Markets rise despite Covid-19 lockdown double-dip fears – as it happened

Graeme Wearden

from on 2020-11-02 19:39 (#59V0S)

Rolling coverage of the latest economic and financial news

Brent crude hits lowest level since May
Travel firms and retailers slide...
...but Ocado hikes profit forecasts
Primark to lose 375m sales in lockdowns
Second England lockdown fuels double-dip recession fears
Coronavirus - latest updates
See all our coronavirus coverage

4.53pm GMT

And finally, European stock markets have ended the day higher.

The FTSE 100 has, for the moment, shrugged off the new English lockdown. It has closed 77 points higher at 5654, recovering from last week's six-month lows.

4.22pm GMT

Ocado is holding firmly on to the top slot on the FTSE 100, after upping its profit forecasts for the year this morning, from 40m to 60m.

Shares are up 8.5% in late trading, valuing the online grocery firm at over 18bn (yes, that's quite a price/earnings ratio).

Duncan Tatton-Brown, the Ocado finance director, said the uplift in profits had come as the UK continued to suffer under Covid-19. Most of the country had hoped the effects of the pandemic would have started to mitigate by now. Unfortunately that has not proven to been the case," he said.

Tim Steiner, the Ocado chief executive, said the group did not experience stockpiling but was continuing to trade at peak volumes every day" as shoppers switched away from physical stores.

Ocado has already proved itself to be ahead of the curve in dedicated online grocery delivery. That market is getting tougher, with major new entrants such as Amazon, and all the retailers refining their offerings in light of the pandemic and the growth of online grocery shopping.

Making significant enhancements in the robotics behind their offering should enhance Ocado's ability to stay ahead, and also allow it to grow the platform it sells to other retailers around the world, making its tech arm even more valuable."

3.41pm GMT

Today's equity market rebound is a little surprising, given the escalating Covid-19 pandemic - and the political uncertainty in America.

Oil has also recovered its earlier losses, despite the concerns over weak demand in the coming months.

Ahead of US elections, surging virus cases and in light of a fresh lockdown in England, you would have thought the markets would be lower today. Well, that's how things started with stock index futures gapping lower overnight, crude oil dropping 4% and the pound slipping to its lowest level since early October. However, things then started to turn around sharply and by mid-morning UK time, it was a sea of green for the major indices, while crude oil had trimmed its losses and the GBP/USD had nearly turned positive on the day.

It will be interesting to see whether stocks will be able to hold onto their gains amid more lockdowns in Europe, rising new virus cases and deaths, and not to mention the fact it will be US presidential election tomorrow. I would be very surprised if investor appetite for risk does not decrease.

3.25pm GMT

The strong US factory growth seems to be lifting markets higher.

The Dow Jones industrial average is now up almost 2% today, or 517 points, at 27,019.

3.08pm GMT

The Institute of Supply Management has also reported that US manufacturing grew at its fastest pace in almost two years in October.

ISM's index of American factory output has jumped to 59.3 for October, must stronger than the 55.8 expected.

Stocks at highs for morning as Oct US ISM Manufacturing surprisingly strong: 59.3 vs. 56.0 est.; Oct New Orders 67.9 vs. 60.2 in Sept. Good start to November! @CNBC

Surge in October ISM Manufacturing; headline up to 59.3 vs. 56 est. & 55.4 in prior month; strength across board, with new orders particularly strong ... notably, employment has gone into expansionary territory pic.twitter.com/ZakvoAGLh7

Sharp pickup in US mfg growth in Oct, according to ISM Mfg Index. The rise in the index to 59.3 -- 3.9 percentage points above the Sep print -- is the 2nd biggest increase since May 2009: https://t.co/YowIm86PWE pic.twitter.com/G2yEw0wBE6

2.53pm GMT

American factories also had a good October.

The US manufacturing PMI has risen to 53.4, from 53.2 in September, signalling that growth picked up a little. It's the strongest reading since January 2019.

With clues being sought as to whether the economy can sustain its recovery after rebounding from lockdowns, the rise in the PMI in October is encouraging news. It's inevitable that the pace of economic expansion will weaken after the surge seen in the third quarter, but the strength of the PMI hints at a recovery for which the underlying trend continues to strengthen at the start of the fourth quarter.

Producers of investment goods such as business equipment and machinery are leading the upturn in a welcome sign of rising business confidence and corporate investment, but it was worrying to see consumer goods producers report weakened order book growth, reflecting rising virus-related worries.

2.47pm GMT

Over in Canada, factory output has expanded at a decent pace for the fourth month in a row.

The Canadian manufacturing PMI, just released, has dipped to 55.5 in October from September's 56.0, a level that shows solid growth. Companies reported that new orders and output both grew, as they continued to recover from the Covid-19 crisis.

October saw a sustained rebound in Canadian manufacturing conditions, with the headline #PMI posting 55.5 (Sep: 56.0). Output rose at the fastest pace for over two years, amid a sharp expansion in total new orders. Read more: https://t.co/L0vtPrJteu pic.twitter.com/8imbuQp7yP

2.35pm GMT

The New York stock markets has opened higher, on the final day of trading before the presidential election day.

Wall Street is shaking off its own grim October, having just posted its worst week since March.

This week, the long wait is over. Tuesday 3 November is US election day, but that date is less significant this year, as record numbers of US citizens have already chosen to vote early either in person or by post. According to the US Elections Project as of 1 November, some 92m Americans (equivalent to two thirds of the total votes counted in the 2016 US election) have already cast their ballots. Despite the current Democrat lead in the polls and betting odds, such predictions have been wrong before, and there is still a risk that the US election outcome may not be known for some days if the votes end up being contested in one or more key US swing states.

Some states are allowing the counting of late postal ballots, for example, by 3 days and 9 days after election day respectively in the case of swing states Pennsylvania and North Carolina. Normally, a state usually requires ballots to arrive on election day in order to count, but following legal rulings, this time for some states it means that ballots need only be postmarked by election day or the day before and can still be counted if they arrive within the allotted time after election day. This suggests that for a very close-run result in some states, postal votes might be the deciding factor and counting those in the days following 3 November could well leave markets unsettled.

2.00pm GMT

October was a grim time in the markets - the worst month since March, culminating with the worst week in seven months too.

But November is starting brighter, with moderate gains across the board as investors try to look beyond the economic harm of Covid-19.

Shares on Monday recovered globally from one-month lows as strengthening factory data in China and Europe offset news of new virus lockdowns, while investors prepared for more volatility arising from the U.S. presidential election.

The MSCI world equity index which tracks shares in 49 countries, was up 0.5% by 1310 GMT, following a strong performance in Asia after data showed Chinese factory activity expanded at its fastest pace in a decade.

China's Caixin #manufacturing PMI hit its highest level since January 2011. Japan's manufacturing sector moves closer to stabilization in October while South Korea's PMI rose to its highest since September 2018 with #output rising at its highest level in seven and a half years. pic.twitter.com/Tmp5izXJrF

1.18pm GMT

Here's our news story on Ryanair's unprecedented summer loss, and its no-refund policy for customers who can't now fly due to the lockdown:

1.17pm GMT

The FT's Matthew Garrahan also reports that central London is unusually quiet today, even before the new lockdown officially begins:

Jubilee line at Westminster, 1pm. Nice having my own personal tube station pic.twitter.com/nDKc2PgRFG

12.39pm GMT

Today's slump in the oil price is putting more pressure on Opec to cut production.

The group of oil-producing nations, and non-member Russia, had been planning to increase production by two million barrels per day in January (partially unwinding their supply cuts from earlier this year).

Oil is getting crushed once again, with the latest Covid restrictions in Europe taking a heavy toll on crude prices. There's a massive imbalance forming in the supply/demand outlook which is weighing heavily at the moment, as we await a response from OPEC+.

The group has previously signaled a willingness to respond in the event of more lockdowns and the time has come for just that. Market pressures are not going to ease, even if prior warnings cushion the blow to an extent.

12.19pm GMT

The boss of Britain's biggest airport group, MAG, has hit out at the government for its shocking" neglect of the aviation and travel industry, and accused the prime minister of effectively shutting down his business" via Twitter.

Given the huge impact on the hundreds of thousands of people working in the aviation and travel industry, it is shocking that the prime minister didn't consider the shutdown of international travel worthy of mention... [but] symbolic of the way government has neglected UK aviation and the role it plays our economy from day one of this pandemic.

It is clear they have not understood, or even tried to understand, what the impact of this latest decision will be, let alone put in place measures to help the industry cope with the tough times ahead."

12.10pm GMT

Here are the top and bottom fallers on the FTSE 100 so far today, after a lively morning:

It is important to remember that approximately three quarters of the FTSE 100 generates its earnings overseas, so a new England-wide lockdown is less of an issue to the index although it does affect investor sentiment.

That might explain why the FTSE 100 only slipped 0.2% to 5,566 whereas the more UK-focused FTSE 250 index fell by a greater amount, down 0.6% to 17,116. One must also consider that the market has already priced in a lot of bad news, as reflected by last week's terrible showing for equities.

12.01pm GMT

Mihir Kapadia, the CEO of Sun Global Investments, predicts the oil price will remain weak as more countries enter winter lockdowns:

Oil markets have continued their spiral of decline on Monday morning as Europe prepares for a wider lockdown for November, amplifying fears that demand for oil will decline once again. As of Thursday, the UK will join France and Germany in a nationwide lockdown, while Italy and Spain look likely to follow suit. As a result, Oil prices have fallen as much as 4% with Brent crude recording losses of 3.9% to hit $36.45 a barrel while WTI futures were hovering around $34.21, a decline of 4.4%.

The US is also facing rising infections as the Presidential election takes place. Oil markets have been consistently underperforming for some time, even before Covid-19 and the short term trend is towards further weakness. The upcoming policy meeting between OPEC and its allies at the end of the month could be an important determinant as to where the markets are heading for the coming months and more broadly into 2021 in general."

Oil kicked off what promises to be a turbulent week of trading by plunging to its lowest level since May with its benchmark Brent crude falling 10% last week to $37.46/ bbl underpinned by a resurgent pandemic, election-uncertainty & double whammy of demand & growing supply. pic.twitter.com/ywomDxwJpz

11.46am GMT

Shares in companies who will be badly affected by England's new lockdown are still under pressure in the markets.

Cinema chain Cineworld are down 8%. Its UK sites are already temporarily closed, and escalating Covid-19 cases could push back their reopening.

11.32am GMT

Caxton's Michael Brown reports that the City of London is moving back into lockdown mode (although rather windier than last time).

For all intents & purposes, the City has already locked-down again.

Though, in truth, I'm not sure it ever properly unlocked from the first time around. pic.twitter.com/qxaAHQos4p

11.28am GMT

Morgan Stanley has also predicted that the UK and eurozone economies will shrink this quarter, telling clients:

We now see a more complex W-shaped recovery, in place of our previous assumption of an asymmetric V."

Significant downgrade of Eurozone fourth-quarter and 2021 GDP estimates by Morgan Stanley.

Germany -1.5%
Spain -3%, pic.twitter.com/ktQIp7Ok0D

11.11am GMT

The prospect of Britain's economy suffering a double-dip recession is also weighing on the pound today.

Sterling fell as low as $1.2852 overnight, the lowest in over three weeks. It has also dipped against the euro.

Sterling, in particular, stood out as the worst performer on the first trading day of November, dropping below the $1.29 level, with most parts of the United Kingdom now under some form of lockdown.

Prime Minister Johnson announced a one-month lockdown for England on Saturday as regional curbs have failed to stem the surge in Covid cases. In addition to the fresh virus blow, UK businesses still have no clarity on where the negotiations for a post-Brexit trade deal are headed. UK-EU negotiators are meeting again this week as the talks enter an intensive phase. An update on the status of those talks is expected mid-week, although there is no guarantee that positive headlines will be able to eclipse the grim virus reality.

10.25am GMT

Analysts at Japanese bank MUFG also predict the UK economy and the eurozone will both shrink in the last three months of this year.

Like Goldman Sachs, they fear the surge in growth over the summer will be short-lived.

The return to partial" lockdowns will trigger another quarter of economic contraction in Q4 for both the euro-zone and UK economies although it is expected to be milder than the unprecedented plunge recorded earlier this year. Manufacturing, construction and education sectors will be less impacted by the new restrictions.

The negative shock will increase pressure on national governments and central banks to provide more stimulus to support growth. The UK government has already announced that it will extend the current furlough scheme rather than switch to the new job support scheme for as long as the lockdown measures remain in place.

10.20am GMT

The new Covid-19 restrictions being imposed in Europe means the UK and the eurozone will shrink this quarter, Goldman Sachs has warned.

The Wall Street bank predicts that economic growth will be hurt by the closure of non-essential shops, restaurants and bars. It also fears the restrictions could last into early 2021.

Goldman Sachs sharply cut Europe's fourth quarter economic forecasts on Monday as a surge in COVID-19 cases led to major countries announcing partial nationwide lockdowns for November.

The U.S. investment bank said it expects the euro area's real gross domestic product (GDP) to shrink 2.3% in the fourth quarter, a sharp reversal from its earlier projection of 2.2% growth.

Goldman Sachs slashes Europe's fourth quarter growth forecasts - https://t.co/Cqxi2dzoK6

10.13am GMT

After a wobbly start, European stock markets are now rallying.

The main indices are all higher, after plunging to their lowest levels since spring last week.

10.05am GMT

British factories couldn't keep pace with their German rivals last month.

Data firm Markit has reported that the recovery in the UK manufacturing sector slowed in October.

October saw the UK manufacturing recovery continue, albeit with the upturn losing momentum amid ongoing lockdown measures and signs that growth could weaken further in coming months after Brexit-related stockpiling.

The main drag was a fall back into contraction for the consumer goods industry, blamed in part on lockdowns and falling demand as virus worries intensified among households.

9.51am GMT

Ryanair will not refund customers who are now banned by the English lockdown from flying abroad this month.

Ryanair CEO Michael O'Leary says Ryanair customers affected by the new curbs can reschedule flights.

If the flights are operating there won't be any refunds, although they will be available to avail of our change policy. We allow people to change their flights timings to flights on later dates if necessary

If the flight is operating, there won't be any refunds. If the flight is cancelled, under government directions, they will be entitled to a refund.

If the government wants to provide refunds to passengers themselves, they should feel free to do so.

If the government wants to change that advice and provide refunds themselves, they can feel free to do so"
Ryanair CEO Michael O'Leary tells #BBCBreakfast there won't be refunds for flights still operating. https://t.co/jX0hKM8Yud pic.twitter.com/lGJizDvrY2

9.38am GMT

The Covid-19 pandemic has forced budget airline Ryanair into its first summer loss.

The Group expects to carry approximately 38 million passengers in FY21, although this guidance could be further revised downwards if EU governments continue to mismanage air travel and impose more uncoordinated travel restrictions or lock downs this winter.

9.16am GMT

Germany's factory boom has lifted manufacturing growth across the eurozone to its fastest rate in over two years.

IHS Markit's final Manufacturing Purchasing Managers' Index has climbed to 54.8 in October from September's 53.7.

The Eurozone Manufacturing #PMI continued its upward climb in October, reaching 54.8 (Sep - 53.7) to record the strongest growth since July 2018. Germany saw a sharp uplift, but there were only modest upturns in France & Ireland and a decline in Greece. https://t.co/8bN95v5omh pic.twitter.com/Ref96rkOIW

9.14am GMT

Just in: German factories have just enjoyed their strongest boom in new orders in at least 24 years.

That's according to the latest survey of purchasing managers from data firm Markit.

Manufacturing in Germany continued to bounce back strongly in October. The standout data point was the survey's measure of new orders, which reached an all-time high on the back of a revival in demand both domestically and internationally.

Less positively and perhaps a sign that growth could be about to slow as more firms get back to pre-COVID levels of output, we saw the first setback to manufacturing expectations for seven months in October. It comes amid rising numbers of coronavirus cases in Europe, and the increased threat of renewed disruption to supply and demand that comes with it.

German factories saw a strong bounce-back in conditions during October, led by a 24-year record increase in new orders. The #PMI rose to 58.2 (Sep - 56.4), highest since March 2018, while job cuts were at the weakest since pre-lockdown. Read more: https://t.co/T7NdPFDqu5 pic.twitter.com/kaVQelNaLz

8.43am GMT

Although there are some large winners and losers, the wider FTSE 100 index has only dipped by 8 points, or 0.15%, this morning to 5568 points.

That would be the lowest closing level since early April, following its sharp losses in October.

The impact will be sector wide, with airlines, tourism and travel remaining out for the count, retailers leaning heavily on their ability to transact online, and the banks considering further spikes in bad debt provisions. Ahead of its full-year results tomorrow, Primark owner Associated British Foods has already announced that it expects a hit of 375 million to sales as a result of shuttering its stores.

In addition, the oil price has slumped further and is now down 45% in the year to date on demand concerns following the various announced lockdowns, putting further pressure on the oil majors. More positively, the supermarkets could avoid some of the selling pressure, having already absorbed costs such as store reformatting as a result of the initial lockdown and therefore being better prepared this time round.

8.38am GMT

There are also some notable stock market risers this morning.

Shares in Ocado have surged 6% after it hiked its profit forecasts this morning.

8.29am GMT

Shares in UK travel companies, retailers, pub chains and hotel operators have fallen sharply at the start of trading on the London stock market.

They're all suffering from the impact of the new English lockdown rules.

A year ago, with all the Christmas TV ads kicking off, the worry was what the upcoming General Election on Dec 12th would do to High Street spending in November...

A year on and the worry now is how the shock closure of non-essential shops in November will affect Christmas spending plans and how on earth Online retailers will cope with the surge in demand...

8.14am GMT

While high street retailers struggle, online grocer Ocado has just hiked its profit forecasts.

It told the City that trading at its retail arm (which moved to offer M&S food this year) remains strong:

Ocado continues to see high demand as consumers migrate to online grocery in record numbers. Sales are in line with the trends reported in the Third Quarter although growth rates reflect the seasonality of the quarter.

As a result of this strong performance, Ocado Group today announces that it expects full year EBITDA for the group to be over 60m, versus previous guidance of over 40m.

Given the market opportunity we want to accelerate the development of our systems, including improving their speed, accuracy, product range and economics.

I am delighted to be welcoming Kindred Systems and Haddington Dynamics to the Ocado group, as we believe they have the capabilities to allow us to accelerate delivery, innovate more, and grow faster. I am also excited by the opportunity to enter new markets for robotic solutions outside of grocery that is demonstrated by Kindred Systems' robust growth, with existing customers such as Gap and American Eagle across the general merchandise and logistics sectors."

BREAKING: Announcing the acquisition of @KindredAI and @HDRobotic. Together we'll advance our robotic manipulation capabilities to fully automate grocery decant, picking & packing with cutting-edge #AI #MachineVision & unique robotic arms.
Hear more: https://t.co/BSYY6ExJJf pic.twitter.com/KNN91Z5Rhv

8.04am GMT

Clothing retailer Primark has warned that the lockdowns being introduced in parts of Europe will hit its sales in the run-up to Christmas.

As of today, all Primark stores in the Republic of Ireland, France, Belgium, Wales, Catalonia in Spain and Slovenia are temporarily closed, which represent 19% of our total retail selling space. The announced period of closure varies by market. The UK Government announced its intention to close non-essential shops in England for one month from 5 November to 2 December. Assuming that this will be passed by the UK Parliament on 4 November, 57% of our total selling space will be temporarily closed from 5 November.

Our estimated loss of sales for these stores, including the stores in England, for the announced periods of closure is 375m.

7.56am GMT

Fears of a double-dip Covid-19 recession have send the oil price sliding to a five-month low this morning.

Brent crude has slumped by 4% this morning to just $36.41 per barrel, as traders digest the new English lockdown - on top of the measures already imposed in Germany and France.

Covid-19 cases continue to break records in the US in election week, with its impact only muted by the fact that 90 million Americans have voted early, including the President.

Europe continues to be of deep concern, with Britain announcing its new national lockdown lite Saturday, and by my count, Belgium, Greece, Austria and Portugal all joining them to varying degrees. The jury is still out on whether the have-your-cake-and-eat-it approach will work. The downstream effects on consumption though have manifest themselves most obviously on oil.

A lot of traders are now looking at the U.S. and their rising infection rates and wondering if Europe is providing the model for what will happen in the U.S. in the coming weeks,"

7.24am GMT

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

Markets like certainty. But that affection melts away when it's the certainty of a four-week lockdown that will derail parts of England's economy in the run-up to Christmas.

UK's FTSE 100 index almost the worst performing advanced equity index this year

Today called -0.4% post #Lockdown2 announcement pic.twitter.com/BDH65Pfw72

The economy is likely to show zero growth or even have a small decline in the fourth quarter of the year.

This has all the signs of a double-dip recession."

Lockdown is a decision for government, not business, and firms share the Prime Minister's ambition to defeat the virus, But for many businesses, a second national lockdown marks the start of a bleak midwinter."

With the right support firms will do everything possible to minimise the damage. Across the country they have already shown how resilient they can be in the face of tighter restrictions. And thanks to huge efforts by businesses to make workplaces Covid secure, more of the economy can now stay open."

US investors expect, surely rightly, Mr Biden to win but can cope with a Trump second term and their main interest is the size of the inevitable fiscal stimulus (which will be determined by the party that controls the Senate)."

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