Stock markets fall heavily as another 1.5m Americans claim benefits amid Covid-19 crisis – as it happened

Jasper Jolly

from on 2020-06-11 14:07 (#54JZP)

Live, rolling coverage of business, economics and financial markets as gloomy central bank forecasts make investors wary

3.06pm BST

US jobless data have confirmed that the world's largest economy remains under severe pressure from the coronavirus - even if the absolute worst of the crisis appears to have abated.

Stock markets around the world have seen steep selloffs as investors rein in their optimism after the Federal Reserve poured cold water on their hopes that a recovery would be quick.

68.4% OF ECONOMISTS EXPECT U.S. RECOVERY IN 3Q, 22.8% SAID IT STARTED IN 2Q -- WSJ SURVEY

ECONOMISTS SEE 9.6% UNEMPLOYMENT RATE IN DECEMBER -- WSJ SURVEY

98.3% OF ECONOMISTS EXPECT FED WON'T CUT RATES BELOW ZERO IN NEXT TWO YEARS -- WSJ SURVEY

Last Friday's jobs report from the BLS reported unemployment at 13.3%, but today's insured' unemployment rate based on continuing claims is at 14.4%. Add in all unemployment benefit recipients - including those receiving help under the Pandemic Unemployment Assistance and that's 29,505,027 people - and we get 20.3% unemployment.

2.37pm BST

Here is what is weighing on Wall Street:

In just 12 weeks more than 44 million claims have been made for benefits as people lost their jobs. Rehiring appears to have started.

2.33pm BST

US stock markets have taken a heavy tumble in opening trades as investor optimism runs out of steam.

Here are the opening snaps:

2.30pm BST

Canadian planemaker Bombardier plans to cut up to 600 jobs in its Northern Ireland operations, in another heavy blow to the UK economy.

2.16pm BST

Investors are wary about signs of a potential second wave of Covid-19 cases, even as the world's largest economy opens up.

Texas in particular showed a record number of hospitalisations for Covid-19 this week.

The US labor market churn continues. Job losses in excess of 1.5m remain extremely high considering the pre-Covid record was 695,000 claims. Fortunately, continuing claims declined by 339,000 implying more people gained employment than lost it.

While the worst of the job losses might be behind us, the recent surges in new Covid-19 cases in states such as Texas and Arizona could stall the nascent recovery if not brought under control.

Our preliminary forecast for next week is for flat or slightly higher claims, based on Google search data and partial hard numbers from Pennsylvania and Wisconsin.

This doesn't necessarily mean that May's payroll increase was a one-time fluke, because claims only measure the pace of gross layoffs, and tell us nothing about the pace of re-hiring of people laid off earlier in the crisis. But markets will not like to see any increase in the claims numbers, which will magnify the uneasiness now being triggered by the second wave of Covid cases, mostly in the South.

2.10pm BST

Over the course of the crisis there have been more than 43m jobless claims.

Allianz chief economic adviser Mohamed El-Erian, who warned earlier today that stock markets are getting ahead of the terrible economic data, welcomed the fall in intial and continuing claims.

Jobless claims data are out.

Both new and continuing claims fell (to 1.5 million and 20.9 million, respectively).

Less good is that continuing claims came in above consensus expectations.

The focus now shifts to high frequency indicator of the hiring side of the labor market. https://t.co/wBkRK24dFk

#www q an you i u re what we q NBC

My 16 month old daughter was playing with my phone!

2.04pm BST

An important factor in looking at the latest jobless claims report is how it squares with the non-farm payrolls data which last week showed the US economy added jobs - suggesting a quicker recovery was in the offing and taking pretty much everyone completely off guard.

One key thing to keep in mind is that - although a significant improvement, the data on their own are unprecedented before the crisis.

It bears repeating that jobless claims are still far, far away from normal.

They do not corroborate the surprising rebound in the May jobs report. pic.twitter.com/nummCaOqTT

The slight decline in initial jobless claims, following last week's surprisingly upbeat nonfarm payroll numbers, suggests that the US recovery is slowly getting underway and the underlying economic fundamentals may be more robust than anticipated.

If this downward trend continues, it could help support the current market rally, but there are still potential risks to the recovery. The possibility of a second virus wave and ongoing civil unrest, alongside heightened rhetoric around US-China trade relations, may weigh on the confidence of consumers and businesses.

1.51pm BST

The weak data, which suggests the global economy might be in for a long, drawn-out recovery, has also added to the weight on the FTSE 100.

It has now lost 3% for the day, or 188 points. The mid-cap FTSE 250 is also down by 3%.

1.49pm BST

US stock market futures have extended their losses after the jobless reading.

Futures for the S&P 500, the US benchmark, are down by 2.6%. Dow Jones and Nasdaq futures point to 3.2% and 1.7% losses respectively when trading opens in about 40 minutes.

1.45pm BST

The number of Americans making continued claims for unemployment fell to 20.9m in the week ending 30 May, down from 21.3m in the prior week, the data showed.

The speed of the crisis has been unprecedented in recent history, with initial jobless claims hitting a record 6m in a week at the height of the crisis.

1.34pm BST

Some 1.54m Americans made new unemployment claims in the week ending on 6 June, according to the US Department of Labor, as the toll of the coronavirus crisis mounted further.

The reading, which was almost exactly in line with economists' expectations, suggested the US economy is recovering as claims slowed, but it still portrayed a workforce suffering from a severe recession.

1.28pm BST

The publisher of the Sun and the Times has warned of impending job losses as part of a major cost-cutting programme as the coronavirus pandemic hammers newspaper sales and advertising revenue.

1.01pm BST

The toll of job losses from the pandemic may have only just started, as the pandemic destroys demand in many industries. Almost one in 10 architecture practices fear they will go under in the aftermath of the Covid-19 pandemic.

The current pandemic and economic uncertainty are clearly continuing to impact both architects' current workloads and their confidence about the future, with the majority expecting their workloads to decrease in coming months.

But while many participants continued to point to the serious recession ahead, some also began to reference glimmers of hope in the form of new enquiries and new commissions.

12.25pm BST

The Fed has also contributed to movements on oil markets. Futures prices for both Brent crude, the North Sea benchmark, and West Texas Intermediate, the North American benchmark, are down by more than 3% today.

One barrel of Brent crude for August delivery will set you back $40.34. The price for WTI was $38.11 just after midday.

While last Friday's labour market figures signalled that the nadir of the current crisis has been passed, the Fed's latest comments reiterate the longstanding economic consequences of the coronavirus pandemic, pouring cold water on the notion of a V-shaped recovery. CEBR forecasts that the US economy will contract by 6.0% in 2020, with GDP not expected to reach 2019 levels until 2023.

11.43am BST

Sterling is down by 0.45% against the US dollar at $1.2689 this morning - a move that would end a 10-day winning streak for the pound.

The pound briefly broke above $1.28 on Wednesday for the first time since 12 March, after the dovish Fed scotched any hopes of interest rates rising any time soon. (Interest rate increases generally make a currency more attractive relative to others.). However, the pound dropped back on Thursday.

11.10am BST

Another round of big job losses that we missed earlier: chemicals company Johnson Matthey plans to make 2,500 redundancies as it halved its dividend.

Following automotive OEM (original equipment manufacturers)shutdowns earlier in the year, we are now seeing our customers gradually reopen their plants. However, visibility on the path of recovery remains low.

Johnson Matthey's decision to cut its dividend - and in the process end a streak of increases that dates back to the late 1980s - means that 48 FTSE 100 firms have now announced some kind of reduction to or suspension of payments to shareholders, compared to 47 that have kept or increased them since the start of the year.

10.58am BST

Advisors for Intu have reportedly asked the company's bondholders for 12m to keep the shopping centres it owns running through an administration process, according to Sky News.

10.36am BST

Lloyds has been fined 64m by the City watchdog after an investigation found the bank failed treat mortgage customers fairly after they fell into financial difficulty.

Banks are required to treat customers fairly, even when those customers are in financial difficulties or are having trouble meeting their obligations. By not sufficiently understanding their customers' circumstances the banks risked treating unfairly more than a quarter of a million customers in mortgage arrears, over several years. In some cases, customers were treated unfairly, including vulnerable customers.

Customers should still pay what is owed, but banks are obliged to treat their customers fairly when making new payment arrangements.

10.19am BST

More than 1m British businesses have furloughed at least one employee, according to data from HM Revenue and Customs that covers up to 31 May.

Claims up to that point totalled 17.4bn, HMRC said. The government pays 80% of wages up to 2,500 a month under the scheme.

9.51am BST

More than a fifth of normal household spending has been prevented by the lockdown, according to interesting new data from the Office for National Statistics (ONS).

In the financial year ending March 2019, UK households spent an average of 182 per week on activities that have since been largely prevented by government guidelines (such as travel, holidays and meals out).

9.22am BST

The government is clearly happy with the Unilever decision: business secretary Alok Sharma has said it represents a vote of confidence" in the UK.

Delighted to see Unilever's proposals to become a fully incorporated UK company - a clear vote of confidence in the UK.#BackingBusiness https://t.co/KJ7ggSHMJc

9.16am BST

There's a fair bit of Anglo-Dutch stock market action today. Just Eat Takeaway is headquartered in the Netherlands but its Just Eat arm was founded in the UK. Added to that recipe will be a dash of New York, as it acquires GrubHub for 5.8bn.

The tie-up will give the Netherlands-based Just Eat Takeaway access to the lucrative food delivery market in the US, writes the Guardian's Joanna Partridge in her full report.

9.08am BST

Italian industrial output was not quite as bad as expected in April, according to data just published - but it still suffered an eye-watering monthly fall.

Production in April dropped 19.1% month-on-month, according to the National Institute of Statistics in Italy, better than economists' expecations of a 24% drop.

8.58am BST

Almost an hour into trading and the mood on European stock exchanges is, if anything, bleaker.

The FTSE 100 has lost 2.5% or 158 points to trade at around 6,169 points. There are falls of similar proportions across Europe's main markets.

8.49am BST

More UK job losses from this morning: Heathrow Airport has started a voluntary redundancy scheme as it tries to cut costs.

The airport, which has about 7,000 staff, said on Thursday that its employment levels were no longer sustainable and that it had agreed to start voluntary redundancy with unions.

While we cannot rule out further job reductions, we will continue to explore options to minimise the number of job losses," Heathrow Chief Executive John Holland-Kaye said in a statement.

8.32am BST

The majority of the Centrica job losses will come in the second half of 2020 - in another sign of the difficulties facing the economy as government withdraws its furlough scheme that is paying many workers' wages.

That said, Centrica was struggling even before the coronavirus pandemic. The Guardian's Nils Pratley in April wrote:

Everything is going wrong at once. Power usage in the UK has plunged as offices and factories have shut. Bad debts will inevitably rise among small businesses and British Gas consumers.

Centrica has over 80 different employee contracts, each with multiple variants, with many of the agreements dating back over 35 years. We need to modernise these to enable us to best serve the changing expectations of today's customers while retaining the quality of our services.

I believe that our complex business model hinders the delivery of our strategy and inhibits the relentless focus I want to give to our customers. We have great people, strong brands that are trusted by millions and leading market positions, but the harsh reality is that we have lost over half of our earnings in recent years. Now we must bring focus by modernising and simplifying the way we do business.

I truly regret that these difficult decisions will have to be made and understand the impact on the colleagues who will leave us. However, the changes we are proposing to make are designed to arrest our decline, allow us to focus on our customers and create a sustainable company.

8.22am BST

British Gas owner Centrica has said it plans to cut 5,000 jobs as part of a significant management shake-up.

Over half of the struggling utility copmany's cuts will be concentrated in management roles, the company has announced.

The company will have fewer customer-facing business units all of which will report directly to the CEO. Three management layers will be removed to create a flatter, less bureaucratic organisation which is closer to, and focused on, the customer. As a result of these changes, around half of the current 40 strong Senior Leadership Team will leave the group by the end of August.

8.18am BST

Anglo-Dutch conglomerate Unilever has decided to simplify its corporate structure and move to a single UK entity - potentially ending a long-running saga that has seen it dragged into the Brexit debate.

8.04am BST

The FTSE 100 selloff has been worse than feared in the opening minutes: London blue-chip stocks are down by 2.4%.

Germany's Dax index is down by 2.5%, while France's Cac 40 has lost 2.1%. There are losses of more than 2% in Italy and Spain as well.

8.02am BST

Just Eat Takeaway has announced a takeover deal with US-based rival GrubHub for $7.3bn, in a move that will create the world's largest fast food delivery service outside of China if completed.

7.48am BST

Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.

Stock market indices around the world have tumbled after Federal Reserve chairman Jerome Powell delivered a pessimistic outlook for economic growth and suggested that it would be a long time before the central bank would be able to withdraw support for the economy.

For those just waking up, we've seen a big risk -off move overnight.#DOW 26493 -1.84%#SPX 3142 -1.47%#NASDAQ 9999 -0.88%#RUSSELL 1418 -3.35%#FANG 4095 -1.08% pic.twitter.com/XqA3djF8mc

The Fed reiterated that it expects to maintain the near-zero fed funds rate until it is confident the economy is on track to achieve the central bank's dual mandate. [...] Powell reinforced this message with the line that they are not even thinking about thinking about raising rates."

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