Stock market gains fade; gold rises to four-month high – as it happened

Julia Kollewe

from on 2021-05-26 14:08 (#5J980)

3.08pm BST

European stock markets have retreated, reversing earlier gains, while Wall Street opened slightly higher. The Dow Jones is now flat, the S&P 500 has edged 0.1% higher and the the Nasdaq is 0.3% ahead, as a dip in bond yields boosted tech stocks for a third session. In Europe:

The Journal podcast: Inflation is the highest it has been in over a decade. WSJ's Jon Hilsenrath explains why the Federal Reserve says everything is under control while some other economists fret. https://t.co/2YZEzRcpkm

2.29pm BST

SSE has promised to spend about 2bn on low-carbon energy projects over the next year and expand its renewable energy business overseas.

As the UK prepares to host the UN climate change conference in Glasgow, Cop26, in November, the energy company set out its plan for the next pivotal year" for climate action alongside better-than-expected annual results, after limiting the financial toll of the coronavirus pandemic to 170m for the year.

1.20pm BST

Here is our full story on the biotech Vectura, a FTSE 250 firm, agreeing to a 958m takeover by the US private equity house The Carlyle Group.

1.07pm BST

Gold has risen above the $1,900 level for the first time since January, as US Treasury yields retreated, lifting its appeal. Federal Reserve officials have confirmed their dovish stance on interest rates in recent days, with Fed vice chair Richard Clarida saying yesterday that the Fed could tame inflation if necessary without throwing the economic recovery off track by engineering a soft landing".

Spot gold has climbed 0.3% to $1,904 an ounce, after hitting its highest level since 8 January, at $1,910. Other precious metals are also rallying, with palladium up 0.8% at $2,792 an ounce, silver up 0.3% at $28.06 and platinum rising 0.6% to $1,198.

11.15am BST

Business confidence has improved strongly in France in May. The business climate index from Insee rose 12 points to 108, climbing above its long-term average of 100 for the first time since February 2020. It is even higher than the pre-pandemic high of 105.

In retail, business climate improved by 17 points, as non-essential stores reopened on 19 May. In the services industry, the index rose 15 points driven by rising optimism in the hotels and food services sectors. In manufacturing, confidence improved by three points.

10.36am BST

The easyJet boss, Johan Lundgren, downplayed fears of the spread of the Indian variant stopping holidaymakers from going abroad this summer, saying the evidence was that vaccines were effective enough.

I don't think that the outlook of this and the likeliness and the probability is that because of the Indian variant the summer is ruined.

I don't think that UK aviation as an industry can go through another lost summer without grave consequences. In that case the govt needs to be ready and prepared to step up - it is its restrictions that have made it impossible to operate for players in this industry.

10.33am BST

Airline and holiday firm bosses have joined in attacking the government's utterly confusing" advice on foreign travel, accusing ministers of moving the goalposts" and lacking transparency over decisions on safe destinations, our transport correspondent Gwyn Topham reports.

The UK was being left behind Europe and throwing away the success of its vaccination programme, they said, warning that another lost summer would have grave consequences" for the industry.

10.28am BST

Stock markets have lost some steam, apparently because traders are focusing more on talk of asset purchases being tapered in the US. The main indices in the UK, Germany and Italy have edged 0.1% higher while the French bourse has gained 0.3%.

Joshua Mahony, senior market analyst at the online trading platform IG, says:

European markets have continued the somewhat indecisive theme seen overnight, with both the Dax and FTSE-100 trading largely flat this morning. Despite easing fears around the Indian Covid variant in the UK, we have seen the FTSE-100 continue to tread water.

There has been a growing theme around Fed tapering taking shape of late, and commentary from Fed vice-chair Richard Clarida furthered the point that we could see the rate of asset purchases trimmed in the coming months. However, Clarida also reiterated the crucial view that while inflation has been moving sharply higher, this continues the be viewed as transitory in nature. For markets, the key question is just how long inflation needs to remain elevated for the Fed to no longer view them as temporary.

Rising inflation and falling treasury yields continue to benefit precious metals, with gold rising into a four-month high this morning. The experiences of 2008 highlight how the prolonged growth in the Fed balance sheet should allow for a drawn out gold bull-market well after the original economic collapse. However, with the Fed having acted at greater speed and size in comparison to 2008, the question for gold bulls is just how long we will see the FOMC maintain their accommodative stance.

9.58am BST

Mould has also sent us his thoughts on the markets.

The UK's FTSE 100 index, Germany's Dax and Italy's FTSE MiB are now flat as earlier gains faded, while France's CAC is still 0.2% head.

Markets in Europe and Asia made small advances as investors took comfort from comments about key central banks maintaining the status quo on supportive monetary policy and stimulus measure.

Federal Reserve Bank of Chicago President Charles Evans yesterday said he saw no reason for the US central bank to change its stance, and European central bank executive board member Fabio Panetta said there was no reason to reduce bond purchases.

9.56am BST

Aside from the agreed Vectura takeover, there is another healthcare deal today. Spire Healthcare, which runs 39 private hospitals and eight clinics across the UK, is being taken over by Australia's Ramsay Health Care, the country's biggest private hospital operator, in a 2.1bn deal including debt (that's 1bn without debt).

9.43am BST

Russ Mould, investment director at the stockbroker AJ Bell, says:

The retailer smashed it with food sales, but clothing was a flop as the working from home trend caused a slump in suit sales and the nation no doubt decided it didn't need to buy any of its pastel-coloured jumpers.

The company seems to be hoping that 2021 will be a turning point (just like each of the previous years and their turning points, given its eternal turnaround programme).

9.36am BST

Here is our full story on Marks & Spencer. M&S boss Steve Rowe expects that up to half of its clothing and homewares business will be online in future.

The trend online has accelerated. We thought about a third of our sales would be online, it looks more like 40-50% in short order.

9.32am BST

British Land, one of Britain's biggest property companies, has reported an annual after-tax loss of 1.1bn following a similar loss in 2020, while underlying profit fell 34% to 201m. But it is encouraged by a return of shoppers to its retail parks in recent weeks.

The company wrote down the value of its portfolio of shops and offices by 10.8%, slashing it by more than 1bn to 9.1bn, as the pandemic led to widespread shop closures during lockdowns while offices stood empty as working from home took off.

We see a value opportunity in retail parks, reflecting increased yields and a more stable occupational outlook. We have been further encouraged by how strongly footfall and sales have rebounded in recent weeks.

These are increasingly preferred by retailers, because they are affordable and support an online offer by facilitating click & collect, returns and ship from store. They are also preferred by business which are more online resilient, including discount food and homeware retailers.

8.25am BST

European stock markets have opened higher: the FTSE 100 index in London has edged up 0.1% to 7,035. Germany's Dax has risen 0.4% to 15,532 and France's CAC is 0.3% higher at 6,412, while Italy's FTSE MiB has gained 0.2% to 24,947.

8.16am BST

Vectura shares have jumped 31% to 160p on the news of the biotech firm's takeover by the US private equity firm The Carlyle Group.

Vectura shareholders are to receive 155p for each share they hold under the terms of the deal, which was announced this morning.

Vectura has made strong progress since embarking on its new strategy in 2019 to become a leading inhalation focused CDMO [contract development and manufacturing organisation], whilst continuing to deliver strong financial and operational results in its royalties and product supply businesses.

While the Vectura directors remain confident in the long term fundamentals of the Vectura Group, we believe that this is an attractive offer for Vectura Shareholders, which secures the delivery of future value for Vectura Shareholders in cash today. The offer reflects the quality, strength and long term performance of Vectura's businesses and its future growth potential. We believe that our people, our clients and our businesses will continue to prosper under the stewardship of Carlyle.

We have followed the strategic changes underway at Vectura closely and fully support the focus on building a market leading inhalation specialist CDMO. We believe that under Carlyle's ownership Vectura will be able to accelerate its transformation significantly with greater access to capital and the support of our long experience in the sector. We look forward to working with [chief executive] Will Downie and his team.

8.10am BST

Our retail correspondent Sarah Butler reports on M&S:

Marks & Spencer is to step up store closures after diving to 201.2m into the red after clothing and homewares sales slid by almost a third during the high street lockdown.

7.49am BST

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

Vectura, one of Britain's biggest biotech firms, has been taken over by the American private equity group The Carlyle Group in a 958m deal. Wiltshire-based Vectura specialises in inhaled treatments and is working with Inspira Pharmaceuticals on developing an inhaled version of Inspira's experimental lead drug for the treatment of Covid-19 - a plant-based drug.

It's really important that government and businesses are on the lookout for pandemic plunderers.

With the right team in place to accelerate change in the trading businesses and build a trajectory for future growth, we now have a clear line of sight on the path to make M&S special again. The transformation has moved to the next phase.

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