Market rally amid global recovery hopes; US payrolls jump; UK car sales recover – as it happened

Graeme Wearden

from on 2021-05-05 18:08 (#5HETE)

Rolling coverage of the latest economic and financial news

Earlier:

7.08pm BST

That's all for today. A quick recap:

Stock markets have bounced back from yesterday's losses, amid signs that the global economic recovery is continuing.

6.56pm BST

The billionaire petrol station tycoons the Issa brothers are on the verge of finalising their 6.8bn debt-fuelled buyout of the supermarket chain Asda, after offering to address concerns raised by the competition regulator.

6.11pm BST

GFG Alliance, the metals empire owned by the industrialist Sanjeev Gupta agreed terms on new financing for a key part of its business located in South Australia, potentially staving off a threat to thousands of jobs.

Liberty Steel also announced the appointment of four directors to the board of a Singapore holding company, Liberty Steel Group Pte Limited, to lead and accelerate the restructuring and refinancing".

6.01pm BST

Chris Beauchamp, Chief Market Analyst at IG, says today's economic data shows the US economy is recovering well:

While ADP numbers fell short of some of the loftier expectations today, a 742,000 increase in job numbers is welcome news, and when coupled with strong Markit and ISM services PMI readings it is clear that the world's largest economy is well on the way to a recovery.

The cyclical recovery play is in fine form on the FTSE 100, with miners, banks and housebuilders on the up and Ocado, the sole real tech/growth firm in the index, dropping sharply. After a struggle in March and April the UK's headline index is back at the highs for the year, and seemingly-determined to keep going.

It has made sense to keep faith with the FTSE 100 in recent months, buying the dips in a way that would have been a very bad idea in the summer, when growth stocks were all the rage. Further strong data from the US and elsewhere should mean the cyclical stocks that are today's winners will keep moving higher in the long-term.

5.18pm BST

European markets just had their best day in almost two months, as they bounced back from Tuesday's wobble.

Germany's DAX gained 2.1%, France's CAC picked up 1.4% and Italy's FTSE MIB rose 2%, as stocks recovered a lot of yesterday's fall.

Live Market Update from the CMC dealing desk - European Closing Prices:#FTSE 7039.3 1.68%#DAX 15170.78 2.12%#CAC 6339.47 1.4%#MIB 24463.89 2.03%#IBEX 8967.8 1.56%

Prices are indicative only. $FTSE $DAX $CAC $IBEX

German cooking appliances maker Rational jumped 12.7% to the top of the STOXX 600, after it posted better-than-expected first-quarter results.

Danish shipping company Maersk was up 6.9% after it said it was expecting an exceptionally strong" performance in the first quarter to continue for the rest of the year.

5.00pm BST

Just 24 hours ago, the markets were fretting about the risk of US interest rate rises.

They seem to have got over them, with the US Dow Jones just hitting a new record....

Dow hits record high pic.twitter.com/LKSea5BsSI

#DOW HITS RECORD HIGH 34,287 $dji

4.53pm BST

In the City, a late surge has sent the UK's FTSE 100 index to its highest level since the early days of the pandemic, more than a year ago.

The blue-chip index hit 7,047.75 points in late afternoon trading, a 14-month high, before closing at 7,039 points.

Having seen large falls yesterday, markets appear to have recovered some of their mojo rebounding strongly today with the FTSE 100 back above the 7,000 level once more, while the DAX has recovered back above the 15,000 level, as the focus returns to the economic prospects of various companies as restrictions continue to get lifted.

Basic resource stocks are leading the way today with the likes of Anglo American, BHP and Rio Tinto benefitting from the continued rise in copper prices, while Irish construction giant CRH has seen its share trade up at new record highs as optimism over the upcoming US infrastructure stimulus plan helped to underpin the shares. The US is one of CRH's biggest markets.

4.45pm BST

Shares in fitness company Peloton have tumbled over 12% today after it announced it is recalling its two popular treadmills in the US over safety concerns, after the death of a child and dozens of other injuries.

My colleague Richard Luscombe has the story:

Peloton has apologized for pushing back against federal safety officials who warned the public last month of the dangers of using them.

The recall is a major reversal for a company that insisted its Tread and Tread+ treadmills were safe despite reports by users.

Aaand Peloton shares pic.twitter.com/2qJ6JcPr4J

4.22pm BST

America's service sector saw a surge of activity last month as its economy picked up, according to two rival surveys of purchasing managers today.

IHS Markit's US services PMI is particularly strong, showing that business activity expanded at the fastest pace on record amid a a marked uptick" in client demand.

US Services #PMI rises to record high in April (64.7) supported by an unprecedented upturn in new business levels and a near-record increase in employment numbers. Read more: https://t.co/h02l1sWLY1 pic.twitter.com/3PvvquIBhe

ISM Services Index: March's 64.0 is followed by 62.7 in April to make for a rare back-to-back 60 showing that underscores just how much business surveys are jumping. pic.twitter.com/xHciNOVtQw

4.03pm BST

On Wall Street, tech companies are recovering a little of Tuesday's selloff.

The Nasdaq has gained 61 points, or 0.45%, to 13,694, having slumped almost 2% yesterday as interest rate rise fears hit stocks.

2.25pm BST

Today's ADP private sector payroll report is a jobs taster ahead of Friday, when we get the total Non-Farm Payroll of US employment.

Wall Street thinks the NFP will show nearly a million new jobs were created last month, as the economy picked up.

The pick-up in [ADP] employment growth isn't as strong as we had been expecting, especially given the recent boost to demand from the fiscal stimulus, and could be a sign that the increasingly widespread reports of labour shortages are starting to constrain hiring.

That said, it's worth stressing that the initial ADP estimate has undershot the official BLS measure of private employment growth in 11 of the past 12 months, and sometimes by a significant margin. The likelihood of a strong rebound in public-sector employment, as schools reopen and fiscal aid to state & local governments feeds through, is another reason to expect that overall non-farm payrolls posted a stronger gain last month.

2.09pm BST

James Picerno of The Capital Spectator also points out that the US labor market has a long way to go' to return to its pre-pandemic size:

US private payrolls posted stronger growth in April, adding 742,000 jobs--a 7mo high. Encouraging, but the gain, strong as it is, was below expectations for today's ADP Employment Report: https://t.co/PYS97MOMOK pic.twitter.com/V8X8kuUi55

The worry is that this is as good as it gets for the near term. If so, that's a challenge since there's still a long way to go for the labor mkt to rebound to its pre-pandemic level via ADP data: pic.twitter.com/IUEXOiKP25

1.54pm BST

US factories continued to hire staff in April too, with manufacturing payrolls jumping by 55,000.

Construction firms took on an extra 41,000 workers, according to ADP.

ADP reported that private sector #payrolls rose by 742K in April. March figures were revised up. April gains were widespread among firm size and across sectors with Information sector the only one showing weakness. Especially strong gains were in #manufacturing and construction. pic.twitter.com/MUl1rAnWKp

1.47pm BST

Sam Ro of Yahoo Finance shows how US leisure and hospitality firms created the most jobs last month:

742,000 private payrolls added according to ADP. Leisure & hospitality leads the way https://t.co/uiZ2mCcvca pic.twitter.com/RbebBBjE21

1.47pm BST

ADP have also revised up March's payroll figures, to show an extra 48,000 new jobs were created (taking March's total to 565k, from 517k).

That partly makes up for April's payroll total missing forecasts (742k, below the 800k expected)

Solid @ADP private payroll +742k #jobs in April but < estimates (March revised +48k)

Goods +106k
Manufacturing +55k
Construction +41k
Mining +10k

Services +636k
Leisure/Hospitality +237k
Trade/Transport +155k
Prof Biz +104k
Health +76k

April #Jobsreport estimate: +775k pic.twitter.com/FqKk81EO9c

Job gains very relatively homogenous across firm sizes:
- Small +235k
- Midsized +230k
- Large +277k

"The labor market continues an upward trend of acceleration and growth, posting the strongest reading since September 2020" via @NelaRichardson pic.twitter.com/jLlAT7mgo0

1.41pm BST

The US jobs market strengthened in April, says Nela Richardson, chief economist at ADP, with the 742,000 increase in company payrolls.

The labor market continues an upward trend of acceleration and growth, posting the strongest reading since September 2020.

Service providers have the most to gain as the economy reopens, recovers and resumes normal activities and are leading job growth in April. While payrolls are still more than 8 million jobs short of pre-COVID-19 levels, job gains have totaled 1.3 million in the last two months after adding only about 1 million jobs over the course of the previous five months."

1.28pm BST

American companies created 742,000 new jobs last month, as the US economy strengthened.

That's the biggest jump in private company payrolls since last September, according to ADP, the payroll provider.

U.S. ADP PAYROLL INCREASE WAS LARGEST SINCE SEPTEMBER 2020

BREAKING:

*U.S. ADP NONFARM PAYROLLS RISE BY +742,000 IN APRIL; EST. +800,000 pic.twitter.com/CliTNyQXCJ

US April ADP Employment Report - ADPhttps://t.co/Lm8SS1MTEQ pic.twitter.com/zTmqK04xcg

1.19pm BST

Oil is pushing higher, amid expectations of stronger demand as economies reopen.

Brent crude has jumped 1.2% to $69.70 per barrel, its highest level since mid-March.

Reopenings in Europe and the U.S. added to the demand revival, thereby helping offset concerns about weaker demand in parts of virus-hit Asia.

12.57pm BST

Some reaction to the drop in US mortgage applications last week:

@pboockvar on ATH home prices sans supply W/change w/o/w in avg 30 yr mortgage at 3.18%, MBA said purchases fell by 2.5% from last week, 5th decline in past 6 weeks & there is no question that a combination of little inventory & high prices are weighing on pace of transactions." pic.twitter.com/iYSG5hlk4Z

MBA Data:

Mortgage Apps: -0.9% (Prev. -2.5%)

Market Index: 700.4 (Prev. 706.6)

Purchase Index: 274.5 (Prev. 281.4)

Refinance Index: 3188.7 (Prev. 3185.3)

30-Yr Mortgage Rate: 3.18% (Prev. 3.17%)

~ @Newsquawk pic.twitter.com/qIINDdUHQn

12.31pm BST

In the US, the number of mortgage application has dipped, down 0.9% last week.

US house prices have surged 12% in the last year, the fastest jump since 2006, partly driven by limited supply, and rising demand as the economy reopened. This could now be putting homes out of more families' reach.

This is a sign that the competitive purchase market, driven by low housing inventory and high demand, is pushing prices higher and weighing down on activity."

UnitedStates MBA Mortgage Applications at -0.9% https://t.co/fmhyqvEcHy pic.twitter.com/gUnKT3RhRQ

12.21pm BST

More van news... Stellantis, the owner of Vauxhall, has announced it will restart a third shift at its Luton van plant to take advantage of rising demand for commercial vehicles.

in order to satisfy the increased demand for the Vauxhall Vivaro, Opel Vivaro, Citroen Jumpy/Dispatch and Peugeot Expert light commercial vehicles."

11.48am BST

Online fashion retailer Boohoo has seen its sales and profits soared during the coronavirus pandemic.

Unlike its high street rivals, Boohoo benefited from the boom in online shopping and being able to trade throughout successive lockdowns,

Demand from younger consumers for its inexpensive activewear, loungewear and tops while working from home helped Boohoo's sales climb by 41% to 1.7bn, up from 1.2bn a year earlier.

Boohoo's adjusted pre-tax profit climbed by 37% in the 12 months to 28 February to a better-than-expected 174m as the group's customers shrugged off concerns about the group's supply chain, following last summer's allegations that linked it to factories with poor working conditions in Leicester and abroad.

Despite the ethical supply chain challenges of recent years, the opportunities presented by lockdown to the brand have been capitalised on to tune of this record turnaround. Maintaining this renaissance as we move out of lockdown and competition intensifies will be challenging but one that benefits the customer as the market vies for its attention."

11.30am BST

UK van sales jumped to their highest level on record for an April, adding to the signs of pent-up demand in the automotive industry as lockdowns ease.

Businesses are investing in new vehicles as they grow in confidence, driven by a more positive economic outlook stimulated by the vaccine rollout. There has been particular uplift in larger van uptake, both from established demand in home delivery, but also more broadly as other sectors emerge from lockdown looking to maximise their payload efficiency.

With a fragile supply chain still subject to risk of disruption and ongoing Covid restrictions, there is some way to go before we can say business is back to normal, but after a very difficult year, the outlook is much brighter.

11.15am BST

And here's Mark Sweney on ITV's hopes for a surge in adverts this summer:

ITV is predicting a summertime ad boom, with revenues expected to be up as much as 90% year on year, fuelled by the return of must-watch content including Love Island and football's European Championship.

ITV, which said that total TV advertising was down 6% in the first quarter because of the impact of the latest coronavirus lockdown restrictions on brands spending on campaigns, is forecasting a strong second-quarter recovery.

11.12am BST

Here's our news story on the jump in car sales in April, by my colleague Jasper Jolly:

11.08am BST

Today's burst of economic optimism has now pushed the FTSE 100 back over 7000 points again.

It's now up 80 points or 1.2% at 7003 points. It was higher at times yesterday, but it's not closed that high in over two weeks.

After steep losses in the previous session, European bourses are flying higher today, helped by strong earnings and accelerating business activity in the region.

Yesterday's sell-off was just the tonic to fire up the bulls, who had been complacent with stocks hovering around all-time highs. Tuesday's declines served as a reminder that valuations are lofty. However, today's strong corporate updates and upbeat PMI data are supportive of further gains.

10.43am BST

The jump in eurozone private sector growth last month shows that the worst" is over, says Nicola Nobile, lead Eurozone economist at Oxford Economics.

She predicts the eurozone downturn will end this quarter, with a return to growth after a double-dip recession.

Overall, after a GDP drop of 0.6% in Q1, the vaccination progress and the gradual reopening of some of the economies point to a GDP increase already in Q2, in line with our call since February this year.

While the uncertainty is still high at the moment with respect to the magnitude of the rebound, our bottom-up forecast now points to a quarterly GDP increase of around 1.5%

10.34am BST

The Eurozone Composite #PMI edged higher again in April. Up to 53.8, highest since July last year. pic.twitter.com/aBw8QOrMsQ

10.22am BST

April was also a better month for eurozone companies. After falling into recession just last week, the eurozone economy may have turned the corner.

Eurozone companies grew at the fastest pace since last July in April, and at the second-fastest rate in over two-and-a-half years, according to the latest survey of eurozone purchasing managers.

April's survey data provide encouraging evidence that the eurozone will pull out of its double-dip recession in the second quarter. A manufacturing boom, fueled by surging demand both in domestic and export markets as many economies emerge from lockdowns, is being accompanied by signs that the service sector has now also returned to growth.

Barring any further wave of infections from new variants, Covid restrictions should ease further in the coming months, driving a strengthening of service sector business activity which should gain momentum as we go through the summer.

April PMI data pointed to a faster increase in eurozone business activity, as the service sector posted an expansion for the first time in eight months. That said, it was manufacturing growth that continued to lead the expansion. Read more: https://t.co/pbmJRNguFl pic.twitter.com/gAeCw7Pm3z

10.09am BST

Younger people have been flocking to book driving tests since they relaunched last month, says Sue Robinson, chief executive of the National Franchised Dealers Association:

It is extremely encouraging to see sales of new cars bounce back in April reflecting the significant pent-up demand as the lockdown was eased across the UK and dealerships reopened.

Customer footfall at dealerships is strong and driving schools are seeing a major increase in young people booking driving tests. All of this leads us to believe that there is a very upbeat outlook ahead for the motor industry in the summer and retailers are looking forward to a further release of the pent-up demand accumulated over the past months."

10.04am BST

Richard Peberdy, automotive lead at KPMG, also predicts that car supply may not keep pace with demand:

The sales rebound signifies returning consumer confidence as showrooms reopen.

Demand could outstrip supply as global production remains constrained by parts shortages. But, at least initially, such a scenario is not unhelpful to dealers, holding on to margin and being less reliant on discounting to shift stock. This could be critical for bricks-and-mortar showrooms hit hard by lockdown, and also facing increasing competition from online players and carmakers' direct-to-consumer propositions.

Strengthening plug-in vehicle sales is encouraging, with demand buoyed by increasing numbers of attractive products available - and as motorists and businesses plan ahead, mindful of schemes such as the expansion of the London Ultra Low Emission Zone in October."

10.01am BST

The global shortage of semiconductors could hurt the UK car industry's recovery hopes, though.

Sean Kemple, managing director of Close Brothers Motor Finance, fears that the scramble for chips, alongside wider supply chain problems, will mean more disruption this year:

Just as things are looking up for the motor industry, it's been slammed by a wave of turbulence caused by a global semiconductor shortage. And given how vital these chips are to the industry, in use in everything from power steering to parking sensors, this will have an impact. Car manufacturers like Ford, MINI and Jaguar Land Rover are halting production in the face of severe disruption, which escalated in April. While new car sales have shot up this month, there's no doubt that demand will be squeezed by an ensuing supply crisis.

Already facing a supply bottleneck due to delays caused by Covid-19 and the aftermath of Brexit, the chip shortage will further push back waiting times for consumers ordering new cars and come at a huge cost for a market recovering from substantial losses.

9.35am BST

The SMMT has also slightly lifted its forecast for car registrations this year, expecting stronger demand as the economy reopens.

With the economic outlook brightening, the lockdown being eased, and Covid-19 vaccination programmes running speedily, the UK auto industry now expects to sell 1.86m new cars this year.

Demand is likely to be driven by a broad range of new models and powertrains, with confidence bolstered by the gradual reopening of the country.

9.30am BST

This table from the SMMT shows how UK new car sales rose by more than 3,000% year-on-year in April, as the reopening of showrooms and the easing of lockdown restrictions boosted demand....

9.21am BST

The Vauxhall Corsa was the most popular car last month, and over 2021 so far....

9.14am BST

The UK car registrations figures are out... and as expected, they confirm that sales last month were rather stronger than in the first lockdown, as car showrooms reopened.

The SMMT reports that 141,583 new cars were registered in April - compared to just 4,321 in the same month a year ago, during the first lockdown.

After one of the darkest years in automotive history, there is light at the end of the tunnel. A full recovery for the sector is still some way off, but with showrooms open and consumers able to test drive the latest, cleanest models, the industry can begin to rebuild.

Market confidence is improving, and we now expect to finish the year in a slightly better position than anticipated in February, largely thanks to the more upbeat business and consumer confidence created by the successful vaccine rollout. That confidence should also translate into another record year for electric vehicles, which will likely account for more than one in seven new car registrations."

9.01am BST

European stock markets are all pushing higher this morning.

Germany's DAX, which posted its biggest fall of 2021 yesterday (down 2.5%), is clawing back some losses - up around 1.3% this morning.

The old sell in May' adage is doing the rounds of course. On seasonality, Stifel says: We see the S&P 500 flat/down -5-10% May 1st to Oct-31st, 2021: Seasonality is especially applicable at this moment in time". And Bank of America notes that the May-October period has the lowest average and median returns of any equivalent six-month period, looking at data going back to 1928. Maybe there is something in the sell in May' trope. Certainly, given the run-up in equities we have seen, the well understood macro picture and the propensity for yields to edge higher, a period of cooling off seems reasonable.

Earnings are powering ahead - we've just entering the last stretch of a blowout quarter in both the US and Europe. But this has been largely priced. Can corporates keep up the pace? The second quarter is meant to be even better - stimulus cheques are back, and GDP growth is seen powering ahead. Markets may not truly reflect just how strong this recovery will be.

8.53am BST

T he plunge in car sales under lockdown, the drop in car journeys and the suspension of driving lessons have all meant people are spending less on car insurance.

The first quarter saw similar motor market trends to those at the end of 2020, namely subdued claims frequency, low levels of new car sales and fewer new drivers entering the market. This led to further motor market premium deflation in the quarter.

8.38am BST

Australia's stock market has hit at a new pandemic high.

The ASX 200 index closed at its highest level since February 2020 (when the first wave of Covid-19 triggered a global selloff), lifted by economic recovery hopes.

[PODCAST] Market Close: ASX 200 hits 14.5 month high
Listen now on iOS: https://t.co/DX3PCMSiJB or Android: https://t.co/7BryMclBHt #ausbiz pic.twitter.com/x8rSqccQtb

Australian markets have rallied once again as ANZ posted bumper results, Services PMI rose to 58.80, and Building Permits exploded higher by 17.40% as commodity prices continued to rise overnight.

The avalanche of positive news sees the ASX 200 rising 0.75%, while the All Ordinaries has added 0.55%.

8.20am BST

In the City, shares have opened higher as traders put Tuesday's wobble behind them.

The FTSE 100 index is up 39 points, or 0.55%, at 6962 points.

8.05am BST

ITV is hoping that the delayed UEFA Euro 2020 championships, and the return of Love Island, will boost its forecasts this summer.

We have made a good start to 2021 with total revenue and total viewing both up, despite the continuing impact of the pandemic. We finished the quarter strongly with the substantial majority of our shows back in production and a recovery in the advertising market.

We are encouraged by the UK roadmap out of lockdown and remain cautiously optimistic about the year ahead. Our advertising revenues are rebounding from last year with April up 68% and we expect May to be up around 85% and June up between 85% and 90%, compared to the same period in 2020. This is driven by UK COVID-19 restrictions being reduced and a strong schedule featuring Love Island and the Euros.

8.03am BST

Virgin Money, HQd Glasgow, formerly Clydesdale Bank, reports Oct-Mar pre-tax profit of 72m (161m loss Apr-Sep) after exceptional items, including 49m merger and rebranding costs. Bad loans down from 232m last year and 269m Apr-Sep to 38m

7.49am BST

UK challenger bank Virgin Money has returned to profit - another signal that the economy is picking up.

We are cautiously optimistic about the improving outlook as the impact of the vaccination programme in the UK delivers positive revisions to economic expectations.

We're continuing to manage through what is still an uncertain economic backdrop, but the bank is well placed, with a strong balance sheet, and through ongoing strategic delivery we have a clear path to long-term, improved sustainable returns."

7.25am BST

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

Last month, customers were able to buy cars in person from April 12 in England whilst delivery, click and collect and online services also facilitated purchases. Plants have continued to operate with COVID safe measures in place.

Sales stood at around 141,000 vehicles last month, still down 13% on the 2010-2019 monthly average, the Society of Motor Manufacturers and Traders (SMMT) said on Wednesday.

UK new car sales recover in April from last year's lockdown hit https://t.co/JcwtVt772E pic.twitter.com/gZzZZDEFWM

Yellen's 'rate hike' comment, clarification later !

Yellen causes a flutter -> "It may be that int rates will have to rise a little bit to make sure our eco doesn't overheat"

Yellen clarifies later in the day -> "Let me be clear,it's not something Im predicting or recommending"

Ultimately, we all know that the investment made by the Biden Administration will need to be offset by tighter monetary policy in the future, so these comments should in no way shock but hearing it from a high-level official makes the market nervous.

Again, a world where we see lower liquidity from central banks is a world questioning how financial assets perform, as so much of the future performance has been brought forward. And as the gravy train is pulled away, it brings the extreme valuation into question and ascribes a lower risk premium. This will mean higher volatility.

On Wednesday, ADP employment, PMI composite final, and ISM services. ADP has been greatly underestimating the strength of payroll growth are on tap. An unexpectedly strong call by ADP (1 million is the high estimate) could lift forecasts further for Friday's employment report. pic.twitter.com/kIvzL9Dv2d

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