Pound rallies over $1.41 to highest since February; Dow hits new peak – as it happened

Graeme Wearden

from on 2021-05-10 18:09 (#5HN6D)

Rolling coverage of the latest economic and financial news

7.09pm BST

Time for a recap

The pound has surged on the foreign exchange markets today, thanks to a cocktail of economic optimism and fading political risks.

With independence risk so far in the future, we do not expect the developments to materially alter our outlook for the pound to continue to trade at stronger levels this year."

The economy will grow at its fastest pace in 80 years this year but loss of low wage jobs will lead to rising regional inequality and destitution for years to come (and persistently high levels of child poverty.) Alarming projections from @NIESRorg https://t.co/HkfQSTQiRh pic.twitter.com/DC4UjdMZqD

7.07pm BST

Companies operating in freeports being launched under Boris Johnson's post-Brexit levelling up agenda will not get the full benefits of the new tax efficient zones if they export to some countries, the government has admitted.

Officials said post-Brexit trade deals with 23 nations - including Canada, Norway and Switzerland - included clauses that prohibit manufacturers in freeport-type zones from utilising the tax breaks they enable.....

6.59pm BST

Many essential workers have done more than enough to deserve a bonus in the last year, keeping the country running.

But workers at West Midlands Trains had a disappointment when they received an email announcing a one-off thank you payment -- it was actually a cybersecurity test, to see if staff would be tricked by a phishing attack.

6.35pm BST

Britain's economy is on track to suffer more than 700bn of lost output caused by Covid-19, made worse by the government's mishandling of the health emergency and Brexit, one of the UK's leading economics thinktanks has warned.

The National Institute of Economic and Social Research (NIESR) said the UK was facing worse permanent damage than other rich nations due to a poor Covid-19 response" from Boris Johnson's government.

6.25pm BST

With tech stocks still weaker today, here's a reminder of how the boom in growth stocks' has faded this year:

Dow hits fresh ATH and Nasdaq drops a modest 1.5% but the frothiest parts of the stock market continue to implode. Goldman Sachs's gauge of money-losing tech companies has lost more than a third of their value since the peak in Feb. (via BBG) pic.twitter.com/zS4eX3ycQp

6.11pm BST

Germany's BioNTech has pledged to keep developing new therapies, including to fight cancer, after its successful Covid-19 vaccine lifted it into profit.

BioNTech has continued to execute the delivery of our COVID-19 vaccine globally to more than 90 countries and territories. Through our continued innovation, we are expanding access to new populations and geographies, and addressing emerging variants.

We are moving into later stage testing for three of our oncology programs in the near future and plan to launch multiple new products over the next five years.

Looking ahead, we will further optimize our technologies and expand our pipeline into additional therapeutic indications, as we meet our ambition to become a global, fully-integrated immunotherapy company."

German vaccine maker @BioNTech_Group reports booming Q1 profits https://t.co/1DOJ0H3NLR Well deserved, especially when compared to the profits raked in by some companies not adding value to society at all, let alone saving lives!

Ugur Sahin, BioNTech's chief executive, said the world would have more than enough" vaccines in just nine months as it rapidly expands manufacturing.

He said there was absolutely no need" to waive patents, a proposal recently backed by the US to try to increase distribution of vaccines to developing countries.

5.29pm BST

Having surged over $1.41 today, the pound is on track for its best day against the US dollar since January, says Reuters.

As this chart shows, it's very close.... with sterling having surged around 1.5 cents today, as economic optimism and dampening political uncertainty lift the pound.

5.17pm BST

The British government has confirmed it is cutting its shareholding in NatWest Group, by selling around 5% of the bank.

The Treasury said it plans to sell around 580 million shares in an accelerated bookbuilding process, reducing the government's stake in the lender to 54.8%.

4.53pm BST

The FTSE 100 has closed for the day broadly unchanged, but with some sharp swings within the blue-chip share index.

Hopes of an economic rebound lifted UK-focused companies, with housebuilder Berkeley Group finishing 3% higher, Lloyds Banking Group up 2.8%, and Barclays gaining 2.1%.

4.17pm BST

Back in the markets, the pound is still trading at its highest level against the US dollar in over two months, as political uncertainty fades after last week's elections.

Relief over the Scottish election results, rising economic optimism, and a generally weaker US dollar are all giving sterling a lift.

Pro-independence parties won a majority in Scotland's parliament on Saturday, which Scottish leader Nicola Sturgeon said gave her a mandate to push ahead with plans for a second independence referendum

But the pound strengthened as market participants did not interpret this as a near-term risk as Sturgeon's party did not win an outright majority. Sturgeon said that her first task was to deal with the COVID-19 pandemic.

The pound is gaining ground on all other major currencies following a weekend dominated by local elections in England and Scotland, with the main takeaways from both being receding political risks for the UK.

The outcome of the Scottish election in particular provided support for the pound, as the SNP failed to secure an outright majority, leading most analysts to predict that London will be able to delay a new Scottish independence referendum for at least a few years, reducing the near-term risk of a break-up of the UK and the detrimental impact such an outcome is likely to have on the value of the currency.

3.58pm BST

Sky News are reporting that UK ministers are preparing to sell another stake in NatWest Group, which was bailed out in the 2008 financial crisis (when it was Royal Bank of Scotland).

One fund manager said that if it proceeded with the deal, the government was likely to sell just over 1bn of stock, equating to a stake of approximately 5%.

That would take the Treasury's shareholding to just under 55% - its lowest level since the bank's 45.5bn bailout in the autumn of 2008.

EXCLUSIVE: Ministers are preparing to sell another chunk of shares in NatWest Group, according to fund management sources, taking UK taxpayers closer to the point at which they will relinquish their status as majority-owners of the bailed-out bank. https://t.co/XOnZWl4G5i

3.37pm BST

While the Dow soars, the tech-focused Nasdaq index has dropped sharply.

The Nasdaq is down 1.5%, or 208 points, at 13,544, as investors ditch tech stocks in favour of companies who'll benefit from the end of lockdown restrictions.

#Breaking Market Alert!
DJIA above 35,000 for the first time, up 240 pts led by P&G, Coca-Cola and Chevron.
-the tech sector retreat continues with the Nasdaq down 180pts.

3.09pm BST

In New York, the Dow Jones industrial average has hit a fresh record high in early trading... but tech stocks are struggling.

Hopes of an economic recovery from the pandemic are lifting energy companies, manufacturers and retailers, as investors put last Friday's poor jobs report behind them.

#MarketWatch The DOW continues record breaking rally, trades above 35,000 for the first time

*** DOW 35k Handle ***

2.44pm BST

Malaysia's disgraced state investment fund 1MDB is suing Deutsche Bank, Coutts and JPMorgan, in an effort to recover some of the many billions lost in the country's largest ever corruption scandal, according to reports.

1MDB is claiming $1.11 billion from Deutsche Bank (Malaysia) Bhd, $800 million from J.P. Morgan (Switzerland) Ltd and $1.03 billion from a Swiss-based Coutts unit, and interest payments from all of them, according to the lawsuit.

The claims are premised on negligence, breach of contract, conspiracy to defraud/injure, and/or dishonest assistance", 1MDB said in the documents, filed at a Kuala Lumpur court on Friday.

2.13pm BST

The pound's strength is pulling the FTSE 100 slightly into the red.

The blue-chip share index, which contains many multinationals with large overseas earnings, is now down 13 points or 0.2% at 7116 points, away from its recent 14-month highs.

1.41pm BST

Sterling is also rallying against the euro.

The pound has now gained one euro cent today, to 1.161 - its highest level in three weeks:

1.18pm BST

The pound continues to rally, and has now risen over $1.41 against the US dollar for the first time since the last week of February.

Sterling is now up 1%, or almost 1.5 cents today, lifted by a mixture of fading political risk and rising economic confidence.

The Scottish Nationalist Party won the regional elections north of the border but failed to secure an absolute majority. While the SNP will continue pushing for another independence referendum, the lack of an absolute majority means the pound is breathing a sigh of relief.

Reopening optimism is also supporting sterling. Prime Minister Boris Johnson is set to announce the next step in easing lockdown restrictions.

1.06pm BST

NIESR have also lifted their forecasts for global growth this year, from 4.5% to 5.5%, and for 2022, from 3.75% to 4.25%.

That's due to vaccine rollouts and huge stimulus spending by the US, as well as signs that businesses have been more resilient through the latest lockdowns.

Our latest UK and Global Spring Economic Outlooks are finally out!

Read here our Director @jagjit_chadha's introductory remarks #CovidEconomics #EconomicRecovery #EconTwitter https://t.co/uhLFNi7u0i pic.twitter.com/EPe69GBS9U

12.52pm BST

Economic think tank NIESR has raised its growth forecasts for the UK this year -- but also warned that the pandemic risks worsening economic inequality.

NIESR's central forecast is for UK GDP to rise by 5.7% this year, up from the 3.4% forecast back in February. This upgrade is due to the way firms have adapted to lockdowns, and the successful vaccination programme which will help the economy to reopen.

Following the worst economic performance among G7 countries in 2020, optimism about the UK recovery is broad-based and well-founded.

The size of the economic contraction means that the level of GDP is nearly 4 per cent lower in 2025 than we had forecast it to be before the Covid-19 pandemic, equivalent to around 1,350 per person per year (2018 prices) falling further behind the US and Germany as a result.

The long-term challenges of low wage growth, slow productivity and inequalities across regions and between groups of people have not been resolved by Covid-19; indeed, the risk is that they have been exacerbated

Beyond short-term optimism, the outlook for the UK economy is less certain given the economic and social challenges that existed before the pandemic.

Our analysis at sectoral, regional, and household level shows that despite the rhetoric about building back better' existing inequalities could be exacerbated by the pandemic and an uneven recovery. Now that the worst of the pandemic may be behind us, a new fiscal policy framework is needed to combine clear principles for spending and tax to support the ultimate long run objectives of economic policy - creating the conditions for more robust and inclusive growth."

12.14pm BST

The Covid-19 pandemic continues to weigh on British Gas's parent company, with business customers using less energy and demand for repairs hit by the lockdown.

Centrica has warned it faced a difficult start to the year, weeks after sacking hundreds of its engineers through a controversial fire and rehire scheme, my colleague Jillian Ambrose explains:

In the first quarter of this year, demand for electricity was 15% lower than the year before among the company's business customers, the company said in a trading update ahead of its annual shareholder meeting.

Home boiler repairs and installations were 11% lower than the same time last year because non-essential home service visits were postponed to help prevent the spread of Covid-19.

11.55am BST

Rob Gill, MD of the independent mortgage broker, Altura Mortgage Finance, reckons that fear of missing out' is fueling the UK housing boom.

Gill says:

There is a deep-seated FOMO in the market right now, a fear among buyers that they could miss out' if they don't hurry up and buy before prices spiral beyond reach.

As prices accelerate, it's certainly tempting to forecast it will all end in tears. However, history suggests that low interest rates, Government support and an improving economy are classic ingredients for house prices to carry on rising rather than crash."

After a year of remote working, the hunt for extra living space has created a sense of urgency, with many homeowners look to upsize their current properties. Indeed, we found more than a quarter of the UK's renters and homeowners have seen their property needs change because of prolonged working from home.

However, this uptick does nothing to help the affordability concerns for many aspiring homeowners who are being rapidly out-priced from the market, pushing that ambition of homeownership farther out of reach. Even with the Government's 95% mortgage guarantee, many individuals still fall short of the lending criteria they need for the homes they really want, even if they can afford the deposit. We need to find ways to balance the property market, ensuring the confidence remains while helping more people to get a foot on the ladder."

11.36am BST

House prices are rising at their fastest pace in five years after the Treasury's extended stamp duty holiday prompted a fresh surge in buying last month, Britain's biggest mortgage lender has said.

The monthly snapshot of the property market from Halifax showed a 1.4% jump in the cost of a home in April - taking the average selling price to a record high of just over 258,000.

11.23am BST

Optimism about the UK economic recovery is also lifting sterling, says Fawad Razaqzada, analyst at Think Markets.

Sterling has been boosted by optimism over the UK economy amid the big drop in Covid cases and deaths thanks to the lockdowns and vaccination success, with investors also ignoring the prospects for a second Scottish independence referendum.

There were only 2 Covid-19 related deaths reported on Sunday and UK PM Johnson is expected to make a statement later, on further reopening plans.

11.09am BST

The pound is continuing to rally, with several analysts pointing to relief that a new Scottish independence referendum is not seen as an imminent threat.

Sterling has now gained more than a cent against the US dollar today to $1.409, its highest level since late February, as traders digest the election results.

#GBP +0.66% against other currencies#GBPUSD 1.40837 +0.68%#EURGBP 0.86326 -0.73%#GBPAUD 1.79108 +0.43%#GBPJPY 153.32 +0.94%#GBPCAD 1.70524 +0.54%#GBPCHF 1.2684 +0.69%#GBPEUR 1.15839 +0.73%

The SNP gained one seat versus the prior result, but fell one seat short of the absolute majority expected that would have arguable given the party a stronger mandate to push for a new independence referendum.

The Green Party, also in favour of independence, added a couple of seats, but sterling rose in anticipation that the mandate is too weak after this election result to indicate any immediate threat of a short timeline for a new referendum on Scotland leaving the UK.

The vote north of the border saw the SNP win Holyrood yet again but without a majority and therefore a wafer-thin mandate for another referendum on Scottish independence.

The pound's reaction suggests that with the SNP unable to secure that absolute majority, there isn't a clear democratic mandate to pressure London into granting another referendum anytime soon. Hence, it's a narrow win for pro-union forces as the Conservative government can keep rejecting calls for another vote.

With political risk fading for now and the Bank of England preparing the ground for ending QE later this year as the British economy kicks into higher gear, the outlook for sterling remains favorable.

The morning G10 mover is sterling. The Conservatives did well in local elections, and the SNP (just) failed to win an outright majority in the Scottish parliament. However, I think the pound's move is as much about the negative dollar toe and risk-friendly mood, as the news.

I don't know anyone who thinks the risk of a second Scottish referendum has gone away.

10.01am BST

Investor confidence across the eurozone has jumped to its highest level in over three years, on hopes that Europe's economy is recovering from the pandemic shock.

Research group Sentix's gauge of investor morale in the euro zone has risen to its highest level since March 2018, increasing from 13.1 in April to 21.0 in May.

The economic situation in the Eurozone continues to improve.....the recession caused by the Corona crisis has been overcome.

*EURO AREA SENTIX MAY INVESTOR CONFIDENCE 21.0 (highest since March 2018); EST 15.0 - BBG pic.twitter.com/4E2BIrhoXU

The excellent economic performance is evident in all regions of the world. The overall index for the US reaches an all-time high and rises for the 13th consecutive month. The global economy is now beginning to show clear signs of overheating.

This is likely to prompt central banks to slow down the momentum.

9.39am BST

The EY ITEM Club say the government's latest stimulus measures helped to pump prices up in April, at the fastest annual rate in five years.

Firstly, in a context of long-term increases in living standards, many people wanted to move home, encouraged to improve their surroundings by repeated lockdowns. Secondly, it is cheap to borrow, due to very low interest rates, which give buyers a discount'. Thirdly, there is a flight to safety': in times of uncertainty, people want to put their money in stable assets as a way to diversify their risk from more volatile investments such as the stock market.

Looking to the future, these other market drivers are likely to remain strong, throughout 2021. The good news for property investors and homeowners is that property tends to hold its value well through times of uncertainty. Demand stays strong, because we all need a roof over our heads, and new supply is limited.

Spring is traditionally a busy time for estate agents, but this year's season has been supercharged by the unleashing of a year's worth of latent demand from buyers, the wider availability of mortgages and the vaccine effect' as people start to feel the worst of the pandemic is past.

For now the yawning imbalance between supply and demand is forcing prices up at breath-taking speed, especially in the hottest hotspots of South West England and parts of Scotland.

9.05am BST

The UK house price boom continues, with prices rising at their fastest rate since 2016.

Mortgage lender Halifax has reported that prices have jumped by 8.2% over the last 12 months -- taking them to a new record high. That's the fastest annual growth in five years, according to Halifax's data.

The stamp duty holiday continues to add impetus to an extremely active market, magnifying the current shortage of available homes as buyers aim to take advantage of the Government scheme. The influence of the stamp duty holiday will fade gradually over the coming months as it's tapered out but low stock levels, low interest rates and continued demand is likely to continue to underpin prices in the market.

Savings built up over the months in lockdown have given some buyers even more cash to invest in their dream properties, while the new mortgage guarantee scheme may have eased deposit constraints for some prospective homebuyers who previously thought their first step on the housing ladder was a few years away.

There is growing optimism in the long-term outlook of the UK economy as the vaccination programme continues at pace, yet we remain cautious about the medium-term prospects of the housing market. As we said in March, the current levels of uncertainty and potential for higher unemployment as furlough support ends leads us to believe that house price growth will slow to the end of the year.

8.46am BST

Provident Financial is to close its doorstep lending business, 141 years after it was first started, in a move that will put 2,100 jobs at risk.

The sub-prime lender will seek to either sell or wind down its consumer credit arm. The cost of either course of action to the company will be as high as 100m, Provident said.

8.42am BST

UK bakery chain Greggs has hiked its profit forecast this morning, after seeing sales beat pre-pandemic levels since lockdown measures were relaxed.

We saw a significant pick up in sales with the reopening of non-essential retail from 12 April, in part reflecting the pent-up demand for retail which has boosted High Street footfall.

Our two-year LFL growth since 12 April has been positive.

8.23am BST

In London, the FTSE 100 blue-chip share index has hit a new 14-month high in early trading.

The FTSE touched 7,164 points for the first time since late February 2020, before dipping back.

8.14am BST

Commodity prices are surging again today, as the scramble for raw materials continues.

Good Morning from Joburg where China's benchmark iron ore futures surged 10% to a record high, while steel prices rose 6% to hit a trading limit, as Beijing's move to limit capacity fuelled worries about a supply shortage and prompted speculative buying. JSE Top 40 called +0.28%. pic.twitter.com/4kSVE7myeU

7.55am BST

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

The pound is rallying at the start of the week, hitting its highest level in over two months.

There will be a pro-independence majority in the Scottish Parliament after the election of 64 SNP MSPs and eight Green MSPs.#BBCElections #SP21

All the latest reaction https://t.co/eWgDWTRuAV pic.twitter.com/V6xnGvvt9m

Nicola Sturgeon has told Boris Johnson that a second independence referendum is a matter of when, not if" after the Scottish National party secured a historic fourth term at Holyrood on Saturday with a pro-independence majority of MSPs returned despite tactical voting by pro-union supporters.

Scotland's first minister made the assertion in a telephone call with the prime minister on Sunday evening, despite senior Conservative figures questioning her mandate.

In the U.K. the Scottish question will remain in focus with the SNP just failing to win a majority but still seeing a strong set of results. With the Scottish Green Party they do have a pro-Independence majority.

European Opening Calls:#FTSE 7155 +0.35%#DAX 15434 +0.22%#CAC 6387 +0.02%#AEX 719 +0.09%#MIB 24705 +0.38%#IBEX 9100 +0.45%#OMX 2269 +0.39%#STOXX 4042 +0.19%#IGOpeningCall

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