Global stocks bounce back; UK and US factories suffer supply-chain woes – as it happened

Graeme Wearden

from Economics | The Guardian on 2021-03-01 18:13 (#5ES7T)

Rolling coverage of the latest economic and financial news, as manufacturers report growing shortages and supply chain delays

Latest: European markets best day in four months
FTSE 100 jumps 1.6% as bond worries fade
Brexit and Covid slow UK factory output growth...
..as eurozone factory growth hits three-year high
Housebuilders jump on reports of more mortgage help

6.13pm GMT

Time for a quick recap.

Stock markets have begun March in bullish mood, with strong gains on both sides of the Atlantic.

5.46pm GMT

David Miller, investment director at Quilter Cheviot, has some interesting thoughts about the recent bond sell-off, and the scare story" that inflation will force interest rates higher.

An optimistic assessment of market movements is that the global economy is recovering at a faster rate than predicted which is putting upward pressure on historically low prices and interest rates. Better this than the reverse, but it may take a few more months before things settle down. Longer term investors are watching as inflation does matter.

During periods of deflation the best course of action is to repay debt. Disinflation, which is what we have been living with for a couple of decades, favours equities, whilst a return to endemic high inflation is a problem for all favouring relatively few companies and asset classes.

5.32pm GMT

Britain's manufacturers suffered from mounting supply chain disruption in February as Brexit and the third Covid lockdown weighed down growth in factory production, according to a survey.

In a reflection of continuing border disruption since leaving the EU, the latest snapshot from IHS Markit and the Chartered Institute of Procurement & Supply revealed the third biggest increase in supplier delivery times on records dating back to 1992.

5.08pm GMT

Stock market banking on a booming recovery again - Dow + 675 Nasdaq + 331 S & P + 89. All up 2 - 2 1/2 % at Noon.

5.06pm GMT

Stocks are surging higher in New York too.

The Dow is up 679 points, or 2.2% at 31,612, while the broader S&P 500 has gained over 2.3% to 3,901 points.

The S&P 500 on Monday was headed for its best day since June 5 as bond markets calmed after a month-long selloff, while encouraging updates on COVID-19 vaccines and fiscal stimulus bolstered bets over a swift economic recovery.

The Dow was on pace for its best daily gain in nearly four months, while the Nasdaq was set for its best daily percentage gain in a month.

4.50pm GMT

European stock markets have all rallied today, lifting the Stoxx 600 by over 1.7%.

That's its best performance since early November, I think, with

European Closing Bell

FTSE 100 +1.44% AT 6,578
STOXX 50 +1.87% AT 3,704
DAX +1.60% AT 14,010
CAC 40 +1.61% AT 5,795
MIB +1.81% AT 23,263
IBEX 35 +1.90% AT 8,381
SMI +1.85% AT 10,717

STOXX600 Sector % Chg

Aero: 3.74
Travel: 3.17
BasicRes: 2.48
Const/Mat: 2.35
IndGoods: 2.26
FinSrv: 2.16
Chem: 2.14
Retail: 2.08
R Estate: 2.04
Tech: 1.97
Insure: 1.74
Telco: 1.49
Health: 1.37
Auto: 1.2
Media: 1.17
Banks: 1.01
Util: 0.95

@PositiveSkugh https://t.co/NkeCEgGv1d

Equity markets have shaken off the negative sentiment that was doing the rounds last week as the pullback in government bond yields has seen buyers step into the fold. Yields have cooled in light of the updates from central banks that they will not be pushed around by the bond market.

The Fed is not overly concerned about the rise in the 10-year yield in recent months, while Philip Lane, the ECB's chief economist talked about being flexible with respect to bond purchases. Traders feel more confident about snapping up relatively cheap stocks as they are less fearful that central banks will look to tighten their policy anytime soon. The focus has switched back to the Biden administration as the planned $1.9 trillion spending scheme was approved by The House of Representatives, so now the upper house - The Senate - is debating the proposal.

Royal Dutch Shell along with BP are helping the FTSE 100 as the oil titans have a relatively large impact on the benchmark in terms of index points. Oil's move higher is helping the energy stocks. In a similar fashion, the rally in copper and platinum has boosted Anglo American, Rio Tinto and BHP Group.

4.40pm GMT

March has got off to a decent start in the City.

The blue-chip FTSE 100 index has closed 105 points higher at 6588, a jump of 1.6%. That's its best day in a fortnight, straight after its worst session in four months.

4.06pm GMT

The billionaire hedge fund manager Sir Chris Hohn paid himself $479m last year after his Children's Investment (TCI) fund, recorded a 66% jump in pre-tax profits to $695m.

It is believed to be the highest annual amount ever paid to one person in Britain and equates to 940,000 a day. It is 9,000 times the average UK salary and 1,700 times the amount paid to the prime minister, Boris Johnson.

3.56pm GMT

Three out of 10 of the UK's biggest public companies emit carbon dioxide at a rate that would contribute significantly to the climate crisis, according to analysis that shows the scale of the challenge for corporate Britain to cut emissions to zero.

Thirty-one members of the FTSE 100, the index of Britain's largest listed companies, are emitting carbon dioxide at a rate consistent with global temperature increases of 2.7C or more by 2050, according to analysis by Arabesque, a company that provides climate data to investors.

3.39pm GMT

The increase in the ISM manufacturing index shows that America's factory sector recovery remains red-hot", says Michael Pearce, Senior US Economist at Capital Economics.

He explains that the global shortages of electronics and in particular semiconductors are pushing up supplier delivery times, and also contributing to rising costs, adding:

Higher oil prices and the depreciation of the dollar are putting some upward pressure on US prices this time around too, but the scale of the rise in the ISM prices paid index goes well beyond what can be explained by those factors alone.

The comments in the report also make it crystal clear that these shortages go well beyond just semiconductors, with firms in every sector reporting shortages and problems with suppliers keeping up with demand.

3.13pm GMT

The Institute of Supply Management has also found that US factories are suffering from supply shortages, as new business continues to grow.

Its manufacturing report, just released, found that many firms reported that supplies are taking longer to arrive, and that their raw materials inventories are contracting as they juggle orders.

U.S. factories packed much growth into a short month, according to February's @ISM(R) Report On Business(R). The #Manufacturing PMI(R) of 60.8%, the highest reading in three years, was powered by gains in new orders, production and #employment. https://t.co/MtFjC7v0Qr #ISMPMI #economy

UnitedStates ISM Manufacturing PMI at 60.8 https://t.co/RCziC7iP0G pic.twitter.com/8nWDxe927n

#US ISM manufacturing PMI (Feb) 60.8 v 58.8 exp. (prev 58.7)

Prices paid 86.0 v 82.1 prev
Employment 54.4 v 52.6 prev
New orders 64.8 v 61.1 prev

2.58pm GMT

Just in: American manufacturers have also been hit by supply chain problems, which have driven up their costs and led them to charge higher prices.

Data firm IHS Markit's latest survey of purchasing managers shows that US factories saw their costs rise at the steepest rate since April 2011, amid record supplier shortages.

The rate of production growth was among the fastest in six years while new order growth was among the fastest seen over the past three years. New export orders also rose solidly, registering the second-steepest gain since September 2014.

February PMI data from IHS Markit indicated a marked upturn in the health of the U.S. manufacturing sector. Although the rate of overall growth eased, it was the second-fastest since April 2010 and was supported by sharp increases in output and new orders.

Unprecedented supply chain disruption remained apparent, however, with supplier shortages and transportation delays leading to a substantial rise in input costs. Firms were, however, able to partially pass on input prices to clients through the fastest increase in charges since July 2008. At the same time, employment grew at the steepest rate since September 2014, as business confidence also improved.

U.S. Manufacturing #PMI posted 58.6 in February (Jan: 59.2) to signal a marked improvement in the health of the sector amid steep rises in output and new orders. But, costs increased at the fastest rate since April 2011. Read more: https://t.co/umnmuSQfsF pic.twitter.com/KxvL5EKgrQ

2.40pm GMT

The US stock market has opened sharply higher, as investors try to put last week's bond market jitters behind them.

... and the giant wheel spins up for March. pic.twitter.com/3OLtT6NTKp

2.05pm GMT

This chart handily shows how investors have been cutting their exposure to US Treasury bonds since early 2021, as rising inflation expectations have pushed prices down, moving yields up.

As of last week, the long-term Treasury ETF ($TLT) experienced its largest 50-day drawdown since just after the 2016 election. https://t.co/LXSdA8hrJw pic.twitter.com/WogQgl3u8q

1.43pm GMT

Wall Street is set to open higher, thanks to the calm in the bond market and relief that US regulators have approved J&J's single-shot Covid-19 vaccine.

US Opening Calls:#DOW 31258 +1.11%#SPX 3852 +1.14%#NASDAQ 13068 +1.31%#RUSSELL 2241 +1.98%#FANG 6885 +1.73%#IGOpeningCall

1.25pm GMT

The latest inflation data from Germany shows that consumer prices rose last month.

The German Consumer Price Index increased 1.3% year-on-year in February, up from 1.0% in January, and slightly ahead of forecasts.

German #Inflation keeps accelerating in Feb. CPI rose 1.3% after 1% in Jan and faster than expected 1.2%. pic.twitter.com/hmI7p6z7Tq

GERMAN CPI (MOM) (FEB) ACTUAL: 0.7% VS 0.8% PREVIOUS; EST 0.5%

GERMAN CPI (YOY) (FEB) ACTUAL: 1.3% VS 1.0% PREVIOUS; EST 1.2%

GERMAN HICP (MOM) (FEB) ACTUAL: 0.6% VS 1.4% PREVIOUS; EST 0.5%

GERMAN HICP (YOY) (FEB) ACTUAL: 1.6% VS 1.6% PREVIOUS ; EST 1.6% credit: @FirstSquawk

In fact, there will be a series of one-off factors pushing up headline inflation. In the short run, it will mainly be higher energy prices driving headline inflation. But when economies reopen, price markups in sectors most hit by the lockdowns will also add to upward pressure on inflation.

Finally, the full swing of the German VAT reversal will only unfold in the second half of the year. Taking all these factors into account, German headline inflation could eventually even range between 3% and 4%, eurozone inflation could breach the 2% level this year.

Germany: Inflation accelerates in February | Snap | ING Think - The national inflation measure accelerated further in February and did little to quieten the discussions around potential ECB reaction to higher yields. We... https://t.co/XsDhWpcJY4

12.59pm GMT

Here's a thought to ponder over lunch... what happens to the world economy next year, and beyond?

Kit Juckes of Societe Generale warns that this year's recovery could collapse like a souffle once the initial post-lockdown spending rush fades, especially if governments tighten spending too soon.

The bigger long-term issue, is what happens to growth after 2021. This year will see an uneven recovery, but a recovery all the same.

There is lots of slack and pent-up demand in most developed economies. Vaccine delivery and the end of restrictions on movement will deliver benefits, but what comes next? There is a very real danger that the initial recovery is stronger but more short-lived than expected. Will we all be going out as much in 3 years' time as we did before Covid? Will restaurants and bars, cinemas and theatres, all reopen? Will families with two working parents be as quick to leave their children behind in the next few years? Has the revolution in labour-saving technology accelerated as a result of the pandemic?

12.54pm GMT

Travel stocks continue to advance too.

British Airways parent company IAG and cruise operator Carnival are both up over 7%, after US regulators approved Johnson & Johnson's single-dose COVID jab over the weekend.

12.04pm GMT

One morning into the new month, and European stock markets are still comfortably higher.

Shares have dipped slightly, but there's still an upbeat mood, thanks to the easing of the government bond sell-off. The approval of J&J's Covid-19 vaccine in the US, and decent manufacturing data from Europe this morning is also lifting shares.

Equity indices are heading higher out of the blocks in Europe at the start of the new week and the new month after a dismal end to February. Vaccine optimism, a calmer tone in the bond markets and a return of the US covid stimulus bill to the spotlight are all helping to underpin the risk on mood, in addition to upbeat manufacturing PMIs in Europe. As a result, riskier assets such as stocks are firmly in demand.

The manufacturing sector in Europe continued to expand last month ahead of forecasts. In the UK the manufacturing PMI ticked higher to 55.1, up from the three month low of 54.1 in January and ahead the flash estimate of 54.9. Although the improved headline figure concealed a more sinister truth that the biggest contributor to the headline figure was the near-record increase in supplier delivery times.

It's almost like the "taperless tantrum" never happened. pic.twitter.com/eEg7LiSIbQ

11.25am GMT

Back in the City, shares in housebuilders are pushing higher on reports that Rishi Sunak will announce a new mortgage guarantee scheme in Wednesday's Budget.

Shares in housebuilders rose strongly to the top of the FTSE 100 on reports the chancellor is set to unveil fresh support for first-time buyers

A mortgage guarantee scheme will be launched, bringing back 95% deals. This will underpin confidence in the housing market, which is inextricably linked to confidence in the broader economy. It should also be a big boon for the housebuilders.

Quarantennials will probably look back with anger on government policies of the last ten years, which have repeatedly thrown fuel on the fire of a booming housing market. As soon as the flames start to subside a bit, another bucketful gets chucked on, and if reports are to be believed, we're due another instalment in the forthcoming Budget, as the Chancellor is reportedly considering extending the stamp duty holiday.

Rishi Sunak is also reported to be weighing up a mortgage support scheme to bring back 95% mortgages. A mortgage guarantee scheme for first time buyers would be a better, more targeted policy than the blanket stamp duty holiday, to give a helping hand to those who otherwise might not be able to get on the housing ladder.

10.55am GMT

The publisher of Daily Mirror and Daily Express has said it will pay a dividend to shareholders despite taking a 100m hit on revenues last year, backed by a post-pandemic bounce back and a target of doubling digital revenues.

While macro-economic uncertainty resulting from Covid-19 clearly remains, the group is well placed to make good progress during 2021."

Resumption of dividend reflects board confidence in growth opportunity and future cash flows."

10.48am GMT

The Restaurant Group, which owns the Wagamama, Frankie & Benny's and Garfunkel's chains, has reported a jump in takeaway orders but warned it is burning through 5.5m a month in the latest Covid lockdown.

The group said it had secured another loan worth 500m that would help consolidate its debt and give it a larger financial cushion as it prepareed to reopen the rest of its sites to diners when lockdown lifts.

10.31am GMT

UK mortgage approvals dipped slightly in January.

Lenders approved 98,994 mortgages in January, down from 102,809 in December, the latest Bank of England data show.

Mortgage approvals for house purchase in Jan 2021 were 98,994 up 40% on Jan 2020, down 3.7% on Dec 2020. Mortgage activity remains high whilst the #stampdutyholiday fuels house purchases. pic.twitter.com/N7NOZWrLPN

10.11am GMT

UK consumers have slashed their borrowing in January, as the latest Covid-19 lockdown hit retail spending and boosted household savings.

Reuters has the details:

British consumer borrowing fell at its fastest pace in January since May last year as the country went back into a coronavirus lockdown, Bank of England data showed on Monday.

Unsecured lending to consumers fell by 2.4 billion pounds ($3.35 billion), the biggest fall since last May's 4.6 billion-pound drop and more than a median forecast for a 1.9 billion-pound fall in a Reuters poll of economists.

UK consumer credit down in January almost 9% in annual terms - a record drop since records started in the mid-90s, according to @bankofengland data just out.

A lot of debt being paid off. pic.twitter.com/bmOEKRAo9v

Especially credit cards right now - 2.2 billion in net terms paid off in January alone.

13.8 billion over the last year. pic.twitter.com/Ujx8EuXt6o

10.08am GMT

Here's Huw Howells, head of manufacturing and industrials at Lloyds Bank, on February's UK manufacturing PMI report.

International supply lines remain tangled after months of disruption which, clients are telling us, is delaying imports of in-demand materials and causing production to flatline despite rising order books. Supply challenges, particularly for businesses with large networks, will take months to iron out. In response, firms may consider creating their own certainty by onshoring supply chains. This would have a longer-term positive influence on UK manufacturing, subject of course to UK capability.

Growing order books combined with new opportunities arising from the green recovery, including planned gigafactories in Coventry and the North East, also represent a promising outlook for the sector. This year, we hope to see ever more manufacturing businesses focussing on reducing their carbon footprint further.

While the rise in the UK's manufacturing PMI is encouraging, sentiment is notably lower than in major Eurozone economies which have reported the fastest growth in manufacturing for three years. While the vaccine roll-out is faster in the UK than in mainland Europe, this would suggest that Brexit frictions are proving challenging.

Input price inflation which has been rising for 10 straight months also continues to weigh on sentiment, reflecting increased raw material costs and transport prices. Lengthening supply chains are also tying up working capital for longer which is putting a greater strain on manufacturers' finances.

On the one hand, business optimism stands at a high not seen in over six years, and on the other, a near record increase in supplier delivery times and cost pressures.

The compound effects of continued Covid-19 related disruption now exacerbated by manufacturers' cautious navigation of the new UK-EU trading arrangement has created a scenario in which logistical and supply-side challenges are limiting the rate of economic recovery for the sector.

10.00am GMT

The UK PMI report also shows there was a continued downturn at consumer goods producers" last month.

In contrast, factories making heavy-duty investment goods reported the fastest growth in output, new orders, new export business and employment.

Notable that weakest performing sector of #UK #manufacturing in February (as in January) according to #PMI was #consumer where output & new orders fell as opposed to rising in investment & intermediate goods sectors. Adds to evidence consumers are more cautious at start of 2021 https://t.co/xgomT3MtVj

9.57am GMT

Today's PMI reports show that UK factories grew slower than the eurozone rivals last month, points out Pantheon's Samuel Tombs:

Clear signs in the latest PMI data that U.K. manufacturers are underperforming their counterparts in the Eurozone this year - the new orders index is substantially weaker: pic.twitter.com/pxv0veP7kO

9.45am GMT

Just in: output growth at UK factories has dropped to the slowest rate since last May.

Data firm IHS Markit reports that British manufacturers suffered from supply-chain disruption and rising cost pressure in February. Many pointed to the impact of the pandemic, and disruption caused by the end of the Brexit transition period.

Output rose at the weakest pace during the current nine-month sequence of increase.

New orders expanded following a slight decrease in January, as domestic demand improved and new export business inched higher. Companies reported improved demand from several markets - including the US, Asia, Scandinavia and (in a few cases) mainland Europe - but noted that the ongoing impact of COVID-19, Brexit complications and shipping difficulties also constrained export order growth.

Markit/CIPS Manufacturing PMI Final (FEB)
Actual: 55.1
Expected: 54.9
Previous: 54.1https://t.co/VnIdXUz5yt

The UK manufacturing sector was again hit by supply-chain issues, COVID-19 restrictions, stalling exports, input shortages and rising cost pressures in February. Look past the headline PMI and the survey reveals near-stagnant production, widespread shipping and port delays and confusion following the end of the Brexit transition period.

In fact the biggest contributor to the headline PMI reading was a near-record lengthening of supplier delivery times. However, while normally a positive sign of an increasingly busy economy, the recent lengthening was far from welcome, more often than not linked to problems resulting from Brexit and COVID related. The resultant shortages for a vast array of components and raw materials, as rising demand chased restricted supply, led to a further acceleration in input cost inflation to a four-year high.

UK manufacturing output was constrained by supply problems and rising cost pressures in February, #PMI data shows, as growth eased to a 9-month low despite an improvement in new orders. Read more: https://t.co/MmROCm4i3E pic.twitter.com/q3h4Sx8gNQ

9.20am GMT

European manufacturers have reported the fastest rise in growth in three years -- and a surge in input costs.

The eurozone manufacturing PMI, which measures activity across the sector, jumped to 57.9 in February. That signals a strong increase in activity, up from January's 54.8.

Manufacturing is appearing as an increasingly bright spot in the eurozone's economy so far this year. The PMI has reached a three-year high to run at a level that has rarely been exceeded in more than two-decades of survey history - notably during the dot-com bubble, the initial rebound from the global financial crisis and in 2017-18.

Producers are benefitting from resurgent demand for goods in both domestic and export markets, linked to post-COVID recovery hopes driving renewed stock building and investment in business equipment and machinery, as well as improved consumption

Amid widespread reports of delays and difficulties in sourcing inputs thanks to an upturn in global demand and ongoing transportation challenges related to COVID-19, input costs subsequently rose sharply with inflation reaching its highest recorded for nearly a decade.

Latest PMI data pointed to the quickest expansion in the eurozone manufacturing sector for three years in February. That said, there was severe supply-side disruption amid shortages of raw materials, and as a result input prices rose sharply. Read more: https://t.co/sQ4Un1pXLl pic.twitter.com/zwrD7PGsZk

9.09am GMT

After an hour's trading, the FTSE 100 is now up 124 points or 1.9% at 6607.

That lifts the blue-chip index away from Friday's lows (the weakest closing level in almost a month).

There has been a pause for breath after the bond market sell-off stabilised, although inflation concerns remain near the surface.

Those fears of inflation have certainly not gone away but attention has shifted back, perhaps temporarily, to the immediate positive drivers which could propel a strong economic rebound.

9.04am GMT

Car and bicycle product retailer Halfords has hiked its profit forecasts this morning, as the pandemic continues to create a cycling boom.

Despite journeys being c.40% below pre-pandemic levels, our Autocentre business has continued to demonstrate signs of growing market share, with strong demand for both our garage business and Halfords Mobile Expert vans.

8.48am GMT

Oil is also recovering this morning.

Brent crude has jumped 1.8% to $65.60 per barrel, towards last week's 13-month high over $67.

8.30am GMT

All the major European stock markets are bouncing in early trading, lifting the Stoxx 600 by over 1.5%.

Investors have decided to focus on brighter aspects of things such as the J&J's one-shot vaccine and the US House passing the stimulus bill.

Something that is supporting the sentiment among investors and traders is optimism on the coronavirus vaccine. Over the weekend, the Centers for Disease Control and Prevention advisory panel voted unanimously to recommend the use of Johnson & Johnson's one-shot coronavirus vaccine. People 18 years of age and older can have this one-shot vaccine, and J&J is expected to ship out 4 million doses.

8.22am GMT

The smaller FTSE 250 index, which includes more UK-focused companies, has jumped by 1.5% in early trading.

Luxury carmaker Aston Martin is the top riser, up almost 7%.

8.08am GMT

Britain's stock market has come roaring out of the gate, with the FTSE 100 index jumping by 87 points or 1.35% to 6570.

Housebuilders are leading the rally, with Taylor Wimpey and Persimmon both up nearly 5%.

7.59am GMT

China's factory growth slowed to a nine-month low in February, data released over the weekend shows.

The latest Chinese manufacturing PMI slipped to 50.9, the lowest since May. That's weaker than expected, and close to the 50-point mark showing stagnation.

China manufacturing growth slipped even further in February, as the PMI fell to 50.9 (Jan: 51.5) to signal the slowest rate of improvement since last May. Lead times on inputs lengthened markedly amid raw material shortages and transport delays. Read more: https://t.co/rHJkcieJm3 pic.twitter.com/AT6FciezDi

China's Economic Recovery Slows

Economic recovery slowed in February as factories shut during the Lunar New Year holidays and virus restrictions dampened what's usually a busy travel season

Manufacturing PMI 50.6 (51.3)#China #economy https://t.co/4PayVCBgcC pic.twitter.com/VwxQU9S72K

7.52am GMT

Bloomberg also sees calm returning to the markets after last week's volatility:

Sovereign bonds extended a rebound, U.S. and European equity futures rose and the dollar dipped Monday, signaling calmer markets after the turmoil sparked last week by a slide in government debt.

Benchmark Treasury yields fluctuated around 1.40% and Australian and New Zealand debt rallied. Australia's 10-year yield slid the most in a year after the central bank doubled down on bond purchases to pacify fixed-income markets.

7.35am GMT

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

European Opening Calls:#FTSE 6534 +0.78%#DAX 13874 +0.64%#CAC 5742 +0.68%#AEX 657 +0.91%#MIB 22971 +0.54%#IBEX 8278 +0.64%#OMX 2021 +0.54%#STOXX 3663 +0.72%#IGOpeningCall

There is little doubt in my mind that central banks will eventually lean quite hard against a sustained rise in yields. They simply can't afford to see it happen with debt so high.

So far though, Fed officials have been largely relaxed over the recent moves, suggesting that it reflects more positive economic growth. But as it all happened so fast last week they will have had a chance to regroup and align their message for this week.

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