Wall Street rebounds as US jobless claims fall to pandemic low – as it happened

Graeme Wearden

from on 2021-05-13 20:12 (#5HRQN)

Rolling coverage of the latest economic and financial news

Earlier:

9.12pm BST

And finally, Wall Street has closed in the green, as investors put inflationary worries behind them...for at least today.

The main indices have all closed higher, despite the jump in US producer price inflation to its highest in over a decade.

US Closing Prices:#DOW 34021.45 +1.29%#SPX 4112.5 +1.22%#NDX 13109.1 +0.83%#RTY 2170.95 +1.68%#VIX 23.21 -4.38

Stocks bounced back Thursday to end sharply higher, taking back a chunk of the losses suffered in the previous session. The Dow Jones Industrial Average rose around 433 points, or 1.3% to close near 34,021, according to preliminary figures. https://t.co/DjuYPJ31F4 pic.twitter.com/aPfATAEX1K

U.S. stocks climbed on Thursday, rebounding from steep losses in the previous session as investors picked up shares after the pullback. Here's how the major averages performed: https://t.co/RMI8sczixu
- The Dow rose 433 points
- The S&P 500 climbed 1.2%
- The Nasdaq rose .83% pic.twitter.com/TMItmN9W4x

More and more companies are warning in their earnings calls of rising commodity prices and the possibility of higher costs for consumers. So is this inflation we're seeing truly transitory, and who will bear the brunt of rising commodity prices: companies, or consumers? pic.twitter.com/agAJeZ57Rf

8.37pm BST

Bitcoin has tumbled back below the $50,000 mark this afternoon, as Elon Musk's u-turn on the crypto currency continues to reverberate.

Bitcoin is currently trading around $49,000, meaning it's lost roughly 10% of its value since last night, when Musk announced Tesla was suspending plans to accept payments, due to the environmental cost of mining.

Energy usage trend over past few months is insane https://t.co/E6o9s87trw pic.twitter.com/bmv9wotwKe

True believers weren't happy about Musk's U-turn but Tesla's shareholders ought to be delighted. The founder's talent for publicity has saved the company a fortune in advertising, but there were clear dangers in tying his personal brand, and Tesla's, to a single cryptocurrency.

A plunge in the price of the coins would not help his popularity. Being seen to step off the rollercoaster when the price is 25% off its highs but, critically, up massively over 12 months, may prove smart timing.

7.59pm BST

Here's our round-up of how the Bank of England governor tried to calm inflation worries today, as shares in London staged a partial recovery from this morning's slump:

7.48pm BST

David Cameron was on Thursday told that his persistent lobbying of ministers, begging for favours on behalf of the controversial bank he worked for, had demeaned" the position of the prime minister and left his reputation in tatters", my colleague Rupert Neate reports.

The former prime minister was forced to deny that his text message and WhatsApp lobbying campaign on behalf of Greensill Capital was driven by fears that an opportunity to make a large amount of money was at risk".

7.44pm BST

Our economics editor, Larry Elliott, has written about the return of inflationary jitters - and the split between hawkish economists who fear a surge in prices, and doves who think it will only be a temporary phenomenon.

Here's a flavour:

Not even the most avid hawk is expecting inflation in the UK to get close to the peak of almost 27% reached in 1975, but there are certainly reasons why price pressures will increase in the short term.

A year of lockdown-enforced stop-go means that a considerable pent-up demand is being unleashed. The supply potential of economies has been cut by the pandemic. When demand exceeds supply, prices rise. The fact that inflation was depressed last year by the battering that economies were taking during the first wave of Covid-19 makes the problem look worse than it is.

7.26pm BST

With 90 minutes to go, Wall Street is on track to end a three-day losing streak....

#WSJWhatsNow: The Dow and S&P 500 are up Thursday, on track to snap a three-day selloff pic.twitter.com/C1qpWX879e

7.21pm BST

The star technology investor James Anderson took a parting shot at fellow fund managers addicted to the near pornographic allure" of earnings reports and macroeconomic headlines today, as he claimed the industry was irretrievably broken".

The outgoing co-manager of the FTSE 100-listed Scottish Mortgage Investment Trust said his own greatest failing has been to be insufficiently radical" over the past two decades (despite doubling its value in the last year during the pandemic).

It is inherent to the notion of efficient markets that all available information is incorporated in share prices. Only new information matters.

This is used to justify the near pornographic allure of news such as earnings announcements and macroeconomic headlines. In turn this is reinforced by the power of near-term financial incentives.

6.39pm BST

Back in New York, stocks have dipped slightly but are still holding on to their gains.

What a difference a day makes. US markets have mostly brushed off yesterday's losses and put the box marked concerns on inflation" under the table for now.

Wall Street's rally was just the tonic London markets needed and even the FTSE 100 looked a completely different beast from this morning, by the end of the day it was only 41 points down at 6963 - such a turnaround from earlier you'd be forgiven for wondering if you'd dreamt it. But instability will be the watchword for a while. Investors are having trouble weighing the good economic news from the disconcerting. But despite the uncertainty, deals are being done, jobs are being created and restrictions relaxed even more. Pent up demand is a good thing, it's just markets don't want too much of a good thing."

The Dow (INDU) rose 1.5%, or 500 points, while the S&P 500 (SPX) was up 1.4%. The Nasdaq Composite (COMP), which booked the biggest losses over the past few days, was up 1.3%.https://t.co/hpT25HgOnn

5.51pm BST

The governor of the Bank of England has weighed in on inflation, saying he doesn't think inflationary pressures will last.

Reuters has the details:

The Bank of England does not think that the factors that will push up inflation in the coming months will persist, but it will watch the situation very carefully, Governor Andrew Bailey said on Thursday.

So the really big question is: Is (higher inflation) going to persist or not?' Our view is that on the basis of what we're seeing so far, we don't think it is," Bailey said at an event with members of the public organised by the BoE.

5.14pm BST

Back in the US, McDonald's has announced it's raising hourly wages by around 10% as it tries to hire another 10,000 workers.

The fast food company says the increases will benefit 36,5000 staff at its US company-owned restaurants.

Entering into the busy summer season with dining rooms re-opening where it is safe, McDonald's-owned restaurants are looking to hire 10,000 new employees over the next three months.

Based on this trajectory of the current marketplace, McDonald's expects the average hourly wage for its company-owned restaurants to increase to $15 an hour in a phased, market-by-market approach. Some restaurants have, or will, reach an average hourly wage of $15 an hour in 2021, and average hourly wages are expected to reach $15 an hour by 2024.

McDonald's will bump hourly pay for employees at its 650 company-owned restaurants by an average of 10% and pay new entry-level workers $11 to $17 an hour, the fast-food chain said. The increases affect only about 5% of its nearly 14,000 U.S. locations. https://t.co/dh2NAuB2eN

4.46pm BST

After a volatile day, the FTSE 100 has closed 41 points lower at 6963 points, a drop of 0.6% today.

That wipes out much of yesterday's recovery. But it's still quite a rebound, after the index dropped to a five-week low at one stage this morning.

4.15pm BST

Wall Street's rally is helping London stocks rebound from their earlier lows.

The FTSE 100 is now only down 34 points in late trading, or 0.5%, at 6970 points - quite a turnaround from this morning, when it briefly fell around 180 points to a five-week low.

Scottish Mortgage has sold 80% of its shares in Tesla over the past year as the UK's largest investment trust exited positions in other Silicon Valley stars and boosted its exposure to China.

The electric carmaker was Scottish Mortgage's fifth-largest holding at the end of March, down from second place a year earlier, after the Baillie Gifford flagship trust took profits on its longtime investment in the company.

At one point today European markets were down heavily, with the FTSE 100 and DAX hitting five-week lows, as inflation concerns once again weighed on sentiment, however these lows proved to be short-lived, with the rest of the day spent clawing the bulk, or all of the losses back, with the FTSE100 unperforming due to its heavy basic resources weighting, where most of today's losses have been concentrated.

In an extremely fickle environment markets are continuing to wrestle with the dilemma as to whether the current bout of rising inflation prints is transitory in nature.

3.45pm BST

Each of the 30 stocks on the Dow Jones industrial average is up.

Aerospace manufacturer Boeing (+2.7%) is leading the Dow risers, as the index rebounds from its losses on Tuesday and Wednesday.

3.25pm BST

Wall Street has opened sharply higher, defying fears of further falls.

Stocks are bouncing back after two days of heavy losses, with the main indices all rallying, and tech stocks among the risers.

A surge in commodity prices, labor shortage and much stronger-than-expected consumer prices data this week have stoked inflation concerns that could force the U.S. Federal Reserve to raise interest rates, despite its reassurances that the rise in prices to be temporary.

All of this comes down to the fact that the market believes that the Fed is going to have to do something sooner than anticipated," said Victoria Fernandez, chief market strategist at Crossmark.

3.03pm BST

Over in politics, David Cameron is being quizzed by MPs over his lobbying for Greensill Capital during the height of the pandemic last year.

My colleague Andrew Sparrow is liveblogging the action here:

2.56pm BST

The prices charged by US producers surged last month, in another signal that inflationary pressures are building.

The US producer price index jumped by 0.6% in April alone, following a 1.0% jump in March.

A major factor in the April increase in prices for final demand goods was the index for steel mill products, which jumped 18.4%. Prices for beef and veal, pork, residential natural gas, plastic resins and materials, and dairy products also moved higher.

Within the index for final demand services in April, prices for portfolio management rose 1.5%. The indexes for airline passenger services; food retailing; fuels and lubricants retailing; physician care; and hardware, building materials, and supplies retailing also moved higher.

US #PPI +0.6% & Core +0.7% in April

Goods0.6%
> Core gds +1.0% (steel mills products+meat)
> Food +2.1%
> Energy -2.4%

Services0.6% led by portfolio mgt, airline, retail & med svc, build mat

Headline PPI inflation +6.2% y/y (+2pt)
Core #inflation +4.6% y/y (+1.5pt) pic.twitter.com/SobCVZ5MfB

2.29pm BST

The drop in new US unemployment claims last week indicates that the labour market is improving, despite the disappointing slowdown in hiring in April (when there were just 266,000 new hires).

So says Daniel Zhao of Glassdoor, on Twitter:

UI claims dropped last week, falling to 591K (487K UI initial claims NSA + 104K PUA claims).

Claims continue reaching new intra-crisis lows, signaling an improving labor market despite Apr's disappointing jobs report.#joblessclaims 1/ pic.twitter.com/7GfcStfp04

The decline in continuing claims has slowed in recent weeks. While PEUC & EB claims have improved by more, this data point *is* more consistent w/ the Apr jobs report, as slowing hiring could explain the trend.#joblessclaims 2/ pic.twitter.com/RIEf0cRRHX

The moves, made by officials in Republican-led states, would cut off benefits as early as 12 June.

The aid includes an extra $300 a week paid on top of typical state benefits. The long-term unemployed, as well as self-employed and gig workers, would lose their entitlement to benefits outright.

In the last week, 12 states have announced they will withdraw from the federal UI programs and more are likely to follow. Today's report shows the 12 states have 607K PEUC & PUA continuing claims and 271K UI claims which face total/partial cuts to benefits.#joblessclaims 3/

As of March, 31% of UI claimants in those 12 states are Black, raising concerns about equity. Black workers are also less likely to get access to traditional UI, so that racial disparity is likely even more notable in the PUA program.#joblessclaims 4/

Claims are improving significantly from earlier in the crisis, but the weekly numbers are still an important indicator that many millions of Americans are still relying on UI benefits. The recovery is underway but we're nowhere near the finish line yet.#joblessclaims 5/5

2.18pm BST

If you strip out seasonal adjustments, new US jobless claims fell to 487,436 last week, which is also a pandemic low.

AnnElizabeth Konkel of Indeed explains:

The decline continues! Total initial claims (nsa) are at their lowest since the start of the pandemic. Regular initial claims are finally now under the 500k mark, while PUA initial claims were essentially flat around 100k. pic.twitter.com/koTIiW5VDN

Similar story for regular continuing claims (nsa), the gradual decline continues and are also at their lowest since the start of the pandemic. Remember we have to look at PEUC too though. pic.twitter.com/KWyNlBXmhF

A slight increase from last week, with California (350k+) certainly contributing to that. PEUC is still incredibly high, would really like to see it drop (because people are getting jobs, not cause benefits have been exhausted). pic.twitter.com/qiCqlc7Rvl

Continuing claims data for week-ended Apr 24 was somewhat disappointing, but weekly claims through May 8 confirm solid trend

3.8mn people on regular benefits (+11k)
5.7mn people on **long-term** benefits (+270k)
7.3mn on PUA (+420k)
------------------------
16.9 mn claimants pic.twitter.com/wSCozj2W1j

2.06pm BST

The 34,000 drop in US jobless claims last week (to 473k, seasonally adjusted) is another sign that fewer companies are laying off staff, as consumer spending strengthens and more firms reopen.

Heidi Shierholz of the Economic Policy Institute says unemployment claims are moving in the right direction, although still too high (especially once you add claims to the PUA, or pandemic unemployment assistance, programme, for self-employed and gig economy workers).

Last week 577,000 people applied for UI. This included 473,000 who applied for regular state UI (seasonally adjusted) and 104,000 who applied for Pandemic Unemployment Assistance (PUA). 1/ https://t.co/tg071kRKs8

Claims are high but moving in the right direction. The 577,000 who applied for UI last week was a decrease of 32,000 from the prior week. The 4-week moving average of total initial claims decreased by 35,000. 2/

Total initial claims are still three times what they were before COVID. (If you restrict to regular state claims-because we didn't have PUA pre-COVID-initial claims are 2.5 times where they were before COVID.) 3/

This chart shows continuing claims in all programs over time (the latest data for this are for April 24). Continuing claims are generally declining but are still over 15 million above where they were before the virus hit. 4/ pic.twitter.com/zMQ30sVLWp

1.44pm BST

The number of Americans filing new unemployment claims has fallen to a fresh pandemic low.

Around 473,000 initial claims' for jobless support were filed last week (to Saturday 8 May), on a seasonally adjusted basis.

US weekly jobless claims tumble to new COVID low of 473,000 https://t.co/1XOpj3h8AW pic.twitter.com/c5ljWF4hex

Previous week's numbers were revised higher to 507,000 from 498,000, however.

And 473,000 is still double the five-year average leading up to March 2020.

LAYOFF WATCH: New U.S. jobless claims drop to yet another pandemic low of 473,000 in week ended May 8. Companies are trying to hold onto current employees and find new ones, but emerging labor shortages put them in a bind.

1.30pm BST

The number of people on furlough in the UK has dropped, after lockdown restrictions were eased.

The Office for National Statistics reported this morning that 11% of the workforce were furloughed, in the two weeks to 2 May, down from 13%. That follows the easing of curbs on hospitality and non-essential shops last month.

Initial results from Wave 30 of our Business Insights and Conditions Survey (19 Apr to 2 May 2021) show the proportion of the workforce of all UK businesses on furlough leave was 11%, down from 13% in the previous wave https://t.co/FSQEa6b0IU

Latest @ONS survey suggests proportion of the UK workforce on #furlough fell over the course of April from 13% to 11%.

Still around 2.8 million people, but some will be already be working again part time ('partial furlough'), and will fall further as more restrictions lifted.

@bankofengland's aggregate CHAPS indicator of payment card purchases increased 7 percentage points in the week to 6 May 2021 to 106% of its Feb 2020 average.

This was partly driven by a notable rise in social" spend (such as for travel and eating out) https://t.co/yeaAJwUVab pic.twitter.com/4AF2IE6Etx

12.56pm BST

After a tough morning, the London stock market is on track for its second hefty fall this week.

The FTSE 100 index is currently down 1.6% today, or 114 points lower at 6890. That would be lowest close in around three weeks (it earlier hit a five-week low, before rebounding somewhat).

US inflation jumping to its highest level in 13 years has spooked the market, whilst a sell off in commodities is giving the bears more room to run.

Inflation fears have been stalking the market all week and are showing few signs of easing. Whilst some inflation is good for companies and the market, the latest US consumer price data points to the balance moving too far in one direction. US CP1 jumped to 4.2% in April, the highest level since 2008. The data confirmed investors fears of overheating and prompted bets that the Fed could move on rates earlier.

12.47pm BST

After booming in the pandemic, the surge in share trading may be slowing as lockdown restrictions ease.

Hargreaves Lansdown, the investment firm, flagged today that it is starting to see a drop in dealing volumes, saying:

Where daily share dealing volumes settle, as we ease out of lockdown and life returns to more normal, is difficult to say.

Similar to when previous lockdowns have been lifted, we have begun to see a reduction in share dealing volumes in both UK and overseas trades.

UK stocks today #7 -

Hargreaves Lansdowne "record net new business, record ISA subscriptions, record client growth, and record share dealing volumes, reflecting the benefits of the investment we have undertaken in recent years in our digital platform" pic.twitter.com/ekq2FCAZdK

11.57am BST

Shares in Canadian chip designer Alphawave IP have slumped by a fifth this morning, after it floated on the London Stock Exchange.

Alphawave, whose semiconductor technology is used in high-speed data networks, sold shares at 410p each, valuing the Toronto-based firm at around 3.1bn.

The 410p offer price put a 3.1bn price tag on the company - hardly a knock-down sum for a firm which, according to the prospectus, generated $44m in sales, $24m of operating profit and generated $15m in cash from operations.

Granted, Alphawave IP is growing very quickly, but such a valuation prices in a lot of future growth already and does so at a time, again, when investors may be able to buy plenty of cyclical, immediate growth cheaply if we do get a strong, post-pandemic upturn, with the result that they may not feel such a need to pay premium valuations for long-term secular growth well out into the future.

Looks like another IPO has gone wrong: Alphawave shares have dropped 15% on their first day of trading in London. The stock was priced at 410p/share to value the semiconductor group at 3.1bn but the market evidently believes this is too high

Once could be misfortune, twice looks like carelessness.

The latest London IPO Alphawave slumps nearly 20% on its market debut against a broader tech slump, weeks after Deliveroo's disastrous first day. @joiceal @ReutersBiz pic.twitter.com/UBOfOPW9pJ

Deliveroo and Alphawave's first day performances are blotting what has otherwise been a pretty strong year for London.

Big question is what this means for the IPO pipeline. pic.twitter.com/1Sy5yyOOHB

11.25am BST

Andy Haldane, the outgoing Bank of England chief economist, has predicted that UK growth and inflation will both accelerate this year... meaning that policymakers need to start tightening the tap" on their stimulus.

In its latest forecasts, the Bank revised down its estimate of peak unemployment from 7.75% to less than 5.5%. It is currently around 5%.

A year from now, it is realistic to expect UK growth to be in double-digits, activity to be comfortably above pre-Covid levels and unemployment to be falling.

Inflation inflicts collateral damage on our finances, squeezing the purchasing power of our pay and causing rises in the cost of borrowing.

And experience during the 1970s and 1980s demonstrates that, once out of the bottle, the inflation genie is notoriously difficult to get back in.

#BoE chief economist & #MPC member Andy #Haldane very much maintaining his optimistic stance on #UK #economy; was the only MPC member to vote for reducing BoE's planned asset purchases at May meeting last week. #BankifEngland https://t.co/gLktYipKDk via @MailOnline

*BOE'S HALDANE SAYS U.K. ECONOMY TO BOUNCE BACK: DAILY MAIL

11.07am BST

Concerns about rising inflation are pushing government bond yields higher.

The yield, or interest rate, on 10-year UK gilts has risen to around 0.92% today. That's its highest level since the market turmoil in March 2020 (when there was a surge of selling to raise funds).

British 10-year gilt yields hit their highest in almost two years - excluding a brief surge seen during last year's dash for cash" - as investors sold government bonds globally after a jump in US inflation.

Ten-year gilt yields rose as high as 0.919%, up about two basis points on the day, following a climb in other European government bond yields on Thursday.

The yield on UK 10-year Gilt hits highest since March 2020 "dash for cash" at 0.913%, up about 2 basis points on the day.#UK #GILT

Bund yields higher for a 7th day pic.twitter.com/vqoSS9wDuQ

10.45am BST

Wall Street futures suggest we'll see further losses in New York in a few hours - with Dow futures down 0.6%, and Nasdaq futures down 0.2%.

Inflation fears grip markets as European stocks and U.S. equity futures slide https://t.co/jKMkOclQdZ

10.26am BST

The oil price has fallen over 2% today, with benchmark Brent crude dropping back to $67.75 per barrel, and US crude down to $64.50.

The shock waves continue to reverberate, with futures pointing to another lower open on Wall Street today. And with yields on Treasuries rising as investors dump bonds to shield their portfolios from the inflationary nova, it seems that many players are simply moving to cash.

Even commodities are trading lower, which implies there's no place to hide for now. Super-loose monetary policy ignited a buy everything' wave, so perhaps it's only natural to see a sell everything' reaction as the days of cheap money slowly draw to an end.

10.03am BST

Commodity prices are weaker today, having soared to record highs recently amid strong demand as the pandemic lifted.

Benchmark iron ore futures in China fell over 7% on Thursday, taking a breather after a remarkable rally.

9.27am BST

With the holiday season approaching, Britain's competition watchdog has warned package companies to promptly refund holidaymakers whose trips are cancelled due to the pandemic.

Since March 2020, the CMA has received over 23,000 complaints from consumers about refund issues relating to package holidays that could not go ahead due to the pandemic.

With summer holidays approaching, we've warned packaged holiday firms to respect the refund rights of holidaymakers.

Our open letter to the sector sets out their legal obligations and the need to ensure refund options are clear and accessible.

Read more: https://t.co/am0wYNKCXv pic.twitter.com/ZJNyWnMIVj

9.06am BST

BT is to create up to 7,000 jobs as it ups the pace of the multibillion-pound rollout of a national next-generation, broadband network to 25m UK premises by 2026.

The telecoms giant, which reported a 23% drop in pre-tax profits to 1.8bn last year as businesses used less of its services during pandemic lockdowns, had previously targeted rolling out full-fibre broadband to 20m premises.

BT is already building more full-fibre broadband to homes and businesses than anyone else in the UK."

It will get fibre to more people, including in rural communities. And it will help fuel UK economic recovery, with better connectivity and up to 7,000 new jobs."

9.03am BST

Burberry are the top faller in London, down 8%, despite reporting that its sales recovery has accelerated thanks to growing demand in Asia and the US.

Within this, full-price sales grew 63% in the quarter (12% versus Q4 FY19) driven by Mainland China, Korea and the U.S.

Burberry has not only put a tough year behind it, but has also clearly turned a corner in positioning for strong future growth.

We will continue to strengthen brand equity by exiting markdowns in mainline stores in FY22. This is a headwind against our comparable store sales growth amounting to a mid-single digit percentage in the full year.

Burberry -8%... surprising reaction to not so bad results

More on SS with luxury analyst Luca Solca from Bernstein

8.36am BST

Stocks are down across Europe, amid worries over rising US inflation, with the French CAC and German DAX both dropping around 1.2%.

8.17am BST

London's stock market has opened in the red, with the FTSE 100 sliding by 1.4%

The blue-chip index dropped by around 100 points at the open, to as low as 6902 points - its lowest level in almost three weeks.

7.49am BST

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

Inflation worries continue to grip the markets today, after US consumer prices jumped much more sharply than expected in April amid supply shortages and rising demand as lockdowns ease.

European Opening Calls:#FTSE 6949 -0.80%#DAX 15047 -0.68%#CAC 6234 -0.73%#AEX 687 -1.10%#MIB 24271 -0.74%#IBEX 8953 -0.61%#OMX 2182 -0.53%#STOXX 3912 -0.89%#IGOpeningCall

Don't Be Fooled by April's Inflation Jump. It's Being Driven by Reopening Quirks.https://t.co/3dVrRdZ38q

<-- always worth digging into the data on levels and the attribution tables pic.twitter.com/6pzsVCVl7H

It's dangerous to read too much into one number but the broad strength gives us confidence that this is not just a transitory story. Another buzz word for us has been how this year will be complicated" for markets especially once reopening happens. This release personifies that thought process.

You may get dull periods but this year is going to be a big battle between the bullishness of mass reopening/stimulus on one hand and the inflationary consequences on the other. Expect regular pockets of vol. I still lean heavily on the inflationary camp but the reality is that the battle is still in the early stages and non-inflationists will still be able to use the transitory argument for several more months yet.

This is the best chart I've seen that clearly explains what's going on with inflation.

Yes, April saw the fastest inflation since Sept. 2008
But that's b/c prices were compared to last April.

Chart via @andrewvandam pic.twitter.com/cuLI23N7aU

Tesla & Bitcoin pic.twitter.com/YSswJmVZhP

pic.twitter.com/vG01cHRg7W

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