UK business and consumer confidence jumps; markets rally on recovery hopes – as it happened

Graeme Wearden

from on 2021-03-08 17:31 (#5F23Y)

Rolling coverage of the latest economic and financial news

Latest: FTSE 100 surges 1.3%
Janet Yellen: Biden stimulus will bring strong recovery
Bank of England governor sees cautionary realism' over economy
Service sector optimism highest since pandemic starter
Vaccine rollout hopes are cheering firms
Oil hits $70 after Saudi oil facilities attacked

5.26pm GMT

Time to recap

Stock markets have shrugged off their anxiety over rising government bond yields, and rallied sharply as optimism over the recovery growth.

5.25pm GMT

Boom! The US's Dow Jones industrial average has just hit a new record high.

The Dow is up 525 points, or 1.67%, at 32,021, as the prospect of a strong economic rebound pushed up hospitality companies, banks and industrial giants

Dow Transports also hit a record intraday high earlier$DJT, $DJI

5.04pm GMT

European stock markets have posted their best day's trading in four months.

The Europe-wide Stoxx 600 index closed 2.2% higher, its biggest daily since 9th November 2020 (the day Pfizer and BioNTech reported their Covid-19 vaccine was 90% effective, sparking a huge global rally)

European Closing Bell

FTSE 100 +1.30% at 6,720
STOXX 50 +2.50% AT 3,762
CAC 40 +2.20% at 5,911
DAX +3.30% at 14,38
IBEX 35 +1.80% at 8,437
MIB +3.10% at 23,678
SMI +2.00% at 10,826

@Newsquawk

STOXX600 Sector % Chg

All positive

Aero: 4.68
Auto: 3.89
Banks: 3.77
Chem: 3.56
BasicRes: 3.38
Const/Mat: 3.03
IndGoods: 2.97
Insure: 2.83
Media: 2.8
Retail: 2.25
Travel: 2.09
Tech: 2.02
R Estate: 1.86
Health: 1.78
Telco: 1.62
Util: 1.42
FinSrv: 1.22

@PositiveSkugh https://t.co/UiTH5XOtsX

4.51pm GMT

The London stock market also rallied into the close of trading, as anxiety over rising bond yields faded.

The blue-chip FTSE 100 index has closed 88 points higher at 6719, a gain of 1.34% today. The rally was led by travel and hospitality stocks and other companies which will benefit from the economy reopening.

The main story at the moment for equities is not so much the movement in global markets overall but the moves beneath the surface. Most notably, there has been a significant rotation away from growth stocks, which were the big winners last year and indeed over the last decade, into cheaper unloved value stocks.

This move continued last week with value up close to 2% compared to a fall of just under 2% for growth. Since vaccine' day last November, which provided the initial catalyst for the rotation, value has gained 18% versus 4% for growth. Echoing this trend, the financial and energy sectors have gained as much as 25% over this period vs 8% for the tech sector. Similarly, the UK has gained 14% compared with a 4% increase for China.

4.26pm GMT

Over in Frankfurt, the German stock market index has hit a new record high, as stocks strengthen.

Michael Hewson of CMC Markets explains:

It's been a strong start to the week for European shares, with the German DAX flying up to new record highs, led by Deutsche Bank which hit new two-year highs after announcing it would be launching a share buyback program of up to 1bn, as well as restarting its dividend program, ahead of the release of its 2020 results next month.

Unstoppable #DAX breaks new record pic.twitter.com/6m8dwGbhpN

4.21pm GMT

Greensill Capital, the main financial backer of Sanjeev Gupta's steel empire, has entered administration.

Grant Thornton is carrying out the administration of the firm's UK business, following a court hearing on Monday afternoon. It paves the way for a pre-pack deal with the private equity firm Apollo Global Management, allowing Apollo to cherrypick the best assets out of administration.

3.30pm GMT

Stocks are moving higher on Wall Street, after Janet Yellen declared that the US stimulus package will deliver a very strong recovery.

The Dow Jones industrial average is now up 324 points, or 1%, at 31,821.

Yellen says Biden COVID bill to fuel 'very strong' U.S. recovery https://t.co/yKucJOEvwD

3.10pm GMT

The US Treasury secretary, Janet Yellen, has declared that President Joe Biden's $1.9tn coronavirus aid package will deliver a very strong" recovery.

In an interview with MSNBC (online here), Yellen says:

This is a tremendously important package that will bring hundreds of millions of Americans the relief they need.

This is a bill that will really provide Americans the relief they need to get to the other side of this pandemic, and we expect the resources here to really fuel a very strong economic recovery.

If it turns out to be inflationary, there are tools to deal with that, and we'll monitor that closely.

Treasury Sec. Yellen:
- Economy could get back to pre-pandemic jobs next year
- Don't expect undesirable levels of inflation
- If recovery is inflationary, there are tools for that$USD

2.46pm GMT

Stocks have moved higher in Europe too, on relief that Wall Street is in the green.

In London, the FTSE 100 index is now up 52 points, or 0.8%, at 6683.

2.45pm GMT

The New York stock market has opened, and stocks are a little higher as investors anticipate an economic recovery this year.

Tech shares are lagging a little, though.

Global markets continue to dance to the tune of rising bond yields, as a swift vaccination campaign and the overload of federal spending that is arriving soon have seen investors bring forward the timeline of Fed rate increases. The US labor market is healing quickly, President Biden's gargantuan relief package has been approved by the Senate, and America has stepped up its immunization game, administering a record number of vaccines this weekend.

Nonfarm payrolls clocked in at 379k in February, more than double compared to the forecast of 182k, pushing the unemployment rate slightly lower. This is rather impressive considering that the report reflects a period before the vaccination program was firing on all cylinders and before the spending barrage from Congress was unleashed properly. Hence, even better days might lie ahead.

2.13pm GMT

BT has denied that a boardroom rift was behind the resignation of its chairman last week, after a report suggested its chief executive had threatened to step down unless Jan du Plessis was replaced.

The telecoms company has countered claims that Plessis' plan to retire from the role after just three years was linked to a bust-up with Philip Jansen, who was reportedly frustrated at the pace of change at BT under the chairman's leadership.

There has been no misalignment between the board and executive management over the company's strategy."

2.01pm GMT

Here's our economics editor, Larry Elliott, on Andrew Bailey's speech today:

The UK can see light at the end of the Covid-19 tunnel but the economy will never fully return to its pre-pandemic pattern, the governor of the Bank of England has said.

Speaking at an event organised by the Resolution Foundation thinktank, Andrew Bailey said the shifts in spending and working patterns seen since the country first went into lockdown measures a year ago would prove permanent.

1.59pm GMT

Here's more analysis of the situation with US Treasury yields:

Curve steepening of #US #Treasuries continues. Financial #markets remain in a tug of war btw a more favourable macroeconomic backdrop (incl the expected acceleration of #global #growth in Q2 & Q3 21) and concerns about a (premature) tapering of #monetary #policy support. https://t.co/jvmXoYCmQ5

"Almost without fail, the Fed's longer-term dot has served as a soft cap on longer-term Treasury yields. For now it should be considered a guidepost for bond traders about just how far the selling can go."
--@BChappatta, @BOpinion https://t.co/3ovGZK5Gha pic.twitter.com/CJ7MzSMN5d

1.41pm GMT

Oil has dipped back from its earlier highs, with Brent crude below $70 again.

Energy traders may be relieved that the drone and missile attack on Saudi oil facilities doesn't seem to have disrupted production (or caused any casualties, thankfully)

There was a drone and missile strike against a Saudi port facility. While there seems to be no disruption to oil supply, the oil price has risen (presumably on fears about regional security). Central banks are likely to ignore any inflation impact-central bank policy is about economic inflation pressures, not prices in a single product market.

1.12pm GMT

US technology stocks are on track for further losses today, as investors continue to rotate into companies who'll benefit from easing pandemic restrictions:

US Opening Calls:#DOW 31454 -0.12%#SPX 3815 -0.64%#NASDAQ 12472 -1.52%#RUSSELL 2184 -0.23%#FANG 6335 -1.78%#IGOpeningCall

US tech recovering somewhat:#NASDAQ 12482 -1.45%#FANG 6350 -1.54% pic.twitter.com/o00DnE5ocr

12.56pm GMT

The early stock market rally has rather fizzled out in London, with the FTSE 100 now up just 3 points (0.04%) at 6633 at lunchtime.

There's quite a tussle between recovery stocks, and the once-in-demand tech companies.

12.41pm GMT

Speaking of rising bond yields... the interest rate on US 10-year Treasury bills has risen this morning.

The 10-year Treasury yield has touched 1.6%, close to the one-year highs seen last week.

10-year Treasury yield rises to 1.6% after Senate passes stimulus package https://t.co/noMAWz1jq9

10y US Treasury #Yield is above 1.6%, this will most likely have a negative impact on "growth companies/stocks" at Monday trading day. Be careful today. #stocks #nasdaq #nio #tesla pic.twitter.com/j4Zy8MM7br

12.04pm GMT

Andrew Bailey has also poured cold water over the idea that the Bank of England could stop paying interest on its reserves to protect the UK government from rising borrowing costs.

Governor Bailey rejected the suggestion that the BoE could stop paying, or lower, the interest payments to commercial banks on their reserves - insisting that such a move would be a tax on banks, and the wider economy.

We pay interest on reserves because that is how we implement monetary policy," Bailey told an event hosted by the Resolution Foundation think tank on Monday.

A small number of analysts have suggested that rethinking how the BoE pays this interest - possibly limiting it to only a fraction of reserves - could help reduce the sensitivity of Britain's public finances to future rises in interest rates.

Andrew Bailey dismisses the idea (proposed by some in the thread under this tweet) that the @bankofengland could simply stop paying Bank rate on reserves, shielding govt from a big rise in borrowing costs.
That's actually fiscal policy. It's a tax on the banking system."

Andrew Bailey in @resfoundation chat: Cashflow from QE from BOE to Treasury of the order 100bn. That will reverse if rates go up.

The reason we pay interest on reserves is because that's monetary policy. Yep. Moving from a corridor to a floor...

We do have to take seriously what room for manoeuvre on central bank balance sheet. @TorstenBell points out it's the flip side of government balance sheet.

Bailey: Balance sheet of CB is a lot bigger. Have to tackle this question...

[interesting governor aware that political pressure could grow to keep interest rates lower with cheap money increasingly being seen as the normal state. high debt burdens would appear sustainable...

...and allow fiscal policy to become dominant. Quite a challenge for CBers.

As Mervyn King pointed out he and others were accused of being obsessed with inflation. King responded: "This is untrue. If (we) are obsessed with anything, it is with fiscal policy."

11.19am GMT

Pearson is to slash office space in a shift to more permanent home working, as the education company reported a slump in operating profits and revenues as schools shut and exams were cancelled last year.

The resulting strategy, based on a simpler, more agile operating model, is focused on three global market opportunities.

The rise in online and digital learning tools, the workforce skills gap and the growing demand for accreditation and certification."

As we change the way we work we will simplify our property portfolio and occupy a significantly smaller square footage which will be fully technology enabled supporting collaboration and creativity."

11.12am GMT

On unemployment, Andrew Bailey says extending the furlough scheme until the end of September should reduce the peak level of joblessness this year.

The likely path of joblessness probably will be considerably smoother' than previously forecast, he explains (we'll get the BoE's new forecasts in May).

Governor Andrew Bailey suggests Bank may reduce its most recent peak unemployment forecast (7.5%) due to furlough extension in #budget21 - tells @resfoundation "I would expect that to be considerably smoother"

BOE'S BAILEY: EXPECTS BANK TO REDUCE UNEMPLOYMENT FORECAST, 'BUT THAT WORK HASN'T BEEN DONE YET.'#bankofengland #ukeconomy #andrewbailey #resolutionfoundation

Ahead of its May Monetary Policy Report, the MPC will assess the impact of the extension of the furlough and related schemes, announced in last week's Budget. My expectation would be that this is likely to reduce the peak level of unemployment over the coming months. However some rise in unemployment as the scheme tapers will be hard to avoid.

11.01am GMT

On inflation, Andrew Bailey says the Bank of England's task is to get it up to target (the consumer prices index rose by 0.7% in January, below the goal of 2%).

And while inflation will rise in the short term, it will be challenging to tell whether that will be a persistent change', he explains.

10.39am GMT

BoE governor Andrew Bailey says that his overall assessment of Britain's economic outlook is positive but with large doses of cautionary realism."

That's because:

10.29am GMT

The governor of the Bank of England, Andrew Bailey, says there is a growing sense' of economic optimism building, but also cautioned that life won't return to pre-Covid normality.

Speaking at a Resolution Foundation event, Bailey explains that Covid has been a shock to both demand and supply in the economy - and some of the structural changes in the last year will not reverse.

Using an output gap measure on its own fails to capture the importance of this story. The best we can say is that how the output gap develops in the recovery from Covid will depend on the net effect of the two, both of which will need to move by more than in normal recoveries. There is another element to this part of the story which is hard to assess at present, namely to what extent the more structural changes we have seen during the Covid crisis will persist, and what effect they will have on the recovery?

There is a lot of uncertainty around these elements, but my best guess is that we will see some persistence, not full persistence but not a full reversion to pre-Covid either.

It seems likely that task and job reallocation and capital redeployment has increased since then, for instance because workers will need less significant retraining to move between sectors.

There is a growing sense of economic optimism, in markets and in consumer and business confidence measures. The rate of new Covid infections is declining, and the vaccine programme is a huge achievement. There is light at the end of the tunnel. A note of realism though: our latest forecast in essence painted a picture of an economy that starts at a lower level of activity as a result of the current restrictions and people's natural caution associated with the renewed onset of Covid, which then gets back to where it was pre-Covid by the early part of next year.

The level of activity in a year's time is broadly similar in the February forecast as it was in our November forecast, although the recovery is faster because the starting point is lower. There is good news in that projection, with a rapid recovery later this year, and inflation returning to around our 2% target. That recovery is assisted by the continued support the MPC is providing through low interest rates and quantitative easing, and in my view it amply justifies our current stance on monetary policy.

Coming at 10am this morning - The economic outlook: Speech and interactive Q&A with Governor of the @bankofengland Andrew Bailey and @helene_rey Professor of Economics at @LBS .
Watch the webinar here (no need to register at this stage) https://t.co/vL04qtNrTk pic.twitter.com/HfjNyVFtP7

10.22am GMT

As flagged in the introduction, British consumer confidence has risen to its highest level since the coronavirus pandemic started, according to polling firm YouGov.

YouGov says its consumer confidence score increased by two points to 105.4, driven by expectations for business activity, house prices and household finances over the next year.

UK consumer confidence hits highest level since pandemic began - YouGov https://t.co/Jjb9DdErI0 pic.twitter.com/raGBXFJw72

9.47am GMT

Back in the markets, the rotation from growth' stocks to value' stocks continues.

Banks are among the risers in London, with Lloyds and HSBC up around 3% each. European bank stocks are at their highest level in a year.

9.15am GMT

Here's our news story on Deliveroo's flotation plans:

9.06am GMT

Here's Bloomberg's Helen Robertson on the oil price move:

Brent oil surged above $71 a barrel after Saudi Arabia said the world's largest crude terminal was attacked.

Output appeared to be unaffected https://t.co/aC56xjLOFa #OOTT pic.twitter.com/WswfKSwm7u

The kingdom said a storage tank at Ras Tanura was targeted on Sunday by a drone from the sea.

The terminal is capable of exporting roughly 6.5 million barrels a day -- nearly 7% of oil demand https://t.co/NGsua5WHRd #OOTT

The assault follows a recent escalation of hostilities in the Middle East region after Yemen's Houthi rebels launched a series of attacks on Saudi Arabia https://t.co/qFTAKYnAcU

9.01am GMT

The oil price has hit a new 14-month high after Saudi Arabia reported that its oil facilities had been targeted by missiles and drones on Sunday.

Yemen's Houthi forces fired drones and missiles at the heart of Saudi Arabia's oil industry on Sunday, including a Saudi Aramco facility at Ras Tanura vital to petroleum exports, in what Riyadh called a failed assault on global energy security.

The Saudi energy ministry said there were no casualties or loss of property from the attacks. The defence ministry said it intercepted an armed drone coming from the sea prior to hitting its target at an oil storage yard at Ras Tanura, site of a refinery and the world's biggest offshore oil loading facility.

Oil prices have spiked higher this morning after Iran-backed Houthi rebels unleashed a coordinated attack on Saudi Arabia oil facilities and military bases.

With OPEC pursuing a tight oil policy and US Shale Oil inelastic supply response to higher prices, any disruption to the Middle East supply chain could shoot oil prices considerably higher.

8.52am GMT

Germany's industrial output tumbled in January, as the latest Covid-19 restrictions hit Europe's largest economy.

Output in the industrial sector, including construction and energy, fell by 2.5% on the month, according to Destatis (the Federal Statistics Office). Economists had expected an increase of 0.2%.

Production in January 2021: -2.5% on the previous month. https://t.co/WlP9ajYbM0 pic.twitter.com/Dom4auR2IM

8.32am GMT

European stock markets have opened higher, with travel companies among the risers in London.

Airline group IAG has gained 3%, with jet engine maker Rolls-Royce jumping 3.2%.

Improving news for the much anticipated global economic recovery is being tempered by accelerating inflation concerns.

In the US, the non-farm payrolls figure which saw 379000 jobs being added in February was significantly higher than expected, with the unemployment rate also dropping to 6.2%.

7.59am GMT

British food delivery firm Deliveroo has unveiled its long-awaited plans to join the London stock market.

Deliveroo formally unveiled its IPO plans this morning - including 64% growth in gross transaction value to 4.1bn and underlying losses of 224m last year https://t.co/RWGD7c5Fwk

Now we take the next big step in our journey by allowing everyone to have a share in our future. That's why we are planning to take Deliveroo public here in London, the city where it all started - and we plan to offer our customers across the UK the chance to own a part of the business.

We are proud to be enabling our customers to participate in a future float and have the chance to buy shares. Your loyalty and custom has helped build our business. I want you to have a chance to share in our future.

7.27am GMT

Britain's events industry is preparing for a post-lockdown surge in demand, as people try to catch up on weddings and look to celebrate the end of Covid-19 restrictions.

But with some suppliers having collapsed during the last 12 months, the law of supply and demand means prices are going to jump.

The UK is in store for an unprecedented boom in events as the industry prepares to stage hundreds of thousands of weddings and end of Covid" celebrations when restrictions on gatherings are lifted this summer - just expect to pay 25% more than before the pandemic.

Booking for events have risen 250% compared with pre-Covid levels, after Boris Johnson announced a cautious but irreversible" roadmap out of lockdown. The plans include a removal of all legal limits on mixing from 21 June, with large events permitted.

6.57am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
After an extremely tough 12 months, Britain's services companies are feeling more optimistic about their future prospects, thanks to the UK's rapid Covid-19 vaccination programme. Service sector confidence jumped in February to its highest level since the pandemic began, according to the latest Business Trends report from accountancy and business advisory firm BDO LLP.
BDO's Services Optimism Index rose to 94.13 in February from 86.60 in January, back towards the long-term average of 100.

That's the highest reading in 12 months for the survey, which covers a range of industries from retail and hospitality to professional services. Overall, services is around three-quarters of the economy.
BDO's report suggests that business confidence was rising even before Boris Johnson laid out the four-stage plan to reopen the UK economy, under which non-essential shops could open on April 12,

The speed of the vaccine rollout across the UK has given businesses a much-needed shot of relief."

With business lifelines extended in the shape of the prolonged furlough scheme, and an extra dose of support provided to hospitality via extensions in business rates relief and the VAT cut to 5%, there is reason to believe this optimism can be sustained as we gradually emerge from the depths of lockdown."

The latest rise in the consumer confidence index underlines the resilience of households throughout this third national lockdown," Kay Neufeld, head of forecasting at the Centre for Economics and Business Research, said.

With a road map for the gradual reopening of the economy now published, we expect the positive consumer sentiment to further aid in the recovery over the coming months."

Monday's TIMES Business: Growth set for rebound as vaccine raises hopes" #TomorrowsPapersToday pic.twitter.com/uUNnrMaV8u

European Opening Calls:#FTSE 6685 +0.82%#DAX 13989 +0.49%#CAC 5822 +0.68%#AEX 661 +1.13%#MIB 23173 +0.90%#IBEX 8363 +0.91%#OMX 2059 +0.49%#STOXX 3696 +0.71%#IGOpeningCall

Source	RSS or Atom Feed
Feed Location	http://feeds.theguardian.com/theguardian/business/economics/rss
Feed Title
Feed Link	http://feeds.theguardian.com/