FTSE 100 vaccine rally continues; UK unemployment jumps – as it happened

Graeme Wearden

from on 2020-11-10 17:14 (#5A64D)

Rolling coverage of the latest economic and financial news

Latest: FTSE closes up 110 points
Pfizer/BioNTech vaccine optimism lifts markets

Earlier:

Introduction: UK unemployment picture is worsening
Unemployment rate up to 4.8% - highest since 2016
Economists: Furlough scheme winddown pushed up job losses
The key charts

5.05pm GMT

After another strong day's trading, the UK's FTSE 100 index has finished at its highest closing level since 23rd June.

The blue-chip index closed up 110 points at 6296 points - a jump of 1.79%.

Reports about Pfizer's vaccine has created a massive short covering. Travel stocks, value and small caps are rallying hard.

This is good news for a long-term investment view-but bad news for long-duration overpriced positions, such as growth without earnings."

4.50pm GMT

Nearly 190 jobs are at risk at the Petroineos oil refinery in Grangemouth, Scotland, as its owners look to scale back operations at the site following the slump in demand for fuel.

The Herald newspaper has the details:

Bosses at the Petroineos plant, established almost a century ago, said they will restructure operations in the wake of falling demand for fuel.

Two production plants at the site, which have not been operational since the lockdown in March, are being mothballed, the company said.

We firmly believe that only by taking action now will we preserve one of Scotland's last large manufacturing sites and a significant contributor to the Scottish economy."

Another one bites the dust: PetroIneos, the owner of the 200,000 bpd Grangemouth refinery in Scotlan is shutting around 1/3 of the plant's capacity in response to the drop in demand due to #Covid_19 and bleak long-term outlook for #oil. #OOTT

3.47pm GMT

The Nasdaq has now dropped by more than 2% today, as vaccine optimism triggers a rotation out of tech stocks and into value' stocks like industrials and energy firms.

As Marketwatch puts it:

The Nasdaq, was under pressure as progress toward remedies and treatments for the coronavirus has investors selling some of the biggest pandemic-era winners and using the proceeds to buy assets that might benefit from the most from a successful vaccine.

U.S. stocks putting in mixed performance as vaccine progress sparks rotation https://t.co/ViTGq9xlKD

3.37pm GMT

A look at the risers and fallers on the Dow Jones industrial average shows that vaccine optimism is driving a rotation in the markets today.

Aerospace manufacturer Boeing is the top riser, up 6%, followed by retail group Walgreen Boots (+5%). Conglomerates Honeywell (+2.7%) and 3M (+2.3%) and construction machinery maker Caterpillar (+2.2%) are gaining more ground.

Today marks the second day that we are seeing the spread between momentum and value widened significantly. Investors finally seem happy to rotate out of the work-from-home plays in the tech sector, and into stocks that rely on economic growth, which had underperformed during the post lockdown melt-up.

Yesterday's announcement from Pfizer on the progress made in coronavirus vaccine seems to have been a game changer, even if experts warn that production and distribution may take time. The markets always try and price in future outcomes, so the reaction makes some sense, even as the virus may not be ready until the middle of 2021.

3.18pm GMT

But back in London, stocks are pushing higher in afternoon trading.

The UK's FTSE 100 has now jumped over the 6,300 point mark for the first time since late July. That's a gain of 114 points, or 1.85% for the day.

2.51pm GMT

Trading has begin on Wall Street, but traders aren't taking their cue from London.

2.44pm GMT

Shares in specialty chemicals firm Croda have jumped to a record high in London, after it announced it has signed a contract to supply Pfizer with an innovative delivery system" for its COVID-19 vaccine candidate.

Croda told the City that it will supply Pfizer with four component excipients used in the production of the vaccine candidate".

Excipients are substances that serve as the vehicle or medium for a drug or other active substance to be delivered.

Lipid systems provide a route to delivery of novel mRNA drugs and vaccines, by which a disease specific antigen can be coded into cells and recognised by the body's immune system, as an alternative to conventional vaccine approaches.

I'm very proud of Croda's involvement in the battle to fight the most significant pandemic that we have seen in a generation.

The application of our innovative capabilities is testament to the strong progress we have made to create industry-leading drug delivery systems, focused on developing speciality excipients and adjuvants to improve the effectiveness and stability of complex drug actives and vaccines.

Croda shares soar by nearly 8% after it reveals a deal with Pfizer to supply novel excipients used in the manufacture of a COVID-19 vaccine candidate.

The contribution from this contract is already included in Croda's trading expectations for 2020, including in its guidance of the impact of the Avanti acquisition.

If Pfizer's publicly indicated vaccine doses for 2021 were to be required, the sales value of Croda's contract in 2021 could be of the order of $100 million.

2.05pm GMT

Our economics correspondent Richard Partington has written about how the jump in UK unemployment shows Rishi Sunak should have moved faster to extend the furlough scheme:

Back in September, the chancellor was still hoping the summer reopening of the economy would be enough to kickstart the jobs market, as he steadily scaled back the support programme.

Despite repeat warnings from business leaders, Sunak insisted it was not right to endlessly extend furlough. Hard choices needed to be taken to help protect the public finances. As the economy reopens it is fundamentally wrong to hold people in jobs that only exist inside the furlough," he said.

1.38pm GMT

Netflix has poached Anna Mallett, the chief executive of ITN, which produces news for ITV, Channel 4 and Channel 5, to run its international studio operations as the streaming giant pours billions into making its own TV shows and films.

My intention had always been to stay with ITN long-term, but I have been offered an opportunity to join one of our clients, Netflix, which in the end, I felt I simply couldn't turn down."

NEW: Netflix has poached Anna Mallett, the chief executive of ITN - maker of news for ITV, C4 and C5, to take a role running its studios operations (originals at Shepperton etc).

1.21pm GMT

Airline chief Michael O'Leary is also optimistic about a Covid-19 vaccine, predicting today that it could mean a less disrupted 2021 summer holiday season than feared.

Reuters reports that O'Leary, CEO of Ryanair, told the WTM Virtual travel conference that Pfizer's vaccine news was the first bit of sunshine we've had for the past 12 months".

There's reasonable optimism now that summer 2021 will get back to some degree of normality."

NEW: Ryanair expects traffic to get back to 75-80% of pre-crisis levels by summer next year

Mrs O'Leary is very keen to get back to the Algarve, and I suspect she'll be there about 2.5 nanoseconds after the restrictions are lifted," he said.

Frankly I think she's reflective of the overwhelming majority of Europe's population."

Mrs O'Leary is very keen to get back to the Algarve, and I suspect she'll be there about 2.5 nanoseconds after the restrictions are lifted," - Vaccine news lifts Ryanair's summer 2021 confidence w/@conorhumphries https://t.co/npy5XYGDQM

1.01pm GMT

Back on vaccines... Paul Dales of Capital Economics explains that a successful rollout would accelerate the recovery, and limit the jump in unemployment:

An effective COVID-19 vaccine would dramatically improve the economic outlook. It may allow GDP to rise to its pre-virus level a year earlier than otherwise and mean that the unemployment rate peaks at 7% next year instead of 9%.

But while this would reduce the need for more Quantitative Easing (QE) and/or negative interest rates, we doubt the Bank of England would reverse QE or raise rates for many years.

12.51pm GMT

Executive Vice-President Margrethe Vestager, in charge of competition policy, says Amazon must not distort competition -- either by favouring its own products, or using data from independent vendors to sharpen its offering:

We must ensure that dual role platforms with market power, such as Amazon, do not distort competition. Data on the activity of third party sellers should not be used to the benefit of Amazon when it acts as a competitor to these sellers.

The conditions of competition on the Amazon platform must also be fair. Its rules should not artificially favour Amazon's own retail offers or advantage the offers of retailers using Amazon's logistics and delivery services.

12.44pm GMT

Over in Brussels, European regulators have charged Amazon with distorting competition in the online retail sector.

The Commission's preliminary findings show that very large quantities of non-public seller data are available to employees of Amazon's retail business and flow directly into the automated systems of that business, which aggregate these data and use them to calibrate Amazon's retail offers and strategic business decisions to the detriment of the other marketplace sellers.

For example, it allows Amazon to focus its offers in the best-selling products across product categories and to adjust its offers in view of non-public data of competing sellers.

In particular, the Commission will investigate whether the criteria that Amazon sets to select the winner of the Buy Box" and to enable sellers to offer products to Prime users, under Amazon's Prime loyalty programme, lead to preferential treatment of Amazon's retail business or of the sellers that use Amazon's logistics and delivery services.

.@EU_Competition issues Statement of Objection against @Amazon for Abuse of Dominant Position in its use of #data relating to independent sellers. Commission also opens secondary investigation into Amazon e-commerce practices re the "Buy Box". #Antitrust https://t.co/hvlORxAVj6

"The Commission takes issue with @Amazon systematically relying on non-public business data of independent sellers who sell on its marketplace, to the benefit of Amazon's own retail business, which directly competes with those third party sellers."

Effectively @EU_Competition maintains that @Amazon uses the non-public data of independent sellers operating on its Amazon Marketplace platform in order to give an advantage to Amazon's direct sales to consumers, which compete with those independent sellers.

12.28pm GMT

Across Europe, energy companies, banks and property firms are in demand again, while the tech sector remains out of favour.

That shows that investors are still anticipating a return to more normal economic conditions - rotating out of stay at home' stocks, into the back to work' trade.

First the relief, now for a wee dose of reality. Stock markets are looking a little more cautious after yesterday's massive surge on news that Pfizer and Biontech have a vaccine that is 90% effective - investors will now show a tad more caution that the kneejerk rally is out of the way. Markets have a habit of overshooting on the way down, and on the way back up. Nevertheless, an effective vaccine changes the game for investors, at the very least in terms of relative valuations and the premium we are willing to pay for growth.

We have a lot more clarity now than a week ago for two big reasons. Joe Biden is all but certain to become the next president of the United States. More importantly, a vaccine is coming. The worst fears - of enduring year after year of masks, of having semi-permanent lockdowns and restrictions on our liberties lasting for ever - should not come to pass. All we need now is a Brexit deal this week as the cherry on the cake. What we in Britain and Europe need more than anything is a confidence injection - and a working vaccine does that.

12.18pm GMT

European stock market are more subdued today, having surged to eight-month highs on Monday in a share-buying scramble.

Germany's DAX index is down 0.1%, while Italy's FTSE MIB has dipped 0.4%.

12.05pm GMT

Travel companies are having another strong day, with cruise operator Carnival up 9.8% and holiday firm TUI gaining 11% this morning.

SSP, which runs Upper Crust and Caffe Ritazza branches across Britain's railway stations and airports, are 15% higher - having surged 51% on Monday.

11.43am GMT

Property group Land Securities is also in the risers, up 8.4%, after its latest financial results.

My colleague Julia Kollewe explains:

Land Securities, one of Britain's biggest property companies, has written down the value of its portfolio by almost 1bn but said interest in the London office market remained strong, with a growing focus on health and wellbeing.

The pandemic has led to a surge in the number of people working from home, but Mark Allan, the Landsec chief executive, was confident that demand for office space would hold up.

11.40am GMT

The stock market rally is picking up pace again, as investors continue to cheer yesterday's positive Covid-19 vaccine trial news from Pfizer and BioNTech.

Britain's FTSE 100 index has now jumped by 1.7% today to 6292 points, a gain of 106 points today.

The FTSE 100 hit its highest level since mid-August as the bullish news with respect to a possible Covid-19 vaccine is still driving sentiment. Yesterday, it was revealed that a potential vaccine for the coronavirus achieved a success rate of more than 90% in its late stage trials.

The news promoted a huge round of buying, and sectors that underperformed on account of the pandemic - airlines, leisure, and transport - outperformed yesterday and again today. There is still a long way to go with respect to the drug in question being given regulatory approval, but traders clearly have high hopes for the medication.

10.56am GMT

Britain's hospitality sector is urging the government to provide more support to help businesses through the crisis.

UKHospitality chief executive Kate Nicholls is concerned that the government will no longer pay a 1,000 Job Retention Bonus in February for taking back a furloughed employee (because the furlough scheme is extended to March instead).

The figures released by the ONS today underline the dreadful hit that hospitality has taken during this crisis and reinforces the urgent need for targeted support.

Our sector has seen the highest fall in jobs of any. We are entering another period that is likely to be incredibly difficult for us. Businesses are in lockdown once again and when they do reopen, it will be back into a severely restrictive environment.

Policy is moving so fast it is difficult for companies to keep up but it is clear that last minute withdrawal of the CJRS bonus will see redundancies spike in hospitality as it is now too costly to use furlough https://t.co/oMBAYDKB6F

There are currently no employer contribution to wages for hours not worked. Employers will only be asked to cover National Insurance and employer pension contributions for hours not worked. For an average claim, this accounts for just 5% of total employment costs or 70 per employee per month.

10.21am GMT

In Germany, economic morale has dropped as worried about a double-dip recession grew.

The Zew Institute's gauge of investor sentiment, released this morning, dropped to 39 points from 56.1 in October. That shows that the new lockdown measures imposed to slow the spread of Covid-19 have increased uncertainty.

Financial experts are concerned about the economic impact of the second wave of COVID-19 and what this will entail.

There is also the additional worry that the German economy could head back into recession."

#Germany ZEW Economic Sentiment Index at 39 https://t.co/2TOP8G26fS pic.twitter.com/uEFtIB1zyR

November #ZEW shows #German #economy edging closer to #recession territory again pic.twitter.com/LebkCAc3x9

10.02am GMT

Here's a neat chart from professor Costas Milas of Liverpool University, showing how redundancies have jumped even as the economy has recovered from the lockdown:

I plot together UK GDP, claimant count and vacancies - all relative to the pre-pandemic period (October to December 2019 average value). Redundancies continue to rise exponentially even as GDP returns, slowly, to its pre-pandemic level.

Some slightly good news on the claimant front, however. This seems to have stabilised' to about 115% above its pre-pandemic level. The bad news, of course, is that this 115% is unacceptably high....

10.00am GMT

At 4.8%, the UK unemployment rate is still below its levels after the financial crisis (it rose over 8% in 2011).

The official rate of unemployment rose to 4.8% (July - September) on the back of a surge in redundancies. Bank of England thinks it will peak at 7.75% next year. OBR forecast of 11.9% is much gloomier. This crisis is moving fast and official data is lagging developments. pic.twitter.com/iYdkxqWrpT

9.46am GMT

Minister for Employment Mims Davies MP has outlined the measures being taken by the government to protect jobs during the pandemic, and help people back into work.

This remains a challenging time for families across the country and today's figures show the impact the virus is having on our labour market.

Through our Plan for Jobs we have a relentless focus on protecting, supporting and creating jobs and we continue to help people of all ages into work. We're doubling the number of Work Coaches across our Jobcentres with 4,500 already taking up posts, our 2bn Kickstart scheme is under way with the first recruits starting last week, and our JETS programme is supporting those who have lost jobs due to the pandemic.

9.23am GMT

Here's our economics editor Larry Elliott on the UK's worsening unemployment situation:

The government's furlough scheme and a recovering economy failed to prevent record redundancies in the period before tougher lockdown restrictions were imposed, according to the latest official data.

Figures from the Office for National Statistics showed that a record 314,000 people lost their job in the three months to September - a period in which the Treasury's wage subsidy scheme became less generous.

9.21am GMT

The Europe-wide Stoxx 600 has also nudged higher this morning, after hitting an eight-month high last night:

9.17am GMT

Over in the City, shares have risen again amid optimism over Pfizer and BioNTech's Covid-19 vaccine.

Rolls-Royce is leading the risers, surging by 26%, with IAG (British Airways' parent company) up 5%. Banks and retailers are also posting gains, with Lloyds up 4% and Next up 3.8%.

9.03am GMT

The TUC's Frances O'Grady says the government must provide more targeted support to the sectors worst hit by the pandemic, and greater help to those who have lost their jobs:

Its time to stop the government's economic rollercoaster. Every day more job losses are announced - and every one is a tragedy for a family.

Ministers must use the spending review to set out a plan to create millions of good new jobs. TUC research shows that we could create 1.2 million new jobs in the next two years in green transport and infrastructure, and another 600,000 by unlocking public sector vacancies.

Today's new labour market data shows that the number of redundancies have hit a record high.

There were 314,000 redundancies in Jul-Sep 2020: higher than any three-month period during the financial crisis. pic.twitter.com/F2eCUfCeSF

The number of people unemployed has risen to 1.62 million.

This is a rise of 243,000 (18%) compared to the previous quarter.

This is, by a distance, the largest percentage rise in unemployment on record. pic.twitter.com/IbuykDxovm

8.42am GMT

Several more economists are also blaming the previous plan to wind back the furlough scheme for driving unemployment to a four-year high.

Here's Nye Cominetti, senior economist at the Resolution Foundation:

The summer saw record redundancies and an unemployment rise of nearly a quarter of a million, as the economy reopened but firms believed the furlough scheme was being wound down.

As the crisis enter its ninth month and second lockdown, job losses will continue to mount. Crucially this is much about those out of work struggling to find new roles as it is about job losses.

Record redundancies as unemployment rises by almost a quarter of a million over the summer - @nyecominetti on today's @ONS labour market statistics https://t.co/gsPrmQRYMR pic.twitter.com/hfpcbCrH46

The latest labour market report is weaker overall, with a significant rise in the number of people without jobs and record redundancies. This suggests that that the original October end-date for the furlough scheme was prompting employers to make decisions about their workforces....

Despite the Chancellor announcing a number of measures before last week to try and protect jobs, it had looked likely that the unemployment rate would rise from October as the furlough scheme was originally scheduled to finish at the end of the month.

8.33am GMT

Today's jobs report also shows that there are still much fewer vacancies than before the pandemic struck, despite a pick-up since the summer.

These figures show a toxic mix of a devastating rise in redundancies and very few people able to find alternative jobs, even before entering a second national lockdown. The recent extensions of the Job Retention Scheme and increased support through Universal Credit are important steps that recognise this difficult reality.

The next couple of months will be crucial. The Government must use this time well to get ahead of the curve on the economy as well as the virus. The creation of an economic recovery commission uniting government, business and unions would be a vital step, as would rollout of mass testing and investment in job-creating projects, with a focus on digital skills and green jobs."

8.14am GMT

Ruth Gregory of Capital Economics says the previous unwinding of the UK's furlough scheme appears to have driven up unemployment levels.

The scheme initially covered 80% of wages of a furloughed worker, with the employer paying nothing. But from September, employers had to pay 10% of wages, rising to 20% in October.

September's rise in the unemployment rate from 4.5% in August to 4.8% suggests that the previous scaling back of the furlough scheme took its toll. And with the second lockdown set to send the recovery into reverse, the unemployment rate may yet climb to about 9% next year.

In response to the government asking firms to shoulder a greater burden of the cost of their furloughed employees, firms reduced their staffing levels at a sharp pace in September.

8.03am GMT

UK chancellor Rishi Sunak has said that today's jobless figures underline the scale of the challenge we're facing".

Sunak says:

I want to reassure anyone that is worried about the coming winter months that we will continue to support those affected."

Redundancies accelerated towards the end of September. That initial decision to end-furlough at the end of October will not have helped I suspect. pic.twitter.com/qECQFz0r9B

NEW: No. of people in work fell by 247,000 between July - Sept @ONS
Redundancies made because of firms planning for the end of #furlough (originally 31st Oct, now end of March) part of the reason. This is the largest decrease seen for this period in ten years.

8.02am GMT

Employment in the UK fell by 247,000 in July-September compared with the previous year, the Office for National Statistics reports, to 32.51m.

That's the largest annual decrease since January to March 2010, another grim consequences of the pandemic.

Looking more closely at the quarterly decrease in employment, it can be seen that this is driven by decreases in the number of part-time workers (down 158,000 on the quarter to 8.11 million) and self-employed people (down 174,000 to 4.53 million, with a record 99,000 decrease for women).

The quarterly decrease was partly offset by an increase in full-time employees, up by 113,000 on the quarter to a record high of 21.17 million. The increase in full-time employees was driven by women (up a record 165,000 on the quarter to 8.72 million), while men decreased by 53,000 to 12.45 million, the first quarterly decrease since March to May 2019.

7.43am GMT

Here are the key charts from today's UK jobless report:

7.26am GMT

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

A day after vaccine optimism sent global stock markets to record highs, the latest UK labour market report is showing the severe economic damage caused by the pandemic.

Mounting cost to livelihoods: Unemployment tops 1.6million in September, up by almost quarter of million over summer, as layoffs reach record as bosses brace for original furlough end, and those laid off earlier search for work again.

For July to September 2020, an estimated 1.62 million people were unemployed, up 318,000 on the year and up 243,000 on the quarter.

The annual increase was the largest since December 2009 to February 2010 and the quarterly increase was the largest since March to May 2009. The quarterly increase was mainly driven by men (up 178,000) and there were increases across all age groups.

Redundancies increased in July to September 2020 by 195,000 on the year, and a record 181,000 on the quarter, to a record high of 314,000.

The annual increase was the largest since February to April 2009.

The employment rate was down 0.6 percentage points on the previous three months, while unemployment was up 0.7 percentage points.

Economic inactivity (people not in work, looking for work, or starting work in the next month) was unchanged https://t.co/rshIK9TXD7 pic.twitter.com/GGDkMP40qx

Global stock rally peters out after vaccine euphoria. Shares pared gains in Japan, HK, & China stocks fell. US & European Futures decline on concerns about smaller US fiscal stimulus package & reality w/record corona cases. Bonds steady w/US 10y 0.91%. Gold $1883, Bitcoin $15.4k. pic.twitter.com/uaOxPl6VDl

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