Markets rally as OECD hikes global growth forecasts – as it happened

Graeme Wearden

from on 2021-03-09 19:13 (#5F3HX)

Rolling coverage of the latest economic and financial news

European markets highest since February 2020
Nasdaq surges 3% as tech stocks bounce back
OECD raises global growth forecasts
US growth forecast doubled after Biden boost
German exports to UK down 29% year-on-year in January
China's State Funds intervene' as market slides again

7.13pm GMT

Time to recap.

The OECD has hiked its forecast for global growth, thanks to Covid-19 vaccine rollouts and Joe Biden's stimulus package.

The world economy is doing a bit better. Firms have adjusted and some countries have accelerated vaccinations and so are reopening their economies.

I don't want to sound overoptimistic because a lot of the predictions are based on the assumption that vaccination will accelerate and that the race between vaccines and the virus will be won by the vaccines."

US tech on an absolute tear:#NASDAQ 12829 +4.25%#FANG 6522 +6.69%$AAPL 121.38 +4.31%$AMZN 3079.35 +4.34%$BABA 237.91 +4.95%$BIDU 260.31 +11.85%$FB 266.81 +4.5%$GOOG 2069.24 +2.23%$NFLX 509.84 +3.35%$NVDA 500.63 +7.98%$TSLA 662.5 +17.68%$TWTR 67.18 +5.83%

6.53pm GMT

MPs have accused the UK's Financial Conduct Authority of failing to protect businesses and investors swept up in the collapse of specialist lender Greensill Capital, saying the crisis draws yet more uncertainty" over the efficacy of the City regulator, and that it is time for a review of its powers.

Kevin Hollinrake, the Conservative MP and co-chair of the all party parliamentary group on fair business banking, criticised the regulator's approach to Greensill (which allows businesses such as GFG to borrow money to pay their suppliers).

The FCA exists to protect consumers and businesses from abuses of financial institutions, but after less than 10 years, already has a string of scandals under its belt.

The fact that Greensill Capital was allowed to operate in the UK in the shadows demonstrates a failure to fulfil its requirements."

6.46pm GMT

In other retail news, pizza chain Domino's is planning to open more stores, and offer more drive-thru services, as the Covid-19 pandemic prompted more people to order takeaways and meal deliveries.

The firm plans to add 200 new outlets to its 1,201 stores, most of which are run by franchisees. To revive its collection business, it aims to offer drive-thru services at 450 outlets by June, up from 189 now, at stores that have a car park or are near one.

6.44pm GMT

Hundreds of staff at UK cycling chain Evans are facing the threat of unemployment, even though demand for bicycles has been strong since the first lockdown.

More than 300 jobs are expected to go at Evans Cycles, and hundreds of remaining store staff are to be switched to zero-hours contracts, as Mike Ashley's Frasers Group aims to slash costs.

6.20pm GMT

Back in New York, the Nasdaq Composite continues to rally - now up 3.89% or 490 points at 13,100 points.

That will bring relief to technology investors, who watched the Nasdaq sink into correction territory last night (down 10% from February's record highs).

History suggests that the drawdown could last 121 trading days if this is an average drawdown in terms of its recovery profile. This we think would profoundly alter investor psychology as the new group of retail investors arriving at equity markets last year have never experienced slow grinding equity markets for very long. Our thesis is that growth investing and its near-term support will hinge on the drawdown length and thus is a key indicator to monitor going forward.

The Nasdaq 100 is 15 trading sessions into the current drawdown, down 10.9% [as of last night] and our bubble stocks basket is down 27.9% since the peak. Listening to many growth investors, both professional and retail, it has been a violent move, and many has been taken by surprise, or at least, many had underestimated the interest rate sensitivity and not given it much thought.

5.29pm GMT

Small correction to that last post, sorry - this is the Stoxx 600's highest closing level since 21st February 2020, just before the Lombardy lockdown started the global selloff.

So European stocks are still a one-year high, but a little further from the record peak (please refresh to get an updated graph below, thanks).

5.09pm GMT

European stock markets have closed at their highest level in over a year, as they claw back their losses since the first lockdown a year ago.

The Europe-wide Stoxx 600 has closed 0.75% higher tonight at 420.41 points, with technology companies leading the rally (as in America).

The dip in government bond yields has acted as the green light for the equity bulls and lately, spikes in yields have sent tremors through stock markets. The positive mood is being fuelled by the hopes the US government will implement the $1.9 trillion relief package soon.

Hopes connected to the economic recovery story have lifted sentiment too. The FTSE 100 hasn't rallied as much as its eurozone equivalents. Declines in mining and banking stocks are holding back the British index.

Wall Street is one-way street right now and it is going whichever way the Treasury market takes it. Big-tech might attract the most attention, a most needed rebound after Apple flirted with bear-market territory and Tesla plummeted over 40% from record highs set in January. The cyclical rotation has been running strong for months and today is an overdue buying the dip for technology stocks. The move in tech stocks coincides with the rally in Treasuries, so many traders will be sceptical that this rebound will stick.

The Nasdaq and meme stocks are leading the charge higher which for someone reason doesn't surprise me. GameStop is up 18% Tesla is 11.1% higher, while Apple rose by 3.4%. It's the return of every millennial traders' favorite bet and it could last a little while longer until bearish bias for bonds returns.

4.52pm GMT

London's FTSE 100 index has fallen back from its earlier highs, and closed just 11 points higher at 6730 points.

That's a modest gain of just 0.17%, but still leaves the blue-chip index at its highest closing point in three weeks.

4.22pm GMT

Europe's stock markets are trading at their highest level since the early days of the pandemic....

EUROPE'S STOXX 600 .STOXX RISES TO HIGHEST SINCE FEB 24 2020, NOW UP 0.8% AT 420.6 POINTS

4.21pm GMT

After decades of service feeding Londoners and tourists, the Covid-19 pandemic has left the long-established Angus Steak House facing an uncertain future.

The Telegraph's Hannah Uttley reports that the meaty chain is on the brink of administration thanks to the lockdown.

Angus Steakhouse on the brink of going into administration? This piece by @archiebland in the Indie back in 2014 is worth reading again https://t.co/AeJgmqTlhR

Angus Steakhouse is run by the Noble Organisation, which has a leisure and property portfolio ranging from tanning salons to amusement arcades. Angus Steakhouse has five restaurants including a flagship at Piccadilly Circus.

The chain was founded in the early Sixties by butcher Reginald Eastwood and became a popular dining-out spot during the Seventies and Eighties.

Exclusive: Everyone's favourite (?) Seventies throwback Angus Steakhouse is on brink of administration. KPMG has written to landlords warning that the firm will be forced to file if rent concessions are not agreed https://t.co/4drsNlbvRV

4.00pm GMT

Back in the UK, Marks & Spencer is to knock down and redevelop its largest UK store after a big consumer switch to online shopping during the pandemic.

The new 10-storey building, at the Marble Arch end of London's Oxford Street, will include just two-and-a-half floors of shop space with several floors of offices and potentially leisure space such as a gym. It will have an arcade through its centre and space for 4,000 office workers on the higher floors.

3.52pm GMT

Technology stocks have also driven the Dow Jones industrial average higher.

The Dow has gained 251 points, or 0.79%, to 32,054 points, taking the index close to Monday's intraday record peak.

Concerns over sky-high valuations in growth stocks, mainly tech names, have weighed on the Nasdaq in recent weeks, while the rally on value stocks such as banks, energy names and industrials have gathered pace.

Investors have been warming to the rising yields as we get closer and closer to coming out of lockdowns thanks to the faster vaccine deployment boosting confidence.

3.29pm GMT

Shares in GameStop, which famously soared and then plunged earlier this year, are climbing again today.

GameStop stock has jumped by 17% in early trading to $227, adding to a surge on Monday as it recovered from its plunge at the start of February when the short-squeeze rally' fizzled out.

GameStop trading around $227 a share, up 17% this morning $GME

3.00pm GMT

Over in New York, technology stocks are bouncing back from their recent wobble.

2.43pm GMT

Meghan Markle and Prince Harry's interview with Oprah Winfrey was watched by more than 11 million UK viewers on Monday night, taking its trans-Atlantic audience to almost 30 million.

ITV's two-hour re-broadcast of the explosive interview, which attracted 17 million viewers when it first aired on CBS in the US on Sunday night, drew the broadcaster's biggest audience since airing the final of the Rugby World Cup in 2019.

ITV's Harry and Meghan coup helps it rebound after 205m Covid slump https://t.co/h33ti6I0B6 pic.twitter.com/0snGqebr97

1.47pm GMT

The slump in trade between Germany and the UK shows that Brexit fallout' is damaging commerce between the two countries, says the AFP newswire:

Germany's exports ticked up in January on robust trade with China, but trade with another key trade partner, Great Britain, plummeted after the Britain left the EU.

The Brexit fallout has continued to hurt commerce with the United Kingdom, with federal statistics office Destatis recording a 29 percent plunge in German exports across the Channel.

'Trade has collapsed': Germany sees business with UK slump after Brexit https://t.co/HGK0CesA0z

1.16pm GMT

Also on the steel crisis, Bloomberg are reporting that the GFG Alliance is trying to negotiate a reprieve on its debts to Greensill.

Bloomberg says:

Sanjeev Gupta's GFG Alliance is in talks to negotiate a reprieve on its debt obligations to Greensill Capital and prevent a rapid collapse of the metals group that's been shaken by the unraveling of its biggest lender.

A standstill agreement with Greensill, GFG's largest lender which filed for administration on Monday, would help the metal magnate's group stave off insolvency and avoid an asset fire sale, according to people familiar with the matter, who asked not to be named because the talks are private. Gupta is separately seeking to raise new financing to replace Greensill's loans, they said.

Sanjeev Gupta's GFG Alliance is in talks to negotiate a reprieve on its debt obligations to its biggest lender, Greensill Capital, sources say https://t.co/WC1ztLDOVT

12.49pm GMT

British tycoon Sanjeev Gupta told UK trade unions on Tuesday that his Liberty Steel business had adequate financing after major financial backer Greensill Capital went into administration, Reuters reports.

We have adequate funding for our current needs while we bridge the gap to refinancing the business," he said in prepared remarks provided by a source close to the meeting.

12.31pm GMT

European stock markets have pushed higher, as optimism over the economic recovery picks up pace.

In London, the FTSE 100 index of blue-chip shares is trading at a three-week high, and currently up 46 points at 6765 points, up 0.7%.

After a shaky start, European equities are bounding higher. The Dax has surged to a fresh all-time high - its second in two days - as risk sentiment is being buoyed by optimism surrounding the global economic recovery. The FTSE is ahead of the pack in Europe despite miners having a hard time on falling base metal prices.

Vaccine rollouts are keeping up pace, particularly in the UK and US, and economic reopening is going well so far. Conviction of a strong economic recovery is boosting risk sentiment and driving demand for riskier assets such as equities. Yesterday's troubles of rising bond yields have been quashed, for now, and the US dollar is slipping lower.

11.56am GMT

Here's our economics editor, Larry Elliott, on today's upgraded growth forecasts:

The OECD said the success of Britain's vaccine programme and the fresh support for jobs and businesses provided by Rishi Sunak in the budget meant it was revising up its forecast for UK growth from 4.2% to 5.1% this year, and from 4.1% to 4.7% in 2022.

Other OECD members - especially in Europe - need to speed up their vaccine programmes or risk falling behind in what has become an increasingly two-speed global recovery, the thinktank said.

11.49am GMT

President Joe Biden's $1.9trn stimulus package will add about 1 percentage point to global economic growth in 2021, Laurence Boone, the OECD's chief economist, told the Financial Times.

The FT explains:

The Biden package was trying to kickstart a new episode where you have higher growth and you move away from too-low inflation", Boone said, although she added that it would have been nice" to see a little more" of the money spent on investment.

11.27am GMT

The OECD has also expressed concern about the varied pace of Covid-19 vaccination programmes around the world - including in Europe.

In today interim economic outlook, the OECD points out that vaccination campaigns are proceeding at different rates around the world, adding:

The evolution of the virus is uncertain, and targeted restrictions on mobility and activity may still be implemented in event of new outbreaks.

Such restrictions would check the pace at which the most affected service sectors and tourism-dependent economies can rebound

While the OECD was generally more optimistic, the organisation flagged serious concerns about the speed of vaccine rollouts in some parts of the world - notably Europe.

Countries like Germany and France, mainly in Europe, are vaccinating far more slowly," Laurence Boone, the OECD's chief economist, said at a press conference on Tuesday. That makes it harder to recover.

OECD upgrades forecasts for UK economy thanks to vaccine rollout https://t.co/iDqwBCy76q

11.15am GMT

The OECD has also raised its forecast for UK growth this year and next year too, noting the fast deployment of Covid-19 vaccines across the country.

It now expects UK GDP to rise by 5.1% in 2021, faster than the 4.2% forecast in December.

In the United States, strong fiscal support should strengthen demand substantially and enable a stronger recovery from the pandemic, with beneficial spillovers for other economies, particularly Canada and Mexico.

A more gradual upturn appears likely in the major European economies, reflecting continued containment measures in the early part of 2021 and more limited fiscal support, although the acceleration of vaccine deployment should help momentum to build, particularly in the United Kingdom.

11.00am GMT

The OECD has doubled its forecast for US growth this year, thanks to the impact of new stimulus spending.

It now predicts US GDP will expand by 6.5% in 2021, sharply up on the 3.2% growth forecast in December. For 2022, growth has been revised up to 4.0%, from 3.5%.

The significant fiscal stimulus in the United States, along with faster vaccination, could boost US GDP growth by over 3 percentage points this year, with welcome demand spillovers in key trading partners.

10.31am GMT

The West's leading economic think tank has sharply upgraded its forecasts for global growth this year, as successful Covid-19 vaccine programmes and president Joe Biden's major new stimulus package boost the economic outlook.

The Paris-based Organisation for Economic Cooperation and Development said it expected the world economy to expand by 5.6% this year. That's an increase of 1.4% compared with the 4.2% growth forecast in December.

Activity in many sectors has picked up and partially adapted to pandemic restrictions. Vaccine rollout, although uneven, is gaining momentum and government stimulus, particularly in the United States, is likely to provide a major boost to economic activity. But prospects for sustainable growth vary widely between countries and sectors. Faster and more effective vaccination deployment across the world is critical.

Prospects have improved over recent months with signs of a rebound in goods trade and industrial production becoming clear by the end of 2020. Global GDP growth is now projected to be 5.6% this year, an upward revision of more than 1 percentage point from the December OECD Economic Outlook. World output is expected to reach pre-pandemic levels by mid-2021 but much will depend on the race between vaccines and emerging variants of the virus.

Global #GDP will grow by 5.6% this year, an upward revision of more than 1 percentage point since our last projection in Dec 2020.

GDP growth by country
OECD Interim #EconomicOutlook: https://t.co/CaYycpMSjv pic.twitter.com/pcwjUUmK01

10.03am GMT

Germany's stock market has shrugged off the slump in trade with the UK in January - and surged to a new all-time high.

The DAX index of leading German companies has rallied this morning, as investors continue to anticipate a strong economic recovery once the pandemic is over.

GERMANY'S DAX HITS FRESH RECORD HIGH FOR THIRD TIME IN A WEEK, UP 0.2%

As the Dow climbed to a new record the Nasdaq 100 slumped to official correction levels, 10%+ below its February 12th highs. 1st time since 1993 that the Dow closed within 1% of a record, while the Nasdaq was down more than 10% from its high -Bloomberg $DIA $QQQ #DowJones #Nasdaq pic.twitter.com/WDnivch0mp

As illustrated by this headline and this chart from the @WSJ, today's continued underperformance of #BigTech (see earlier tweets) has driven the #NASDAQ into correction territory -- and this on a day when the #Dow registered intra-day a new record high.#economy #markets #stocks pic.twitter.com/xbEU2qfTtf

In the broader market, European stock markets and the Dow Jones rallied though tech weighed on the S&P 500 as the sell-off in growth and momentum continued....

We've not see such a divergence between the industrials and growth in a long time.

10.00am GMT

Today's selloff took China's CSI 300 stock index down to its lowest levels since late-December.

China expert George Magnus fears that something is brewing'....

China stock market reversal required support from national team' today. Back down to mid Dec levels. And rather making a mockery of 21 Jan @SCMPNews headline, and others predicting a banner year. Mkt still well up on yr ago but something brewing here pic.twitter.com/PVQMUko0pA

9.34am GMT

It's been a turbulent day in China's stock market, where state backed funds reportedly stepped in to prop up share prices.

Chinese state-backed funds were said to intervene on Tuesday to alleviate declines in the stock market, a sign that the rout had gone too far for policy makers. The equity benchmark erased a loss of as much as 3.2%.

The funds, known as China's national team," stepped in to ensure stability during the government's key policy meeting in Beijing, according to people familiar with the matter. A Hong Kong-based trader, who declined to be identified discussing client business, said entities linked to mainland funds were actively buying shares through stock links with Hong Kong on Tuesday.

China's CSI 300 recovers losses following reports that state-backed funds 'national team' will be used to purchase equities - BBG pic.twitter.com/ehmKf0WFgH

The CSI 300 Index erases losses of as much as 3.2% after China's state-backed funds were said to intervene to alleviate declines in the stock market. More: https://t.co/MXCci7peHB pic.twitter.com/2oWXFkqA8e pic.twitter.com/2pfmjQvTkg

JUST IN: The CSI 300 Index erases losses of as much as 3.2% after China's state-backed funds were said to intervene to alleviate declines in the stock market. More: https://t.co/4yVh7yDoH1 pic.twitter.com/uZWAk1maQw

While somewhat unique to the broader volatility in financial market currently, the underlying factors driving the sell-off is familiar to investors: a deterioration in financial conditions as market participants position for tighter monetary policy from the PBOC, as policymakers in the country attempt to deflate the risk of asset bubbles.

While certainly only a band-aid fix, China's move today has at least taken some of the pressure out of the market, with market participants remaining nervous in an environment where improving global growth is raising concerns central banks will be forced to tighten policy sooner than even the central bankers themselves expect.

9.17am GMT

More than 35,000 jobs, including thousands at steel mills in Britain and at Whyalla in South Australia, are at risk as GFG Group, the conglomerate controlled by British entrepreneur Sanjeev Gupta, races to refinance about $4bn owed to failed finance company Greensill.

Greensill's UK operating companies collapsed on Tuesday and the Australian company that is the head of the group, Greensill Capital, followed suit on Wednesday morning, Australian time.

9.14am GMT

The sharp fall in UK-German trade in January will intensify concerns about the damage caused to the economy last year.

A report published yesterday showed that the UK suffered a larger drop in exports than major rivals in 2020.

The UK's goods exports slumped by 54bn in 2020 and Britain lost market share to its main competitors as Covid-19 hammered global trade, according to new research published this morning.

The findings, from Aston University's Lloyd's Banking Group Centre for Business Prosperity, showed that Britain suffered a 14.7 per cent drop in goods exports, one of the largest of any major country in 2020, and also saw a slower recovery as other nations gobbled up market share in key export destinations.

54bn pandemic export hit: UK losing market share in US, Germany and China

The UK's goods exports slumped by 54bn in 2020 and Britain lost market share to its main competitors as Covid-19 hammered global trade https://t.co/qOcZrAmUG6 #Export #Import #Trade #GlobalTrade #Covid pic.twitter.com/S2P3QCdnRl

9.05am GMT

Despite the ongoing lockdowns, Germany exports to the rest of the world rose on a monthly basis in January - with strong trade with China lifting demand.

Seasonally adjusted exports increased 1.4% month-on-month in January, the Federal Statistics Office [but were still 8% lower than a year ago].

A Reuters poll had pointed to a 1.2% drop in exports and a 0.5% fall in imports. January's 1.4% increase in exports far surpassed even the most optimistic forecast.

The trade surplus grew to 22.2bn. On the year, exports to China rose by 3.1%. Exports to other European Union countries fell 6.0% on the year, those to the United Kingdom dropped 29% and those to the United States decreased by 6.2%.

German exports post surprise rise as China trade sizzles https://t.co/5T6VVBkBu8 pic.twitter.com/hvLs2u2F4A

8.35am GMT

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

Trade between the UK and Germany slumped in January, new figures from Germany show, as the two countries adjusted to life after Brexit amid the Covid-19 pandemic.

On 1 January 2021 the partnership agreement negotiated between the EU and the United Kingdom took provisional effect. As the United Kingdom has left the EU single market and the customs union, its withdrawal from the EU has now been completed.

In January 2021, exports to the People's Republic of China rose by 3.1% to 7.5 billion euros compared with January 2020. Exports to the United States fell by 6.2% to 8.5 billion euros.

In January 2021, most imports to Germany came from the People's Republic of China. Goods to the value of 10.5 billion euros were imported from there (+1.1% on the same month of the previous year). Imports from the United States declined by 22.8% to 4.7 billion euros in January 2021.

Based on provisional data, the Federal Statistical Office (Destatis) also reports that, after calendar and seasonal adjustment, exports were 3.3% and imports 5.2% lower than in February 2020, the month before restrictions were imposed due to the coronavirus pandemic in Germany.

Germany trade data in Jan 2021: EXP: 98.1bn +1.4%M, -0.8%Y, IMP: 83.8bn, -4.7%M, -9.8%Y, CA-surplus: 16.9bn, EXP to #UK: -29.0%Y, to #US: -6.2%Y, and to #China: +3.1%Y, chart @destatis https://t.co/r5H5Saxi7F pic.twitter.com/w7dAYSil04

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