Global stocks and oil prices rise amid stimulus and vaccine optimism – as it happened

Julia Kollewe

from Economics | The Guardian on 2021-02-03 16:02 (#5DP6Q)

4.02pm GMT

Most European stock markets are still trading higher, buoyed by optimism around the proposed US stimulus package and positive vaccine news, while the FTSE 100 index in London and Wall Street indices are in the red. The FTSE has slipped 0.1% while the Nasdaq is also down 0.1% and the S&P 500 and the Dow Jones have both shed 0.19%.

Oil prices are still pushing higher to the highest levels in almost a year, with Brent crude, the global benchmark, 2.3% ahead at $58.78 a barrel, while US crude is 2.45% higher at $56.11 a barrel.

3.55pm GMT

In the US, Spotify has said that podcast listening hours almost doubled in the fourth quarter and credited its strategic shift beyond music with driving a Wall Street-beating 24% year-on-year increase in new paying subscribers to 155m, reports Mark Sweney.

The audio streaming company, which saw its total monthly user base including those on its advertising-supported tier grow by 27% year-on-year to 345m, said that a quarter of its total user base engaged with podcast content in the final three months of 2020.

We are confident that podcast usage has been a factor in the accelerated net additions," said Daniel Ek, founder and chief executive of Spotify, in a letter to shareholders. We have increasing conviction in the causal relationship between growth in podcast consumption driving higher LTV [lifetime value] and retention among our user base."

3.08pm GMT

The US services survey from the Institute of Supply Management is out, and shows activity strengthened in January - more than expected. The sector put in its best performance since February 2019.

ISM REPORT ON U.S. NON-MANUFACTURING SECTOR SHOWS PMI 58.7 IN JANUARY (CONSENSUS 56.8) VS 57.7 IN DECEMBER

ISM NON-MANUFACTURING PMI AT HIGHEST SINCE FEBRUARY 2019

- BUSINESS ACTIVITY INDEX 59.9 IN JANUARY (CONSENSUS 57.3) VS 60.5 PREV
- PRICES PAID INDEX 64.2 IN JANUARY VS 64.4 PREV
- NEW ORDERS INDEX 61.8 IN JANUARY VS 58.6 PREV
- EMPLOYMENT INDEX 55.2 IN JANUARY VS 48.7 PREV

2.38pm GMT

The opening bell has run on Wall Street, and US stocks are mixed. The Nasdaq has opened 100 points higher after strong results from Google owner Alphabet and Amazon released after market close last night, while the Dow Jones is trading lower.

2.36pm GMT

Patrick O'Brien, UK research director at the research firm GlobalData Retail, has unearthed Amazon's stellar UK performance in its 2020 results, published last night. I wonder how much tax Amazon paid in the UK last year...

Hidden away in Amazon's SEC filing today is just one mention of UK performance: UK sales increased by a staggering 51% in 2020 to $26.5bn (19.4bn) pic.twitter.com/vr37fYzrfq

2.21pm GMT

The FTSE 100 index in London has turned negative, trading 12 points lower at 6,503, a 0.2% drop. Other European markets are still up.

1.33pm GMT

Diane Swonk, chief economist at Grant Thornton, says we shouldn't read too much in the better-than-expected employment data.

Upside surprise on Jan. employment report to be expected. Seasonal adjustment distorts official data to upside in Jan. Could provide a false sense of security on healing in broader economy. January seasonal cuts smaller bc of cuts we have already endured. https://t.co/3Z1qKyecvL

1.28pm GMT

Private businesses in the US hired 174,000 workers between December and January, according to the ADP research institute. The increase beat market forecasts of an increase of 49,000, and comes after a 78,000 decline (revised lower from 123,000) in the previous month.

Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, says:

The labor market continues its slow recovery amid Covid-19 headwinds. Although job losses were previously concentrated among small and midsized businesses, we are now seeing signs of the prolonged impact of the pandemic on large companies as well.

#UnitedStates ADP #Employment Change at 174K https://t.co/LOS8b95mlz pic.twitter.com/KSPOTwF9Gy

1.01pm GMT

Sebastian Skeet, senior healthcare analyst at research firm Third Bridge, says:

GSKs top-line growth has been muted for several years now and this has left the company falling behind its peer group. In 2020 GSK wasn't able to change course effectively, despite some considerable efforts to rebuild its pipeline. At constant exchange rates and pro-forma basis, top line sales for the pharmaceuticals, vaccines and consumer health division dropped by -1%, -1% and -2% respectively. Whilst this was offset with effective cost control, adjusted earnings per share declined 4% at constant exchange rates, and history is likely to repeat itself in the coming years.

Key assets such as its shingles vaccine, Shingrix, has seen significantly depressed prescription volumes due to US lockdowns although Q4 volumes have picked up. New launches include the multiple myeloma therapy Blenrep, although sales execution will be impacted by the pandemic and the drug carries concerning ocular toxicity issues which may limit its use.

12.59pm GMT

Julie Palmer, partner at the restructuring specialist Begbies Traynor, says:

The pandemic may have come at a bad time for GSK, with the drug maker currently mid-way through a restructuring program, but it could prove beneficial for the company in the year ahead as a global effort continues to tackle the virus.

Although the pharmaceutical giant has been late to the party with its Covid-19 vaccine, research trials are focusing on greater efficacy, while the company has the logistical capacity to manufacture and distribute products globally once the drug is approved. This compares to rival vaccines that have already been rolled out and faced significant scrutiny regarding their distribution and effectiveness. For long term protection, it will be companies such as GSK that have the most reliable trials and can mass produce cost-effectively that governments turn to. If the business can get its strategy right, it will be just what the doctor ordered for its investors.

12.29pm GMT

GSK took a 10% stake in CureVac last year, and will also support the production of up to 100m doses of CureVac's current Covid-19 vaccine this year. The biotech, based in Tubingen, is aiming to produce up to 300m of its vaccine this year.

It is already working with Germany's Bayer to speed up development and production of that vaccine, which is in late-stage clinical trials involving thousands of volunteers in Europe and Latin America. Initial results are expected in March or April.

12.23pm GMT

GSK, the UK's second biggest drugmaker (behind AstraZeneca), made sales of 34bn last year, up 3% at constant exchange rates, and a profit before tax of nearly 7bn, a rise of 12% from 2019.

However, GSK shares dropped 4.1% to 13.08 because it forecast lower profits this year. It predicted a decline of mid to high-single digit percent adjusted earnings per share at constant exchange rates. While the pandemic has boosted demand for the company's over-the-counter painkillers, its vaccines business has suffered as fewer people are getting shots for shingles and other conditions.

2020 was an extraordinary year for all of us, and one of significant progress for GSK. We invested in our pipeline and new launches, readied the company for separation, and had to rapidly mobilise and respond to the pandemic. We delivered our guidance for the year, offsetting the significant impact of Covid-19 on [other] adult vaccinations, with strong performances of new products and effective cost control.

12.04pm GMT

The Spanish banking giant Banco Santander has reported the first annual loss in its 163-year history, reports our banking correspondent Kalyeena Makortoff.

The lender swung to a 8.8bn loss for 2020, compared to a 6.5bn profit a year earlier, after the Covid crisis dealt a 12bn blow: forcing the bank to put aside to cover a potential surge in defaults and take a writedown the value of some of its assets. Restructuring costs also took their toll.

10.55am GMT

Here is our full story on the 132m partnership struck by GlaxoSmithKline, the world's biggest vaccine manufacturer, and the German biotech CureVac to develop a next generation of Covid-19 vaccines targeting new emerging variants in the pandemic.

10.48am GMT

Here's more on Vodafone from Mark Sweney, our media business correspondent.

Vodafone's shares climbed 4.4% this morning, after the company reported a return to organic service revenue growth in the mobile operator's third quarter, handily beating analyst expectations of a decline for the third straight quarter.

10.42am GMT

And here are some of today's other stories.

There are no black executives in any of the top three roles at Britain's 100 biggest companies for the first time in six years, according to a report on boardroom diversity, writes my colleague Joanna Partridge.

10.38am GMT

The Guardian has taken a closer look at the UK's jobless crisis.

Rishi Sunak has been warned by the leaders of Britain's most influential business groups and the trade union movement that he risks plunging Britain into a period of mass unemployment unless he extends the furlough scheme, our economics correspondent Richard Partington reports.

10.28am GMT

Eurozone inflation rises to +0.9% YoY, much more than expected +0.5%. It could be a problem for the ECB to keep its monetary stance unchanged...@JuliaKollewe

10.27am GMT

Eurozone inflation has risen to an annual rate of 0.9% in January, up sharply from a 0.3% decline in December, while core inflation increased from 0.2% to 1.4% - all due to temporary factors. And that's exactly why the ECB shouldn't be alarmed, says Bert Colijn, senior eurozone economist at ING.

Think German VAT increase, delayed winter sales that are usually in January. As they are delayed, prices are measured against last year's discounts, increasing the rate. This effect will be reversed once the sales do occur. This boosted core inflation from 0.2% to 1.4%.

So temporary factors are pushing up inflation at the moment, and there is more to come. Expect prices for product categories impacted by social distancing measures to return to normal levels when the economy reopens - think package holidays, accommodation and transport.

10.21am GMT

Joshua Mahony, senior market analyst at online trading platform IG, says:

Another bout of good news on the vaccine front has helped lift stocks, with the recent volatility being left behind for now. The US dollar continues to gain ground, with traders keeping an eye out for US jobs data to test whether the current positive dollar/stock correlation is just fleeting.

European indices are continuing their rise, with the weekend clearly playing a significant role in calming recent fears over a potential market collapse. While recent anxiety over attempts to target particular areas of weakness in the markets, that volatility has eased in anticipation of potential regulatory action from Treasury Secretary Janet Yellen.

10.14am GMT

Stock markets have given up some of their earlier gains but are still trading higher, buoyed by optimism over the proposed $1.9 trillion US stimulus package and the rollout of coronavirus vaccines, following positive news on the effectiveness of the Oxford University/AstraZeneca vaccine yesterday.

9.46am GMT

Tim Moore, economics director at IHS Markit, which compiles the survey, says:

Service providers experienced a steep downturn in business activity due to the third national lockdown in January, although the speed of decline remains much slower than last spring. Tight restrictions on travel, leisure and hospitality resulted in severely reduced trading among customer-facing businesses.

Temporary closures led to shrinking demand for business services and a ripple effect of corporate spending cutbacks. As a result, total new work fell at the fastest pace since May 2020 and this setback contributed to a steeper rate of job shedding at the start of the year.

9.41am GMT

The UK economy is on course for a sharp contraction in the first quarter of this year due to the third Covid-19 lockdown, but the rapid rollout of vaccines has lifted confidence among service sector firms to the highest since May 2014.

Britain's service industries recorded the sharpest fall in output since May, according to the final reading from the IHS Markit/CIPS survey. The headline business activity index fell sharply to 39.5 in January, from 49.4 in December. Around 41% of firms polled indicated a decline in output in January, while only 15% registered an expansion.

Survey respondents overwhelmingly linked lower activity to the impact of restrictions on trade and temporary business closures during the third national lockdown.

Despite a sharp downturn in client demand due to the coronavirus pandemic, the latest survey indicated that business optimism improved for the third consecutive month. The degree of positive sentiment was the strongest since May 2014. This largely reflected the successful UK vaccine rollout so far in 2021 and hopes of a strong rebound in economic conditions as the pandemic situation improves.

UK January Final Markit Services PMI Report - Markithttps://t.co/aYSL67AFKz pic.twitter.com/388X15rZvT

9.11am GMT

The eurozone as a whole had a tough start to 2021, when private sector output fell for a third month - and at a faster rate. IHS Markit's composite output index fell to 47.8 in January from 49.1 in December, according to its final reading.

Services was once again the main drag on the economy, with activity in this sector contracting for a fifth successive month and also at a sharper rate than in December. Manufacturing remained a bright spot, with production rising for a seventh successive month albeit at the lowest rate in this growth sequence.

Of the largest eurozone members, only Germany recorded a rise in private sector output during January, although growth here weakened to its lowest level for seven months.

January PMI data signalled a further decline in eurozone business activity, extending the current run to three months. The service sector was once again the main drag, where activity fell at a sharper rate than in December. Read more: https://t.co/TGf8sTS5V1 pic.twitter.com/HLNWZrZZ4P

9.06am GMT

Germany is up next. The business activity index for its services sector dropped to 46.7 in January, down from 47.0 in December. While it pointed to further contraction, the latest reading remained much higher than the record low last April (16.2) during the first lockdown, says IHS Markit.

Coupled with slower factory output in January, this meant that activity in the private sector slowed. Germany's composite output index slipped from 52.0 in December to a seven-month low of 50.8.

The service sector was a drag on the German economy at the start of the year, according to latest PMI data, with business activity falling for the fourth month in a row and at a slightly quicker rate as lockdown restrictions were further tightened.

After recording the smallest of expansions in the final quarter of 2020, the economy looks likely to see a renewed contraction in the first quarter of 2021, with the current strict lockdown measures continuing until at least mid-February and even manufacturing showing some loss of growth momentum.

8.59am GMT

In France, the service sector worsened at the start of the year, with the business activity index falling to 47.3 from 49.1 in December, according to final readings from IHS Markit. Hotels and restaurants were worst affected by tighter Covid-19 restrictions.

Eliot Kerr, economist at IHS Markit, says:

The first set of final PMI results for 2021 pointed to a sharper decline in private sector activity, as tighter COVID-19 restrictions hindered the economy. The service sector was more heavily impacted than the manufacturing sector, although goods producers did record a fresh decline in output, partially reversing the growth seen in December.

Meanwhile, a faster decline in new business was confined to the service sector, with manufacturers registering an improvement in demand conditions for the first time since October.

Tighter COVID-19 restrictions saw French service sector activity contract at a quicker pace in January, according to the latest PMI data. The result was partially driven by a fresh decline in new orders. Read more: https://t.co/8v70UaNO5y pic.twitter.com/Zl46QnXyii

8.53am GMT

The downturn of Italy's service sector continued into 2021, albeit at a slower pace, according to the latest survey from IHS Markit. Its headline business activity index rose to 44.7 in January from 39.7 in December - closer to the 50 mark that separates expansion from contraction.

The composite output index, which comprises services and manufacturing, posted 47.2 in January, up noticeably from 43.0 in December, to signal a softer reduction in Italian private sector output at the start of this year.

Italy's service sector remained mired in a downturn into 2021, although the latest contraction in services activity was much softer than those recorded in the closing months of last year. Inflows of new work also declined in January, but similarly, the rate of reduction was the slowest for four months.

The latest data highlighted a much stronger level of business confidence, however, with firms' hopeful that now the vaccine roll out is underway, restrictions will soon be loosened, allowing for the release of pent up demand and an economic recovery.

Latest PMI data revealed a softer downturn in Italian service sector activity during January. Similarly, the rate of decline in new orders eased and sentiment regarding future growth ticked higher. Read more: https://t.co/VqP5zXQcpR pic.twitter.com/ZzSwAj794U

8.46am GMT

Here's an update on the Asda deal. The Blackburn-based Issa brothers, backed by the private equity firm TDR Capital, are in the process of buying the supermarket chain Asda from Walmart. They said today that they will sell Asda's petrol stations business for 750m to EG Group, which runs 6,000 petrol stations around the world and is also owned by the billionaire brothers.

They expect the Asda acquisition, which still needs regulatory approval, to complete later this month. The Issa bothers and TDR agreed to to buy a majority stake in Asda in October in a deal which valued the company at 6.8bn.

8.29am GMT

In China, activity in the services industries eased notably last month, the Caixin survey from IHS Markit showed. The headline business activity index fell to 52.0 in January from 56.3 in December. This points to a further loss of momentum since November, as it was the slowest rate of growth recorded over the last nine months.

China's service sector expanded at a softer rate at the start of 2021, #PMI suggests, with companies signalling the weakest increase in business activity since April. Cost pressures continued to build, with inflation nearing a 9-year high. Read more: https://t.co/lVfn0XqZOR pic.twitter.com/9xPEGkt6AC

Business activity at Japanese services firms was still disrupted by rising #COVID cases in January, as the #PMI fell to 46.1 to signal the sharpest fall in output in 5 months. Firms saw the quickest decline in new work since May '20. Read more: https://t.co/CZvxuiS7OI pic.twitter.com/OZOPOZRWCs

8.25am GMT

Spain's services sector has had a tough start to the new year, according to the latest survey from IHS Markit. The headline business activity index (which is based on a single question asking firms to comment on developments in their activity since the previous month) plunged to 41.7 in January, from 48.0 in December.

It has been below the 50 market which divides expansion from contraction for six months.

It was a tough start to 2021 for the Spanish service sector as the negative impacts on market activity of the pandemic plus unseasonably poor weather conditions weighed on the services economy.

Given the challenging near-term outlook, firms are understandably again being forced into employment cuts especially as new business volumes remain weak and operating expenses are rising.

8.18am GMT

Oil prices are also pushing higher, with Brent crude, the global benchmark, rising more than 1%, or 60 cents, to $58.06 a barrel, the highest in more than 11 months. US crude has gained 0.82%, or 45 cents, to $55.21.

The oil market was buoyed by the latest assessment from the oil cartel Opec and its allies that oil stockpiles will fall below their five-year average by June.

8.10am GMT

European stock markets have recorded chunky gains in the first few minutes of trading.

8.03am GMT

On the vaccine front, the British drugmaker GSK has teamed up with the German biotech CureVac to develop the next generation of mRNA Covid-19 vaccines that is effective for emerging new variants in a 150m partnership.

Tubingen-based CureVac is already developing an mRNA vaccine for coronavirus and GSK will help manufacture up to 100 million doses of this vaccine this year. It is in late-stage clinical trials.

Analysis of fresh data from three trials found that the first shot conferred on average 76% protection against symptomatic infections from three weeks until 90 days, and reduced transmission of the disease by 67%.

The findings are preliminary, and still under review at The Lancet, but if they stand up to scientific scrutiny would reassure public health officials that prioritising more vulnerable people for a first shot of the Oxford/AstraZeneca vaccine is a sound strategy.

7.40am GMT

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

Stock markets have been rising this week and European markets are poised to open higher again, amid optimism about the US stimulus package, the roll-out of covid-19 vaccines, positive company results and oil prices near a one-year high. In Asia, the Nikkei closed 1% higher while the Australian market rose 0.9%.

The billionaire has been among a group of prominent financial heavyweights, including Chamath Palihapitiya and Cameron and Tyler Winlevoss, to align with retail traders in what they see as a battle between Main Street and Wall Street.

During the chat, Cuban encouraged the forum to hold on to their GameStop Corp. shares if they could afford to do so, and predicted that institutional funds would jump back in for a second round of shorting the video-game retailer. The serial entrepreneur and reality television star said GameStop holders should take a lesson from Bitcoin investors who held on to the cryptocurrency when its price plummeted in 2017.

Mark Cuban joined Reddit's WallStreetBets for an Ask Me Anything" session on Tuesday and he didn't hold back https://t.co/12KARvTHHO

Gamestop, AMC, silver: How to talk to your teen about the current investing mania #investinyou (In partnership with @acorns.) https://t.co/BlyJLddvxP

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