Global market rally fades after Dow hits 30,000 – as it happened

Graeme Wearden and Jasper Jolly

from on 2020-11-25 14:57 (#5ATWK)

Rolling coverage of the latest economic and financial news

2.57pm GMT

An investor looking at global stock market levels today compared to the start of the year would never guess that the world had been shaken by a global pandemic. New record highs instead appear to tell a tale of much better to come.

And there are obvious potential catalysts for further gains: a settling of US politics as the new president (hamstrung by a Republican-majority Senate) beds in; the prospect of vaccines allowing economies to return to normal.

US equity markets are trading back at record highs as hope for a vaccine and additional fiscal stimulus continues to counterbalance the surging coronavirus outbreak.

The fundamental backdrop remains constructive, but some cracks have appeared in the foundation as the economy battles a growing list of lockdowns. Based on this backdrop, we believe there is a growing risk that hope is outpacing reality and remain cautious with our near-term outlook.

2.41pm GMT

Bertelsmann, the parent company of the world's biggest book publisher Penguin Random House, has struck a $2.17bn deal to buy rival Simon & Schuster.

Bertelsmann, the parent company of the world's biggest book publisher Penguin Random House, has struck a $2.17bn deal to buy rival Simon & Schuster. Paid significantly more than expected in an auction that included News Corp, owner of HarperCollins

2.33pm GMT

The US jobless claims data appear to have rubbed even more of the lustre off the fading global market rally: Wall Street has dropped at the opening bell in New York (although the tech-focused Nasdaq has performed better.

Here are the opening snaps:

2.23pm GMT

Some economic reaction to the US data - and particularly the higher-than-expected initial jobless claims.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said:

The second straight increase in initial claims is consistent, unfortunately, with the message from the Homebase small business employment data, namely, that the labor market is deteriorating again in the face of the Covid third wave. We expect claims to keep rising for several more weeks, because people are retreating from social interactions, and state and local authorities are adding restrictions to dining and other indoor commercial activity across the country.

The need for further policy easing ought to be obvious, though Congress apparently has better things to do.

There is some concern that the labour market is taking a step backwards as opposed to forward on the heels of stimulus having run out and no more stimulus packages in the offing.

2.17pm GMT

Here is a story that few would have predicted a decade ago, when Portugal was on the verge of financial collapse: some Portuguese government bonds are heading for negative-yielding territory, which would mean investors effectively paying the country to borrow money.

Italian and Portuguese bond yields hit fresh record lows on Wednesday, with Portugal's 10-year yield in striking distance of negative territory as upbeat sentiment globally provided another incentive to pile into Europe's lower rated bond markets.

World shares rallied to a record peak after the formal start of U.S. President-elect Joe Biden's transition to the White House and on growing confidence surrounding Covid-19 vaccines.

2.07pm GMT

Chancellor Rishi Sunak's spending review has finished (albeit the reaction is just beginning). Here are some of the key economic points, reported by the Guardian's economics correspondent, Richard Partington:

2.01pm GMT

And another handy graph for some context on the huge increase in US GDP - a confirmed record. It looks a lot less impressive alongside the previous quarters.

US Q3 GDP Report Second Estimate - BEAhttps://t.co/S27xPjOj4x pic.twitter.com/NNYK5oLLm8

1.51pm GMT

Here's a handy graph from the US Department of Labor showing the initial jobless claims picture:

1.42pm GMT

A quick skate across some of the other data releases just out:

1.34pm GMT

More Americans made initial unemployment claims than expected during the week of 21 November, according to government data.

Some 778,000 US workers made claims for jobless benefits. Economists had expected 730,000 initial jobless claims.

*US Jobless Claims +30K To 778K In Nov-21 Wk; Survey 733K

*US Nov-14 Week Continuing Claims -299K to 6,071,000

1.19pm GMT

Here's a reminder of the barrage of economic data that the US is about to unleash (add five hours for the UK time):

Just a normal day at the office...

Wednesday Nov25:

8:30am Initial #unemployment claims
8:30am #GDP Q3
8:30am Durable goods #orders
8:30am Advance report on #trade

10am New #home sales
10am Consumer sentiment
10am Personal #income
10am #Consumer spending
10am #Inflation pic.twitter.com/XQ2kmziBT6

12.58pm GMT

Financial markets are so far mostly unmoved by Rishi Sunak's spending review, even as the chancellor delivers a warning that the UK economy will not recover its lost output fully until the end of 2022.

The pound has edged towards a drop of 0.1% against the US dollar at about $1.335, and the FTSE 100 also briefly nudged lower, down by 0.7% at 6,388 points.

12.45pm GMT

The rally on the FTSE 100 has well and truly melted into air: London's blue-chips have now lost 0.6% today.

It's those cyclical stocks from earlier - like Barclays, Lloyds Banking Group, Rolls-Royce - that are still dragging the index back.

12.35pm GMT

UK Prime Minister Boris Johnson is speaking in parliament now (albeit via video link because of self-isolation rules) ahead of the spending review by his chancellor, Rishi Sunak.

12.00pm GMT

Gold, that traditional safe-haven asset, is inching up from yesterday's four-month low....

Precious Metals update:#Gold 1813 +0.3%#Silver 2343 +0.69%#Platinum 958 -0.53%#XAUUSD #Commodities

11.51am GMT

Copper prices have hit their highest level in nearly seven years today, on anticipation of higher demand as the global economy recovers from the pandemic.

With China's exports growing as its economy strengthens, and president-elect Biden likely to push for more stimulus, commodities could be boosted by higher infrastructure spending.

Copper's three-month price reached a near seven-year high during morning trading on the London Metal Exchange on Wednesday, boosted by bullish macroeconomic trends, while other base metals showed a mix of small rises and falls.

The red metal rose to $7,360 per tonne in morning trading, surpassing a price last seen in January 2014, before easing back to $7,287 per tonne by 9:10am, a slight dip from its Tuesday closing price.

11.32am GMT

Netflix will boost its spend on making TV shows in the UK to $1bn (750m) this year as the streaming giant maintains the breakneck pace of its production pipeline despite the coronavirus pandemic, my colleague Mark Sweney reports.

Netflix, which makes shows such as The Crown and Sex Education in the UK, has increased its budget by 50% from the 500m it spent on British-made films and TV shows last year. Netflix UK had originally estimated a spend of about 400m last year, but ended up investing about 100m more.

11.14am GMT

Most European stock indices have now dropped into the red, as the markets take a breather after yesterday's surge.

The Europe-wide Stoxx 600 is down 0.4%, with cyclical stocks such as banks, miners and consumer-focused firms leading the fallers.

Investors know that in the medium term there are still vast challenges and issues which needs serious attention. Yes, the presence of vaccine has answered many questions and we are in a much better situation today as compares to the beginning of this year. But, this does not change the fact that it is going to fair amount of time before things get back on track.

This means that optimism spurred by vaccine and political development may be a little too much and the reality is that the recovery path is still full with obstacles.

10.28am GMT

Future, Britain's biggest magazines publisher, has swooped on price comparison site GoCompare this morning, in a 594m takeover deal.

My colleague Mark Sweney explains:

The deal to buy GoCompare, known for its adverts featuring the opera singer character Gio Compario, means another huge windfall for GoCompare's non-executive chairman, Sir Peter Wood.

Wood, GoCompare's largest shareholder, holds a 29.65% stake in the business, worth almost 180m under the terms of the deal. He had already made a near-800m fortune from insurance after founding Direct Line and Esure, which owns the women's car insurance brand Sheila's Wheels. GoCompare was spun out of Esure in 2016.

10.14am GMT

After a bright start, Europe's rally is now faltering.

The FTSE 100 has shed those early gains, now down 22 points or 0.35% at 6410 - away from its five-month high.

The mood in global markets has been lifted by a combination of three doses of very encouraging vaccine news, the US election finally being settled', and I think it's worth noting the appointment of Janet Yellen to the US Treasury.

She's someone who, as Fed chair, repeatedly called on Treasury to do more and is viewed as a dove in relation to the deficit.

9.55am GMT

Wall Street has now moved into extreme greed' mode, according to CNN's tracker of investor emotions.

Following November's market surge, the index has moved to 88 points -- where 0 is maximum fearfulness and 100 is maximum greed.

Markets are pricing in a lot of good news.
The vaccine is coming, we have a stronger policy mix in the US and global central banks are easing.
However, risk assets are more expensive too.
Time for investors to be much more selective. pic.twitter.com/8p1BQ8MEO4

9.31am GMT

A Reuters poll of fund managers, strategists and brokers has found that more than half expect the current market rally to last at least another 12 months.

Around 31% reckon the rally will last at least two years, with 23% seeing an end within two years.

The blistering rally in global stock markets is set to continue for at least six months, albeit at a shallower pace, amid hopes more cheap cash and a COVID-19 vaccine allow economies to heal and corporate earnings to recover, Reuters polls of market experts found.

Reuters has polled around 170 strategists, brokers and fund managers around the world for their forecasts covering 17 major stock indexes, the first survey since stock markets across the globe rallied following breakthroughs in vaccines for the COVID-19 virus.

#Reuters #poll on #European #equity #markets - #FTSE100 seen rising 8.9% in 2021, major European indices rising around 10-12%. Flirting with record highs: European #stocks back to normal in 2021 - Reuters poll https://t.co/2Ok9Rs26CK

Global #stocks bull run to race on, spurred by cheap cash, vaccine hopes: Reuters poll - https://t.co/3yDWGH5GmI

9.00am GMT

Engineering firm Melrose is the top riser on the FTSE 100, up 3.4%, after reporting that trading is currently at the top end" of its expectations.

Its aerospace division has been badly hit by the pandemic, with sales down 37% year-on-year in the four months from 1 July 2020 to 31 October 2020.

Melrose is currently trading at the top end of the Board's expectations for 2020. Your Board is encouraged by this, but clearly given the global uncertainty caution is required on any predictions for next year.

The performance of the Group in the Period reflected the faster than expected recovery in automotive markets, first seen over the summer, the continued strong performance in Nortek Air Management, and the more challenging, although currently stable, market conditions in Aerospace.

8.43am GMT

The UK's FTSE 100 has risen to a new five-month intraday high, as European stock markets add to yesterday's gains.

The blue-chip index has gained another 35 points, or 0.55%, to 6468 points - its highest level since early June.

Any concerns on the timing of a vaccine roll-out were swept aside as both the Dow Jones and the S&P500 surged to record highs.

Despite the level of Covid-19 cases remaining uncomfortably elevated and with unemployment still an unsolved problem in the background, US investors are currently positioning for the post-pandemic environment.

8.16am GMT

Vaccine optimism has helped drive the oil price to its highest level since early March.

Brent crude hit a new eight-month high of $48.75 per barrel today, lifted by expectations of stronger demand for energy next year.

7.51am GMT

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

Global stock markets have rallied to new all-time highs as investors anticipate a smooth presidential transition in the US, and effective vaccine rollouts in the coming months.

With the economic data improving, a vaccine on the way, and Biden-led push for more stimulus on the horizon, there are plenty of reasons to be optimistic for the months ahead."

European Opening Calls:#FTSE 6446 +0.22%#DAX 13288 -0.04%#CAC 5569 +0.19%#AEX 607 -0.05%#MIB 22120 -0.11%#IBEX 8163 +0.24%#OMX 1936 -0.11%#STOXX 3509 +0.02%#IGOpeningCall

A consistent barrage of positive news flow about vaccines, a failure for high frequency/real-time data to be dramatically impacted by the COVID restrictions, and a positive vibe towards Janet Yellen's appointment as UST Secretary are all contributing towards the flow.

A smooth transition of power towards the Biden administration is also a catalyst.

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