UK service sector slump levels off, as China growth surges - as it happened

Graeme Wearden

from on 2020-07-03 14:07 (#55AKR)

Rolling coverage of the latest economic and financial news

3.07pm BST

Usually at this time, we'd be watching the early action on Wall Street.

2.46pm BST

Poundstretcher could close nearly half its stores in six weeks' time, with 2,000 jobs at risk, after landlords and other creditors approved a rescue restructure, my colleague Sarah Butler reports.

Rents will be cut by up to 40% on 84 stores and held at current rates on 94 stores under the insolvency process known as a company voluntary arrangement (CVA) approved late on Thursday night.

2.37pm BST

The Labour Party has thrown its support behind calls for a wealth tax to cover the cost of the pandemic.

PA has the details:

Shadow chancellor Anneliese Dodds, in her first major speech in the role, told the government on Friday to not increase taxes or cut support for low and middle-income people" during the crisis.

But she said a new settlement" is needed to address the injustice of the worst-off paying more tax proportionally than high earners, while the richest derive a significant part of their income from wealth.

2.35pm BST

An update on the pub situation - landlords in England can throw their doors open at 6am tomorrow, as part of the relaxing of Covid-19 rules.

That may not seem completely consistent with the government's calls for responsible drinking, but at least it should prevent bars opening at 00.01am for late-night revelry.

2.24pm BST

Over in Brazil, service sector companies continue to suffer... as the country's Covid-19 crisis intensifies.

June's survey of Brazilian service providers continued to indicate that the coronavirus disease 2019 (COVID-19) pandemic is having a severe and adverse effect on the services economy.

Although easing further on April's survey record, activity continued to fall sharply in June, undermined by another considerable drop in new work. Firms continued to cut employment in response, reflective in part of efforts to control costs. Latest data showed that operating expenses rose only marginally and at the slowest rate in the survey history.

Despite easing somewhat since May, the downturn in Brazil's services economy remains severe and of an unprecedented nature. Indeed, the latest data on activity and new business was again quite simply awful, with rapid falls recorded again as the country continues to grapple with the COVID-19 pandemic.

1.07pm BST

The slump in retail sales since the pandemic began has left many retailers unable to meet their rental payments.

Landlords are now counting their losses. Property group Landsec, which owns Bluewater in Kent and the Trinity Leeds shopping centre, has revealed it only received a third of the rent it was due last week, to cover the next three months.

12.23pm BST

Here's my colleague Larry Elliott on the recovery in China's service sector, and the market reaction:

11.42am BST

Tomorrow has been billed as Super Saturday, when thirsty Brits will be hammering on the nearest pub door for a pint after months of lockdown.

However, while pubs in England can reopen tomorrow, many are taking a cautious approach - concerned not to act riskily while Covid-19 is still around.

A message to all our wonderful customers and friends about our upcoming re-opening.

Pippa, Paul and @GeriPubCat

pic.twitter.com/UnYqlqo1rx

The Company is undertaking a phased, gradual reopening across the estate. On 4 July 2020, 27 pubs will open, with further pubs opening in groups over the following weeks. By the end of July, over 80% of our Managed Pubs and Hotels will be open.

We expect the majority of our Tenanted Inns to also reopen during July.

We will be transparent with guests as to these measures such that they can trust in us.

Equally some consumers may not heed the measures put in place to restrict the spread of the virus, potentially putting our team members and other guests at risk."

11.17am BST

Over in the City, stocks are heading lower.

The FTSE 100 is now down 70 points, or 1.1%, handing back all of yesterday's gains after the strong US jobs report.

It's probably fair to say the banking sector is not investible because when people try to do the models about what banks are worth they can't plug in any numbers for cash out.

10.58am BST

The CBI sums up the situation....

The composite PMI posted significantly improved balances for the second consecutive month but remained in negative territory. Whilst the worst of the downturn has passed, activity continues to be hampered by subdued demand, weak export performance and capacity constraints. pic.twitter.com/lyuZXgxkzB

10.29am BST

British consumers struggling to repay their car loans, or other credit bills, have been thrown a small lifeline:

The UK's financial regulator has given customers of car finance and other forms of high-cost credit the option of freezing payments and repossessions for three more months, amid concerns about a mounting economic toll from the coronavirus pandemic. More here:

10.23am BST

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, says UK services companies (who make up around 70% of the economy) are struggling, based on today's PMI report.

Pipelines of new work were still severely weakened for the fourth consecutive month, and export orders were still in dire straits. With imposed travel and logistics restrictions disrupting supply chains overseas clients shied away from placing orders as the pandemic's presence is still felt.

Businesses securing their premises to ensure Covid safety for staff and customers means operating costs are rising. Some firms are resorting to heavy discounting, others accelerating innovative solutions to change their operating model to stay in business. For others, the decision to shed jobs may be the only solution as the fight for survival continues and the UK economy grits its teeth for the months ahead."

9.55am BST

The UK PMI index may look like a V - but it's not showing a V-shaped recovery. Instead, it suggest activity has stabilised.

Although, as economist Rupert Seggins points out, surveys will struggle to capture exactly what's happening in the economy right now.

UK PMI at 47.7 in June. Taken at face value it means activity is still falling. As with EZ, it's likely to only be a mega-rough indicator of anything right now. pic.twitter.com/r3H6N9Q8Jb

9.44am BST

The slump across Britain's service sector is levelling off too as shops reopen - but the economy still remains very subdued.

Around 33% of the survey panel reported a drop in business activity during June, while 28% signalled an expansion. The proportion of service providers experiencing a fall in business activity has eased sharply from 54% in May and 79% in April.

Survey respondents again cited highly subdued demand and disruptions related to the COVID-19 pandemic as factors constricting business activity in June.

9.15am BST

Just in: The eurozone's economy shrank again last month - but at the slowest rate since the pandemic started.

Data firm Markit's eurozone composite PMI, which measures activity across the economy, has risen to 48.5 from 31.9. That's shows a small contraction (50 = stagnation).

Despite the sharp improvement since May, the index was nonetheless indicative of challenging economic conditions across the region.

Both manufacturing output and service sector activity continued to fall according to the latest data as the coronavirus disease 2019 (COVID-19) pandemic again weighed on wider economic activity. Country level data for June showed that all countries enjoyed their best Composite PMI readings since February.

The downturn across Italy's service sector continued to ease in June, with the Business Activity Index to 46.4 (May - 28.9) as far slower reductions in business activity and new orders were recorded. Read more: https://t.co/quJ204lHoG pic.twitter.com/9f3U0Z4C77

9.01am BST

With Wall Street closed for the Independence Day holiday, European stock markets are rather subdued.

8.44am BST

The Chinese stock market has closed at its highest level in five years, as the jump in services sector growth cheers investors.

The CSI 300 index of China's top companies jumped 2% today to close at 4419 points, its highest closing level since June 2015.

8.28am BST

Australia's service sector returned to growth last month after its Covid-19 slump.

Companies reported that new business volumes returned to growth, as firms reopened and individuals resumed consumption. This lifted business confidence, although (as in China) firms kept cutting jobs.

8.08am BST

China's overall recovery is becoming more balanced and broader based as life slowly returns to normal, says Reuters, adding:

The Caixin survey showed a sub-index for new business received by Chinese services firms rose to 57.3 from 55.8 in May, with the rate of growth accelerating to the fastest since August 2010.

New export business also expanded for the first time since January on firmer foreign demand, in contrast to overseas orders for manufactured goods, which continued to contract as many of China's trading partners remained in lockdowns.

7.58am BST

Economist and investors are cautiously welcoming the jump in China's services PMI in June:

Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank

On the data deck, the Caixin services PMI pointed at the fastest expansion in a decade as the emerging market giant accelerated the pace of economic activity to tackle the Covid-led slowdown.The second wave worries didn't have a material impact on PMI figures, which was very good news for investors.

This suggests the services sector's recovery is gaining traction.

However, we caution that the recovery momentum could lose some steam in coming months."

The problem with PMIs is that they simply measure changes in activity versus the previous month, so can prove rather volatile when you have the sort of economic dislocation we've seen since the shutdowns.

7.52am BST

Growth across the wider Chinese economy has also hit a 10-year high, as new business accelerates.

With service sector firms and manufacturers both reporting growth, the China Composite PMI has hit its highest level since November 2010.

7.37am BST

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

Chinese service providers signaled the sharpest increase in activity for over a decade in June.
Business confidence hit a three-year high#China #Caixin #Services #PMI pic.twitter.com/Fdfu6aiyNh

Despite flare-ups in some places, the epidemic remained largely under control in China. Work resumption in the services sector accelerated. The business activity index hit a 10-year high, and the gauge for total new business also reached its highest level since August 2010, indicating a good recovery of services activities.

Despite uncertainties over the pandemic overseas, the measure for new export business returned to expansionary territory, meaning that external demand has not been a drag for the first time in five months....

European Opening Calls
FTSE set to open +20 at 6,260
DAX set to open +50 at 12,658
CAC40 set to open +9 at 5,058

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