Retail sales in surprise fall in Great Britain; Wall Street, FTSE rise – as it happened

Julia Kollewe

from on 2021-08-20 14:17 (#5NJ6X)

3.17pm BST

Wall Street has edged higher at the open and the UK's FTSE 100 and France's CAC 40 hare also trading cautiously higher now, reversing earlier losses (up 0.29% and 0.17% respectively). The European Stoxx 600 index has also turned positive, up 0.17%. Germany's Dax is flat and Italy's FTSE MiB has slipped 0.2%.

Stocks have had a tough week and suffered heavy losses yesterday, pressured by concerns over rising Covid-19 infections, slowing economic growth in China, and the prospect of the US Federal Reserve starting to taper its asset-purchase programme later this year. More details are expected at the Jackson Hole central banker symposium next week.

2.49pm BST

Nvidia has been quick to issue a brief statement:

We look forward to the opportunity to address the CMA's initial views and resolve any concerns the government may have. We remain confident that this transaction will be beneficial to Arm, its licensees, competition, and the UK.

2.44pm BST

On Wall Street, stocks edged higher at the open but the Dow Jones and the S&P 500 are still on course for their worst week since mid-June, amid concerns over rising Covid infections, slowing growth in China and. the possible tapering of monetary stimulus in the US later this year.

2.42pm BST

Neil Wilson, chief market analyst at Markets.com, says:

The CMA looks like it might torpedo Nvidia's attempted takeover of Arm... The CMA is progressing to a detailed phase 2 investigation and this means the deal is in serious trouble. The CMA itself cites grave competition concerns - notably the fact that Arm's tech is used by various chipmakers in competition with Nvidia.

But we also know there are national security concerns, too, and a public interest test is already being applied to the deal. Secretary of state Oliver Dowden will decide whether the merger should be referred for an in-depth Phase 2 investigation on both competition and national security grounds, or if it should be passed back to the CMA to investigate on competition grounds only. Either the defence argument or the competition angle ought to be enough to block the deal, I feel. And ultimately it would be great to see Arm shares trade on the FTSE - if SoftBank were to let it go.

2.36pm BST

Oliver Dowden, the secretary of state for digital, culture, media and sport, raised national security concerns about the Nvidia-Arm deal in April. He will now decide whether the merger should be referred for an in-depth phase 2 investigation on both competition and national security grounds, or if it should be passed back to the CMA to investigate on competition grounds only.

2.25pm BST

Britain's competition watchdog has found that US company Nvidia's $40bn (30bn) takeover of the UK-based chipmaker Arm raises serious competition concerns".

The Competition and Markets Authority said it has determined that an in-depth investigation into the deal is required. It started investigating the contentious deal in January.

We're concerned that Nvidia controlling Arm could create real problems for Nvidia's rivals by limiting their access to key technologies, and ultimately stifling innovation across a number of important and growing markets. This could end up with consumers missing out on new products, or prices going up.

The chip technology industry is worth billions and is vital to products that businesses and consumers rely on every day. This includes the critical data processing and datacentre technology that supports digital businesses across the economy, and the future development of artificial intelligence technologies that will be important to growth industries like robotics and self-driving cars.

1.05pm BST

Here is more analysis of the UK's public finances from the Institute of Chartered Accountants in England and Wales, and a look ahead to the three-year spending review in October.

Alison Ring, ICAEW public sector director, said:

Last month registered the second-highest July deficit on record, which further emphasises the weak fiscal foundations underpinning the upcoming three-year Spending Review in October.

There is a difficult choice to be made on the state pension, which at over 105bn a year is the second largest individual item in the public sector budget after the NHS. Sticking with the triple lock formula could make a significant contribution to increasing pensioner incomes, but would reduce the amount available for public services by tens of billions of pounds over the coming decade.

1.02pm BST

Global shares are falling for the fifth day in a row, putting them on course for the biggest weekly drop since February, as traders worried about rising coronavirus cases, slower Chinese econmic growth and the Fed's taper of its asset purchase programme. The MSCI World index, a broad gauge of global shares, fell as much as 0.7% today.

The dollar is holding firm as investors sought out safer investments. The dollar index, which measures the greenback against six other currencies, rose to 93.685 for the first time since early November. Gold, another safe haven investment, increased 0.2% to $1,784 an ounce, and is heading for its second week off gains.

The Delta variant remains the biggest worry for investors right now, and along with the question of waning vaccine efficacy has made the risks to the outlook much more pronounced relative to just a few months ago.

However, nervousness about possible tapering by the Fed ahead of next week's Jackson Hole speech by chair [Jerome] Powell, along with a potential Chinese growth slowdown have further played on investors' minds, and brought the narrative a long way from the reflation hopes many had back in the first quarter.

12.38pm BST

Here is our full story on Elon Musk's Telsa Bot".

11.52am BST

Elon Musk said he will probably launch a humanoid robot prototype next year, dubbed the Tesla Bot", which is designed to do boring, repetitious and dangerous" work, reports my colleague Mark Sweney.

The billionaire chief executive of electric car maker Tesla said that the robot, which would be about 5ft 8 inches tall and weigh 125 pounds, would be able to handle tasks such as attaching bolts to cars with a wrench or picking up groceries at stores.

11.35am BST

Time to recap. European stocks are still falling, but the declines are relatively small after yesterday's heavy losses. Oil prices are down for a seventh day.

Here is our full story on the 2.5% surprise fall in retail sales in Great Britain and the improvement in the government's finances.

10.13am BST

The battle for Morrisons entered another round when it announced last night that it had agreed a 7bn takeover by the US private equity group Clayton, Dubilier & Rice in a fierce fight for control of the UK's fourth largest supermarket chain.

All eyes are now on rival suitor Fortress - will it come back with a higher offer? After the new CD&R bid, the US investment group responded with a brief statement, saying it was considering its options" and urged shareholders to take no action".

Supermarkets were one of retail's big lockdown winners and the allure of those retail juggernauts has been clearly visible over the past weeks as the battle to takeover Morrisons has pulled no punches. In the dying minutes of what could be the final round, first bidder CDR got its second wind and delivered a 7bn knockdown offer.

Will Fortress pick itself of the mat and find another level? It is a real possibility. Morrisons is unique, its production capabilities make it extremely attractive at a time supply is becoming a huge issue and the Japanese bank behind Fortress has deep pockets. Then there's the Amazon factor. No one really expects they'll table a bid, but even their position on the field is huge factor.

9.49am BST

AstraZeneca said its treatment AZD7442, a combination of two long-acting antibodies, reduced the risk of developing symptomatic Covid-19 by 77% compared to a placebo. There were no cases of severe disease or deaths in those treated with the therapy while in the placebo arm, there were three cases of severe Covid-19 including two deaths.

Myron J. Levin, professor of pediatrics and medicine at the University of Colorado School of Medicine, and principal investigator on the trial, said:

The PROVENT data show that one dose of AZD7442, delivered in a convenient intramuscular form, can quickly and effectively prevent symptomatic Covid-19. With these exciting results, AZD7442 could be an important tool in our arsenal to help people who may need more than a vaccine to return to their normal lives.

JUST IN: AstraZeneca's Covid-19 antibody cocktail was found to be 77% effective in preventing symptomatic Covid in high-risk people https://t.co/T6BR2DgKWX

9.48am BST

European shares are a sea of red again, although losses are limited, compared to yesterday's chunky falls.

The FTSE 100 is on track for its worst week since January. Today the index is being dragged down by AstraZeneca after the drugmaker halted a late-state clinical trial, and news that retail sales in Great Britain fell sharply in July.

9.25am BST

Marks & Spencer has surprised investors with a rare profit upgrade, sending its shares soaring by as much as 12% (now up nearly 11%).

M&S, one of the biggest names on the high street, enjoyed a jump in demand for food and a surge in online orders for clothes and items for the home, indicating that its turnaround plan is working. Food revenues leapt 10.8% in the 19 weeks to 14 August compared with last year, and 9.6% on 2019/20.

8.52am BST

Turning to the UK public finance figures, they showed a bigger than expected improvement in July. The government borrowed 10.4bn, amid a fall in the number of workers on furlough and a rise in self-assessed income tax receipts. City economists had forecast borrowing of almost 12bn. Compared to July last year, borrowing almost halved (but it was still the second-highest July borrowing on record).

It comes as chancellor Rishi Sunak weighs options for the spending review this autumn, which sets out funding for Whitehall departments. The chancellor said the latest borrowing figures showed the UK's economic recovery from the pandemic was well underway, boosted by the huge amount of support government has provided".

The government is in a much stronger financial position than last month according to today's public finances data, with borrowing halving in July at 10.4bn. This is largely driven by 13% increases in tax receipts and a 5% decrease in government spending compared to June.

Today's data also shows an impressive recovery in self-assessed income tax and business rates, together contributing nearly 11bn to the government budget, twice the amount received in this time last year. With the Coronavirus Job Retention Scheme ending next month, all eyes are on business and wages recovery which seems to have withstood the test of 10% increases in employer contributions to furloughed worker salaries from July 2021.

8.30am BST

The FTSE has turned negative again, trading some 10 points lower at 7,048, a 0.15% drop.

8.06am BST

Stock markets have opened in London and the rest of Europe. The UK's FTSE 100 index has risen 23 points to 7,082, a 0.3% gain (following its sharp drop of 1.5% yesterday).

But elsewhere, markets are slipping again. Germany's Dax and Spain's Ibex have edged down 0.2% while France's CAC and Italy's FTSE MiB are flat, following yesterday's heavy losses.

8.00am BST

Martin Beck, senior economic advisor to the EY ITEM Club, says the fall in retail sales is down to three factors:

First, June's Euro 2020-related rise in sales in food stores unwound. Second, there is likely to have been some impact from the fact that the number of people told to self-isolate by the Covid-19 app in July was nearly three times the June total, constraining retail footfall. And third, with restrictions continuing to be relaxed, consumers will have spent more on social consumption at the expense of the retail sector.

Looking ahead, the normalisation of spending patterns is likely to remain a key theme. Increased opportunities for social consumption, and a high degree of pent-up demand for these services, points to consumers switching back to spending a higher proportion of their money in these areas, at the expense of the retail sector. But there is likely to be some mitigation from the fact that the broader environment for consumer spending is very positive, with restrictions on mobility having been lifted, household incomes more resilient, and some consumers sitting on large levels of excess' savings accumulated over the pandemic.

7.52am BST

While retail sales fell sharply between June and July, they were 5.8% higher than in February 2020, before the impact of coronavirus.

People still shop online: the proportion of sales online went up to nearly 28% in July from 27% in June - much higher than before the pandemic when online sales were just under 20%.

7.45am BST

Here is some instant reaction to the fall in July retail sales. Aled Patchett, head of retail and consumer goods at Lloyds Bank, said:

With the UK's recovery lagging behind that of other major economies, the return of holidays, social events including weddings and the general easing of restrictions last month hasn't turbocharged consumer spending in the way many hoped it might have.

Significant caveats remain as retailers' attention turns to the upcoming golden quarter'. For example, inflation is expected to continue affecting pricing, leaving brands caught between the rock and hard place of deciding between passing on price increases to consumers or sacrificing margin. Meanwhile global shipping issues are already contributing to stock shortages in a range of sub-categories - particularly food and drink.

Underwhelming start to Q3 for the UK economy - retail sales down 2.5% m/m in July 2021, largest fall since the lockdown driven drop in Jan-21.

Food (-1.5%), non-food (-4.4%) sales decline sharply & first fall in fuel sales (-2.9%) since Feb-21. pic.twitter.com/NB7Pw87P3e

7.34am BST

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

Retail sales in Great Britain fell sharply in July, as the boost from the Euro 2020 football tournament faded and people dined out more, and so bought less food and drink to consume at home.

Our latest data show retail sales fell by an estimated 2.5% in July 2021 compared with June 2021.

This is 5.8% higher than their pre-pandemic February 2020 levels https://t.co/zHf7yPqIWY pic.twitter.com/FvF5iPV53u

Our recovery from the pandemic is well underway, boosted by the huge amount of support Government has provided.

But the last 18 months have had a huge impact on our economy and public finances, and many risks remain.

Public sector net borrowing excluding public sector banks was 10.4 billion in July 2021.

This was the second-highest July borrowing since monthly records began in 1993, but 10.1 billion less than in July 2020 https://t.co/ON50Rs82jt pic.twitter.com/eimHfJDDpU

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