Emerging markets hit record highs amid economic recovery hopes – business live

Graeme Wearden

from Economics | The Guardian on 2021-02-10 17:52 (#5E0AM)

Rolling coverage of the latest economic and financial news

Latest: US inflation come in below forecasts
Pound at 33-month high
Heineken to cut 8,000 jobs
Emerging markets at record levels
China factory gate prices rise
Platinum at six-year high

5.52pm GMT

Time to wrap up.

The pound has risen to a new 33-month high against the US dollar, as Britain's vaccine rollout spurs hopes of an economic recovery. Sterling hit $1.3866 today, for the first time since late April 2018, with some analysts suggesting it could soon hit $1.40.

Twitter CFO @nedsegal said a tipping point could come if enough people are interested in #Bitcoin transactions with the tech firm https://t.co/9fAb2apamB

5.27pm GMT

Bank of England Governor Andrew Bailey urged the European Union to work with Britain over financial services trade after Brexit, rather than engaging in a regional argument'

In the annual Mansion House speech, Bailey argues that the EU is demanding more of London than other partners, and demanding concessions from the UK that it wouldn't accept itself.

As is well known, the post-Brexit equivalence process between the UK and EU has not been straightforward. It is, of course, two distinct processes - one for the UK to recognise the EU as equivalent to the UK, and one for vice versa. The UK has granted equivalence to the EU in some areas, but the EU has not done likewise to the UK. In a few areas - involving central clearing and settlement - there has been agreement by the EU to extend temporary equivalence to the UK, recognising, I think, the clear risks to financial stability that would have arisen had this not been done at the outset.

It would be reasonable to think that a common framework of global standards combined with the common basis of the rules - since the UK transposed EU rules from the outset - would be enough to base equivalence on global standards. Less than this was enough when Canada, the US, Australia, Hong Kong and Brazil were all deemed equivalent. Continuing with the example of central clearing, the EU has recently made the US SEC equivalent for CCPs, subject to certain conditions. These conditions are already met by UK CCPs as they are a legal requirement in the onshored legislation, but equivalence beyond the temporary extension remains uncertain.

"A standard that the EU holds no other country to and would, I suspect, not agree to be held to itself" - Bank of England Governor Andrew Bailey comes close to accusing the EU of hypocrisy over equivalence at the City of London's annual Mansion House event https://t.co/7YmLldz1ry

We have an opportunity to move forward and rebuild our economies, post-COVID, supported by our financial systems.

Now is not the time to have a regional argument."

(On trivia, both Bailey and the Lord Mayor are wearing lounge suits rather than the traditional black tie as they speak from their laptops! Gordon Brown might be smiling somewhere...)

4.59pm GMT

After a bright start, the US stock market has now dropped back from its earlier highs - with the tech-focused Nasdaq currently down around 0.3%.

European markets have also subsided, with the Stoxx 600 closing down 0.25% tonight. Germany's DAX lost 0.5%, with France dipping 0.35%.

Here in Europe, governments continue to distribute vaccinations so there is an overall feeling that things are heading in the right direction health wise. Nobody is expecting the process to be fast but while vaccinations are being rolled out, that bodes well for the prospects of governments easing up in restrictions in the next few months.

In London, firmer metal prices have helped Rio Tinto, Anglo American, Glencore and BHP Group - they are some of the biggest gains on the FTSE 100.

4.47pm GMT

On bitcoin... Twitter's CFO Ned Segal has revealed that the microblogging site has considered whether it should hold the cryptocurrency on its balance sheet - but hasn't made any changes yet.

Segal told CNBC that Twitter had done a lot of upfront thinking' about how it might potentially pay vendors or employees using bitcoin, should they ask to transact using the virtual currency.

We might consider whether we would be transferring dollars to bitcoin at the time of the transaction or if we wanted bitcoin on our balance sheet ready to complete that transaction."

"We've done a lot of the upfront thinking to consider how we might pay employees should they ask to be paid in #bitcoin, how we might pay a vendor if they asked to be paid in #btc and whether we need to have #btc on our balance sheet," says @NedSegal $TWTR. pic.twitter.com/KjIgnqDmYC

4.19pm GMT

Oracle and Walmart's plan to buy TikTok's US operations has reportedly been pushed back indefinitely, as the US president, Joe Biden, reviews the previous administration's efforts to address potential security risks posed by Chinese tech companies.

The administration of the former president Donald Trump had cited national security concerns in its targeting of TikTok, arguing the personal data of US users could be obtained by China's government. TikTok denies the allegation.

4.13pm GMT

Back in the energy sector, US oil stocks have fallen by more than expected.

EIA WEEKLY CRUDE OIL INVENTORIES -6.644M VS +0.985M EXPECTED VS -3.5M APIS$CL #OOTT $CAD pic.twitter.com/NTdwWSUKMO

Oil inventories extended their downward slide in the February 5 week, down 6.6 million barrels to 475.7 million commercial barrels. pic.twitter.com/J20IzftLUM

3.37pm GMT

Another vaccine development: World Health Organization experts have recommend the use of AstraZeneca's Covid vaccine in adults of all ages, including the over-65s.

Reuters has more details:

In interim recommendations on the shot, the Strategic Advisory Group of Experts on Immunisation (SAGE) panel said the vaccine should be given in two doses, with an interval of around 8 to 12 weeks between the first and second doses.

SAGE also said that even where questions have been raised about the vaccine's efficacy against a South African variant of the coronavirus, there is no reason not to recommend its use".

3.09pm GMT

AstraZeneca has unveiled plans to build a new large Covid-19 vaccine manufacturing facility with Germany's IDT Biologika at the firm's Dessau site, in an attempt to defuse a row with the EU over vaccine supply.

IDT Biologika, one of AstraZeneca's manufacturing partners, provides glass vials and injects the liquid vaccine - which is made at other European sites - into vials, before capping and boxing them.

#BREAKING AstraZeneca says to boost vaccine manufacturing for Europe with Germany's IDT Biologika pic.twitter.com/rAvxdtYMy6

We are proud that AstraZeneca has chosen us as a strategic partner for the manufacturing of their vaccines. The agreement underscores our expertise in the production of demanding vector-based vaccines and our ability to provide a one-stop solution, from creating drug substance, through to fill and finish" and secondary packaging."

This agreement will greatly help Europe build an independent vaccine manufacturing capability that will allow it to meet the challenges of the current pandemic and create strategic supply capacity for the future."

Potential for increased capacity of #AstraZeneca vaccine in EU plant in Germany #COVIDVaccine pic.twitter.com/QosDDbu2lS

This news now confirmed by Germany's health ministry. AstraZeneca to collaborate with German firm IDT Biologika to manufacture #Covid vaccine. Health minister @jensspahn calls it "another important building block... that helps us in this pandemic" https://t.co/BKzP3J6hn9

After a very public row with the European Union over Covid-19 vaccine supplies, AstraZeneca now says it will boost manufacturing in Europe with Germany's IDT Biologika. The EU's immunisation programme has got off to a slow start.

2.40pm GMT

Th US stock market has opened at fresh record highs, after January's tame inflation data reassured investors.

The main indices all hit new peaks, as traders continue to anticipate major new stimulus package from the Biden White House, and loose monetary policy from the Federal Reserve.

BREAKING: Dow, Nasdaq, and S&P 500 hit record highs at the open. pic.twitter.com/jjvHgXppIJ

2.31pm GMT

Here's Neil Birrell, chief investment officer at Premier Miton Investors, on the subdued US inflation report:

The reflation trade is the hot topic, but there is no sign of it becoming a bigger issue in the short term data, with the US CPI for January coming in as expected at 0.3% month-on-month and a little lower than expected year-on year at 1.4%.

Investors will be looking further out but with the 10 year yield bouncing off 1.2% again, the reflation trade is clearly not a one way bet."

Four pieces. First CPI pie piece: Food & Energy. pic.twitter.com/7fZbWL7MxR

Second piece, and the ongoing story, is core goods inflation. Now above core services, with or without shelter. pic.twitter.com/hPdIV0tdai

Core services less rent of shelter. Here is where the mobility stuff is dragging us down. One hopes this comes back once mobility comes back. pic.twitter.com/KvRRl0G5At

And piece 4, what will be endlessly debated: rent of shelter, including lodging away from home. Be careful comparing to the GFC - that was, after all, a housing crisis with collapsing home prices. Made perfect sense then. Makes very little sense now; I don't see this persisting. pic.twitter.com/S5vhzTT2iZ

It isn't a huge surprise that the recent virus-induced weakness in activity and employment appears to be weighing on inflation, but with virus cases now falling sharply and states starting to ease restrictions on activity, that weakness is unlikely to last for long.

In any case, as the big falls in prices last year drop out of the annual comparison inflation will pick up sharply in March and April.

1.52pm GMT

The US dollar has dipped following the inflation report, with traders relieved that prices aren't rising faster than expected.

If inflation was accelerating, it would put pressure on the US Federal Reserve to consider easing back on its huge stimulus programme.

#USD slips about 10 pips vs #CAD after distinctly underwhelming US #CPI data for Jan. (MarketWatch). May provide some impetus for the #dollar to move deeper into the 1.2600s vs the #loonie #forex #FX #cdnecon pic.twitter.com/qGV6WsgGHe

1.49pm GMT

January's inflation data shows that the US economy isn't overheating, says Oxford Economics' Greg Daco.

He also flags up that energy prices picked up last month, matching the rise in crude prices:

The economy isn't overheating#CPI +0.3% in Jan
- energy +3.5% w/ gas +7.4%
- food +0.1%
- core prices flat w/ shelter only +0.1%:
apparel, medical, shelter
recreation, used & new autos, air fares

Headline #inflation 1.4% y/y (flat)
Core inflation 1.4% y/y (-0.2pt) pic.twitter.com/BKAHTE2WRg

1.44pm GMT

Just in: US inflation was a little lower than expected last month, which could calm fears that prices are taking off.

Consumer prices rose by 1.4% per year in January, below consensus of a 1.5% rise.

US CPI was slower than expected in January. Headline rate holding at 1.4%Y/Y (vs 1.5% exp). Core CPI easing to 1.4% from 1.6% (vs 1.5% exp). pic.twitter.com/OcQTUQ2Svt

Jan CPI +0.3% m/m (in line with est.) vs. 0.4% prior; core flat vs. +0.2% est. & +0.1% prior ... y/y unchanged from prior at +1.4% vs. +1.5% est. (blue); core pic.twitter.com/tXaw3BLnmw

Whoops.

Year over year:
CPI: 1.4%, estimate 1.5%
Core CPI: 1.4%, estimate 1.5%

Month over month:
CPI: 0.3%, estimate 0.3% (& Dec. revised down)
Core CPI: 0%, estimate 0.2% (& Dec. revised down)

As @TheStalwart would say, that's a "beat" on inflation.

1.28pm GMT

Back in the City, shares in travel and hospitality companies have lost ground today,

British Airways parent company IAG has dipped by 3%, while easyJet has lost 4% and Intercontinental Hotels is down 2.1%.

People shouldn't be booking holidays right now - not domestically or internationally."

1.13pm GMT

Over in the US, the number of new mortgage applications fell last week - suggesting the property market might be cooling.

Overall mortgage application volume fell 4.1% last week compared with the previous week, according to the Mortgage Bankers Association.

Despite some weekly volatility, Treasury rates have been driven higher by expectations of faster economic growth as the Covid-19 vaccine rollout continues."

#UnitedStates MBA Mortgage Applications at -4.1 https://t.co/fmhyqvEcHy pic.twitter.com/4c34KpSzxP

12.40pm GMT

Despite the optimism over vaccine rollouts, the UK hospitality sector continues to suffer from the current lockdown.

Oliver Shah, business editor at The Sunday Times, reports that Italian restaurant chain Prezzo has filed for administration. This could lead to around 200 job losses (with its owners buying back most of the sites through a pre-pack' rescue).

Restaurant chain Prezzo has filed for administration after failing to reach agreement with landlords on rent payments. Owner Cain International likely to buy it back and keep 158 of its 180 sites. About 200 jobs to go

Prezzo file notice of intention to appoint Administrators just over two months after being acquired by PE firm Cain International. Uncertainty over when restaurants can reopen coupled with mounting rent arrears and future rent arrangements are driving factors.#insolvency

Exclusive: The new owner of Prezzo, one of Britain's biggest high street restaurant chains, is exploring options including putting the business through a pre-pack administration amid uncertainty about a reopening timetable for the hospitality industry. https://t.co/qRz0Ox8GeQ

12.33pm GMT

If the current rally continues, the pound could soon approach the $1.40 mark for the first time in almost three years

Fawad Razaqzada, market analyst with ThinkMarkets, says sterling (currently trading around $1.384) could push higher, if investors remain optimistic about economic prospects.

The GBP/USD has today risen to its best levels since April 2018 as investors continue to pile into the racier pound and out of the US dollars amid ongoing reflationary" and risk-on" trades.

The pound has been pushing up across the board since the turn of the year due to a no-deal Brexit being avoided and the UK is currently well ahead of many countries in the race to vaccinate its population.

12.06pm GMT

European office workers aren't expecting to return to their desks until the summer, according to a new survey, as the date for going back to work has slipped despite ongoing vaccination programmes and tight coronavirus restrictions.

11.31am GMT

Marios Hadjikyriacos of XM agrees that the UK's vaccine programme is pushing up the pound, as it could lead to a faster economic recovery.

The British pound continues to capitalize on the dollar's troubles, with Cable [the /$ exchange rate] exploring heights not seen since early 2018.

The UK economy is still in a deep hole, but the swift pace of vaccinations implies a stronger recovery ahead.

The UK's advanced vaccination rates may also start to show its impact in health outcomes and that certainly will strengthen the Bank of England's current relatively optimistic case."

11.20am GMT

France's factories are continuing to struggle, highlighting concerns that its economy may lag behind the global recovery.

French industrial output fell by 0.8% month-on-month in December, much weaker than the 0.2% growth expected. The narrower measure of manufacturing output shrank 1.7% compared with November.

The drop in production observed in December 2020 compared to December 2019 in Italy (-1.9%), Germany (-0.7%) or Spain (-0.6%) is much less than the 3% drop observed in France.

Compared to February 2020, the last month before the lockdown, the fall in French industrial production is also much greater than that of its European neighbours (-4.9% compared to -3.7%, -3.6% and -0.5% for Italy, Germany and Spain respectively).

The production of machinery and capital goods is a smaller share of industrial production in France than in Germany or Italy. This implies that France benefits less from the economic recovery in China than its neighbours.

Moreover, production in France is strongly oriented towards the aeronautics sector, which is suffering much more during the pandemic. This being the case, the weakness of the construction sector (-10.9% since February) also indicates that the sectors oriented towards the domestic market are also suffering significantly.

French industrial production seems to be struggling, but things are looking particularly bad when you compare them to Germany and Italy writes @CdeMontpellier https://t.co/DxvS74zVLF

11.06am GMT

Former Labour MP Chuka Umunna has become the latest UK politician to take a senior role in the financial world.

Umunna, the ex-shadow business minister who was once tipped as a future prime minister, is joining JP Morgan, to lead its European environmental, social and governance (ESG) work.

10.18am GMT

The UK government's main funding scheme for start-up businesses hit by the Covid-19 crisis has handed firms in the south east five times as much money as those in the Midlands and the north.

According to figures compiled by the Labour Party from official data, businesses in the South East and London received in total of more than 700m in funding, while businesses in the north, Yorkshire and the Midlands received just 140m.

While the Government talks about backing the north and Midlands, the reality is starkly different. Their interventions are making regional inequality worse not better.

By investing much more heavily in start-ups in the south of England and squeezing out other parts of the country, they will be simply reinforcing economic imbalances."

The Future Fund uses a set of standard terms with published eligibility criteria, independent of ministers. This a clear, efficient way to make funding available as widely and as possible, irrespective of location.

In addition to the Future Fund, the British Business Bank has provided nearly half a billion pounds to high-growth firms outside of London."

10.02am GMT

Optimism about the UK's speedy Covid-19 vaccine rollout is also boosting the pound.

It's trading close to a nine-month high against the euro, at 1.1413, on top of its gains against the dollar.

GBP bulls have been flexing their muscles since the start of the year based on relief about the EU/UK trade deal and on hopes that the relatively rapid vaccine roll-out programme will lead to a fairly fast economic recovery this year,"

9.54am GMT

The pound has hit its highest level against the US dollar in close to three years this morning.

Sterling has hit $1.384 for the first time since the end of April 2018, amid hopes of economic recovery - and with the prospect of major new US stimulus measures weakening the dollar.

The US dollar has continued to drift lower in the wake of last Friday's disappointing US payrolls report hitting its lowest level this month, as increased confidence fuels a move out of the greenback into riskier areas of the market.

The pound has continued its move towards the $1.4000 level after breaking the 1.3750 resistance area that had been capping gains for most of January, bringing it closer to its highest levels in over three years.

9.40am GMT

Grim news of the morning - Heineken is cutting around 8,000 jobs as part of a restructuring plan, after its sales were hit by the pandemic.

In Europe in particular, we estimate that at the end of January 2021, less than 30% of on-trade outlets were operating. Product and channel mix is expected to continue to adversely impact results, especially in Europe.

We expect market conditions to gradually improve in the second part of 2021 and to continue improving into 2022, with significant differences across markets and channels. In particular, we see a slow recovery of the on-trade channel in Europe.

9.25am GMT

Another UK housebuilder, Redrow, has reported that demand for larger homes away from the cities remains strong, after the pandemic lockdowns encouraged some families to move.

Redrow reported a 20% rise in revenues in the last six months of 2020, lifting profits by 11%.

Demand in the regions for our Heritage homes has been particularly high as more buyers reflect on their lockdown experiences and prioritise space in their homes and access to green areas.

Record-breaking first half for @Redrow with sales which suggest that the short-term lockdowns are leading to long term societal changes in how and where we choose to live with growing demand for homes suitable for working from home and with easy access to green spaces pic.twitter.com/l7UiMJRJLt

9.07am GMT

The housebuilder Persimmon has set aside 75m to pay for any work needed to remove cladding on its high-rise buildings after a review of its past developments.

The developer is mostly known for constructing family homes but has identified 26 multi-storey buildings it constructed that have cladding that may need to be removed.

8.59am GMT

Prices charged by Chinese manufacturers haver risen year-on-year for the first time since the Covid-19 pandemic began - another sign that the economic recovery is building.

Figures released overnight showed that China's factory gate prices increased by 0.3% in annual terms in January.

China inflation figures in Jan 2021: PPI: +0.3%Y (Dec 2020: -0.4%), CPI: -0.3%Y (Dec: +0.2%), 1.0%M, #pork prices fell 3.9%Y (Dec: -1.3%Y), chart @economics https://t.co/v1P8OxwFqU pic.twitter.com/HHTBN15DXA

China's producer-price index returned to inflation at the start of the year by rising 0.3% in January from a year earlier, compared with a 0.4% fall year-over-year in December.

Good morning: and China CPI for January went negative -0.3%YoY & that mirrors other data like PMIs that show growth momentum sagging on weak demand. Obvs a lot of this is on the base effect + food but it now reveals that demand is a challenge & the PBOC is going to pay attention. pic.twitter.com/YzxVOgCbsE

8.45am GMT

Mining stocks are rallying this morning, on expectations of stronger demand for commodities such as iron ore, copper and coal.

Antofagasta (+2%), Glencore (+2%) and Rio Tinto (+1.9%) are all among the FTSE 100 risers.

#Platinum surges to a six-year high above $1200/oz, while its discount to #gold slumps to $635 (from $1050 in early November). The green transformation theme currently turbocharging platinum and #copper as constrained supply meet strong demand. pic.twitter.com/ShzOMht3Vz

Stock market rally resumes w/reflation & re-opening remain the buzzwords dominating the narrative. Tencent fueled gains in Asia. MSCI World hit ATH, global stocks now worth record $109tn. Platinum climbs to 6y high. Bonds steady w/US 10y yields 1.15%. Gold $1843, #Bitcoin $46.4k. pic.twitter.com/jm7rf3T4Jx

8.27am GMT

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

Stock markets across the emerging economics are pushing higher today as investors continue to price in a solid recovery once the Covid-19 pandemic has been driven back.

MSCI's main emerging-market index, which covers nearly 1,400 companies across 27 developing-world countries, rose 0.9% on the day and has gained seven out of the last eight sessions.

The index, which is heavily skewed towards Asian tech and internet stocks, last hit a record high in early January.

After a mid-week lull, markets appear to be perking-up again. There's been little to really catalyse the latest move higher in risk-assets. But after a bit of a breather, market participants appear to have the appetite to take-on more risk, and juice a little further the stimulus, vaccine and reflation themes.

Asian indices are generally higher, led by strength in Chinese and Hong Kong stocks leading into the Lunar New Year holiday.

In a market basking in the prospect of the reflation trade, there's the gnawing concern, at least amongst some in the market, that that Goldilocks condition is precariously close to boiling over into outright inflation. Though the risk isn't seen as being significant in the short-term, with economists predicting a relatively modest 0.2 per cent increase in core CPI for the month, any upside surprise in inflation data will only amplify the calls that the US economy runs the risk of running too hot.

How the Fed might respond to such a set of circumstances will also be crucial, and will be homed in on tonight, as US Federal Reserve Chair Jerome Powell delivers an address to the Economic Club of New York. As per usual, market participants will hanging off every word Chair Powell has to say. The crucial issue, given the preoccupation with inflation risks right now, is whether the Fed will keep the punch bowl nice and full for the markets, even in the face of rising inflation expectations.

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