FTSE 250 hits record high amid buyout spree and factory boom – as it happened
Rolling live coverage as UK manufacturing PMI signals continued output growth despite supply chain struggles
- HSBC profit doubles as it expands bonus pool for bankers
- Meggitt set to be latest UK acquisition target in 6.3bn takeover
- FTSE 100 and European stock market indices rise
3.08pm BST
The UK's rapid economic recovery is looking like it is continuing, with factories in boom mood.
Indeed, UK factory output grew at among the fastest rates in history in July, according to PMI data. However, the complaints of supply chains troubles and inflationary pressures are starting to get louder, suggesting it could be held back.
Related: Progressive Democrats call on own party to extend evictions moratorium - live
2.58pm BST
The respected National Institute of Economic and Social Research has forecast the UK economy will grow by 6.8% in 2021, an upward revision of 1.1 percentage points since May.
The economy slumped by 9.8% in 2020 as the coronavirus pandemic hit, but is bouncing back. The 6.8% growth in 2021 will be followed by a 5.3% expansion in 2022, Niesr said.
Supply-side factors and effects of reopening amid the recovery in consumption are likely to keep inflation well-above the Bank of England's 2% target for the most part of next year. Now is the time for the monetary policy committee to prepare the ground for normalising its monetary policy stance by clearly communicating how asset purchases and the Bank rate will be adjusted in response to a changing inflation outlook.
Given the uncertainties regarding the exit from QE, the Bank should follow a carefully communicated gradual approach to avoid a significant tightening in financial conditions that might risk the ongoing recovery from the pandemic.
2.33pm BST
Wall Street has indeed gained at the opening bell - leaving the S&P 500 a whisker shy of a new record. (It will of course probably break this record the moment this is published.)
Here are the opening snaps:
2.20pm BST
With a few minutes to go until the Wall Street opening bell, it looks like US stocks are going to test new record highs.
Futures suggest the S&P 500 will gain about 0.4% to reach 4,405 points. That would leave it just shy of the record that will be hit at 4,430 points. The Nasdaq is pegged at an early gain of about 0.5%.
1.46pm BST
The Meggitt takeover deal is not the only thing helping the FTSE 250 to its record high: shares in outsourcing company Sanne have also enjoyed a healthy bump after an approach by investment fund services company Apex Group.
Sanne shares are up by 8% to a new record high, after Apex joined private equity firm Cinven in bidding for it.
1.21pm BST
An interesting story from the Financial Times () today: it reports that Goldman Sachs has raised its pay offer to new joiners:
First-year analysts will now earn a base wage of $110,000, rising to $125,000 in their second year, according to people familiar with the decision. Those at the more senior associate rank will receive a boost to $150,000.
12.45pm BST
A quick look at the oil markets, where Brent crude futures prices have lost 1.2% today.
One barrel of Brent, the North Sea benchmark, will set you back about $74.60. West Texas Intermediate, the North American benchmark, is down by 1.3%, to $72.90.
China has been leading economic recovery in Asia and if the pullback deepens, concerns will grow that the global outlook will see a significant decline.
12.12pm BST
Ferrari made a net profit of 206m in the second quarter of 2021 as the supercar maker bounced back from the pandemic it barely broke even.
11.29am BST
A gigantic glowing orb, as wide as the London Eye and almost as tall as Big Ben, is planned to descend on Stratford, bulging on to the skyline like a great artificial sun, dazzling the East End with the power of 36m LEDs, writes Oliver Wainwright, the Guardian's architecture and design critic.
This is the MSG Sphere, the latest live entertainment concept from New York's Madison Square Garden company, purveyors of high-octane razzmatazz since 1879.
Related: The MSG Sphere: will Stratford's giant orb venue really go ahead?
11.10am BST
It has been a good morning for most investors on the London Stock Exchange, with the FTSE 100 and the FTSE 250 both up by more than 1% as traders have their elevenses, if that's still a thing.
The mid-cap FTSE 250 has, in fact, set its latest record high above 23,300 points. It is hovering slightly below that now, up 1.4% for the day.
10.54am BST
Shortages of labour and materials are hampering the ability of Britain's manufacturers to take advantage of a post-lockdown boost to demand, the latest snapshot of industry has shown, writes the Guardian's economics editor, Larry Elliott.
Despite posting another strong performance in July, the monthly survey from IHS Markit/Cips found output and order book growth slowed to its weakest in four months.
Related: UK manufacturers held back by staff and parts shortages, survey finds
10.29am BST
It should be emphasised that manufacturing companies would probably have taken this situation a year ago when the pandemic struck, but there are definite signs of struggle.
The supply chain pressures are stifling" some businesses, according to Rob Dobson, a director at IHS Markit. He said:
On one hand, manufacturers are benefiting from re-opening economies.
On the other, the recent surge in global manufacturing growth has led to another month of near-record supply chain delays, exacerbated by factories and their customers building up safety stocks. Some firms also noted that post-Brexit issues were still a constraint on efforts to rebuild sales and manage supply and distribution channels to the EU.
Many manufacturers are in a relatively robust financial position having remained open through large parts of previous lockdowns and having continued to see steady demand, which is now soaring.
While benefitting from increased demand, manufacturers are now facing the challenge of substantially increased shipping costs, in addition to disruption from staff having to isolate due to the pingdemic'. Staffing costs are also rising as demand for workers intensifies, leading to labour shortages in certain areas, such as in particular in the food manufacturing and automotive sectors, and greater powers for workers to demand pay increases. This is leading to higher production costs at the factory gate and price rises becoming more commonplace. However we would expect the buoyant results of recent PMI to continue over the next few months.
10.07am BST
A key question for economists (particularly those at the Bank of England) is whether all of these pressures on factories result in some durable inflation.
Input prices rose at a near-record pace in July, with 72% of manufacturers seeing an increase, IHS Markit said:
A vast array of items increased in cost, including chemicals, commodities, cardboard, electronics, food stuffs, metals, packaging and timber products. The pass-through of higher input costs led to a further substantial rise in output charges, which rose at a near-identical pace to June's series-record.
9.58am BST
It has been a few months of historic boom time for British factories thanks to the bounceback from the coronavirus recession.
July's reading would have represented the strongest month seen since the financial crisis - had it not been for the even stronger growth in the previous few months.
9.45am BST
The FTSE 100 had pulled back marginally before the PMI data to a 0.8% gain, but now it's back at 1% for the day.
9.39am BST
UK factory output grew at among the fastest rates in history in July, but supply chains are showing signs of being overstretched as companies race to keep up with demand, according to its latest purchasing managers' index (PMI).
The final reading of the IHS Markit/CIPS PMI dropped to 60.4 in July, down further from May's record high of 65.6, but a continuation of the 14-month expansion since the pandemic's effects on the UK economy became clear.
Scarcities, shortages and price rises remained prominent challenges faced by UK manufacturers during July.
Raw material, staff and skill shortages were all major factors stymieing output growth and contributing to a further marked increase in input purchasing.
9.16am BST
There are inflationary pressures everywhere, according to survey compilers IHS Markit.
Chris Williamson, chief business economist at IHS Markit said:
The fact that growth of eurozone manufacturing cooled slightly in July after a record-breaking expansion during the second quarter should not itself be a major cause for concern. But the July survey also brought further signs that manufacturers and their suppliers are struggling to raise production fast enough to meet demand, driving prices ever higher.
Although growth of demand has come off the boil slightly as the initial boost from the reopening of the economy fades, the July survey showed inflows of new orders outstripping production to an extent unprecedented in the survey's 24-year history.
9.14am BST
European factory output was just short of the record high it enjoyed in June, according to the latest purchasing managers' index (PMI) for the sector.
The coronavirus pandemic has caused ructions around the world, but it appears that European factories are in the midst of a record-breaking bounceback - even as their counterparts in Asia appear to be at a very different part of the cycle.
Widespread shortages of materials and poor transport availability pushed up manufacturing input prices in July at a survey-record rate. Indeed, national level data showed rates of cost inflation accelerating to fresh highs across a slew of countries including Austria, Germany and the Netherlands.
9.02am BST
Australian Stock Exchange-listed buy-now-pay-later company Afterpay will be bought out by Square, the payments company started by Twitter boss Jack Dorsey, for $39bn (28bn).
Related: Australian buy-now-pay-later company Afterpay to be bought by US giant Square for $39bn
8.40am BST
The board of Meggitt, the FTSE 250 engineering company, has unanimously recommended that shareholders accept the 800p-per-share takeover offer from Parker Hannifin.
The offer is at a 71% premium to Meggitt's closing share price on Friday. Meggitt's share price surged 60% to 750p at the start of trading on Monday as investors reacted to the news.
Related: UK defence supplier Meggitt agrees 6.3bn takeover by US rival
8.39am BST
British aerospace manufacturer Meggitt is set to be the latest big UK company snapped up by an overseas buyer, after it agreed a 6.3bn deal with US engineering group Parker Hannifin.
8.25am BST
It has been a profits parade for British banks so far this summer, with the major UK lenders reporting an economic recovery that has meant previous predictions of loan losses were unfounded.
HSBC has hiked banker bonuses by 50% after profits grew by more than fourfold thanks to an economic rebound in the key markets including the UK.
The London-headquartered bank said it had put aside $900m to compensate its star bankers in the first half of the year, up from $600m during the same period in 2020 when the bank's profits suffered from the onset of the Covid crisis. Its top bankers will have another six months to grow the bonus pool, before it is paid out next spring.
8.09am BST
It's looking like a positive start to the week on European bourses in spite of the cautious outlook from Asia. London's FTSE 100 has gained 1% in the opening minutes.
The index has been helped by strong results from HSBC, while the aerospace sector has been a takeover approach for Meggit (more on both shortly).
8.02am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It's manufacturing PMI day - but the monthly check-up of factory activity from purchasing managers' index surveys around the world has got off to a fairly tepid start with the news of the slowest growth in output from China's manufacturing sector since April 2020.
ICYMI! The Caixin #China Manufacturing #PMI fell to 50.3 in July, still above 50, signaling a marginal improvement in the manufacturing sector, but also the lowest level in 15 months. pic.twitter.com/N6MpKBIgHV
We remain worried about a period of weakness in manufacturing, with exports and production well above pre-pandemic trends. The sharper drop in the Caixin PMI-more aligned to smaller and exporting firms-to 50.3, from 51.3 in June, underlines the precariousness of foreign trade. New export orders were a serious drag in the official index too.
Other economies in the region also posted weak manufacturing readings as they grappled with a surge in infections. Indonesia (at 40.1 vs. 53.5 last month) posted its worst reading in 13 months while Thailand's reading slipped to 48.7 from 49.5 and Philippines manufacturing PMI dipped to 50.4 from 50.8. Vietnam's manufacturing PMI continued to remain in contractionary territory with a reading of 45.1
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