Pound and FTSE 100 rally as Covid vaccine optimism lifts markets – as it happened

Graeme Wearden

from Economics | The Guardian on 2021-02-15 16:53 (#5E6DW)

Rolling coverage of the latest economic and financial news

Introduction: Pound strongest against US dollar since late April 2018
4.30pm: FTSE 100 closes 166 points higher, led by travel firms and oil companies
Carmaker JLR announces net-zero target and electric push
Japan's Nikkei highest since 1990
US crude oil back over $60/barrel

4.53pm GMT

And finally, the UK stock market has closed sharply higher, on a good day for UK assets.

The blue-chip FTSE 100 index has closed 166 points higher at 6756 points, a gain of 2.5%. That's its highest closing level in a month, having hit a three-week intraday high earlier in the session.

European stocks are enjoying a very strong start to the week, led by energy stocks as WTI jumps above $60 for the first time since the pandemic hit.

There's real momentum behind the global recovery trade and with every passing week, it seems investors are becoming more optimistic about it. The vaccine rollout is providing enormous encouragement, with the UK surpassing 15 million vaccinations and the topic of conversation finally turning to reopening the economy.

3.14pm GMT

With Wall Street closed for President's Day, it's time for a recap.

The pound has hit its highest level against the US dollar in almost three years, amid optimism that the UK economy will recover strongly once the lockdown is lifted. Sterling is trading over $1.39 for the first time since April 2018, with analysts predicting it will keep rising.

3.01pm GMT

Congratulations to former Nigerian finance minister Ngozi Okonjo-Iweala, who has received unanimous backing to become the first woman, and the first African, to run the World Trade Organization.

Okonjo-Iweala was chosen as the WTO's next director general at a special meeting of its General Council today -- nearly three months after her appointment was blocked by the US.

BREAKING: Ngozi Okonjo-Iweala from Nigeria is appointed as the next WTO Director-General.

Dr. Okonjo-Iweala makes history as the first woman and the first African to lead the WTO.

Her term starts on the 1st of March 2021.

More details soon. #WTODG @NOIweala pic.twitter.com/2RJkkfK2Id

The WTO needs ... a fresh look, a fresh face, an outsider, someone with the capability to implement reforms and to work with members to make sure the WTO comes out of the partial paralysis that it's in," Okonjo-Iweala said in an interview with CNN.

Ada Osakwe, an economist who worked with Okonjo-Iweala in government, said the appointment was big deal for Africa and it's a big deal for the world". Having such a remarkably accomplished woman take the helm of an institution that needs some level of a shake-up, given everything that's happening with trade in the world, the fights between the US and China. She has been in the trenches," she told the Guardian.

2.37pm GMT

Over in Texas, electricity prices have surged dramatically as the state is hit by a harsh winter storm, forcing blackouts.

Reuters flags up that the spot price of electricity on the Texas power grid spiked more than 10,000% on Monday, as snow and ice sent temperatures plunging across the southern US plains states.

Real-time market prices on the power grid operated by the Electric Reliability Council of Texas (ERCOT) have climbed as high as $11,000 per megawatt, according to ERCOT. A typical price on the grid, which supplies most of the electricity for Texas, is less than $100 per megawatt.

From East Texas to El Paso, Texas natural gas prices going hockey stick today... Waha up almost 5000% (five thousand percent) from last week pic.twitter.com/eKceoFDLIk

Ice storms knocked out nearly half the wind-power generating capacity of Texas as a rare deep freeze across the state locked up turbine towers while driving electricity demand to record levels, the state's grid operator reported https://t.co/ks2juB7gPI pic.twitter.com/Y8lf5TsCDp

Rotating blackouts were enforced in Texas to reduce demand on the electric system amid icy storms, state's grid operator Electric Reliability Council of Texas said https://t.co/jIaI92V0tD

2.27pm GMT

Chetan Ahya, global head of economics at Morgan Stanley, reckons US policymakers will try to create a high-pressure' economy to get growth up, and unemployment down, after the pandemic.

Ahya writes:

After hunkering down for much of 2020, people are eager to make up for lost time. Much the same can be said of policy-makers, who are taking action to recoup lost economic output and return to maximum employment as quickly as possible. To get there, we think they are aiming for a high-pressure economy - an environment of stronger-than-average economic growth that helps to reduce unemployment. That's exactly where we think the US economy is headed in the coming quarters....

Spending patterns indicate that households have been forced to accumulate excess saving as restrictions on mobility have limited their opportunities to go out and spend. With warmer temperatures coming and vaccinations set to cover a large part of the vulnerable population, we are confident that the relaxation of restrictions, which has begun in the states with the tightest controls, will pick up speed as spring approaches.

39 million Americans (12% of population) have now received at least 1 dose of the Pfizer/Moderna vaccine, with the pace of vaccinations continuing to increase (1.7 million shots per day over the last week). pic.twitter.com/qWQ4HrwwxN

Covid-19 new cases per day in the US have declined over 154k from their peak on Jan 11, lowest level since last October. pic.twitter.com/TvccPc8tlp

Covid-19 new cases in the UK are down 78% from their peak on Jan 9, lowest level since Oct 9. pic.twitter.com/sTAoYFsCeN

1.58pm GMT

Tim Martin, the founder and chairman of pub chain Wetherspoon's, is urging the government to get locals open again.

Martin warned that the pub industry was on its knees under the latest lockdown rules, and should be allowed to reopen alongside non-essential shops.

Surely it is possible for the hospitality industry to reopen at the same time as non-essential shops, now that a vaccine exists, on the basis of the social distancing and hygiene regulations, which were agreed with the health authorities, after full consultation, for the July 4 reopening last year.

Unless the industry does reopen on that basis, economic mayhem will inevitably follow."

Wetherspoon's Tim Martin has called for pubs to reopen at the same time as non-essential shops https://t.co/RvFw8IcAP1

1.29pm GMT

The stock market rally is gathering pace in London, where the FTSE 100 is now up 2% or 132 points at 6722.

That's the index's highest level in three and a half weeks (since 21st January), putting the Footsie on track for its best day since 6th January.

Global markets have started the week higher as investors remain confident that the pandemic will soon give way to an economic boom. Rising for the 11^th day in a row, stocks appear to have recovered from the GameStop fiasco as there is now a concrete sign that the global economy is back on track. In Asia, the Japanese Nikkei rose 1.9%, to its highest since 1990, while the South Korean KOSPI has also rallied to provide some impressive gains.

Europe has also felt this momentum with the UK leading the charge across the continent.

US futures update:#DOW 31614 +0.48%#SPX 3952 +0.40%#NASDAQ 13846 +0.27%#RUSSELL 2311 +0.95%

12.46pm GMT

Raffi Boyadjian, senior investment analyst at XM, says US stimulus hopes and vaccine-led euphoria continued to bolster sentiment today, pushing both oil and the pound higher.

It was a bullish mood in commodity markets as well on Monday as rising optimism for the economic outlook fuelled expectations of higher demand for commodities such as oil and copper. WTI oil was up almost 2%, breaking above $60 a barrel today to a new 13-month high. Brent crude was also up sharply (1.3%) to trade above $63.

Aside from the growth optimism, fresh tensions in the Middle East also supported oil prices following reports of an Iranian-backed drone attack in Yemen against Saudi-led forces.

12.38pm GMT

Commodity prices are also rallying hard today, on expectations of higher demand as the global economy rebounds from the pandemic.

Tin has hit a seven year high, which the Financial Times attributes to a manufacturing-driven buying frenzy" that has drained physical stocks of the commodity.

The dark grey metal, usually associated with cans, has become a key material for the global electronics industry. It is used to make solder - the substance that binds together circuit boards and wiring.

The shift to working from home has boosted demand for computers and other electronic devices, while China has also been stockpiling the metal to meet its goal of self-sufficiency in semiconductors, according to traders.

12.24pm GMT

The US dollar has dipped broadly in the markets, hitting a two-week low against a basket of currencies.

Optimism about COVID-19 vaccine rollouts, and the prospect of more US stimulus measures, pushed investors into riskier assets and out of the dollar.

We believe there is plenty yet to go in the so-called reflation trade' with market participants under-estimating the willingness of global policymakers to let the economy run hot and fuel stronger-than-expected global growth through the remainder of the year.

Sterling heading for $1.40 - highest level versus dollar in nearly three years, basically on back of vaccine rollout success... pic.twitter.com/HlrLy48QtL

Up a fair amount versus the euro too in recent weeks - 5 cents since Christmas - though still well down on 5 years ago, unlike pound-dollar which is within range of pre referendum level pic.twitter.com/fjujSPNYwV

12.22pm GMT

Here's our news story on Jaguar Land Rover's electric car push:

12.06pm GMT

At $1.39 against the US dollar, the pound is still rather weaker than before the Brexit vote in 2016 - when it was worth almost $1.50.

But Paul Dales of Capital Economics argues that sterling could close that gap and rally to $1.45 this year, as the threat of negative interest rates diminishes.

UK assets are well placed to shake off their underperformance since the 2016 Brexit vote by outperforming global assets over the next couple of years. All risky assets will continue to be buoyed by the combination of a rapid global economic recovery from the COVID-19 crisis and global central banks running ultra-loose policy for many more years.

But the UK's more favourable valuations and its greater exposure to the sectors that are likely to benefit most from the recovery, such as consumer-facing, energy and financial, suggests that equities in the UK will rebound more rapidly than elsewhere.

11.58am GMT

Overnight, mortgage lender Halifax has reported that demand for detached houses in the UK has boomed during the coronavirus pandemic.

Buyers paid an average price of 486,595 for a detached property in December, 10% more than in December 2019, amid a scramble for more space to make home-working and schooling easier.

11.35am GMT

The pound's rally comes on the 50th anniversary of decimalisation.

That was the day when the UK abandoned the complicated mix of tanners, shillings and florins in favour of today's simpler system based on 100 pennies in the pound.

Monday: 50th anniversary of UK coins #Decimalday
Biggest revolution in UK currency for centuries
Dad designed the reverses
Mum was model for 50p Britannia
& I (as toddler) trashed key designs
Dad had to win not 1 but 2 competitions to become #decimal designer: a thread pic.twitter.com/LfIHqBbRpu

1st secret competition run by @RoyalMintUK
The UK's best artists & designers invited to compete.
Dad won.
His designs turned into sample coins, see below.
Then disaster. He got a call to go into the Mint....2/16 pic.twitter.com/7P4DPfMK5J

Deputy Master poured him a huge gin & said Govt going public with decimal plans but would be launching a 2nd competition, open to all
So Dad hadn't won after all. He was devastated but....3/16

Next day he picked himself up & vowed to enter 2nd competition - anonymously - with new, better designs. He won the reverses again. Arnold Machin got the head 4/16 pic.twitter.com/nBoSVq7ank

This is how the final designs began - doodles in a sketchbook 5/16 pic.twitter.com/kiZsrDt1FX

Then, at his desk in corner of living room, he turned them into fully drawn designs 6/16 pic.twitter.com/gwoxWhvg5U

Next he made circular plaster casts on kitchen table. Back at his desk, he'd carve out the designs in reverse on the casts, then pour more plaster into the delicate moulds to create 3D versions of designs 7/16 pic.twitter.com/nX5Lk5PbZ2

He needed a model for the 50p's Britannia. Step forward my mother, who sat clutching large ruler as trident and a paper as her frond....8/16 pic.twitter.com/5kqoGbv0NL

Amid controversy over lack of women on UK currency (great campaign by @CCriadoPerez) Mum has actually spent more than 40 years on our coins as Britannia. Only Queen has been on coins longer.
Mum recreates the pose decades later for @BBCTheOneShow 9/16 pic.twitter.com/TVx9TO2HUp

WFH dangers just same in 1960s. As a toddler, I escaped from cot at 6am, climbed on desk and trashed a key set of plaster designs just hours before they were due to be delivered to @RoyalMintUK. 10/16 pic.twitter.com/XSGpaJER1i

Took 6 yrs before final designs were complete - they would become the longest lasting set of UK coin designs 11/16 pic.twitter.com/Mh0ioel6CL

My brother, born at end of those yrs, has middle name Decimus, normally a name Romans gave to 10th child but Dad said he couldn't stretch to 10.
Later we all went to Buckingham Palace to watch Dad get OBE 12/16 pic.twitter.com/pvNtBf0HHU

Designs then spent decades in portfolios under my parents' bed.
Arrival of grandchildren (best game bouncing on Granny's bed) drove Mum to donate designs to @britishmuseum to keep them safe.
Fab curator @fearandsequins shows kids their grandfather's work 13/16 pic.twitter.com/lf5SSop3U7

Baton now passed to great young designer Matthew Dent who designed the latest reverses. 14/16https://t.co/MFreyoKq6T

Final word to Dad, writing in 1969: Can there be a man so pompous & conceited ...that he would not admit excitement beyond measure at prospect of designing a coinage, frustration, fury, anguish & all.... 15/16 pic.twitter.com/bGA1b7TRy6

His work which he has sweated blood over will be published in vast quantities and gazed at by millions...not because he is a genius, a saint or a monster - merely because he is a coin designer." Christopher Ironside 1913-1992 ENDS pic.twitter.com/peS7ksQOgS

11.06am GMT

After three hours trading, the UK's FTSE 100 is solidly higher - up 90 points at 6679 points, its best level in almost three weeks.

Oil producers and miners continue to lead the rally, along with UK retailers (JD Sports are up almost 5%) and hospitality firms, on hopes of an economic revival this year.

11.00am GMT

The owner of Harvester restaurants and Nicholson's pubs plans to raise 350m from a group of tycoons known as the Sandy Lane set" after it came close to breaching the terms on its debts.

10.46am GMT

Over in Paris, French bank BNP Paribas has announced a new policy to fight deforestation in the Amazon.

It means France's largest bank will not provide financial support to firms who produce, or buy, beef or soybeans from land in the Amazon that was cleared or converted after 2008.

Beef and soybean production in Brazil accelerates deforestation in the Amazon and the Cerrado. Whether legal or illegal, it jeopardises the ecological integrity and future of these two biomes.

Faced with this degradation, there is an urgent need for all relevant stakeholders to prioritise land use strategies that integrate zero deforestation, sustainable production and a positive social impact.

10.39am GMT

The eurozone has recorded its largest goods trade surplus since the currency block was created over 20 years ago.

The eurozone's trade in goods surplus with the rest of the world swelled to 27.5bn on a seasonally-adjusted basis in December, up from 24.9bn in November.

Euro area trade in goods surplus 29.2 bn in December 2020, 30.1 bn surplus for EU https://t.co/BHpkpj0Iea pic.twitter.com/E35o2wS5sc

In January to December 2020, euro area exports of goods to the rest of the world fell to 2 131.4bn (a decrease of 9.2% compared with January-December 2019), and imports fell to 1 897.0bn (a decrease of 10.8% compared with January-December 2019).

As a result the euro area recorded a surplus of 234.5 bn, compared with +221.0 bn in January-December 2019.

Seasonally adjusted, the eurozone recorded its largest trade surplus on record in December, with imports falling as exports rose. This is probably a lockdown artefact, with so much of the domestic economy frozen https://t.co/BJLd03Fy1P

10.08am GMT

Europe's factories ended 2020 on a rather low note, with output shrinking by more than expected.

Industrial production across the eurozone fell by 1.6% in December, and by 1.2% in the wider EU.

Euro area #IndustrialProduction -1.6% in December over November 2020, -0.8% over December 2019 https://t.co/fUgBxNGiWB pic.twitter.com/84M3o5NxK7

9.47am GMT

Jaguar Land Rover, the UK-based manufacturer, will produce only electric models under its Jaguar brand as part of a set of sweeping changes brought in by its new chief executive.

9.35am GMT

Here's Reuters' take on the pound's rally this morning:

The British pound climbed above $1.39 for the first time in nearly three years on Monday, lifted by broad-based dollar weakness as well as Britain's success in rolling out the COVID-19 vaccine.

The currency has been a key gainer against a struggling greenback this month as the aggressive rollout of the vaccination programme in the United Kingdom raises hopes its economy will be able to recover quickly, compared to its European peers.

British pound above $1.39 for first time in nearly three years https://t.co/wNFnf7IgtW pic.twitter.com/qMsHL41D5Q

9.23am GMT

European stock markets are all stronger this morning, led by the UK's FTSE 100 which is now up 92 points or 1.4% at 6682.

Government attempts to manage expectations on Covid better are helpful to the market which is now probably pleasantly surprised at just how quickly the UK has vaccinated the most vulnerable sections of its population.

This is making it easier for investors to look through to a reopening of the economy even if the pace at which restrictions are eased remains a topic of fierce debate.

9.19am GMT

The FTSE 250 index of medium-sized UK companies is also rallying strongly this morning, up 1.2% at 21280 points.

That's its highest level since the start of the start of the stock market crash nearly a year ago, as stock prices have steadily clawed their way back:

9.09am GMT

The pound having a bit of a party.. just breached $1.39 , level not seen since April 2018, also interesting that strength hasn't hurt FTSE 100 which is up ~ 3% YTD$GBP pic.twitter.com/blUFS2pkwM

8.46am GMT

Here's some reaction to Japan's Nikkei closing at its highest level since August 1990 today, at 30,084.15 points.

Incidentally the lowest point for the Nikkei 225 in the last three decades was March 10, 2009, in the aftermath of the global financial crisis. Warren Buffett said the U.S. economy had gone "off a cliff". You don't want to think about how cheap some stocks were that day! pic.twitter.com/ifRR4ARPnu

Global markets start the week on front foot w/Japan's Nikkei hitting 30k for 1st time since 1990. US & European Futures point to higher open. Dollar lower w/Euro at $1.2134. Oil rallied to a 13mth high as energy mkts now in balance. Gold $1819, #Bitcoin pares some gains, now $47k pic.twitter.com/qIiflYNmaY

8.29am GMT

Britain's stock market has opened higher, with the FTSE 100 jumping by 58 points to 6648, up almost 1%.

That's its highest level in two and a half-weeks, amid hopes of economic recovery this year.

8.18am GMT

The oil price has climbed to its highest level in over a year, lifted by economic recovery hopes and new tensions in the Middle East.

Brent crude is up 1.4% at $63.29 per barrel, while US crude is over $60/barrel, their highest levels since January 2020.

WTI Crude Oil off to a flyer in early Globex trading. Rising almost 1% to over $60, its highest level since early January 2020. pic.twitter.com/q7B4AyAaSB

The price of Crude #oil (#WTI) is back above USD 60! pic.twitter.com/27PtvC0Fbm

Hopes of increased demand in the coming months along with controlled supply has been positive for an oil price which has risen by 22% in the year to date, and which has seen a further small spike following some concerns around fresh tensions in the Middle East.

8.02am GMT

Japan's Nikkei stock index has surged to a 30-year high, lifted by better-than-expected growth figures overnight....and Covid-19 vaccine hopes.

Japan is expected to start coronavirus vaccinations this week, which is also supporting stock prices. However, Japanese stocks have rallied 8% so far this month, and some analysts warn that the market may be overheating.

Stocks have risen so fast you could say they've broken the speed limit," said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

Japan's main #StockMarket, the #NIKKEI, has closed above the 30,000 mark for the first time in more than three decades.

After reaching nearly 39,000 in 1989, the Nikkei lost more than half its value during a period of Japanese economic stagnation known as the 'lost decade'.

Just to put things into perspective: Japan's Nikkei has crossed the 30k mark for the first time since 1990, but compared to the Dow Jones, the performance looks scary. The Dow was at 2500 points in 1990 and is higher now than the Nikkei today. pic.twitter.com/2Gin5CdNzh

7.42am GMT

The UK could soon see a surge of pent-up demand', if the vaccination programmes allow economic restrictions to ease soon, says Michael Hewson of CMC Markets:

The UK's vaccine rollout program is much further advanced than everyone else's in Europe as the government, over the weekend, met its target of 15m people getting their first jab by 15^th February.

Assuming everything else goes according to plan this opens up the prospect that we could see a slow easing of restrictions sooner rather than later, with the next update on measures, due a week today.

7.25am GMT

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

Optimism over the global economic recovery is continuing to lift markets at the start of a new week.

While the economy is likely to have escaped a double-dip recession, the data for the coming months will likely reverse lower, reflecting the effects of the third lockdown that began in January.

The impressive pace of this program should allow UK PM Boris Johnson to release the country from lockdown sooner rather than later and get the economy moving.

European Opening Calls:#FTSE 6633 +0.65%#DAX 14143 +0.67%#CAC 5739 +0.63%#AEX 680 +0.44%#MIB 23631 +0.94%#IBEX 8115 +0.74%#OMX 2036 +0.56%#STOXX 3716 +0.55%#IGOpeningCall

The market environment remains very much sweet for risk investors. Combined to prospects that things could only get better from where we are, the whole setup is absolutely supportive of the continuation of the record run in risk assets, including stocks of all sizes, bonds, junk bonds and alternative investment vehicles.

The financial marketplace looks nothing else than a huge eat whatever you can' buffet - and we'll see what happens when inflation kicks in.

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