Climate protests at Bank of England; global factory growth hits 10-year high – as it happened

Graeme Wearden

from on 2021-04-01 16:04 (#5G1QM)

Rolling coverage of the latest economic and financial news

Latest: Global factories have best month since 2011
US factories post fastest growth since 1983
S&P 500 index hits 4,000 points
Climate protesters at Bank of England
Extinction Rebellion: Why we did it
Eurozone factory growth hits record;UK factory growth at 10-year high
Next: Profits halve last year as pandemic forced store closures

5.18pm BST

A late PS: Here's Reuters with the latest on the European markets (I've just updated our post too):

European stocks ended a hair's breadth away from a record high on Thursday as strong factory activity data out of the euro zone and optimism around a new U.S. government spending plan eclipsed concerns about another lockdown in France.

The earnings recovery story looks pretty well underpinned. My forecasts suggest 25%-30% earnings growth across Europe this year and next year combined. It's a pretty punchy recovery."

5.04pm BST

And finally... Europe's stock markets have closed higher ahead of the Easter break.

The Stoxx 600 index of European companies closed around 0.67% higher at over 432 points, as it continues to close in on its pre-pandemic high set in February 2020.

Opening Day is here and baseball fans will happily be returning to stadiums, albeit mostly at partial capacity. America's pastime is hopeful for full ballparks in 2021 and that type of optimism is being reflected across all pre-pandemic activities. The stimulus check impact on retail trading is waning and that could be because many Americans are looking to go big on attending sporting events, traveling across the country, vacationing, visiting family and friends, and revamping wardrobes before going out to restaurants/pubs and returning to the office....

The S&P 500 index finally rallied above the 4,000 level for the first time as investors embraced the US growth outlook following President Biden's infrastructure plan. European indexes are outperforming as the COVID situation appears to be turning a corner in Europe as France sees the virus peak nearing.

4.40pm BST

Speaking of supply chain disruption.... efforts to clear the backlog of vessels at the Suez Canal are continuing today.

Reuters has the details:

The Suez Canal Authority said 87 ships were expected to pass through the waterway in both directions on Thursday, as it tries to clear a backlog since re-opening on Monday.

A total of 194 ships have already passed through between Monday night, when a giant container ship blocking the crucial international trade route was re-floated, and Wednesday, the Suez Canal Authority said.

4.27pm BST

Global manufacturing growth has hit a ten-year high as the world economy recovers from the shock of the pandemic.

Output, new orders and employment all expanded at a more rapid pace, with eurozone, US and UK factories all performing well.

Five of the six top-ranked nations were located in the euro area (Germany, the Netherlands, Austria, Italy and France), taking the combined PMI for the currency bloc to its highest on record, with unsurpassed readings also registered in both Germany and the Netherlands.

Outside the euro area, the strongest improvements were seen in Taiwan and the US. Improvements were signalled for Japan and China, but both PMIs were below the global average.

The increase in supplier delivery times was the second-greatest extent on record, surpassed only by April last year.

The combination of increased new orders at manufacturers and supplychain delays was the main factor underlying a sharp rise in backlogs of work, the steepest since May 2010. Demand outstripping supply also contributed to a marked increase in purchasing costs during March. Input price inflation surged to a near-decade high, the pass-through of which led to the steepest rise in output charges since data on selling prices were first tracked in October 2009.

Global manufacturing conditions boomed at the end of the first quarter, as the #PMI rose to a decade high of 55.0, supported by sharp rises in output and new orders despite the potential of supply side disruption curtailing growth. Read more: https://t.co/ScVvcig3yg pic.twitter.com/dq6IPWw8fJ

The performance of the global manufacturing sector continued to strengthen in March consistent with the idea that global activity is rebounding as vaccinations become more available.

In the latest PMI surveys, both the output and new orders PMIs increased by a solid amount. The new orders to finished goods inventory ratio at 1.2 stood out as it marked a high since 2010 suggesting strength in the manufacturing sector near-term.

3.58pm BST

Here's a chart showing how US factories just posted their best month since 1983:

ISM manufacturing highest since *checks notes* 1983 pic.twitter.com/Nnls4C8KC2

3.31pm BST

Back in the UK, thousands of angry British Gas customers have written to the company vowing to switch to another energy supplier unless it scraps plans to force its engineers to accept longer working hours or lose their jobs within weeks.

More than 50,000 people have signed a petition against the controversial fire and rehire" policy, which has led to months of bitter negotiations between British Gas executives and trade union representatives and weeks of strike action.

3.14pm BST

US factories posted their strongest growth in almost four decades, according to the Institute of Supply Management's PMI survey.

The ISM's healthcheck shows strong growth in new orders, output and employment, in another sign that American factories had a blistering March.

.@ISM(R) Report On Business(R): With all five key subindexes up - including the New Orders and Production indexes at their highest levels in 17 years - the Manufacturing PMI(R) was 64.7% in March, the best reading since December 1983 (69.9%). https://t.co/B0uOR3fvWi #ISMPMI #economy

U.S ISM MANUFACTURING PMI (MAR) ACTUAL: 64.7 VS 60.8 PREVIOUS; EST 61.5

U.S ISM MANUFACTURING EMPLOYMENT (MAR) ACTUAL: 59.6 VS 54.4 PREVIOUS; EST 53.0

U.S ISM MANUFACTURING PRICES (MAR) ACTUAL: 85.6 VS 86.0 PREVIOUS; EST 85.0

ISM Manufacturing PMI highest since 1983
- New orders highest since 2004
- Employment index highest since 2018 https://t.co/mpOfaLOLwS

The manufacturing economy continued its recovery in March.

However, Survey Committee Members reported that their companies and suppliers continue to struggle to meet increasing rates of demand due to coronavirus (COVID-19) impacts limiting availability of parts and materials. Extended lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are affecting all segments of the manufacturing economy.

2.54pm BST

American factories have also had a very strong month. But, like in the UK and eurozone, price pressures and supply chain problems are mounting.

IHS Markit reports that its US manufacturing PMI has hit its second-highest level since the survey began in 2007. It rose to 59.1 in March, up from 58.6 in February (any reading over 50 shows growth).

U.S. Manufacturing #PMI signalled the second-strongest improvement in the health of the sector on record during March, amid marked new order growth and supply chain disruptions. Output rose at a slower pace amid material shortages, however. Read more: https://t.co/vHQ1IEg8iQ pic.twitter.com/JuufHUZnYw

Although output continued to rise at a solid pace, capacity is being severely strained by the combination of soaring demand and supply chain disruptions: supply chain delays and backlogs of uncompleted orders are growing at rates unprecedented in the survey's 14-year history, meaning inventories of finished goods are falling at a steep rate.

Pricing power has risen accordingly as demand outstrips supply: raw material prices are increasing at the sharpest rate for a decade and factory gate selling prices have risen to a degree not seen since at least 2007.

2.47pm BST

We also have more PMI surveys, showing that Canadian factories had their best month in at least 10 years...

The Canada Manufacturing #PMI hit a survey record high during March, as a substantial rise in new work boosted production volumes and stimulated further job creation. But, material shortages and delays led to a steep rise in input costs. Read more: https://t.co/DdNgQMxXpD pic.twitter.com/YqCwlXkgX7

Brazil's manufacturing recovery was interrupted in March according to #PMI data. Output, new orders and employment all fell amid higher COVID-19 cases and new restrictions, while inflationary pressures intensified due to ongoing supply issues. Read more: https://t.co/XYQazwqZcO pic.twitter.com/LrlU9FMTAE

2.42pm BST

Over in New York, stocks have opened higher - with the S&P 500 index hitting 4,000 points for the first time.

**** SPX 4000 HANDLE ****

U.S. markets open higher. The S&P breaks above 4,000 https://t.co/TvKdFIBF3U pic.twitter.com/9xgLBevN4a

S&P 500 Index tops 4,000 for the first time ever! pic.twitter.com/ra39jxzJzW

2.27pm BST

The International Monetary Fund has called on governments to close the income gap between the richest and poorest that has worsened during the Covid pandemic, by spending more and taxing wealthy households.

In a warning that the economic shock triggered by the pandemic could undermine public attitudes to the fairness of taxation and welfare systems and lead to social unrest, the Washington-based organisation said surveys showed governments would have the support of the public if they shifted the burden of taxation away from low and middle earners to better-off members of society.

Against this backdrop, societies may experience rising polarisation, erosion of trust in government, or social unrest. These factors complicate sound economic policymaking and pose risks to macroeconomic stability and the functioning of society."

JUST RELEASED: The new #FiscalMonitor A Fair Shot"' shows how the pandemic intensified inequalities and outlines how to blunt the negative impact of inequality on the most vulnerable groups in society.https://t.co/4yV6zroLRJ pic.twitter.com/lKdbzerCCR

2.03pm BST

Back to economic data... and the number of Americans filing new claims for unemployment support has risen.

There were 719,000 fresh initial claims' for jobless support last week, an increase of 61,000 from the previous week [which has been revised down to 658,000, from 684,000].

Initial UI claims rose to 714K, driven by large increases in:
VA: 18K->48K
GA: 25K->37K
KY: 9K->25K

Those spikes are quite large; remains to be seen if they will persist.#joblessclaims 2/ pic.twitter.com/8GOV3EE7zs

Total initial claims (nsa) rose to around 950,000. Disappointing that last week's downward trend didn't continue but at least we stayed below the one million mark. Interesting that the rise is solely from regular initial claims. pic.twitter.com/3lw2NxJ5uP

This chart shows continuing claims in all programs over time (the latest data for this are for Mar 13). Continuing claims are more than 16 million above where they were before the virus hit. 4/ pic.twitter.com/MgJ1yaMOkq

1.42pm BST

Here are a few more photos from this morning's climate emergency protest at the Bank of England:

1.26pm BST

Although the pavement has been jet washed clean, the Bank of England building remains covered by @XRebellionUK's fake oil https://t.co/9yt7vfIIL6 pic.twitter.com/PhXS6zDUOi

1.23pm BST

Extinction Rebellion say they sprayed the Bank of England with fake oil today, because the central bank isn't doing enough to fight the climate crisis.

This morning in an elaborate April Fools prank two members of Extinction Rebellion dressed as the Fossil Fools' who are recklessly endangering our future for profit - sprayed the front of the Bank of England with fake oil. Others held a banner outside that read No More Fossil Fools'.

Windows' depicting images of the impacts of the climate and ecological emergency were placed outside the building. The windows', created specifically for the action, symbolised a view into the impacts of the Bank's activities.

We are currently policing a small protest outside the @bankofengland on #ThreadneedleStreet.

We have made one arrest for criminal trespass and three arrests for criminal damage.

UPDATE

A further arrest has been made for going equipped to commit criminal damage. The protesters have now dispersed.

Climate activists spray black dye at Bank of England in 'Money Rebellion' https://t.co/OhKHqvDbOD pic.twitter.com/Xdh7Qq8c0n

1.01pm BST

The Office for National Statistics' latest weekly assessment of the impact of the pandemic has found a small increase in people travelling to work.

The number of job adverts has also risen closer to its pre-pandemic levels, as firms prepare for lockdown measures to ease, and there were more cars on the roads too.

53% of working adults travelled to work in the last seven days (exclusively or in combination with working from home) in the week ending 28 Mar, according to the latest Opinions & Lifestyle Survey.

This is a slight increase from last week https://t.co/VH8LSB9Gt8

Data from @transportgovuk show the volume of motor vehicle traffic on Monday 29 Mar 2021 was 4 percentage points higher than last week, at 84% of its Feb 2020 average.

This coincides with the easing of #COVID19 restrictions in England https://t.co/XrJQDuSQc9 pic.twitter.com/ZTOxjiC8OV

12.30pm BST

Here's our news story on Next's results

12.29pm BST

It's been a busy start to the year for stock market listings in London, partly thanks to Deliveroo's dismal debut yesterday.

London Stock Exchange has had a fantastic start to the year, helping companies raise over 15 billion in equity capital in the first quarter.

The positive activity demonstrates the ability of UK capital markets to support dynamic companies across all sectors and from around the globe, enabling them to access deep pools of international capital in London."

11.58am BST

UPDATE

A further arrest has been made for going equipped to commit criminal damage. The protesters have now dispersed.

11.39am BST

We are currently policing a small protest outside the @bankofengland on #ThreadneedleStreet.

We have made one arrest for criminal trespass and three arrests for criminal damage.

Bank of England hit by climate activists pic.twitter.com/3m0QorLcO7

11.36am BST

Climate activists in London splashed black dye on the front of the Bank of England on Thursday as part of a protest, a Reuters photographer at the scene said.

Activists, some dressed as jesters, hurled the dye at the imposing neo-classical building, known as the Old Lady of Threadneedle Street" as they demonstrated against the finance sector's support of what they say is a climate catastrophe.

This bank is killing us," read a banner held up by one protester. No more fossil fuels," read another.

11.33am BST

Chris Daly, CEO at the Chartered Institute of Marketing, points out that Next has big ambitions for its Total Platform' service.

Total Platform is a pay as you go' system, that provides various retail infrastructure including website systems, online marketing platform, warehousing, distribution networks, returns handling, call centre services, and financial like account management and payment systems.

With 12 days left to go until shops reopen in England, it won't be a day too soon for Next, which has suffered a significant fall in profits after a year of extremely difficult trading conditions.

But if there's one brand that knows how to weather a storm effectively, it's this one. Evolution has been key to its 157 year old success - from pioneers of the modern day chain store, to today's ambitions to become the Ocado of fashion' after extending its online third party Total Platform.

10.59am BST

The Liberty Steel owner, Sanjeev Gupta, has pledged not to shut down any of his steel plants even as creditors seek to wind up key businesses.

Gupta has been urgently seeking refinancing for GFG Alliance, the conglomerate that owns Liberty Steel, after the collapse three weeks ago of Greensill Capital, a key creditor.

None of my steel plants under my watch will be shut down for sure."

10.38am BST

European stock markets have begun April on the front foot, with gains across the board.

In London, the FTSE 100 is up 42 points, or 0.65%, at 6757 points

EU stocks continue to consolidate near record highs while Wall Street is struggling to find a direction. With most major markets closed tomorrow, investors will prefer to stand on the sidelines today.

Market participants are waiting for the latest U.S. labor market figures, which will be published tomorrow. The Non-Farm Payroll figure is likely to beat expectations and signal that the U.S. economy is on a steady recovery path.

10.21am BST

Sam Tombs, chief UK economist at Pantheon Macroeconomics, points out that eurozone factories posted faster order growth than UK counterparts last month, according to today's PMI data:

The upward revision to Markit's UK manufacturing PMI (flash: 57.9 final: 58.9) does not change the big picture that the recovery would be much stronger, absent Brexit. The gap between the EZ & UK orders balances hasn't been this big since July 2000: pic.twitter.com/PYjqxE7e3g

10.21am BST

There are green shoots of recovery' sprouting across UK manufacturing, says Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply.

On today's PMI report, he says:

The floodgates to new business, rising confidence and more jobs were opened in March with the highest index level since the last recession and green shoots of recovery popped up across the UK as the global marketplace improved.

Manufacturers picked up the pace to meet new orders rising at the fastest levels for three years with the domestic pipeline of work strengthening and previously deflated export orders bouncing back across the board, including from the EU. In turn suppliers were under the cosh to keep up as the list of shortages in raw materials increased leading to the second-greatest lengthening of delivery times in the history of the survey.

10.13am BST

Supply-chain issues remained a constraint on UK manufacturers during March, Markit reports.

This disrupted raw material deliveries, production schedules and deliveries of finished goods to clients -- as well as pushing prices up.

Vendor lead times lengthened to the second-greatest extent in survey history due to coronavirus disease 2019 (COVID-19) restrictions, low stocks at suppliers, port disruption, shipping delays, post-Brexit issues and raw material shortages.

With demand outstripping supply, input price inflation accelerated to a 50-month high. This also led to upward pressure on output charges, which rose at the quickest pace since January 2017.

10.12am BST

March #PMI data pointed to a marked improvement in operating conditions in the UK's manufacturing sector, with faster increases recorded in output, new orders and employment. Supply chain problems intensified, however. Read more: https://t.co/vrWni3I39N pic.twitter.com/T0ddekPJQ0

9.54am BST

British factories have reported a surge of orders last month - and severe supply chain disruption.

Markit's UK manufacturing PMI has jumped to a decade-high of 58.9 in March, the highest reading since February 2011.

Business sentiment was at its most elevated for seven years, hitting unsurpassed levels at both consumer and investment goods producers.

Almost two-thirds of manufacturers expect output to rise over the coming year (only 6% expect a contraction). Jobs growth was also at a seven-year high, supported by the sharpest rise in backlogs of work for 11 years

9.40am BST

The Eurozone manufacturing sector grew at the quickest pace in nearly 24 years of data collection during March. However, the unprecedented expansion was accompanied by severe delays to input deliveries, driving a sharp increase in cost burdens. Read more: https://t.co/QcOlNyzOBb pic.twitter.com/L0vMyaqOXx

9.40am BST

Chris Williamson, Chief Business Economist at IHS Markit says rising business confidence drove eurozone factories to their best monthly growth on record.

But.. he also warns the blockage in the Suez Canal could intensify supply chain disruption, and drive the cost of supplies even higher.

Eurozone manufacturing is booming, with production and order books growing at rates unprecedented in nearly 24 years of PMI survey history during March.

Although centred on Germany, which saw a particularly strong record expansion during the month, the improving trend is broad based across the region as factories benefit from rising domestic demand and resurgent export growth.

9.31am BST

Over in the eurozone, factories have reported their strongest growth in at least 24 years -- and unprecedent delays for supplies too.

That's according to Data firm IHS Markit, which says that the eurozone's manufacturing economy performed extremely strongly during March.

The further strengthening of trade, orders and production placed further strain on already stretched supply chains.

According to the latest data, average lead times for the delivery of inputs lengthened at an unprecedented rate as challenges in sourcing inputs due to product shortages, stronger global demand and ongoing logistical challenges linked to COVID-19 continued in March.

9.11am BST

Reuters have caught up with Next CEO Simon Wolfson, and he's explained that the retailer has paused placing new orders in Myanmar following its military coup.

Here's the details:

Next has ceased placing new production orders in Myanmar in the wake of February's military coup, its boss said on Thursday.

We're not placing any more orders at the moment, that is a big step," CEO Simon Wolfson told Reuters.

The recent blockage of the Suez Canal has delayed the arrival of about 2% of British fashion retailer Next's stock, its boss said on Thursday.

It's a problem but not a big problem. It's delayed about 2% of our stock by three weeks," CEO Simon Wolfson told Reuters.

8.53am BST

Steve Clayton, fund manager of the Hargreaves Lansdown Select funds (which hold NEXT plc shares) points out that Next has outperformed some UK rivals, thanks to its online offering:

Profits may have more than halved, but to be reporting any sort of profit at all as a fashion retailer after a year like 2020 is a remarkable achievement. But NEXT is a remarkable business.

The group saw the potential of online retailing years before their rivals took it seriously. As a result Next was earning most of its money online, even before the pandemic struck.

It has almost become expected that Next will deliver ahead of guidance and, despite the highly challenging trading conditions of last year for most retailers, it has done so again. In fact, the business has already upped its central profit guidance for this year, with online sales overachieving in the first eight weeks of 2021.

As a destination people want to visit, Next is likely to be among the biggest beneficiaries as the economy re-opens; but its growing online business, integrated logistics offering, and add-ins like its Total Platform service for other brands give it a strong anchor in the online economy. Debt has been reduced significantly and, although there is no dividend for the year, shareholders can take solace that Next is investing in the business and its growing retail reach - following the money', in its own words - the benefits of which should start to materialise in 2022."

Online and finance now account for over 70% of overall sales, and in the first eight weeks of its new financial year Next has reported that online sales are 60% ahead of the figure from two years ago. The company concedes that it is difficult to predict how much of the change in consumer behaviour to online will stick post-pandemic, although the possibility remains that the new behaviour will have become largely entrenched.

It is therefore also keeping a close eye on its retail estate, ensuring that it is appropriate for the overall direction of the group. Over the last year city centre and shopping mall volumes dropped significantly - and unsurprisingly - and were partially offset by retail park revenues where social distancing was easier to introduce when stores were allowed to open.

8.50am BST

Next have also produced this chart, showing how its Online business (including Finance) has increased fivefold since 2005.

Online is now expected to make up 71% of the company's revenues this year, up from just 23% in 2005, highlighting the long-term shift in retail.

The year to January 2022 for Retail is artificially low due to the ten weeks when the stores will be closed. If we account for the lost sales in those weeks, then the participation of Retail would be around 34%, instead of 29%.

8.27am BST

Shares in Next are up 3% in early trading, after it raised its profit forecasts for this year by 30m.

8.21am BST

Wolfson also points out that Next was fortunate in one other respect: The product areas that did well have much lower returns rates than those that underperformed.

For example, customers traditionally order several dresses with the intention of only keeping the one they like, so the returns rate is high. Conversely, the returns rate on babygrows is very low.

That, along with customers generally being more selective at point of order, meant that we experienced a material reduction in returns rates. This allowed us to achieve sales growth far in excess of the growth in units we despatched from our warehouses.

8.20am BST

Here's a chart showing how the pandemic affected sales at Next:

8.14am BST

Next chief executive Lord Simon Wolfson has also warned that the battle to keep its stores relevant in an online world is far from over".

In his review of the year (lengthy, but worth a read), Wolfson predicts that like-for-like stores sales could fall by a fifth this year, leaving them marginally profitable'.

There remains a big question mark over the level of sales our stores will achieve when they reopen. The pandemic has served to accelerate a pre-existing social trend - the move to more online shopping. History has been given a shove and, having moved forward, seems unlikely to reverse.

That said, the steady reduction in Retail occupancy costs, the continued relevance of our stores to online shopping through collections and returns and (perhaps) the closure of competing shops, mean that the battle to keep our stores relevant in an online world is far from over.

More ruminations on stores from Lord W at Next

"History has been given a shove" and store sales could fall by a fifth this year - leaving them only "marginally profitable"

But battle to keep stores relevant in an online world "is far from over"

Landlords, you've been warned...

7.59am BST

Given the disruption caused by the pandemic, it's hardly surprising that Next's earnings halved.

As the company points out:

If we had been told twelve months ago that our shops were going to be shut for 20 weeks, we could not have imagined the Group delivering the sales or profit we achieved last year.

Areas such as homeware, childrenswear, sportswear and stay-at-home basics (underwear, sweat tops, joggers, nightwear, etc.) all served to mitigate declines in adult's formal and casual clothing, footwear and accessories.

In general, retail park stores are local and easier to access, with social distancing simpler to maintain both within and outside the store. So it is not surprising that these locations fared much better than city centres and shopping malls.

At the times when stores were open, like-for-like-sales in retail parks, although negative, were between 15% and 20% better than our other stores.

7.37am BST

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

In last year's Full Year Results, published just as the UK went into lockdown, we stated that our sector was facing a crisis unprecedented in living memory. We also stated that our strong balance sheet and profit margins would allow us to weather the storm.

Both statements have proved true.

We accelerated part of our planned capital expenditure in the Online business, spending 121m on warehousing and systems.

Next is boosting profit guidance for this year to 700m from 670m on the back of online sales being 60% higher in first 8 weeks of this financial year so far, which has helped offset store closures

Mighty Next posts annual profit of 342m (down from 729m). Total group sales decreased by less than 17pc to 3.6bn compared with 4.4bn last year.

Asian and European stocks track Wall St gains as the global recovery & President Biden's infrastructure plan helped traders look past escalating curbs from Covid-19 flareups while Bonds trimmed losses. US 10y yields drop to 1.72%. Gold regains $1700, now $1714. #Bitcoin at $58.9k pic.twitter.com/AIC7l3WUTa

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