US jobless claims rise; FTSE 100 dips; rising dollar hits commodity prices – as it happened

Graeme Wearden

from on 2021-06-17 18:22 (#5K60S)

Rolling coverage of the latest economic and financial news

7.21pm BST

Back on Wall Street, there's a clear split between the fast-growing technology companies, and old economy' stocks, a day after the Federal Reserve gave markets a jolt.

Overall London markets were pulled down, not only by lingering concerns about inflation following yesterday's comments by Fed Chair Jerome Powell but also by a fall in mining stocks. Investors are mulling over China's announcement that it intends to release some of its metal reserves in a bid to curtail the sharp rise in global metal prices which is having a considerable impact on its manufacturing base.

Miners also weighed down the S&P 500 which hasn't had quite the same bounce back as the Nasdaq. While the Dow built on yesterday's losses, tech stocks have simply soared. Investors seem to have quickly made peace with the prospect of rising rates at some point next year if the intervening recovery continues apace, most betting that the recovery will only fuel consumer demand and offset any downside from hikes.

Despite yesterday's pivot, the Fed is still at risk of moving too slow. The latest update to their forecasts shows that they have no clue where inflation is going and that has some traders nervous. In three months time, the Fed has bumped up their 2021 inflation forecast from 2.4% to 3.4%. While the argument for transitory inflation is strong, the Fed's reliance on actual data and not forecasts is raising the risk that they will move too slowly.

US stocks were mixed as big-tech makes a comeback as longer-term Treasury yields plunge, while a commodity selloff is dragging down some of the Dow's key components (Dow, Chevron, and Caterpillar).

7.01pm BST

Copper is another prime example of the cooling of the commodities boom:

Copper prices are down 15% in just over a month. pic.twitter.com/C5zI2LXrWe

6.38pm BST

There's also some interesting action in the bond markets.

The yields (or interest rates) on longer-dated US government bonds are falling today, indicating that investors are more confident that the Federal Reserve will keep inflation in check in the longer term.

US 2-year, 10-year treasury yield curve flattens to 126 bps, flattest since February 26 pic.twitter.com/VwqWBZlwMz

US 5-year, 30-year treasury yield curve flattens to 117 bps, flattest since November pic.twitter.com/zfQuVUYvSy

6.16pm BST

Rolls-Royce, the jet engine maker, has said that all products launched after 2030 will be capable of running with net zero carbon emissions as part of decarbonising plans that rely heavily on replacing fossil fuels with synthetic alternatives that are yet to be approved.

The manufacturer and other aviation companies face a huge challenge to cut their products' carbon emissions. No existing technology can fly passengers across the world without producing tonnes of carbon dioxide.

6.16pm BST

Precious metals prices are being hammered harder.

Spot gold is now down 2% today at $1774 per ounce, the lowest since early May, on top of Wednesday's 2.5% fall.

sadtrombone.exe for metals pic.twitter.com/dXyQZ6b0b4

5.53pm BST

The dollar is continuing to climb, sending the pound down nearly a cent today to a near-six week low around $1.39.

But, the pound's still higher against the euro, which has tumbled to a nine-week low vs the dollar.

While the signals from the FOMC meeting last night were in some way mild, the strong market reaction suggests that the market was overinvested in the Fed position that inflation would prove transitory.

That suggests that we could get a larger repositioning that continues to take the US dollar higher for now.

The dollar rally just keeps going, and going, and going....

The clearest outcome was the surprisingly large shift forward in when the median fed forecaster sees the Fed achieving lift-off, with the median now suggesting two hikes by the end of 2023, a shift from March, when the median forecast was still for no lift-off until 2024.

There is some risk of over-interpretation (especially as Fed Chair Powell clearly disdains the dot plot), as the dots don't differentiate where the Board of Governors voted versus regional Fed members, etc. Still, a generally higher set of policy forecasts despite very modest longer term inflation forecast adjustments (more on that below) suggests a general weakening of the Fed's confidence in is belief that inflation will prove transitory. It's a signal.

5.44pm BST

Oil has now slumped 3% today, pulling US crude down to $69.83 per barrel, and Brent crude to $72.05 per barrel.

That takes it down from its highest levels in over two years.

The 'growth' rally that has been in play since start of 2021, peaked in March and is now rolling over. With #dollar bid and positioning very streched in #wti #oil. Short Oil is strong risk-reward play for a minimum re-test of $65 in near term #trading pic.twitter.com/zjXtqJQ7NB

Data from the EIA revealed that crude oil stockpiles dropped steeply as refineries boosted operations at the fastest pace since before the pandemic. Inventories declined by 7.4 million barrels in the week to 11 June.

The draw was stronger than expected, also due to a rise in exports, which indicates demand is picking up worldwide.

5.27pm BST

European stock markets' winning run is over.

After nine days of gains, the best run since 2017, the Stoxx 600 has closed 0.1% lower tonight, down half a point at 459.33 points.

5.21pm BST

Stocks in London have closed lower, as the rising dollar and jitters about potential central bank tightening weighed on the market.

The UK's FTSE 100 index ended 31.5 points lower at 7153 points, down 0.44% from last night's 15-month closing high.

Commodity prices are suffering a hefty selloff this AM as the U.S. dollar surges in response to the #FOMC.

Mining stocks are faced with a double whammy as China confirms metal stocks release from state reserves. https://t.co/MpGpsLeTMk #Commodities pic.twitter.com/dDfFmP8L4Y

4.35pm BST

London's hopes of attracting more technology companies looking to float on the stock market have received a shot in the arm after the fintech firm Wise chose the City for a rare direct listing expected to value the company at up to 9bn.

The international money-wiring company, formerly known as TransferWise, claims to have revolutionised cross-border transactions by cutting out exchange rate markups charged by banks.

Being listed and having shareholders was the last bastion for big banks as a defence against the fintechs disrupting them... now what?"

4.07pm BST

Billionaire hedge fund investor David Tepper has told CNBC that Federal Reserve did a good job yesterday, showing that policymakers are not asleep at the wheel.

Here's the details:

The Appaloosa chief, known for bold calls and strong returns, told CNBC's Scott Wapner on Thursday that despite the Fed's plan to move up its interest rate hike timetable, the stock market remains alright.

I think the stock market is still fine for now," Tepper told Wapner.

Billionaire investor David Tepper says 'the stock market is still fine' after Fed announcements https://t.co/xhUHOsW0dD

3.46pm BST

Lumber prices continue to sink back from their recent record highs:

LUMBER LIMIT DOWN

Lumber prices have also continued their recent falls adding weight to the idea that the recent sharp moves higher in broader commodity prices is transitory.

Corn, soybeans and wheat are also seeing losses as well as they continue their retreat from their May peaks.

3.29pm BST

Factory activity growth in the Philadelphia region has slowed after surging earlier this year, as firms grabble with rising prices.

The Philadelphia Federal Reserve Bank's business activity index fell to 30.7 from 31.5 in May. That's the second monthly fall in a row, but a level that still shows rapid expansion (anything over zero = growth).

#Manufacturing continues to grow at a healthy pace this month in the #Philly Fed district. #Shipments, #neworders and #employment all reflect strong expansion. But #price pressures are strong, with #input #costs rising and more firms passing higher prices onto customers. pic.twitter.com/1rhacG2tRA

Philly Fed: Manufacturing activity continued to expand strongly in June despite slowing slightly. The composite index declined from 31.5 in May to 30.7 in June, with orders, inventories and the average workweek decelerating. At the same time, shipments and hiring strengthened. pic.twitter.com/D0KQEf9j1b

The Philly Fed and New York Fed are both seeing the manufacturing sectors raising prices at the fastest rate in years - since the survey began 20Y ago in the case of NY - and 1980 in the case of the Philadelphia Fed region. Pricing power has returned. pic.twitter.com/9NHsF7gRbY

3.04pm BST

On Wall Street, stocks have gingerly after yesterday's jolt from the Fed.

2.18pm BST

One week's increase in jobless claims isn't a reason to panic, points out economist AnnElizabeth Konkel of jobs site Indeed.com.

While regular initial claims (nsa) did tick up this week, don't freak out yet. It's one week of data. Regular initial claims are broadly trending downward when looking at the longer time series. pic.twitter.com/lqfW6j4C3X

Regular continuing claims (nsa) are down, but we also want to look at PEUC, which is one metric of long-term joblessness. pic.twitter.com/ArgN13HGd0

PEUC is still stubbornly high. And while it is going to drop in coming weeks, that's because many states will be opting out of the program. PEUC and PUA initial claims are going to be very tricky to interpret in the coming weeks. pic.twitter.com/9TfpjjJvtG

A question on my mind right now is how states opting out of federal programs will impact filing behavior. I don't have a good answer. Will a claimant file a PUA initial claim if they know their state is ending the program in a week?

2.08pm BST

US jobless claims post an unexpected increase after falling for weeks. Last week's increase to 412k from 375k lifts new filings for unemployment benefits to 1mo high. Noise? Probably, but that won't be known until next week's update: https://t.co/Nogpap3KWY pic.twitter.com/fydRxFWXwr

1.57pm BST

Here's more details and snap reaction to the rise in US jobless claims last week:

#Unemployment claims reverse course after falling for several weeks, initial claims +37K to 412K and continuing claims were also up. #California responsible for a lot of the increase with initial claims +15K and continuing +63K. #DOW -114

Initial claims rise to 412k from 375k previously. The increase supports the notion that the move back to full employment is not a one way street & full of turns & twists. What's normal? Prior to the pandemic claims ranged between 200-230K. Long way to go till normalization.

Initial jobless claims creep up to 412k, breaking a hot streak of pandemic lows. Likely a blip-the trend has been moving in the right direction for months and should continue that way as the economy recovers. pic.twitter.com/uKK6U8ih82

1.51pm BST

The number of Americans filing fresh claims for jobless support rose last week, for the first time since April.

A total of 412,000 initial claims for unemployment insurance were filed last week, dashing expectations of another fall to around 359k.

BREAKING:

*U.S. JOBLESS CLAIMS RISE BY 412,000; EST. 359,000 pic.twitter.com/7AMxP6xeNF

BREAKING: Initial jobless claims jump up to 412k, an increase of 37k from last week's number. Initial UI claims had been trending down since late April, according to @USDOL data.

1.30pm BST

European stock markets are still lower today, with the FTSE 100 index now off 45 points or 0.6% at 7140.

Although travel stocks are still higher and banks are holding their gains, mining companies, utilities, consumer cyclicals and industrial stocks are all losing ground.

1.30pm BST

Whisky makers are raising a glass after the UK and US agreed to suspend retaliatory tariffs on goods including Scottish malts for five years, in the de-escalation of a transatlantic trade dispute stretching back almost two decades.

Liz Truss, the UK international trade secretary, said a historic deal" had been reached with Washington to ensure tariffs, which affected UK exports to the US worth 550m, remain suspended.

1.15pm BST

Nutmeg, the UK digital wealth manager, is being acquired by US banking giant JPMorgan Chase.

As a robo-adviser, Nutmeg builds portfolios of investments based on a customer's investment style and preferred level of risk.

A decade after launching in the UK, today we're excited to announce the next chapter for Nutmeg. We will become wholly owned by @jpmorgan @Chase and form the bedrock of their digital wealth management offering outside the US https://t.co/OCCR8ern51

Interesting! JP Morgan buying Nutmeg, a prominent British to robo-advisor with 3.5 billion in assets. Plans to combine it with digital banking services. https://t.co/k7Jqz5R5uG

More big fintech news from the UK...

JPMorgan has acquired robo-advisor
Nutmeg. (with link that actually works)

Sharing our story below soon too.https://t.co/TbTg7XH1F4

12.22pm BST

The Fed sent shock waves through financial markets" by signalling that rates will likely rise faster than previously expected and that a decision to wind down asset purchases may be approaching, says Marios Hadjikyriacos of XM.

The dot plot of interest rate projections now envisions two rate hikes in 2023, from zero previously, while a large minority of officials see a move by next year already.

The market reaction was fierce as the hawkish message came like a bolt out of the blue, propelling the dollar much higher and demolishing gold prices. Stock markets struggled as well, although the fallout was contained, signalling that equity traders didn't panic at the first sign that excess liquidity will be drained from the system.

12.21pm BST

Gold has fallen to its lowest level in over a month, following the Fed meeting.

12.09pm BST

On the other hand... the pound has hit a 10-week high against the euro.

Sterling traded as high as 1.17 against the single currency, for the first time since 6th April.

12.01pm BST

Sterling has dropped to its lowest level against the US dollar in nearly six weeks.

The pound has lost almost half a cent this morning, adding to last night's losses against the greenback.

Perhaps most notable of the materials released last night was the so-called dot plot', i.e. individual FOMC participants' forecasts for the Federal Funds target rate.

Here there was a clear forward shift in expectations, with seven participants now of the view that the first move up in rates would come in 2022, up from four previously. However, the headline change was that the median view was now for two hikes in 2023; the previous projections published in March envisaged no hikes at all through 2023 in the median projections.

The minutes to the last meeting in April revealed that a number of participants argued that discussions over asset purchases should be on the table at upcoming meetings".

Whilst there was no mention of tapering in the FOMC statement, Chair Powell did reveal in his press conference that yesterday's meeting had been one that could be described as the talking about talking" meeting, but added that the Fed is monitoring economic data and that it had not made any decisions about ending asset purchases.

11.35am BST

If Norway follows through on today's forecast of a September rate rise, it would be another milestone in the economic recovery from the pandemic.

The Financial Times says:

Norway's central bank is likely to raise interest rates in September, it said on Thursday, a move which would make it the first large western nation to increase the official cost of borrowing after the Covid-19 pandemic.

Norges Bank held its benchmark interest rate at zero per cent on Thursday, but governor Oystein Olsen said the policy rate will most likely be raised in September" and hinted that a second increase was set for December.

Norway's central bank sets out plan to start raising rates in September https://t.co/UZpiMCgMco via @financialtimes @rmilneNordic

Norway's central bank is preparing for a series of quarterly interest-rate increases after the summer, in a move that puts it ahead of most of the rich world in unwinding the crisis policies triggered by the pandemic.

Norges Bank will most likely" raise rates in September, Governor Oystein Olsen said in a statement on Thursday. At a press conference later in the morning, he suggested the bank will deliver 25 basis-point hikes each quarter over the coming year

Norway's central bank could hike its key policy interest rate twice in the second half of this year and also twice during the first half of 2022, central bank Governor Oeystein Olsen told a news conference.

Norges Bank kept rates on hold at a record low 0.0% on Thursday and said a first hike is likely to come in September.

#NorgesBank clearly signalled a first rate hike in September today. Second in December. Norwegian economy normalising quickly, reasonable for rates to be normalised also.@DN @Finansavisen @E24 #NorgesBank #Norway #NOK pic.twitter.com/LoIZBr7gNx

11.00am BST

Car sales across the European Union have risen, but remain weaker than before the pandemic.

In May 2021, passenger car registrations in the European Union rose by 53.4% compared to last year to 891,665 units, industry body ACEA reports.

#EU May Car Registrations Rise 53.4% Y/y to 891,665 units - European Automobile Manufacturers Association
*Nevertheless, last month's result is still far below the 1.2 million cars that were sold in May 2019.
*Link: https://t.co/Kxk5DsGjm7

New Passenger Car Registration, EU countries - 2021M05 (YoY % change) pic.twitter.com/3OTei8PylO

10.44am BST

Inflation across the eurozone was slightly above the European Central Bank's target last month, new data confirms.

Eurozone consumer prices rose by 2% year-on-year in May, Eurostat reports, up from 1.6% in April and just 0.1% in May 2020.

Euro area annual #inflation up to 2.0% in May https://t.co/fWGaKt0w0d pic.twitter.com/5pXjNf1gPa

Eurozone CPI rises to +2.0% YoY from previous +1.6% in May. Inflation is now above the "below, but close to, 2%" target by the ECB, hinting a possible change in the central bank's forward guidance@graemewearden

Euro area core inflation revised from 0.94% to 0.95% in May. Nothing to see here but the big picture. pic.twitter.com/OGaZh3WPcO

Core inflation at a whopping 1%. Such inflation. Much price pressure. Wow. https://t.co/ijcPAyLP8R

10.29am BST

London and Washington have agreed a truce over the long-running dispute over Airbus and Boeing subsidies.

The two sides have agreed a new cooperative framework for Large Civil Aircraft, following a similar deal between the US and EU earlier this week, over state subsidies given to the European and US aerospace rivals.

Products such as Scotch whisky, biscuits and clotted cream had been hit by additional duties of 25% because of the spat, and the agreement between the U.S. and Britain suspends the tariffs until 2026 while talks take place, U.S. Trade Representative Katherine Tai's office said in a statement on Thursday.

NEW: We've secured an historic deal with the US on the long-running Airbus-Boeing disputes today

This will support jobs across and is great news for Scotch whisky and other exports including aerospace who will no longer face punitive tariffs https://t.co/YNo4DKwc65 pic.twitter.com/HE5bYgftcK

BREAKING: The UK and the US have reached a deal on the long-standing Airbus Boeing disputes, ensuring key UK businesses are not subject to punitive tariffs.

This means greater export opportunities for iconic UK products like Scotch, cashmere and more.https://t.co/NV30IOJRGA pic.twitter.com/RDtrgkjIj8

The European Commission president, Ursula von der Leyen, described the announcement of a suspension of tariffs between the EU and the US as a breakthrough".

This really opens a new chapter in our relationship because we move from litigation to cooperation on aircraft - after 17 years of dispute," she said.

9.50am BST

The owner of Premier Inn hotels has reported strong demand at UK tourist spots as Britons holiday domestically, but hotels at airports and in central London continue to struggle.

We expect leisure demand in coastal and other tourist locations to remain very strong throughout the summer, while the full recovery of leisure demand is dependent on the final release of lockdown, and the return of unrestricted events."

Decent update from Whitbread. As suspected, coastal locations seeing strong demand as people rush to book up their UK summer holidays. London and airport locations a bit patchy. Shares up 3% today, +12.7% year to date #WTB

9.35am BST

More people in the UK own crypto assets, according to new data from the Financial Conduct Authority.

The consumer research shows that as holding cryptoassets has become more common attitudes to them have changed. 38% of crypto users regard them as a gamble (down from 47% last year), while increasing numbers see them as either a complement or alternative to mainstream investments.

By contrast, the level of overall understanding of cryptocurrencies is declining, suggesting that some people who have heard of crypto may not fully understand, with only 71% correctly identified the definition of cryptocurrency from a list of statements.

If consumers invest in these types of products, they should be prepared to lose all their money.

Our new research finds an increase in ownership but a decline in understanding of #cryptoassets https://t.co/Tp9UijRAui

9.15am BST

Norway's central bank has left interest rates on hold at record lows, and signaled that the first rate rise since the pandemic is likely to come in September.

At its latest meeting, Norges Bank's Monetary Policy and Financial Stability Committee decided unanimously to keep the policy rate unchanged at zero percent.

In the Committee's current assessment of the outlook and balance of risks, the policy rate will most likely be raised in September.

Norges Bank Monetary Policy Report - Norges Bankhttps://t.co/OhJRZk4LlL pic.twitter.com/8Ette6UOIk

9.00am BST

Shares in travel stocks are rising following reports that Britain is considering easing the restrictions on foreign holidays for people who are fully vaccinated.

British travellers who have had two Covid vaccines could be allowed quarantine-free entry into England under plans being considered by ministers, the Guardian understands.

As the government grapples with allowing more trips abroad while trying to prevent the importation of new variants, changes are being considered to the traffic light system under which places are graded according to their Covid case and jab rate, determining whether and how people coming from them must isolate.

The change would effectively turn amber countries green for the vaccinated, opening up the possibility of quarantine-free travel to most major holiday destinations in Europe and the US.

It is still at an early stage and it is not clear whether it will be worked out in time for the end of the month. There is an awful lot to do. The devil is in the detail," said a source.

8.23am BST

European markets have also opened lower, with Germany's DAX and France's CAC both dipping in early trading.

The Europe-wide Stoxx 600 index has slipped by 0.3%, from a record closing high yesterday.

8.17am BST

Stocks have opened lower in London too, where the FTSE 100 index is down 34 points or 0.5% at 7150 points.

Mining giants are among the fallers, with Glencore, Anglo American and Antofagasta down around 2.2%. Commodity prices have fallen today, as the dollar strengthens.

7.59am BST

Asia-Pacific markets have dropped after the Fed signalled that monetary policy could tighten faster than expected.

Japan's Nikkei has fallen by almost 1%, while Australia's S&P/ASX 200 and South Korea's KOSPI are both down around 0.4%.

7.47am BST

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

The markets are edgy this morning after the US Federal Reserve surprised investors by indicating that interest rates will rise from record lows sooner than expected, as the US recovery gather speed.

The Federal Reserve Dot Plot

Rising rates may be in our future, but it's going to be a slow and gradual process.https://t.co/svzVh6dOtk #FOMC #TransformingEconomy #FederalReserve #TheFed #Powell #economy #EconTwitter #dotplot #money #inflation #transitory #EURUSD #USD #Fed pic.twitter.com/PIoHGFiWPr

US Dollar touching around 8-week highs of 91.445 in asia/pacific market overnight on hawkish US monetary policy

European Opening Calls:#FTSE 7157 -0.39%#DAX 15669 -0.27%#CAC 6636 -0.26%#AEX 732 -0.24%#MIB 25708 -0.23%#IBEX 9177 -0.28%#OMX 2278 -0.37%#STOXX 4138 -0.34%#IGOpeningCall

Equity futures fall gathering momentum, dollar strengthening. #ftse100 #DOW #DAX30

Lift-off is well into the future.

We're very far from maximum employment, for example, it's a consideration for the future."

The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been hardest hit.

5 minutes into the presser, #Fed Chair #Powell already hat some strong statements:
1) Inflation could turn out to be higher and more persistent that we expect.
2) unemployment assistance may hold back workers wanting to go back to work
3) variants remain a risk #Handelsblatt

We will do what we can to avoid a market reaction, but ultimately when we achieve our macroeconomic goal we will taper, as appropriate.

Powell bashes the dot plot, saying "the dots are not a great forecaster of future rate moves" and should be taken "with a grain of salt."

This time there was no denying it, the Federal Reserve took its first tentative steps on a more hawkish path. It was instantly felt in markets. While there was no immediate change in policy, the median projections for interest rates saw two hikes leap into the forecast for the end of 2023. Additionally, the talking about tapering finally began. However, Chair Powell suggested a start to tapering still remained a ways off" as the FOMC continues to look for further progress in the economy.

The Fed's economic forecasts shifted higher as it recognized that growth this year is going to be even stronger that it had already forecast. The 7% growth rate expected is now above economists' consensus expectations, although forecasters are more optimistic about growth in 2022 than the US central bank. Elsewhere, the Fed's forecasts now show a clear bias to above target inflation in the coming years. PCE inflation is forecast to be above target over the next 3 years.

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