European lockdowns hit travel firms and oil price – as it happened

Graeme Wearden

from on 2021-03-23 17:42 (#5FP3B)

Rolling coverage of the latest economic and financial news

Latest: Pound hits six-week low vs US dollar
Oil down 3% as selloff deepens
Volvo shares drop after chip shortage warning
UK unemployment rate drops
In the City: IAG, TUI and Carnival shares drop
Introduction: Rising Covid-19 cases weigh on markets
China's market falls after western sanctions

5.40pm GMT

Time to recap.

Shares in airlines and travel companies fell again today as rising Covid-19 cases in Europe and tighter restrictions threatened to disrupt the summer holiday season.

5.02pm GMT

Britain's FTSE 100 index has closed down 27 points, or 0.4%, at 6699, amid anxiety over rising Covid-19 cases in Europe.

Travel companies and oil giants were among the fallers, with IAG down 4.4% and BP losing 3.7%.

Concerns that Europe's economic rebound will be hampered are playing on traders' minds. Germany's lockdown will last until 18 April, other countries have adopted tighter restrictions too in an effort to tackle the problem of rising Covid-19 cases. The EU's vaccination distribution scheme is underperforming in comparison with Britain's programme, and now fears of another wave of the virus in mainland Europe have sparked worries that several countries in the region will have to reopen their economies later than anticipated. The mood isn't awful, traders aren't running for the hills but there is a sense of fatigue that the restrictive climate will drag on a bit longer. Most European indices are in the red this afternoon.

4.30pm GMT

International Airlines Group (IAG) has signed a three-year $1.755bn revolving credit facility with a syndicate of banks, a move that will bolster its finances.

The facility is available to its three airlines - Aer Lingus, British Airways and Iberia - who each have a separate borrowing limit.

IAG has used its airlines take off and landing slots at London Gatwick & Heathrow to secure a new revolving credit facility of $1.8 billion which will initially be available for a period of three years.

The facility has been agreed with a syndicate of banks and is available to Aer Lingus, British Airways and Iberia which each have their own limits under the facility.

British Airways has cancelled its US dollar facility that was due to expire on 23 June 2021 & had $786 million undrawn & available at 31 December 2020. In addition, approximately 400 million of facilities are due to expire undrawn by the end of March.

4.07pm GMT

Spacs, or special purpose acquisition companies, are in the news again today.

Sir Martin Sorrell, the advertising mogul who has built his business empire through shell companies, has argued that these blank-cheque vehicles are too expensive to take off in the UK.

Sorrell, who transformed Wire and Plastic Products (WPP), from a cash shell to the world's biggest advertising agency more than three decades ago, claims the structure is better suited to the UK market than the new investment craze of so-called special purpose acquisition companies, or Spacs. The ad titan also used the well-established cash-shell route to launch his venture S4 Capital in 2018, just six weeks after his acrimonious split from WPP.

I looked at a Spac in America [to set up] S4 Capital, I thought that Spacs were too expensive and took too long. I prefer the shell route because it's cleaner, faster and more efficient," he told Financial News.

If you relapse significant amounts of the company to the promoter [of a Spac] or it becomes a beanfeast for advisers, in terms of legal fees and banking fees, I think that is potentially a problem," Sorrell said. The spac route is more a creation of bankers and promoters."

The crowd appears to have moved on... pic.twitter.com/YZZM3u3U8N

SPACs keeps falling. #SPAC index down >20% from ATH and so in bear-market territory. pic.twitter.com/FtM0O86klZ

Revealed: Kingswood Acquisition Corp, a US-listed SPAC, is in exclusive talks to buy Lombard, the wealth manager owned by Blackstone, in what would be the first example of a UK-based financial services company going public through a 'blank cheque' merger. https://t.co/4MCqTVCBtT

3.45pm GMT

Back in Turkey, the stock market has recovered from its earlier sharp losses to end the day pretty much flat!

3.30pm GMT

Today's UK unemployment report gave a timely reminder that younger workers have been particularly hit by the pandemic, and the lockdown measures introduced to fight it.

My colleague Anna Bawden explains:

The numbers of young people out of work in the UK have reached new highs - with young people accounting for nearly two-thirds of job losses since the pandemic, according to official figures.

The regional employment figures from the Office for National Statistics show that long-term unemployment has risen 40% over the same period to 215,000 young people out of work for six months or more. Of all 16- to 24-year-olds who are currently unemployed, 74% have been unemployed for at least six months.

Blimey - of the 693,000 payrolled jobs lost over past pandemic year... 611k or 88% have been lost to under 35 year olds... pic.twitter.com/eEWYsnSBqq

Age breakdowns of real-time payroll data show that, as with employment, the young have borne the brunt when it comes to pay. Pay among 18-24-year-olds has fallen, unlike other age groups. pic.twitter.com/Ui4i4eWdyN

3.10pm GMT

After a year of lockdown, the novelty of using video calls to keep in touch with collegues and friends has definitely worn off.

So those suffering from Zoom fatigue might look enviously at Citigroup.

I know, from your feedback and my own experience, the blurring of lines between home and work and the relentlessness of the pandemic workday have taken a toll on our wellbeing,"

It's simply not sustainable.

2.50pm GMT

The IMF's managing director, Kristalina Georgieva, has warned today that the prospects for a recovery from the COVID-induced economic slowdown are uncertain and uneven.

Georgieva s pointed out that some emerging economies and almost all low-income countries, run the risk of a weak recovery -- underlying the need for a rebound in trade to lift growth.

It is the time to double down so trade can be again the engine of growth and opportunities it has been for so, so long," Kristalina Georgieva said at an online event organised by the World Trade Organization. Trade volumes could grow 8.5% this year and 6.5% next year, she added.

A rebound in trade, if managed well, can lift growth and living standards in the developing world," Georgieva said.

.@KGeorgieva: The outlook for the economy is improving: thanks to extraordinary actions by governments, trade, vaccines, and our increasing adaptability. But the prospects for recovery remain both uncertain and uneven. https://t.co/jx7qSND39L #AidforTrade pic.twitter.com/zn1OQqszkz

2.24pm GMT

Over in the US, new homes sales tumbled by 18% in February -- in the latest sign that the economy weakened last month.

US Feb New Home Sales -18.2% To 775K; Consensus 870K

According to mortgages being more expensive and higher construction costs the price of the new home can't be contained for sure.

Extreme cold weather across the country slammed the new-home market in February. New-home sales plunged 18.2% to 775,000 annualized units in February, much more than either we or the consensus anticipated. https://t.co/gxsabFZgv8

If it was all about the frigid weather, why did new home sales fall out West?

Sales declined in all 4 regions led by -37.5% slump in the Midwest, -14.7% decline in the South, -11.6% drop in the Northeast & -16.4% tumble in the West. Months' supply of homes jumped to 4.8 from 3.8

2.10pm GMT

Prince Harry has been given a job by a $1bn (730m) Silicon Valley startup which provides professional coaching, mental health advice and immersive learning" as its chief impact officer.

The Duke of Sussex said he hoped to be able to create impact in people's lives" by working with BetterUp to provide proactive coaching" for personal development, increased awareness and an all-round better life".

Often because of societal barriers, financial difficulty, or stigma, too many people aren't able to focus on their mental health until they're forced to. I want us to move away from the idea that you have to feel broken before reaching out for help."

2.07pm GMT

Shares in pharmaceutical giant AstraZeneca are down 2% in London today, after its Covid-19 vaccine ran into more problems in the US.

In a rare move, the independent monitoring board that oversaw its US trial warned that the results released by the company on Monday were misleading.

The Oxford/AstraZeneca vaccine against Covid has been dealt yet another blow within hours of AZ posting excellent results from its long-awaited big trial in the US.

Questions have been raised in the US by the independent Data and Safety Monitoring Board (DSMB), which has suggested that AstraZeneca may have provided outdated information" in its statement on Monday, which gave an incomplete view" of the results.

AstraZeneca sliding after the NY open. pic.twitter.com/0V8ODIQMU4

1.52pm GMT

PensionBee, an online pension provider, has become the latest company to announce plans to float on the London Stock Exchange, with an estimated market value of 350m.

The firm, which helps savers consolidate their old pensions into one new plan, aims to sell shares to institutional investors as well as its 130,000 active customers. It wants to list on the London Stock Exchange's main market, which requires firms to have a market value of at least 300m at admission.

1.48pm GMT

U.S. stocks opened lower Tuesday as a worsening COVID-19 outlook prompted renewed lockdowns around the globe. https://t.co/obdqGThbse pic.twitter.com/W04xGXWckF

1.40pm GMT

The New York stock exchange has made a subdued start to trading.

Even fresh reports of a new infrastructure stimulus in the US have been treated with a degree of caution, investors preferring to wait for more concrete evidence before becoming too keen on jumping back into the water.

Tech stocks continue to outperform, as the growth to value rotation starts to shift back in the other direction, as some of the optimism regarding a reopened economy falls away.

1.18pm GMT

Britain's financial watchdog has warned today that a new wave of younger investors are taking on large financial risks.

The FCA reports that a new, younger, more diverse group of consumers" are involved in higher risk investments, partly due to the new wave of investment apps which make it easier to trade foreign exchange, cryptocurrencies and shares.

Much of the consumer investments market meets consumers' needs. But we are worried that some investors are being tempted - often through online adverts or high-pressure sales tactics - into buying higher-risk products that are very unlikely to be suitable for them.

Our new research findings reveal there is a new, younger, more diverse group of consumers getting involved in higher risk investmentshttps://t.co/dcgWfQ8oJr

12.46pm GMT

The weaker pound is propping up the FTSE 100 index, which is currently down just 0.2% at 6713 points.

But travel firms and oil majors are sharply lower, as Sophie Griffiths, market analyst at OANDA says:

Oil majors and airlines are among the steepest decliners as the likes of BP trace oil prices lower, while investors ditch airlines following the government's latest travel restrictions.

With no end in sight to the illegal" holiday restriction, it's difficult to be bullish on airlines.

Energy update:
Oil - WTI (undated) 5915 -3.89%
Oil - Brent (undated) 6209 -3.79%
Natural Gas 2577 -1.38%
Heating Oil 17670 -3.43%
Gasoline 19016 -2.91%
London Gas Oil 493 -3.9%#Oil #Brent #WTI #OOTT

12.22pm GMT

Back in the City, travel shares are still sharply lower.

Foreign holidays are currently not allowed under the "stay at home" rule, which ends on Monday

From next week, the ban on leaving the UK will become a specific law, backed up by the threat of a 5,000 finehttps://t.co/da85asjMnO

The earliest date by which we will allow for international travel ... is 17 May. That has not changed."

11.27am GMT

Order books at UK factories have swelled to their highest levels in nearly two years, in a sign that Britain's manufacturing sector is picking up.

The CBI's industrial trends survey found that total order books improved considerably on February', rising to their strongest position since April 2019, and above the long-run average.

It's great to see the mood lift among manufacturers, buoyed by a jump in order books. But firms continue to grapple with higher freight costs as well as raw material shortages. Consequently, manufacturers anticipate prices to grow at a quick pace next quarter.

Meanwhile, risks to growth in European markets are elevated given the slow pace of vaccine roll-out and the likelihood of further lockdowns.

UK #manufacturing output volumes in the three months to March improved to broadly flat, which marked their highest balance since May 2019. Looking ahead, manufacturers expect output to pick up rapidly over the next three months, with expectations at their strongest since Aug 2017 pic.twitter.com/OxD7gDK5YL

Total orders books improved to their highest balance since April 2019, surpassing their long-run average. Export order books strengthened to broadly in line with their long-run average pic.twitter.com/KQ7pghaVTU

Manufacturers anticipate output price growth will accelerate quickly in the next quarter, the strongest expectations since February 2019 pic.twitter.com/ml8Bmbk483

11.00am GMT

After a rotten year, cinema chain Cineworld is hoping that Godzilla and King Kong can lure customers back to its screens.

10.28am GMT

Sterling is also down this morning.

It has dropped by a cent against the US dollar, to a six-week low of $1.376.

Looks to be a pretty soggy morning for risk as sterling slipped to its weakest since the start of February, whilst the dollar is bid, shares slipped, oil fell and bond yields retreated ahead of the Congressional testimony of Fed chair Jay Powell and Treasury Secretary Janet Yellen.

We kind of know where the Fed is at in terms of yields, inflation and accommodation. We will want to hear a lot more about what Yellen says on additional stimulus, with Biden's mooted $3tn plan in the offing.

One of the reasons why sterling has strengthened this year is the successful vaccine rollout but the UK relies on imported vaccines," said Lars Sparreso Merklin, senior analyst at Danske Bank.

There are growing tensions between the UK and the EU, with more and more EU countries considering backing a vaccine export ban to the UK, which may delay the UK's vaccination plan. We do not think the EU will implement an export ban (because it may turn out to hit themselves as well) but it is a topic to watch."

9.58am GMT

The oil price has now fallen over 3%, extending its earlier losses, amid worries that fresh Covid-19 restrictions in Europe will hit demand.

Brent cude is now down over $2 per barrel, at $62.40, while US crude has dropped back below $60 per barrel.

Investors are concerned that oil demand is going to face a difficult time in the coming days because of the rollback of the coronavirus measures in a number of European countries.

Both Brent and Crude oil have seen over a 6% drop last week--the worst weekly drop for oil prices for this year. Oil producers are still optimistic as they believe demand recovery is taking place, but it will take some time.

9.53am GMT

A warning from Swedish truckmaker Volvo that the global shortage of semiconductors will hit its production is weighing on the auto sector today.

In the beginning of the quarter, the Group will implement stop days across its global truck manufacturing operations. In total, these are currently estimated to between two and four weeks depending on production site.

In addition, disturbances are also expected to impact the Group's other business areas.

9.32am GMT

9.28am GMT

Over in Istanbul, stocks are falling for the second day after the shock dismissal of central bank governor Naci Abal over the weekend.

The benchmark BIST 100 index slumped by 5% earlier today, and is currently down around 2.5% in volatile trading. That follows a tumble of around 9.8% on Monday -- the worst day since 2013.

President Recep Tayyip Erdogan's ouster of Naci Agbal prompted speculation the monetary authority will break with his hawkish policies, sparking a slump in the lira and sending 10-year bond yields higher by more than 4 percentage points.

Foreign investors have a big presence in Turkey's banking industry and the nation's lenders have led the equity declines.

Opposition politicians seized on what they called a dangerous and baffling move by the president to oust a bank governor, Naci Agbal, who had gained market credibility as an inflation-fighter in less than five months on the job.

The ridiculous steps you take, the unqualified people you appoint are not enough," Iyi Party chairwoman Meral Aksener said in parliament. Every error you insist on carries us deeper into trouble ... We are on the verge of a balance of payment crisis."

The BIST 100 Index slumped 9.8% to close at 1379.25 in the biggest retreat since June 2013, with all members finishing lower. The drop triggered circuit breakers for the first time since their introduction in August as the benchmark sank 5%, then extended losses to 7%." https://t.co/9Y0noJpe8J pic.twitter.com/D5yI75jrEx

8.53am GMT

Here's more reaction to the UK labour market report:

UK unemployment rate edges down to 5% in three months to January according to ONS

Imagine a year ago if you'd told someone the economy would contract by 10% in 2020 but the official jobless rate would only rise by 1 percentage point - shows the power of furlough pic.twitter.com/gbMNdclP1Y

More reassurance on the UK labour market: headline #unemployment rate in 3 months to January fell from 5.1% to 5.0%, with single-month measure for January itself down to 4.9%.

Obviously flattered by furlough, but consistent with (my) view that the peak will be below 6%. pic.twitter.com/8QxRB3UOZ9

FYI, UK #unemployment in January (5.0% on three month measure, 4.9% on the single month) remains well below the EU average of 7.3% and the euro average of 8.1%...

(to save anyone asking, the figures are calculated in the same way and other countries have #furlough too) pic.twitter.com/SxThY868Np

The UK job market stabilised through the winter and even saw some signs of improvement in the first few weeks of 2021. But @SmithEconomics says the unemployment rate is set to risehttps://t.co/EOs0dJeS6S

Annual average earnings growth was 4.8% in 3 months to January for total pay & 4.2% for regular pay. ONS reports this is influenced by fall in number & proportion of lower paid jobs during pandemic. Underlying wage growth is around 3% for total pay; around 2.5% for regular pay https://t.co/upBjlNu9dx

8.50am GMT

Economists say the drop in Britain's unemployment rate shows that the furlough scheme is protecting jobs... but there could still be more job losses ahead.

Ruth Gregory, senior UK economist at Capital Economics:

The drop in the unemployment rate from 5.1% in December to 5.0% in January highlights once again the extent to which the government's job furlough scheme has protected jobs during the pandemic.

We still expect the unemployment rate to rise further to a peak of 6.0% by early 2022, but that would be a much better result than most feared only a few months ago.

Today's strong labour market report has shone a light on how important the Chancellor's furlough scheme has been at preventing job losses and keeping the UK on the road to recovery.

With the furlough scheme extended until the end of September, the chances that the unemployment rate rises to levels last seen in the financial crisis or even reaching the OBR's forecast of 6.5% seems an unlikely destination.

With payrolls up for the third consecutive month in February, the furlough scheme continues to cushion the blow to the labour market from the current national lockdown.

We expect unemployment to remain somewhat steady until summer, followed by a gradual rise over the third quarter as employer contributions towards furlough pay begin to pick up in July."

8.41am GMT

Unemployment in the UK has fallen for the first time since the coronavirus pandemic began despite the toughest lockdown measures since the first wave spread a year ago, according to official figures.

The Office for National Statistics said the unemployment rate fell back slightly to 5% in the three months to January, representing 1.7 million people - down from 5.1% in the three months to December.

UK unemployment falls for first time in Covid-19 pandemic https://t.co/3Ym24G5EDi

8.29am GMT

All Europe's stock markets are in retreat this morning.

Germany's DAX index is leading the selloff, down 0.8%, after chancellor Angela Merkel extended lockdown restrictions and warned that the country in in a new pandemic".

8.16am GMT

It's a similar picture on the FTSE 250 index of smaller, more UK-focused companies.

SSP Group, which runs Caffe Ritazza and Upper Crust outlets at airports and railway stations across the UK, has dropped 5%, while cruise operator Carnival are down 3%.

8.14am GMT

Travel and hospitality stocks are dragging the London stock market down, as trading begins.

British Airways parent company, IAG, has fallen 2.3%, as hopes of summer holiday getaways are hit. Hotel groups Intercontinental (-1.4%) and Whitbread (-1.3%) and luxury goods maker Burberry (-1.9%) are also down.

8.04am GMT

Here's a round-up of the latest Covid-19 restrictions in Europe:

8.00am GMT

The oil prices has fallen over 1% today amid concerns that the latest pandemic curbs and slow vaccine rollouts in Europe will hit the economic recovery.

Brent crude is down 1.1% to $63.91 per barrel, extending its recent losses, while US crude is back at $60.90.

The vaccine spat is negative for European and UK asset markets this week.

Europe is also contending with spiking Covid-19 cases and reimposing or extending lockdowns across major European economies. That has been felt most keenly in oil markets, with reassessments of future consumption taking place.

7.43am GMT

China's stock markets fell today amid worries over the sanctions imposed by the UK, Europe, US and Canada, and concerns that rising Covid-19 cases could hit the global recovery.

Market sentiment is mixed on the back of rising Covid cases despite vaccinations and escalating tensions between China and the West.

The major US indices kicked off the week on a positive footing, but Asian indices didn't follow up on the New York session gains. Most Asian indices traded in the red. Chinese indices led losses on the back of reviving diplomatic tensions after the US, the UK, Europe and Canada imposed sanctions on Beijing over human right abuses in Xinjiang. The latter will further weigh on fragile US-China trade relations and add fuel to the global trade war.

7.25am GMT

Rising tensions between China and Western countries are also weighing on the markets today.

Last night Britain, the EU, the US and Canada imposed parallel sanctions on senior Chinese officials involved in the mass internment of Uighur Muslims in Xinjiang province.

The move..marked the first time in three decades that the UK or the EU had punished China for human rights abuses, and both will now be working hard to contain the potential political and economic fallout. China hit back immediately, blacklisting MEPs, European diplomats and thinktanks.

The US and Canada also imposed sanctions on several senior Chinese officials as part of the coordinated pressure campaign.

7.10am GMT

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

We are now basically in a new pandemic. The British mutation has become dominant."

Merkel extends lockdown until late April incl five days of hard lockdown over Easter"

Church services online only
Hospitality remains closed
Shop closures for Easter, incl some grocery stores
No oversea travel ban but test needed to board flight home#Osterlockdown

People in this country should be under no illusions that previous experience has taught us that when a wave hits our friends, it washes up on our shores as well. I expect that we will feel those effects in due course.

European Opening Calls:#FTSE 6688 -0.56%#DAX 14612 -0.31%#CAC 5942 -0.45%#AEX 682 -0.33%#MIB 24189 -0.31%#IBEX 8316 -0.33%#OMX 2169 -0.28%#STOXX 3818 -0.41%#IGOpeningCall

Germany is trying to slow the third wave by locking down over Easter. Although the major economies of the Eurozone are targeting a full vaccine roll-out by August, where they might still succeed, in the interim, a sustained recovery in consumer spending relative to the US and UK looks set to disappoint.

Oil is struggling in Asia as lockdown concerns rear their ugly head again. German Chancellor Merkel has proposed extending and slightly tightening the existing Covid restriction for another 4 weeks. Dr Fauci is warning of a possible Covid surge in the US following the rise in Europe. And the latter is likely sounding New York City reopening alarm bells with Mayor De Blasio urging a pause in the reopening narrative.

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