNmwg pic.twitter.com/C9z4BScGV5

8.20am BST

Ryanair is threatening to add to the swathe of job cuts across the travel industry, unless staff agree a pay cut.

Back in May, Ryanair announced it would cut 3,000 pilots and cabin crew positions. This morning, CEO Michael O'Leary declared that some of these cuts could be avoided, if staff agreed lower wages.

We've already announced about 3,500 job losses but we're engaged in extensive negotiations with our pilots, our cabin crew and we're asking them to all take pay cuts as an alternative to job losses.

We're looking from 20% from the best paid captains, 5% from the lowest paid flight attendants and we think if we can negotiate those pay cuts by agreement, we can avoid most but not all job losses."

"We need to get this stupid quarantine lifted."#RyanAir boss Michael O'Leary criticises the government's quarantine rules on international travel saying they are causing 'untold damage' for the industry and wider British economy. RH #KayBurley pic.twitter.com/8h9URKu1K9

8.11am BST

Despite these recent falls, UK houses are still pretty pricey when compared to wages:

7.59am BST

Britain's estate agents are insisting that the property market isn't about to collapse.

They're arguing that the 3.2% drop in prices during May and June is a reset', and that demand will pick up now that the economy is reopening - and house viewings are allowed again.

Prices are down by a whisker annually but what is remarkable is how soft a landing the market has had given the scale of the disaster that has unfolded in the past few months.

Nationwide's reading of the situation is totally in line with recent indications that the prices being achieved on the doorstep have slipped to 2% or 3% below asking prices on average.

So far this is a hard reset for the market rather than a collapse. The gains of the Boris bounce' seen at the start of the year have been swept away, and the market is transitioning to the new normal'.

With estate agents across the UK at last able to conduct viewings, both buyers and sellers are feeling their way on price.

7.44am BST

Here are the key charts from today's Nationwide house price survey:

7.32am BST

Here's our news story on the SSP job cuts:

7.18am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The economic cost of Covid-19 is mounting, forcing struggling companies to slash jobs even as governments try to unlock their economies without fuelling the virus's spread.

Our expectation is that by the autumn only around 20% of units in the UK will have opened. We have therefore come to the very difficult conclusion that we will need to simplify and reshape our UK business, and we are now starting a collective consultation on a proposed reorganisation.

If the pace of the recovery continues at the current level, this could lead to up to c. 5,000 roles becoming redundant from within the Head Office and UK Operations.

#Breaking Upper Crust owner SSP has said up to 5,000 jobs are under threat as it shakes up the group following plunging passenger numbers at railway stations and airports due to the coronavirus pandemic pic.twitter.com/X7og6woHmV

Airbus is facing the gravest crisis this industry has ever experienced."

It is unsurprising that annual house price growth has stalled, given the magnitude of the shock to the economy as a result of the pandemic. Economic output fell by an unprecedented 25% over the course of March and April - almost four times more than during the entire financial crisis.

Housing market activity also slowed sharply as a result of lockdown measures implemented to control the spread of the virus. While latest data from HMRC showed a slight pick-up in residential property transactions from April's low, in May they were still 50% lower than the same month in 2019.

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