Pound rallies amid US stimulus hopes; US jobless claims dip – as it happened

Graeme Wearden

from on 2021-01-21 17:11 (#5D3YQ)

Rolling coverage of the latest economic and financial news

Latest: US initial jobless claims drop, but still high
UK factories fear supply and labour shortages
Markets rally on Biden $1.9trn stimulus hopes
Wall Street hit record highs last night
Pound at eight-month high vs euro; 32-month high vs dollar

5.10pm GMT

Time to wrap up

The pound has jumped to its highest level against the dollar since spring 2018, amid hopes that President Biden will drive through massive spending plans to revive the US economy.

Airbus won't increase the #A320 production rate as much as planned previously: From rate 40 to 43 in Q3 and then to 45 in Q5. Before it wanted to increase it to rate 47 in July.

4.55pm GMT

Some late news. Airbus has trimmed its plans to increase aircraft production, due to the impact of the pandemic.

The aerospace group says production rates will remain lower for longer, with a smaller increase in output of single-aisle planes, and no increase in production of widebody jets yet.

The new average production rates for the A320 Family will now lead to a gradual increase in production from the current rate of 40 per month to 43 in Q3 and 45 in Q4 2021. This latest production plan represents a slower ramp up than the previously anticipated 47 aircraft per month from July.

The A220 monthly production rate will increase from four to five aircraft per month from the end of Q1 2021 as previously foreseen.

The market environment remains complex. Uncertainties remain, and air travel will likely stay lower for longer. This latest production plan represents a slower ramp-up than previously anticipated. We will gradually increase single aisle production as of Q3 2021. https://t.co/JaiXjmAtAz

4.47pm GMT

The FTSE 100 index has closed lower tonight, with the stronger pound weighing on multinational companies.

The Footsie closed 24 points lower at 6715, a drop of 0.37%, as this morning's bounce faded.

3.49pm GMT

David and Victoria Beckham have paid themselves 14.5m - or nearly 40,000 for every day of the year - following the strong performance of the former footballer's image rights sales.

The couple collected total dividends in 2019, up 3.4m on the previous year, according to accounts filed at Companies House on Thursday. The 2019 accounts are the latest available, but they note that the couple also collected an additional 7m in interim dividend payments in 2020.

3.34pm GMT

Over in Frankfurt, ECB president Christine Lagarde has warned that the latest wave of Covid-19 infections, and lockdown restrictions, will hit the recovery at the start of this year.

Lagarde told reporters:

The resurgence of the pandemic and the associated intensification of containment measures have likely led to a decline in activity in the fourth quarter of 2020 and are also expected to weigh on activity in the first quarter of this year."

ECB President Christine Lagarde says the euro-zone economy probably contracted at the end of last year, meaning that the bloc now looks headed for a double-dip recession https://t.co/THnOer5E7j via @markets

3.07pm GMT

The big picture, as this chart shows, is that America is suffering an unemployment emergency that dwarfs the impact of the financial crisis over a decade ago:

https://t.co/37VwQ0xZsp pic.twitter.com/CdOaHV0Gne

2.54pm GMT

The persistently high US jobless claims total shows the challenge facing President Joe Biden and his team, as they try to fight the Covid-19 pandemic and strengthen the economy.

Glassdoor senior economist Daniel Zhao explains:

Initial unemployment insurance (UI) claims fell slightly last week to 961,000. Although this is a dip from recent weeks, claims remain elevated at levels not seen in months. The recent surge was likely due to a combination of larger-than-expected seasonal and pandemic-induced layoffs, which are now slackening. Unemployment claims continue to show a job market unable to progress further as long as COVID-19 remains in the driver's seat.

The current wave of the pandemic doesn't appear to be receding yet and the prospect of new, more transmissible variants raise the risk of a prolonged third wave. While the vaccine offers a light at the end of the tunnel, we're still far away from a complete reopening of the economy that could drive rehiring and stem further layoffs.

2.41pm GMT

In New York, the stock market has opened at record levels, but trading is rather more muted than yesterday.

In other news US stocks at record highs

DOW HITS RECORD HIGH

U.S. markets open higher https://t.co/AebS6ZbOjN pic.twitter.com/N9Z8FoEpsC

1.49pm GMT

Here's more detail and reaction to the jobless figures, first from Dr Thomas Kevin Swift of the American Chemistry Council:

The number of new #jobless claims fell by 26,000 to 900,000 during the week ending 16 January. Continuing claims fell by 127,000 to 5.05 million and the #unemployment rate for the week ending 16 January eased 0.1 percentage points to 3.6%. pic.twitter.com/QiXUke55dj

Initial #unemployment claims fell back modestly in w-e Jan 16, but they remain alarmingly elevated.

Regular claims:
900k (SA): 26k
961k (NSA): 151k

PUA claims (NSA):
424k: 139k

Still very high 1.4 million **new** jobless benefits claimants! pic.twitter.com/0bHsAgF3mP

Big drop in continuing claims for PUA and PEUC last week. But that week is the one after the one day lag caused by Trump not signing the legislation and I think its possible that people got dropped because of that. Or did people age out of the programs pic.twitter.com/u5b7Or9gz1

1.47pm GMT

Kathy Bostjancic of Oxford Economics says there is some good news in this week's US jobless report, but the number of people seeking help overall is little changed:

Regular initial jobless claims (SA) fall 26k to still high 900K and continuing claims -127K to 5.05mn in the latest weeks. And overall individuals on benefits fall to 16.4mn from 18mn. Some good news, but total initial jobless claims (NSA) were little changed at a high 1.38mn pic.twitter.com/99V2zJ5aKy

1.42pm GMT

The Washington Center for Equitable Growth have summarised the key points from today's US jobless report:

For the week ending January 16, 960,668 workers filed for regular #unemploymentbenefits. Initial regular claims have now remained above 700k for 44 weeks. 1/4 pic.twitter.com/hiqLnEzZDO

States reported that another 423,734 workers filed for initial #PUA, which extended UI to some workers who are not eligible for regular benefits. In total, 1.4 million workers filed initial PUA or regular unemployment benefits last week. 2/4

Regular continued claims, also referred to as insured unemployment, fell to 5.56 million the week ending January 9. Adding all Unemployment Insurance programs-including PUA, PEUC, and Extended Benefits-a total 16 million workers claimed benefits the week ending January 2. 3/4 pic.twitter.com/1bEtnJbruX

The Coronavirus Recession continues to expose cracks in the Unemployment Insurance system. Read @alixgouldwerth's brief on how policymakers can address some of its key structural problems. 4/4 https://t.co/FZEwiOsYox

1.40pm GMT

Just in: The number of Americans filing new claims for unemployment support has dropped, but remains painfully high.

Some 960,668 fresh initial claims' for jobless benefits were filed last week, on an unadjusted basis. That's a drop of 151,303 compared with the previous week, when over 1.1m claims were filed.

961,000 people filed for unemployment benefits last week (regular state programs, not seasonally adjusted). That's down from the week before but still extremely high.

Another 424,000 filed for Pandemic Unemployment Assistance, which is up sharply.https://t.co/zmlpRhcIhO pic.twitter.com/huYdujUtmV

WASHINGTON (AP) - US jobless claims dip to 900,000 as layoffs remain high with economy in grip of virus.

JUST IN: 900,000 Americans filed new claims for unemployment benefits last week. These are people newly out of work, laid off. And the number is more than 4x what is was this time last year.

1.25pm GMT

British shoppers who bought items from European websites are facing post-Brexit demands of more than 100 in import duties that must be paid before parcel firms will deliver the items.

Despite claims by Boris Johnson that there would be tariff-free trade after the Brexit transition period ended on 31 December, consumers who bought items from EU websites are being chased for import duties, VAT and admin fees - which, they say, render the purchase uneconomic.

1.19pm GMT

The European Central Bank's decision not to launch any fresh stimulus moves today hasn't alarmed the markets.

Neil Birrell, Chief Investment Officer at Premier Miton Investors, says the ECB can still act if conditions deteriorate:

No change from the ECB is no surprise. Confirmation of the Pandemic Purchase Programme and maintaining the stimulus after the December boost is good news.

It also looks like they don't view the extension of the lockdown as having such a negative effect that they need to step things up. The ECB, like every other central bank, is ready to act and still has the ability to do so."

The reality is that the ECB is in a difficult spot (twas ever thus) - without fiscal backing and decisive action from national governments, simply creating more liquidity that ends up recycled into safe' core countries does little. Credit conditions are continuing to tighten despite repeated TLTRO expansions and the currency is too strong.

The ECB needs to get creative if it wants to stimulate the economy longer-term, e.g. buying private sector assets such as bad loans or equities."

1.04pm GMT

The European Central Bank has left eurozone interest rates unchanged at their current record lows, and pledged to maintain its Covid-19 stimulus programme until the crisis has abated.

First, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively. The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.

Second, the Governing Council will continue the purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of 1,850 billion. The Governing Council will conduct net asset purchases under the PEPP until at least the end of March 2022 and, in any case, until it judges that the coronavirus crisis phase is over.

12.51pm GMT

The FTSE 100 index now has six female CEOs again, following Jette Nygaard-Andersen's appointment to run gambling firm Entain (see earlier post).

The others are Emma Walmsley at GlaxoSmithKline, Liv Garfield at Severn Trent, Alison Brittain at Whitbread, Alison Rose at NatWest Group, and Milena Mondini de Focatiis at Admiral.

12.19pm GMT

Bitcoin is having a bad day, sliding around 9% to around $31,700.

That's a drop of over $3,000 since last night -- and nearly 25% below its record high earlier in January (although still up over 9% this year).

Cryptocurrencies are a particular concern. I think many are used - at least in a transaction sense - mainly for illicit financing.

And I think we really need to examine ways in which we can curtail their use and make sure that money laundering doesn't occur through those channels."

Bitcoin is tanking https://t.co/5No0uKQJUu pic.twitter.com/QKZGCAoDqt

12.12pm GMT

Speaking of manufacturers... the Financial Times is reporting that Volkswagen, the world's largest carmaker, will pay more than 100m in fines after narrowly missing strict EU emissions targets in 2020.

That's despite VW launching its flagship electric vehicle during the year.

The group, which includes the Audi, Porsche and Seat brands, said its fleet-wide emissions in Europe stood at 99.8 grammes of CO2 per kilometre driven, roughly half a gramme short of the goal set by Brussels.

The miss is a blow for VW, which has sought to remodel itself as an electric vehicle superpower in the wake of the diesel emissions scandal, and plans to eclipse Tesla by selling 26m battery-powered cars this decade.

Full story up, by @JoeMillerJr & me - FT calculations indicate VW faces a fine of around 150m: https://t.co/6pOhnOs3D5

11.49am GMT

Nearly half of UK manufacturers fear they will struggle to obtains parts and materials this quarter, as the Covid-19 pandemic and Brexit create supply disruption.

The CBI's latest quarterly Industrial Trends survey found that concerns about supply disruptions are the highest in over 45 years.

This appears to be linked to widespread COVID-related supply disruption, such as delays in shipments from abroad, a shortage of containers across the world, and knock-on impacts from disruptions to production over 2020.

Border challenges and customs-related delays arising from Brexit also appear to be playing a role.

Notably, the share of firms citing other labour" (as opposed to skilled labour") as a factor to constrain output next quarter rose to its highest since April 1974.

This, in part, reflects constraints on labour availability arising from staff having to isolate due to COVID related reasons.

Manufacturing employment fell again in the three months to January, but at the slowest pace since October 2019. But business sentiment declined significantly after staying flat over the second half of 2020. Optimism around export prospects also continued to fall notably.

Output is expected to fall in the quarter ahead. Firms also anticipate total new orders to fall at a slightly quicker pace, reflecting faster declines in domestic and export orders. Headcount is expected to be broadly flat.

UK #manufacturing output stabilised in the quarter to January, following fifteen consecutive months of decline. Output is expected to fall in the quarter ahead #ITS https://t.co/t36XpCbd3k pic.twitter.com/tAxKF1lm3i

UK manufacturing employment fell again in the three months to January, but at the slowest pace since October 2019. Firms expect headcounts to be broadly flat next quarter #ITS pic.twitter.com/S0Y8m9LVLZ

Almost half of UK manufacturers - the highest share since January 1975 - are concerned that access to materials or components may limit their output over the quarter ahead #ITS pic.twitter.com/gGvd6RdKbd

11.21am GMT

Metallica and Michael Buble are not the most obvious double-act.

But they're both part of the latest trend of investors buying up the rights to classic popular songs and albums, as my colleague Jasper Jolly explains:

The producer of songs by Metallica and Michael Buble has sold his rights to investors in the latest in a flurry of back-catalogue sales by artists and other rights owners looking to cash in on the music streaming boom.

Bob Rock has sold his producer's rights in heavy metal band Metallica's eponymous album and songs by Canadian singer Michael Buble that include Call Me Irresponsible, Crazy Love, and Christmas.

11.01am GMT

I certainly don't do stock market recommendations (there are already too many people struggling without threatening your nest egg).

But Adrian Lowcock, head of Personal Investing at investment platform Willis Owen, does have some fund ideas for how people might want to position themselves for the Biden presidency.

Today was the best inauguration day returns for the S&P 500 Index since Ronald Reagan's second term. pic.twitter.com/0rfBFjxayQ

10.27am GMT

The Covid-19 lockdown has driven a boom in pet ownership, with people turning to furry and feathered friends to get them through the pandemic.

COVID-19 pandemic pushed Pets at Home sales to 302m https://t.co/kbxAILbaXQ

Pets At Home is on the hunt for up to 20 sites in London, where it plans to open high street branches to cater for a new wave of animal owners in the capital since the first lockdown.

Chief executive Peter Pritchard said the retailer has seen a significant step up in pet ownership during the pandemic".

Pets At Home is planning to open a number of high street stores in London to cater for a new wave of pet owners since the first lockdown. https://t.co/tR5chxAHoB

10.06am GMT

European technology stocks are leading today's rally, Reuters points out:

Tech stocks jumped 1.5%, continuing their rally for a second straight session, led by software maker Sage Group which jumped 4.7% after posting higher quarterly recurring revenue.

In the past few days, the market has been breathing a sigh of relief that we had a safe transfer of power from Trump to Biden," said Dhaval Joshi, strategist at BCA Research.

10.04am GMT

Separately, the Bank of England has reported that lenders expect to offer more secured credit to consumers in the current quarter.

That could help those looking to buy a house:

Good news for homebuyers: Bank of England Credit Conditions Survey: Mortgage availability to households was unchanged in the three months to end-November 2020 (Q4), but expected to increase in Q1 pic.twitter.com/IizA7VfmVY

9.51am GMT

UK consumers spent a third less on their credit and debit cards last week than before the pandemic struck, as the latest lockdown hit the economy.

That's according to new data from the Office for National Statistics which shows the impact of Covid-19 on spending, and company sales.

Aggregate CHAPS purchases were on average 4% greater in December 2020 than in February 2020. This increase was driven by staples and delayable spending, such as in supermarkets and other retail stores, which typically increase in December.

Spending fell in the week following Christmas, and has remained relatively low for work-related", social" and delayable" expenditure. This is expected, coinciding with the extension of Tier 4 restrictions on Boxing Day, and the start of national lockdowns in the UK on 5 January 2021.

CHAPS retail consumer purchases were on average 4% greater in December 2020 than in February 2020.

This increase was driven by staples and delayable spending, such as in supermarkets and other retail stores, which typically increase in December https://t.co/848wJKhoCo pic.twitter.com/mzJ96HBIRd

Spending fell in the week after Christmas and has remained low for work-related, social and delayable expenditure.

This coincided with the extension of Tier 4 restrictions in England on Boxing Day and the start of national lockdown on 5 January 2021 https://t.co/8ITtMe6cjx

9.27am GMT

Back in the foreign exchange markets, the pound has hit a fresh 32-month high against the dollar - up nearly a cent today at $1.374.

Connor Campbell of SpreadEx says there's a positive mood, thanks to those stimulus package hopes:

The 46^th President of the United States was aggressive in first few hours after taking office, announcing 17 executive actions, with 15 of those executive orders. These include reversing Trump's Muslim travel ban, halting the construction of the US-Mexico border wall, and putting things in motion for the States to re-join the Paris climate agreement. Biden has also mandated the wearing of masks and social distancing in federal buildings and lands.

It appears that Biden isn't messing around. And it is exactly this purposeful and robust approach the markets were hoping for - especially if it leads to his $1.9 trillion covid-19 stimulus package escaping the Senate unscathed.

9.12am GMT

Fresh from fighting off a takeover bid, the owner of betting firms Ladbrokes and Coral has become the first major listed British gambling group to appoint a female CEO.

As a Board member Jette has been instrumental in the development of Entain's growth and sustainability strategy.

Jette has more than 20 years' experience in leadership and operational roles in media, entertainment, sport and digital businesses and an extensive track record of working with fast-growing digital next generation online and mobile entertainment companies offering video gaming, e-Sports, and social media video content.

8.49am GMT

Optimism over the UK's vaccine rollout also appears to be lifting the pound.

Sterling just hit 1.132 for the first time since last May, adding to its recent gains, amid hopes of an economic recovery this year as the Covid-19 pandemic eases.

With Biden likely to focus on getting a handle on the Covid-19 pandemic, a large stimulus package and repairing US relations with larger countries in the short term, we would expect to see a period of stability for investors. This may see them feeling more comfortable to move money out of the US dollar to riskier assets, thereby weakening the dollar.

In the UK, the fast vaccination rollout currently underway could provide a much needed lift to the UK economy, spurring a surge in the pound. When it comes to the US dollar, many forecasters are predicting a large sell off should the vaccine be successful. This move to risk on would open the door to safe haven selling.

Sterling has steadily gained ground since reports of significant progress in trade talks between Brussels and the UK at the end of last year. The subsequent deal, announced on Christmas Eve, helped allay fears of an abrupt and disorderly end to the UK's relationship with its European partners.

Charles Diebel, head of fixed income at Mediolanum Asset Management, said the recovery in the currency was a function of avoiding the worst effects for a hard Brexit combined with a very aggressive Covid-19 vaccine plan".

8.29am GMT

The London stock market has opened higher, with the FTSE 100 index of blue-chip shares gaining 26 points or 0.4% to 6766 points.

8.23am GMT

Kay Van-Petersen, global macro strategist at Saxo Capital Markets, reckons that Democratic control of the Senate increases not just the probability of more fiscal (stimulus), but the magnitude."

He said (via Reuters)

That means that this market should be way, way, way higher as a whole and we're going to get there. We're entering this regime of even more accelerated asset class inflation."

For all the noise about the Biden $1.9 trillion stimulus package that we are writing about ad nauseum, and the follow-on remake America spending the new President also wishes to enact, one critical risk remains and is being totally ignored by financial markets everywhere. That is the inclination of the Republican minority in the US Senate to bipartisanship. Their silence has been deafening until now on how cooperative they intend to be with the new President.

Certain aspects of the Biden stimulus plan, and his follow-on spending wishes will almost certainly require a 60-vote majority in the Senate under the Byrd Rule. Otherwise, they will enter reconciliation, piece by piece in Senate committees to work around the filibuster. The net result will be a long drawn out process and risks momentum being lost on the Biden plan. It should also be noted that some Democrat Senators are more right of centre, making controversial passages potentially challenging to pass even within their own party.

7.51am GMT

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

While much of the appeal was aimed at cooling the temperature of national discourse there was also a message to lawmakers of the need to cooperate more as Democrats only hold a slim majority in both chambers of Congress....

On the economic front, there were further support measures, including an extension of the pause on federal student loan repayments and the extension of the federal eviction moratorium.

Japan's benchmark Nikkei 225 rose 0.8% to finish at 28,756.86. Australia's S&P/ASX 200 gained 0.8% to 6,823.70, while South Korea's Kospi edged up 1.1% to 3,147.51. Hong Kong's Hang Seng slipped 0.3% to 29,887.89, while the Shanghai Composite added 1.0% to 3,619.82.

Live Market Update from the CMC dealing desk - European Opening Calls:#FTSE 6767.85 0.41%#DAX 13970.94 0.36%#CAC 5650.48 0.39%#IBEX 8225.62 0.26%
Prices are indicative only. $FTSE $DAX $CAC $IBEX

We've already heard in the last few days that Germany is extending its lockdown into mid-February, while curfews have been implemented in France and the Netherlands, while yesterday it was being reported that bars and restaurants in France were more than likely expected to remain closed until Easter, even under the most optimistic scenario.

This would appear to suggest even more economic pain in the weeks and months ahead, at the same time as the vaccine program gets off to a faltering start.

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