Markets hit by UK quarantine move and China retail sales fall - as it happened

Graeme Wearden

from on 2020-08-14 15:39 (#56WZC)

Airline and hotel companies are hit by UK imposing a 14-day quarantine on arrivals from France

Also:

4.39pm BST

And finally, after a turbulent day the FTSE 100 index has closed down 1.5%.

The blue-chip index lost 93 points to finish at 6,092, wiping out the gains earlier this week.

3.57pm BST

Back to the US...and the increase in retail sales last month has lifted consumer spending back to pre-pandemic levels.

Ton of US econ data this morning 1. Retail sales back at pre-pandemic levels in July even as spending cools 2. Productivity up by the most since 2009 3. Industrial production up for third month 4. Consumer sentiment levels off on policy gridlock' https://t.co/PC7q7StTwn pic.twitter.com/8kYukFlyWm

Retail Sales Increase! With the 1.4% MoM increase in July, the retail sales control group is now rising at the fastest YoY pace (+8.0%) since 1999. From a historical standpoint, this gain is impressive and suggests that fiscal stimulus has helped to support consumer spending. pic.twitter.com/nFBzakaa0Z

'Yes', retail sales volume is back at all-time highs (buying all those new laptops, disinfectants and Netflix subscriptions with government-sponsored money), but consumer #confidence remains very subdued!

Michigan Consumer Sentiment Index pic.twitter.com/8fIGh1jp4C

3.38pm BST

With an hour to go until the close, European markets are still solidly in the red.

The FTSE 100's hovering around 6086, a drop of 99 points (-1.6%), with travel and leisure companies still doing the damage.

Though markets shook off the week's - admittedly long-teased - second quarter GDP contraction in the UK, a worse than forecast Chinese retail sales reading seemed to pose more of a problem for traders. This was further compounded by a retail sales miss out of the US (though the core figure did improve on estimates).

The real issue in Europe, however, was the latest quarantine decision from the UK government, removing France, like Spain, from its travel corridor. And with reports Macron could do the same in retaliation, investors received an unwelcome reminder that countries may have ran before they could walk with things like holidays.

3.13pm BST

Just in: US consumer confidence has improved slightly this month, but remains low.

The University of Michigan's consumer sentiment index has risen to 72.8 for August, up from 72.5 in July.

Michigan Consumer Sentiment Prel (AUG)
Actual: 72.8
Expected: 72
Previous: 72.5https://t.co/KDsjjRAPvp

Consumer sentiment remained weak in Aug as renewed shutdowns weighed on optimism about future prospects & unemployed Ams had to reckon with a lapse of income support. pic.twitter.com/sPRBUtiLgv

2.42pm BST

Anxiety over the economic cost of the pandemic is weighing on Wall Street as trading begins.

The benchmark S&P 500 has opened a little lower, having nearly hit record highs earlier this week. Technology stocks, though, are holding up better.

#DOW 27803.88 -0.33%#SPX 3368.09 -0.16%#NDX 11195.6 +0.15%#RTY 1570.73 -0.57%#VIX 22.73 +2.71%

2.37pm BST

Companies beyond the travel industry who are vulnerable to fresh lockdown restrictions are also falling today.

GVC, the betting firm behind Ladbrokes Coral, is down 3.1%. It was hurt by the cancellation of sporting events during the pandemic.

2.02pm BST

Nearly 2bn has been wiped off Europe's travel and leisure industry today.

The Stoxx 600 Travel and Leisure index (which was worth 95.5bn last night) is currently down 2.3%, showing the impact of the travel restrictions.

1.36pm BST

Some snap reaction to the US retail sales figures:

BREAKING! US retail sales rose by 1.2% in July, slightly below expectations. Ex autos retail sales rose 1.9%, more than expected. YoY sales up 2.7% pic.twitter.com/xGKFozV2KR

BREAKING:

*U.S. CORE RETAIL SALES JUMP 1.9% IN JULY, BEATING FORECASTS FOR GAIN OF 1.3% pic.twitter.com/jwjV6fPhvZ

Worse than expected: July retail sales rose 1.2%. That's a slow-down after brisk gains. Failure of Congress to approve additional coronavirus relief believed to have undermined U.S. consumer spending https://t.co/tub16KnGJT via @WSJ

1.35pm BST

Just in: Retail spending across the US rose in July, but not as much as expected.

Retail sales jumped by 1.2% in last month, compared to June -- when they had surged by 8.4%.

*US RETAIL SALES JULY MoM 1.2%, EST. 1.9%, PREV. 7.5% pic.twitter.com/83h7ITWlaw

1.18pm BST

Here's my colleague Richard Partington on the weak Chinese retail sales figures:

Fears over the strength of China's economic recovery from the coronavirus pandemic have been raised after retail sales slumped in July and industrial production remained subdued.

Fuelling concerns for the world economy, retail sales in China dropped in July by 1.1% compared with the same month a year ago, missing predictions for a small increase in consumer spending.

12.58pm BST

Wall Street is expected to follow Europe's lead when trading begins in 90 minutes:

BREAKING:

*U.S. STOCK INDEX FUTURES ACCELERATE LOSSES IN RISK-OFF TRADE

*DOW FUTURES170 POINTS, OR 0.7%
*S&P 500 FUTURES0.4%
*NASDAQ FUTURES0.2%$DIA $SPY $QQQ pic.twitter.com/6epbYCpqch

12.35pm BST

Our main Covid-19 liveblog has all the details on the quarantine changes, including the prospect that France imposes its own restrictions in return.

France's European affairs minister, Clement Beaune, tweeted that the government regretted the British decision that will lead to a reciprocal measure", while adding hoping for a return to normal as soon as possible".

12.30pm BST

The record-breaking slump in eurozone employment in the last quarter (see here) has wiped out swathes of jobs created since the last recession.

And with nearly 5 million jobs already lost, many more are at risk as governments move towards winding up their job retention schemes.

The coronavirus pandemic has wiped out nearly half of the 12 million euro-area jobs created in the seven years since the last recession, in another sign of the enormous damage wreaked on the economy.

Employment slumped by 4.9 million in first half of the year, almost all in the second quarter when the most stringent measures to contain the spread of the virus were in place.

12.06pm BST

European stock markets are all solidly in the red as lunchtime approaches.

The FTSE 100 is currently down 1.8%, with travel shares worst hit on a bad day for stocks. IAG is currently down 5.5%, with easyJetshedding 6.4%.

What we have got is a significant amount of uncertainty over the evolution of coronavirus pandemic, which is maintaining a risk premium for the transportation, leisure and hospitality sectors."

A deal on a new coronavirus relief package looked increasingly out of reach as US Senators left Washington for the summer recess, pushing the likely timing of an agreement to September when both houses return. A last-ditch attempt on Wednesday to resume talks went nowhere with Republicans refusing to meet Democrats halfway for a $2 trillion stimulus package and President Trump yesterday saying he would block any deal that contains additional funding for the Post Office.

Trump is strongly opposed to the use of mail-in voting for the forthcoming presidential election out of fear that it may harm his prospects of defeating his Democratic foe Joe Biden. His objection to any extra funds for the Post Office that would help expand voting by mail could further scupper the chances of reaching a bipartisan compromise.

11.43am BST

Denmark and Finland have joined the ranks of countries whose economies shrank last quarter.

Denmark suffered a historically bad drop in GDP, down 7.4% in April-June during the lockdown. Finland was less badly hit, contracting by 3.2%.

Finland & Denmark posted better economic performance in the second quarter than Sweden despite their lockdowns:
Finland GDP -3.2%
Denmark GDP fell by record 7.4%

But the Nordic countries fared better than Sweden, whose economy contracted 8.6%https://t.co/npqCGGdnd4

Finland's economy best performer in Europe so far in Q2 while Denmark's GDP contracts by record amount. Both had lockdowns, both did better than neigbouring Swedenhttps://t.co/6znGOpj5a3 pic.twitter.com/8pRhsSeD0B

Total deaths from Covid / Q2 GDP contraction:

Sweden: 5,776 / -8.6%
Denmark: 621 / -7.4%
Finland: 333 / -3.2%

https://t.co/0JS2FdtmdT

11.14am BST

The UK travel industry has warned that the new restrictions on travel to France is a devastating blow" and will lead to job losses.

My colleague Gwyn Topham has the details:

Airlines UK, which represents the biggest carriers, said the decision was another devastating blow to the travel industry already reeling from the worst crisis in its history".

It urged the government to bring in a new testing regime and change its approach to quarantine to end its broad-brush, weekly stop-and-go changes to travel corridors at a national level, which have proven so disruptive to airlines and passengers alike."

10.49am BST

Global oil prices slipped below $45 a barrel on Friday morning as the market turned its attention away from encouraging signs that US oil stockpiles are receding and towards the gloomier economic picture in China.

The slowdown in China's retail market underlined concerns raised on Thursday by the International Energy Agency that a sluggish recovery from the pandemic would lead to lower than expected oil demand this year, and in 2021 too.

10.28am BST

Here's our full story on the slump in travel stocks this morning:

10.27am BST

Over in the eurozone, employment has fallen sharply as the region's economy plunged into its worst ever recesssion.

The number of employed persons decreased by 2.8% in the euro area, and by 2.6% in the EU in the second quarter of 2020, compared to January-March.

Euro area #employment -2.8% in Q2 2020, -2.9% compared with Q2 2019: flash estimate from #Eurostat https://t.co/j9XHYnzfoN pic.twitter.com/RcXNNEuhGL

10.09am BST

Shares in IAG (which owns British Airways and Iberia) are falling back towards the seven-year lows seen earlier this month:

10.02am BST

The Office for National Statistics has also found that people are more worried about losing their jobs, but also happier to visit pubs and restaurants.

It says:

9.59am BST

Six in ten UK adults would be put off from travelling abroad if they had to quarantine afterwards, and a fifth have already scrapped holidays.

That's according to Office for National Statistics, in its latest survey of the economic impact of Covid-19.

This week, we asked adults how likely or unlikely they were to travel abroad on holiday if they had to self-isolate at home for two weeks upon their return to the UK. Of all adults, 1 in 10 (10%) said they were likely or very likely to travel with the knowledge that they would have to self-isolate for 14 days, however, 62% of respondents said they were very unlikely to travel if this were the case.

We also asked all adults how the possibility of having to self-isolate for 14 days upon returning home from holidays abroad had affected their travel plans. Of all adults, 1 in 5 (20%) reported that they had cancelled their travel plans and 14% said they had decided to holiday in the UK instead of travelling abroad this year.

9.38am BST

The consumer group Which? is warning travellers will be" disproportionately" paying the price for the government's flip -flop approach to foreign holidays this year.

Rory Boland, Which?'s travel editor, says the quarantine changes will cost holidaymakers:

It's understandable that the government wants to restrict travel to these countries at this time, but the burden of this decision disproportionately falls on holidaymakers - thousands of whom are likely to be left significantly out of pocket because their airline will refuse to refund them,"

Unlike tour operators, airlines now routinely ignore FCO travel warnings and refuse refunds because, they argue, the flight is still operating. Some major airlines, like Ryanair, won't even allow customers to rebook without charging a hefty fee.

9.30am BST

The UK's new quarantine rules are a serious blow to the travel sector, says Russ Mould, investment director at financial platform AJ Bell.

The problem for the airlines is that people's desire for a break in the sun may be outweighed by their fear of the logistical challenges of holing up for two weeks when they get back, with decisions on which countries to add to the quarantine list often coming at short notice.

This decision will feel particularly painful as it comes at the height of the UK holiday season and the question now becomes just how long the likes of EasyJet, Ryanair and British Airways-owner International Consolidated Airlines can continue under these conditions.

9.15am BST

EasyJet has said it will keep operating a full schedule, despite the quarantine changes.

Reuters has the details:

UK airline easyJet said it planned to operate its full schedule in the coming days despite last minute changes to quarantine rules for those arriving in Britain from France, Malta and the Netherlands which could deter travel.

We plan to operate our full schedule in the coming days," the airline said.

9.14am BST

The selloff is gathering pace, with the blue-chip FTSE 100 now down 1.95% or 119 points at 6066.

That wipes out the market's strong gains earlier this week, when shares rallied on hopes of economic recovery and a new US stimulus package.

8.53am BST

Here's some advice for those planning a holiday to France, or already there.

8.41am BST

Neil Wilson of Markets.com says the UK's decision will hurt consumer confidence, as well as ruining holidays:

With France being added to the quarantine list for the UK, travel & leisure is under pressure. Shares in IAG, Ryanair, Tui and EasyJet were all sharply lower as the move will force a large swathe of cancellations right at the peak of the summer holiday season for one of the largest markets for UK tourists. Half a million Brits are thought to be in France right now. Related stocks were also hit. WH Smith - purveyor of overpriced sweets and free Evian - slipped down the board as a result.

Apart from the immediate damage this will do at the height of the school holidays and peak summer season, the quarantine decision also underlines the inherent risk you take in booking a holiday abroad right now, which will do nothing for consumer confidence.

8.39am BST

Travel companies are the top fallers across Europe's stock markets this morning, with easyJet and TUI worst hit.

8.25am BST

Shares in hotel groups are also dropping after the UK added France, the Netherlands and Malta to its quarantine list.

InterContinental, which runs Holiday Inns and Crowne Plaza, are down 2.7%.

8.10am BST

Shares in French travel companies are also falling in early trading, with Air France-KLM dropping 3%.

Reuters has more details:

Shares in Getlink, which runs Eurotunnel, have dropped 2.2%. ADP, which runs Paris' airports, fell 2.3% while hotels company Accor was down 2.1%.

8.09am BST

In the City, shares in holiday companies and airlines have fallen sharply after the UK government added France to its Covid-19 14-day quarantine list.

IAG, which owns British Airways, has fallen 4% in early trading, making it the worst-performing company on the blue-chip FTSE 100.

Hundreds of thousands of holidaymakers' plans have been plunged into chaos after the government confirmed that France would be removed from the UK's travel corridor list following a surge in Covid-19 cases.

The move, which will mean arrivals into UK from France will have to quarantine for 14 days on their return or face a fine, will come into effect at 4am on Saturday leaving a window of little more than 30 hours for travellers to get home if they want to escape the measure.

7.59am BST

The South China Morning Post points out that China's industrial engine has recovered from the coronavirus shutdown ahead of other parts of the economy.

Here's their take on the 4.8% rise in industrial output last month:

Within industrial production, manufacturing output grew by 6.0 per cent year-on-year, while mining shrank by 2.6 per cent.

Fixed asset investment, a cumulative measurement of expenditure on infrastructure, property and capital goods in the year so far, fell by 1.6 per cent over the first seven months of 2020. But it is edging closer to growth, improving from the 3.1 per cent decline in the first six months of the year, and 6.3 per cent in the first five. July's drop was in line with expectations.

Industrial production in China grew by 4.8 per cent in July from a year earlier, emphasising its role as the main engine of economic growth #China #china #industrial #Industry https://t.co/YebKKltuss pic.twitter.com/DT5tMGS9dc

7.48am BST

ING economist Iris Pang says today's data shows China is more reliant on its domestic economy.

She writes:

Retail sales fell 1.1%YoY in July, better than -1.8%YoY a month ago. The main reason for the continued negative yearly growth in retail sales was the -11.0%YoY spending on catering, which results from social distancing measures in China. We do not expect this situation to change particularly over the rest of 2020, or until there is an effective vaccine for Covid-19.

We also observe that high-end spending has returned. Chinese tourists could not travel abroad during the summer holidays because of travel restrictions from other economies. But cross-province travel is now allowed in China. This resulted in growth in spending on cosmetics and jewellery rising by 9.2%YoY and 7.5%YoY respectively.

7.45am BST

Spending on catering in China fell particularly sharply in July, down 11 % year-on-year.

But there are positives too -- with spending on cars and mobile phones rising.

In July, sales of upgraded consumer goods continued to grow with that of automobiles went up by 12.3 percent [year-on-year], while it was down by 8.2 percent in June; and that of communication equipment and cosmetics went up by 11.3 percent and 9.2 percent respectively.

7.16am BST

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

China's retail sales fell 1.1% in July, vs previous 1.8% fall https://t.co/PlAmxI2YbK pic.twitter.com/LYqrT2jwnO

Retail sales growth in China hasn't been the same since the country came out of lockdown at the end of February, though optimism over the July numbers had been increasing given recent positive data from the auto sector in July, as well as reports from the likes of Daimler, and Apple talking of some decent rebounds in their Chinese markets.

Expectations were for a number in the region of 0.1%, which on the face of it still seemed a little on the low side, given the recent decent set of numbers from TenCent, with Alibaba's numbers set to come later today.

I believe the recent heavy rains and floods in Southern China disrupted some domestic activities. Although the affected areas - mainly Jiangxi, Anhui, Hubei, and Hunan - so far do not appear to include China's key economic hubs, activity data likely would have been stronger without these weather-related impacts.

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