Markets strengthen amid economic recovery hopes - as it happened

Graeme Wearden

from on 2020-07-13 15:49 (#55MKA)

Rolling coverage of the latest economic and financial news

Latest: Bank of England governor says recovery underway
Pepsico beats forecasts as drink and snack demand holds up
Introduction: Asia-Pacific markets rally on recovery hopes
Vaccine optimism pushes FTSE 100 higher
Coronavirus - latest updates
See all our coronavirus coverage

4.49pm BST

And finally, a late flurry of action has driven the FTSE 100 up to its highest closing level in nearly a week.

The index has closed up 80 points, or 1.3%, at 6,176, with silver miner Fresnillo (+5.6%), chemicals group Johnson Matthey (+4.3%) and hospitality group Intercontinental Hotels (+3%) among the risers.

4.46pm BST

In another blow to the UK labour market, Halfords has confirmed plans to close 60 stores and garages by April.

My colleague Sarah Butler explains:

The cycle and car parts retailer said it hoped to move staff to other branches, but the closures could lead to hundreds of job losses. Halfords has already closed its Cycle Republic chain and five Halfords stores and garages.

Covid-19 has materially changed the retail outlook for the coming months and has overshadowed Brexit as the emerging risk," the company said in a statement.

4.28pm BST

Donald Trump's economic adviser, Larry Kudlow, has been sounding optimistic on Fox News today.

Kudlow predicted that the US economy could grow by at least 20% in the second half of this year, meaning a V-shaped recovery would be intact.

WH Economic Advisor Kudlow : Not Expecting Interruptions In V-Shaped Recovery

WH Economic Advisor Kudlow : +20% Growth Seen In H2 2020 - Fox

WH Economic Advisor Kudlow
: Pres. Trump Is Willing To Consider More State Aid If Schools Reopen

4.13pm BST

Wall Street is getting close to a five-week high:

S&P 500 just 6 points off the 9 June high - that being the highest print since March sell-off...

4.09pm BST

Most stocks on the Dow are up today, led by healthcare stocks and tech firms.

Pharmaceutical firm Pfizer (+4.7%) is the top riser, on hopes for its Covid-19 vaccine. It's followed by Apple (+3.6%), and United Health (+2.7%).

3.31pm BST

UK tech company Sage shares the Bank of England's concerns about the jobs market.

It has published new research today, showing that 62% of small and medium sized enterprises (SMEs) are either planning to make redundancies following the Covid-19 pandemic, or have already done so.

3.18pm BST

Here's another example of how tech stock valuations have soared, even as sales have been hit by the coronavirus lockdown.

Apple just passed its all-time peak valuation seen in mid-2007 when revenues were growing 90% year-over-year as a result of the introduction of the iPhone. Revenues for the company's fiscal Q3 ending in June are expected to fall 5%. pic.twitter.com/4FRGnzGtw0

3.08pm BST

Shares in electric car company Tesla are absolutely soaring again today.

Tesla has jumped almost 11% in early trading to $1,711 per share, a new record high.

***Tesla hits $300bn valuation in pre-market trading***

$1620 +4.88%$TSLA #tslaq pic.twitter.com/8bEajFwmAW

Just to put things into perspective: #Tesla is priced at 6,348 times 2019 earnings. Stock is priced at 166 times 2021 earnings, 20 times book value, & 7* sales. Toyota, biggest auto comp by mkt value after Tesla, sells for 61% of sales & 91% of book value https://t.co/cnGA3OVGkz pic.twitter.com/R1FPPFDbTN

Please excuse me while I collect my jaw, which just fell off. pic.twitter.com/ft0wPxPKQM

2.47pm BST

Over in New York, shares are rallying at the start of the new week, sending the Nasdaq to a fresh record high.

Optimism is building that this week's earning season will show that an economic recovery is underway. Pepsico's forecast-beating results have brightened the mood.

Stocks are rising on Wall Street amid vaccine news for the coronavirus. The FDA granted fast track designation to two companies to develop a vaccine. At the opening bell, the Dow Jones is up more than 200 points. The Nasdaq and S&P 500 are also up around 1%.

2.37pm BST

It's a little early, but we should raise a toast to Diageo for creating the world's first paper-based spirits bottle that is 100% plastic-free.

It may sound a little fragile, but my colleague Rebecca Smithers reports that it should hold your whisky safely, and be better for the environment:

The company said it was aiming to launch the bottle early next year with its Johnnie Walker whisky brand in one market before rolling it out worldwide.

The bottle is made from sustainably sourced pulp, complies with international food and drink safety standards and is fully recyclable. The contents are protected by a liner, made of resin rather than plastic, which holds the liquid but disintegrates when finished. The cap will be made of aluminium.

2.29pm BST

Just in: the governor of the Bank of England has predicted that the UK economy has started to recover from its Covid-19 slump.

Andrew Bailey told an online audience of school pupils that the turnaround has begun, but also warned that unemployment is a huge worry.

We are seeing the economy come back now somewhat, because obviously the restrictions are beginning to be lifted.

But there's a long way to go, we are very worried about jobs, as are a lot of people."

"I joined the Bank of England and hung around" - great summary from Andrew Bailey when asked about his career success in a webcast for schools

2.14pm BST

Pepsico's CEO Ramon Laguarta says the company benefited from demand for snacks to help people through the lockdown.

Speaking after posting that 3% drop in revenues last quarter, he says:

We gained market share in salty, savory and macro-snacks in the quarter."

Pepsi's well diversified business means the impact of COVID-19 has not been felt evenly across the company. While the pandemic looks to have been a net cost to the group, divisions like Quaker Foods have done well - perhaps benefiting from more home cooking and health conscious customers.

While the pandemic has been disruptive and raised costs in the short term, Pepsi is well placed to bounce back - the group's enviable stable of brands should be enough to see them through. The market has recognised these strengths though, and the shares have almost recovered to their level at the start of the year."

1.13pm BST

Just hours after hiking its profit guidance, its emerged that security firm G4S is planning to cut jobs.

The GMB union has warned that G4S is restructuring its cash-handling operations in the UK, called Cash Solutions. The plan could eliminate over 1,100 jobs, they say.

These cuts are devastating for our members and their families. GMB will fight to the end for every single job.

They are also another worrying step towards a cashless society - the cash industry really is on a knife edge.

These G4S cuts are devastating for our members and their families.

We will fight to the end for every single job.

We call on the government to take action to protect the cash industry.https://t.co/qi62oM5iet

12.52pm BST

The London stock market is pushing higher again, with nearly every share up.

Miners, energy firms and consumer goods makers and service providers are the top-performing sectors. That reflects optimism for the global recovery, helped by Pepsico's results this morning.

US Opening Calls:#DOW 26296 +0.84%#SPX 3210 +0.79%#NASDAQ 10947 +1.04%#RUSSELL 1438 +1.22%#FANG 4880 +1.91%#IGOpeningCall https://t.co/NebPBayyYD

12.34pm BST

Back in the UK, prime minister Boris Johnson has urged the public in England to wear masks in shops as an extra insurance policy" against the coronavirus:

12.23pm BST

Pepsico has given the markets a lift with its better-than-expected results today, at a crucial time, says Edward Moya of OANDA:

Global stocks are rising ahead of an earnings storm that will likely deliver the worst plunge in profits since the Great Recession. With many traders anticipating roughly a 40% drop in corporate profits, businesses could be ready to deliver a round of job cuts to shore up their balance sheets. Wall Street remains fixated with the recovery trade but that will be hard to hypothesize as the path of virus is unknown. The end result for many traders remains that the Fed is keeping rates near zero for at minimum a couple years, governments will continue to deliver fiscal stimulus, and that recovery ahead might have only got pushed back a quarter.

The official start to earnings season is tomorrow, but one key trading update and earnings report provided a small boost to risk appetite. Pepsico delivered stronger-than-expected results as COVID-19 stockpiling drove demand. The first test of the consumer showed healthy demand for mostly unhealthy food.

11.59am BST

The International Monetary Fund has warned that Europe's Covid-19 slump could be even worse if there is a second wave of infections, and if efforts to bring a vaccine to market quickly falter.

Poul M. Thomsen, director of the IMF's European Department, explains in a blog post that Europe, and the rest of the world, faces a extended crisis'.

An element of social distancing-mandatory or voluntary-will be with us for as long as this pandemic persists. This, coupled with continued supply chain disruptions and other problems, is prolonging an already difficult situation.

Based on updated IMF projections released last month, we now expect real GDP in the European Union to contract by 9.3 percent in 2020 and then grow by 5.7 percent in 2021, returning to its 2019 level only in 2022. If an effective treatment or vaccine for COVID-19 is found, the recovery could be faster-but the opposite would hold true if there are large new waves of infection.

Europe's real GDP is expected to contract by 9.3%- and return to its 2019 level only in 2022. How can economies reposition their policies for a longer crisis? Read our #IMFblog https://t.co/KQSZqqWlSO pic.twitter.com/mFRwfXVebv

11.24am BST

Just in: Snacks and fizzy drinks group Pepsico has kicked off the Q2 reporting season, by beating expectations.

-- PEPSICO REPORTS Q2 CORE EPS $1.32, CONSENSUS $1.25

-- PEPSICO NOT PROIVIDING FINANCIAL OUTLOOK FOR FY20 AT THIS TIME

-- PEPSICO CEO: BUSINESS PERFORMED 'RELATIVELY WELL' DURING Q2$PEP

11.06am BST

Three hours into the new trading week in Europe, and stocks are holding most of their earlier gains.

#AnotherWeekAnotherDollar

*Our markets analyst @JesseCohenInv gives us his #Top5ThingsToKnowThisWeek:

- Q2 Earnings Season Starts
- $JPM Kicks Things Off On Tuesday
- $NFLX Reports On Thursday
- U.S. Retail Sales
- U.S. Jobless Claims$DIA $SPY $SPX $ES_F $QQQ $NQ_F $VIX pic.twitter.com/D2X1614FWa

10.47am BST

Britain's property sector emerged from its Covid-19 freeze in June, according to new data from property group Andrews.

It has reported that instructions picked up last month (although they were still lower than a year ago). Viewings also increased sharply - with some people checking out properties remotely.

Instructions in April and May 2020 were down 90% and 73% respectively on the equivalent months in 2019 as the property market felt the full impact of lockdown and Covid-19.

But June 2020 saw a significant rebound, with instructions down just 26% on the corresponding month last year, up 178% on May 2020, when the property market reopened mid-month, and 624% on April - when Andrews saw just 55 instructions across its south of England branches.

10.38am BST

The ONS has looked at how households were set-up to cope with a loss of income when lockdown hit.

Using data from its wealth and assets survey, it found households where the head works in accommodation and food services were the least equipped to manage with a loss of income.

Households where the head is employed in industries with lower rates of furloughing, such as IT and professional services, were more likely to be able to cover a drop in employment income with savings https://t.co/pU4AZWtGHw pic.twitter.com/0GF2lxTVz5

10.29am BST

UK retailers aren't joining in today's rally, following signs that some consumers are still avoiding the shops.

The latest figures are an improvement on the 73% year-on-year decline in May, but highlight the challenges facing retailers and hospitality companies as they try to encourage worried customers to return as the coronavirus lockdown eases.

At the same time online shopping has soared, as consumers browse and order from the comfort and safety of their home...

10.11am BST

In the telecoms world, the boss of BT has warned it will be impossible" to strip Huawei products out of the UK's telecommunications network within a decade.

With the government due to rule on Huawei's involvement in 5G networks on Tuesday, Philip Jansen warned that its tech is already very deeply embedded in the UK infrastructure.

9.57am BST

Germany's economy has turned the corner in the Covid-19 recession, according to a new government report.

Reuters has the details:

Germany's economy has passed its lowest point and the recovery process is starting, the economy ministry said on Monday.

A rise in industrial orders indicates that production will pick up in the coming months, but risks still exist, particularly in a very slack demand from non-euro zone, the ministry said in its monthly report.

German economy ministry says that economic low point has passed https://t.co/JcyajuTA7t | https://t.co/VOmsi4fwOp #forex #trading pic.twitter.com/tvM9kk6UFa

9.43am BST

The copper price also rallied today, hitting a two-year high in London, after copper miners in Chile voted to strike.

Workers at Antofagasta's Zaldivar copper mine in Chile voted to walk out after rejecting a pay deal, accusing Antofagasta of trying to strip workers' contracts of existing benefits.

We cannot accept the mine owner's exploitation.

If the company does not recognize our contribution and sacrifice, it will face an extensive strike that will completely stop production

Copper price pinging up today - hitting 2-yr highs over strike fears in Chile.

- Price trades $6,600 before
- Lots of short covering
- Beefyvolume on LME 3-mth at 16k lots
- Zaldivar (the potentially striking mine) only produces 54kt per year https://t.co/ZCeiXmhqi0 pic.twitter.com/sTSxn8xvYf

9.19am BST

Mining stocks are also among the stock market risers, usually a sign that investors are more upbeat about growth prospects.

Equity markets seem relatively unconcerned with the rising number of US COVID-19 cases. Although fear in the US would appear to have increased, the level of fear is nothing like that seen earlier this year. National lockdowns remain very unlikely.

There is also the possibility that the increase in cases will encourage further fiscal stimulus.

8.52am BST

Security firm G4S has cheered investors this morning, by hiking its profit forecasts.

8.31am BST

Output across Britain's service sector and manufacturers picked up in June, but remains extremely weak, according to a new survey this morning.

Accountancy firm BDO has reported that its Services Output Index posted its biggest ever monthly jump for June, following the reopening of businesses. It rose by 11.2 points to 64.73.

Although economic activity remains considerably suppressed, the recovery in output is an encouraging signal that the easing of restrictions has breathed life into certain sectors.

While output continues to show positive momentum, the crucial infrastructure underpinning the economy remains fragile. As government support measures are rolled back in the coming months, the prospects for the economy will become clearer. For now at least, there is reason for some very cautious optimism."

8.20am BST

Some traders are pinning their hopes on a Covid-19 breakthrough.

Over the weekend, the head of German biotech firm BioNTech predicted that the vaccine being developed with Pfizer could be ready for regulatory approval by the end of the year.

A study on Remdesivir showed that the drug reduced coronavirus fatalities by 62%. Boosting sentiment further Pfizer and BioNTech announced that their vaccine could be approved by the FDA as soon as December.

A vaccine is the quickest and surest way for the economy to bounce back to pre-corona levels, which explains why the market is so sensitive to any vaccine news flow.

8.09am BST

A burst of Monday morning optimism is lifting stocks in the City.

Britain's FTSE 100 has jumped by 77 points at the open, or 1.3%. That lifts the blue-chip index back to 6174 points - clawing back a chunk of last week's losses.

7.52am BST

A new poll from Reuters has found that the slump in China's exports probably eased in June as some countries reopened their economies.

The survey of economists also found that imports also probably contracted less sharply, thanks to higher demand for crude oil and commodities from Chinese firms.

June exports from the world's second-largest economy are expected to have contracted 1.5% from a year earlier, according to a median estimate from the survey of 32 economists, easing from a decline of 3.3% in May.

Imports likely fell 10.0% on year, the poll showed, compared with a steep drop of 16.7% the previous month, due to higher purchases of crude oil and orders for infrastructure materials.

China's export slump to ease in June as economies reopen, imports fall less: Reuters poll https://t.co/35lI9x7u57 pic.twitter.com/wgyVqleU3u

7.29am BST

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

A study found that Remdesivir, an anti-viral drug produced by Gilead Sciences, reduced the fatality rate by 62%.

The drug in question has been tipped as a potential treatment for the coronavirus for several months, and the findings from the latest study boosted market sentiment.

BREAKING:

*SUNDAY NIGHT #FUTURES ACCELERATE GAINS WITH THE DOW JUMPING NEARLY 200 POINTS DESPITE RISING CORONAVIRUS CASES $DIA $SPY $QQQ $IWM $VIX pic.twitter.com/ZDJNpQXRgp

Asian markets ripping higher. Chinese stocks resume their epic rally. pic.twitter.com/TsFRlvIuOI

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