UK manufacturing optimism highest since 1973; ECB presses on with bond purchases – as it happened

Graeme Wearden

from on 2021-04-22 17:32 (#5GXFK)

Rolling coverage of the latest economic and financial news

6.30pm BST

Time for a recap

UK factory bosses are their most optimistic in almost 50 years, as confidence about the recovery grows.

While the recovery in global demand, and the sizeable fiscal stimulus, are supporting global and euroarea activity, the near-term economic outlook remain clouded by uncertainty about the resurgence of the pandemic and the rollout of vaccination campaigns.

Persistently high rates of coronavirus infection, and the associated extension and tightening of containment measures, continue to constrain economic activity in the short term.

6.15pm BST

Another piece of encouraging data from earlier - eurozone consumer confidence has hit its highest level since the pandemic began.

The index rose to -8.1 this month, up from -10.8, suggesting that Europeans are more upbeat about prospects for 2021.

Eurozone April Consumer Confidence Report - EChttps://t.co/CNFUkr4Qw9 pic.twitter.com/jeHNeyCB6q

The surprising jump in consumer confidence is actually more noteworthy than any action at the ECB meeting this afternoon.

The increase from -10.8 to -8.1 in April reveals an optimistic consumer that finally sees light at the end of the tunnel. This is the highest reading since February last year, marking the best reading since the start of the pandemic. It far surpasses the levels seen in the summer of last year when reopenings led to only modest improvements in confidence, indicating that consumers really feel close to the end of things.

The increase in eurozone confidence in April reveals an optimistic consumer that finally sees light at the end of the tunnel, writes @BertColijn https://t.co/K0W1HTBthA

5.48pm BST

European stock markets have ended the day higher.

In London, the FTSE 100 index gained 42 points, or 0.6%, to finish at 6938.

Live Market Update from the CMC dealing desk - European Closing Prices:#FTSE 6938.24 0.62%#DAX 15320.52 0.82%#CAC 6267.28 0.91%#MIB 24398.41 0.98%#IBEX 8656.8 1.61%
Prices are indicative only. $FTSE $DAX $CAC $IBEX

Falling infection rates in Europe, a vaccination take-up in over 50's of 95% in England and signs consumers here have remembered how to spend on the high street won't harm that sentiment at all.

But there have been other factors at play today. The global shortage of microchips is having a tangible impact on the automotive sector and Wall Street will be paying close attention when Intel updates markets later, hoping for further guidance on how quickly manufacturers can adapt.

Scoop: Jaguar Land Rover to suspend work at major UK car plants amid computer chip shortage. Castle Bromwich and Halewood to stop production for a week at least https://t.co/5FsOyLPGIa

Jaguar Land Rover is no means the only car manufacturer to be affected by the global shortage of semiconductors. Most other major car manufacturers have already announced production slowdowns.

The main reason for the shortage is a significant increase in demand for semiconductors during the pandemic, partly due to increased sales of consumer tech, such as tablets and gaming hardware as well as the growing requirement for battery electric vehicles. The global market for semiconductors is now estimated to have a value of $433bn, and further growth of 8.4% is forecast this year.

5.37pm BST

Over in the US, the number of people filing new unemployment claims have dropped to their lowest level since the pandemic began.

Initial unemployment claims dropped to 547,000 for last week, the lowest since the week of March 14, 2020 (figures released earlier today show).

Weekly initial jobless claims fall to 547,000, lowest since pandemic began, as labor market begins to sizzle #dol #initialclaims pic.twitter.com/v1oGRS3ALK

Another US data beat:
Weekly initial #jobless claims declined to 547,000. a new #Covid-period low and below consensus expectation of 610,000.
Continuing claims also fell -- to 3.67 million.
Both data points are consistent with the general picture of an accelerating US recovery. pic.twitter.com/XQHcBsKYn6

5.31pm BST

Shares in Deliveroo have closed at a new low tonight, as it continues to struggle after the worst IPO in London's history" last month.

Deliveroo ended the day at just over 230p, down 1% today, or over 40% down on the 390p which investors (including some of its own customers) bought shares.

Odey Asset Management has revealed to clients that it took a short position against Deliveroo, the first sign that hedge funds are targeting the food delivery company after last month's disastrous initial public offering.

The bet against Deliveroo's share price was taken by James Hanbury and Jamie Grimston, fund managers at London-based Odey, according to investor documents seen by the Financial Times. The position appears to have been taken on March 31, the day of Deliveroo's listing.

Hedge fund Odey takes short bet against Deliveroo https://t.co/aqRVPE0J38

5.09pm BST

The future of a landmark deal to improve safety at clothing factories in Bangladesh is in doubt, unions have said, in the run-up to the eighth anniversary of the collapse of the Rana Plaza building in which more than 1,100 garment workers died.

More than 200 brands, including Primark, Marks & Spencer and H&M, signed up to the Bangladesh accord on fire and building safety after the 2013 disaster at the factory in the outskirts of Dhaka. That deal, agreed with the international clothing workers' unions UNI Global and IndustriALL, is due to expire next month.

5.01pm BST

Gig economy workers have won another victory in the battle for employment rights - this time against cab and courier company Addison Lee.

My colleague Sarah Butler explains:

Thousands of Addison Lee drivers could be entitled to an average 10,000 each in compensation after the court of appeal found they were workers" entitled to the national minimum wage and paid holiday.

Lord Justice Bean dismissed an appeal by Addison Lee against a 2017 employment tribunal that found that three drivers for the company were entitled to the minimum wage from the time they logged on as ready to take passengers to the time they logged off. That decision was also upheld by the employment appeal tribunal in 2018.

4.55pm BST

The pandemic has been a difficult and stressful time for many workers.

And at Swiss bank UBS, they're introducing a new promotion bonus as part of a drive to keep young dealmakers healthy and engaged.

4.27pm BST

Informa, the world's biggest exhibitions group, has highlighted the economic disruption that is being caused by the pandemic.

Informa reported a loss of 1.1bn for 2020 as the coronavirus pandemic prevented gatherings around the world, sending its revenues plunging.

In the US, the first Informa event took place in February in Florida, which has had looser coronavirus restrictions than some other states. It has since run two large boat shows there.

Informa is planning to draw corporate crowds to Las Vegas from June for events such as the World of Concrete show, the International Surface Event and WasteExpo.

4.17pm BST

Also today, the chairman of funeral provider Dignity has been ousted in a coup led by the company's biggest shareholder.

Clive Whiley lost an investor vote, with 55% of votes cast in favour of a motion to remove him. It follows growing pressure from Phoenix Asset Management over the handling of a strategic review at Dignity (which runs around 800 funeral locations and 46 crematoria in the UK).

Norway's oil fund, the world's largest sovereign wealth fund, voted against the proposal to oust Whiley and replace him with Channon, while a top-20 shareholder said he was extremely worried about the outcome.

He said: We are very concerned there is going to be complete vacuum and chaos. Phoenix are acting extremely irresponsibly. For the company, the stakeholders, the bereaved customer, it is potentially a disaster for everyone."

3.49pm BST

Back in the UK, John Lewis is handing a 1.5m payoff to Patrick Lewis, the great grandson of the retailer's founder and the only remaining family member of the business, who is to exit in June.

Lewis, who spent more than 26 years at the group, stepped down as a finance director in December and has since been on leave after being replaced by Berangere Michel, formerly John Lewis's director of customer service.

3.32pm BST

Christine Lagarde has welcomed the news that Germany's Green party has nominated Annalena Baerbock as their candidate to succeed Angela Merkel as chancellor.

She was asked for her views on the possibility of Baerbock, who is 40 and a former trampoline champion who hasn't held a government role, leading Europe's largest economy.

I very much welcome an athlete, a young women, and certainly one who has a very high concern for climate issues and protection of the environment, which as you know on a personal basis I care for.

#ECB Lagarde stops shortly before endorsing Annalena #Baerbock of the German #Greens, it seems, pointing out that she shares on a personal level the same concerns for climate change and welcoming another former athlete in politics

.@Lagarde welcomes election of @ABaerbock as Green candidate for GER elections, noting her past in competitive sports &climate goals-close to her heart.
She adds that Merkel's 16 years in power didn't discourage young women to enter into politics
"It's the value of role models"

Baerbock, 40, viewed as a tenacious, down-to earth centrist with an eye for detail, and an expert on climate change and how to tackle it, told a small party gathering she aimed to make politics for society at large".

She described her candidacy as an offer, an invitation to lead our diverse, prosperous, strong country into a good future".

2.41pm BST

Lagarde then explains that the euro economy is on crutches" - one fiscal crutch (government support), and one monetary crutch (central bank support).

There is a long way to go until we've crossed the bridge of the pandemic and the recovery is sustainable and solid, Lagarde explains.

The economies of the euro area have to go across the bridge of the pandemic, and have to be on solid and sustainable ground... to walk on a self-sustained basis.

#LAGARDE: We still have a long way to go before we cross the bridge of the pandemic. For now, there are two crutches - one fiscal and one monetary. We have to be on solid ground before we can walk by ourselves on a sustained basis. #ECB

2.29pm BST

On the issue of bond tapering..... Dutch central bank chief Klaas Knot predicted earlier this month that the euro zone economy is on course for a robust recovery in the second half of the year, that could allow the ECB to start phasing out PEPP purchases in the third quarter.

Christine Lagarde is insisting today that any change to the pace of the programme is data-dependent", rather than linked to a specific timeframe. So it's premature to discuss phasing it out.

#ECB's Lagarde: #ECB didn't discuss any phasing out of PEPP program. Pace of PEPP is data dependent, Not time dependent. pic.twitter.com/EPjMw3IqMm

2.16pm BST

#ECB @Lagarde asked on front-loaded PEPP tapering talk by some council members: Any phasing out has not been discussed & is premature."

Hawks: See you in June! pic.twitter.com/PU7F2xJRAj

2.15pm BST

Asked whether the ECB could slow its bond-purchase programe later this year, ECB president Lagarde points to the uncertainty in the near-term outlook.

The service sector may be bottoming out, but there are plenty of short-term risks, she says.

.@Lagarde on the "significant" increase in PEPP purchases: "that decision was implemented right away (as of the 16th March). There has been a clear and significant increase in the pace of purchases, and it will continue." #okayyy

#ECB @lagarde: We did not discuss any phasing out because it is simply premature.

#ECB's Lagarde: "We do not target any kind of exchange rate, but we monitor very carefully the exchange rate and variations, as clearly it can have a downside impact on prices and we are very attentive to that."

Perhaps she is getting better at this game now?

1.57pm BST

ECB president Lagarde also warned that the eurozone may have shrunk in the first three months of 2021 (which would put the region into a double-dip recession).

She adds that growth appears to be resumed in this quarter:

Euro area real GDP declined by 0.7 per cent in the fourth quarter of 2020 to stand 4.9 per cent below its pre-pandemic level one year earlier.

Incoming economic data, surveys and high-frequency indicators suggest that economic activity may have contracted again in the first quarter of this year, but point to a resumption of growth in the second quarter.

ECB's Lagarde: overall risks to growth on the downside; headline inflation likely to increase in the coming months.#ECB

1.54pm BST

ECB president Christine Lagarde has warned that uncertainty over the latest wave of Covid-19 infections, and Europe's vaccine rollout, are casting a cloud of uncertainty over the eurozone.

Speaking at a press conference in Frankfurt, she says that the current restrictions imposed to fight the pandemic are hitting economic actitity:

Persistently high rates of coronavirus infection, and the associated extension and tightening of containment measures, continue to constrain economic activity in the short term.

. @Lagarde "The situation remains clouded by uncertainty. Wider financial risks remain. Reduction of the increase in infections and the speed of vaccines underpin the robust recovery". #COVID19 @eunewsit pic.twitter.com/YfS81QiB1P

1.23pm BST

Melissa Davies, chief economist at Redburn, is concerned that the ECB is short of firepower, if the eurozone economy weakens:

The ECB confirmed its current policy stance today, with rates on hold and QE asset purchases temporarily boosted during this quarter. But with Eurozone credit conditions tightening and governments' grip on the virus in question, observers may wonder whether the ECB has anything left in the cupboard to deal with negative risks to growth and inflation.

Any increased Covid restrictions and the risk of winter lockdowns point to the need for the ECB to do more, rather than less, in the coming months. As things stand, ECB growth estimates are far too bullish for this year and the central bank risks falling behind the curve as Eurozone deflation pressures build in H2."

1.20pm BST

The European Central Bank has vowed to continue its stimulus measures to help the eurozone economy through the pandemic.

The ECB has voted to leave interest rates unchanged at record lows at today's meeting.

Since the incoming information confirmed the joint assessment of financing conditions and the inflation outlook carried out at the March monetary policy meeting, the Governing Council expects purchases under the PEPP over the current quarter to continue to be conducted at a significantly higher pace than during the first months of the year.

The Governing Council will purchase flexibly according to market conditions and with a view to preventing a tightening of financing conditions that is inconsistent with countering the downward impact of the pandemic on the projected path of inflation. In addition, the flexibility of purchases over time, across asset classes and among jurisdictions will continue to support the smooth transmission of monetary policy.

If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full. Equally, the envelope can be recalibrated if required to maintain favourable financing conditions to help counter the negative pandemic shock to the path of inflation.

UNCH! #ECB confirms significantly faster pace of pandemic purchase program. (chart via @Schuldensuehner) pic.twitter.com/XPjIvSWTQB

1.01pm BST

The jump in UK manufacturers' confidence to its highest since 1973 bodes well for growth this quarter, says Howard Archer of EY Item Club.

He adds:

Investment plans were healthier across all categories, adding to hope that business investment will contribute significantly to the UK's recovery.

12.50pm BST

1973, incidentally, was the year in which Edward Heath took the UK into the EEC (in January, having signed the accession treaty in 1972).

It was also the era of the Barber Boom, when chancellor Anthony Barber slashed taxes and boosted borrowing in an expansionary, but unsuccessful, dash for growth". And it was the year of the oil crisis.

Cast your mind to 1973. It was the year the Yom Kippur war brought the long postwar boom to a shuddering halt. Sunderland brought off one of the great FA Cup shocks by beating Leeds at Wembley. Britain joined the European Economic Community; Ted Heath was prime minister; the miners went on strike; the charts were full of songs by Sweet, Slade and Donny Osmond.

UK manufacturing optimism now highest since Dawn featuring Tony Orlando topped the charts with "Tie the Yellow Ribbon Round the Old Oak Tree" pic.twitter.com/SnJkfeBL7e

12.35pm BST

Optimism among UK manufacturers is rising at the fastest rate in 48 years, as hopes of an economic rebound are lifted by the Covid-19 vaccination programmes.

The CBI's latest industrial trends survey shows that manufacturing optimism has jumped at its quickest pace since April 1973, with firms anticipating a surge in output and new orders in the next quarter.

Sentiment in the manufacturing sector improved at its quickest rate since 1973, likely reflecting an improved outlook for demand conditions.

Indeed, new orders last quarter grew at their fastest pace since April 2019, and output volumes are expected to grow rapidly next quarter after being flat in the three months to April.

Manufacturing optimism in the three months to April improved at its quickest pace since April 1973. Meanwhile, export optimism for the year ahead strengthened to its fastest since April 2018 #ITS pic.twitter.com/GL0Z64Sd1V

Happy happy manufacturers!

Fastest rise in optimism since 1973
Expectations for output growth strongest on record (since 1975)
Expectations for employment growth strongest since 1974
Plant & machinery investment plans strongest since 1997 #ITS https://t.co/IEyofPtmbZ

Numbers employed in the quarter to April grew at their quickest pace since July 2018 - this marked the first growth in employment in two years.

Firms expect headcount growth to accelerate further next quarter, with expectations at their strongest since April 1974.

Manufacturers have reported the biggest increase in optimism in nearly 50 years in this month's quarterly survey. Phased reopening has lifted the mood among firms, notably driving orders, employment, and investment plans.

However, rising costs are an increasing concern for many businesses, and seem to be putting upward pressure on prices as firms try to protect their margins.

11.32am BST

11.31am BST

That HSBC quote was via Reuters, by the way. Here's their story:

Climate activists shatter 19 windows at HSBC HQ in London's Canary Wharf

11.05am BST

An HSBC spokesman has responded to the protest at its Canary Wharf HQ this morning, saying (via Reuters):

We welcome meaningful dialogue on our climate strategy, however, we cannot condone vandalism or actions that put people and property at risk.

We have an ambition to be net zero by 2030 and to bring our financed emissions to net zero by 2050."

10.57am BST

A group of activists from Extinction Rebellion protesters have broken windows at HSBC's headquarters in Canary Wharf today.

Despite HSBC's pledge to shrink its carbon footprint to net zero by 2050, their current climate plan still allows the bank to finance coal power, and provides no basis to turn away clients or cancel contracts based on links to the fossil fuel industry.

The women argue that commitments to reaching net zero carbon emissions in 30 years' time are largely meaningless without immediate action to put banks on course to avoid an increase in global temperature in excess of 1.5 Celsius.

BREAKING: Reuters reports climate activists have broken 19 windows at the HSBC headquarters in Canary Wharf.

Read more here: https://t.co/0m9lxl6TaP pic.twitter.com/O8s86ORhy3

I shouldn't be having to do this but I think we owe it to our children and grandchildren to act in whatever way we can. I would like to enjoy my retirement with my grandchildren, but instead I have to spend it fighting for their future because banks like HSBC are happy to keep making money from fossil fuels no matter the risk.

We're in a planetary emergency and people are dying right now. Just because it's not on our doorstep doesn't mean it's not already happening in the global south. What we are doing today is an act of care."

10.23am BST

Pizza delivery firm Dominos is still seeing high demand for home deliveries in the lockdown.

At an order count level, we have seen delivery growth of 6.8% in the quarter with collection reporting some recovery, now trading at 65% of 2019 levels.

Shares in Domino's fell 2% after its update as analysts said the update signalled ongoing declines in order numbers at the chain.

Wayne Brown, at Jefferies, said: Order count decline has improved slightly, but still remains mid-single digits negative."

10.05am BST

Credit Suisse swung to a 757m Swiss franc loss (592m) in the first quarter, as the bank reeled from the collapse of US hedge fund Archegos that wiped out what would have otherwise been its best quarterly performances in at least a decade.

The bank has taken the biggest hit from the Archegos collapse among its peers, logging a SFr4.4bn charge in the first quarter. It comes after one of its prime brokerage clients Archegos was forced to liquidate almost $20bn (14bn) in assets last month, in a fire sale that reverberated across global markets.

9.53am BST

Jaguar Land Rover (JLR) is to temporarily shut down production at two of its main UK factories because of a shortage of computer chips, in the latest sign of the difficulties facing the global car industry during the pandemic.

The company, which has the UK's largest automotive manufacturing operation, confirmed to the Guardian it would have a limited period of non-production" at its plants in Castle Bromwich in the West Midlands and Halewood on Merseyside starting on Monday.

9.51am BST

A surge in demand for home-drunk coffee during the pandemic has boosted sales at Nestle.

Dairy grew at a double-digit rate, based on elevated demand for home-baking products and fortified milks.

9.05am BST

European markets have opened higher this morning, with the Stoxx 600 index up around 0.4%.

The European Central Bank isn't expected to ruffle any feathers this Thursday, with analysts predicting that it will be another steady session from Christine Lagarde and co.

But with a while until the next meeting - the central bank skips May - the ECB could use this opportunity to sharpen its forward guidance. There are also hawks lurking among the doves, meaning the get-together may not go as smoothly as forecast.

8.53am BST

Tom Kinmonth, senior fixed income strategist at ABN Amro, says Credit Suisse has taken a huge hit from Archegos's collapse:

It is a quarter that is likely wanted to be forgotten by the bank. The fall-out from the hedge fund Archegos has been severe. The bank posted a CHF 4.4bn charge in the first quarter and expects a further impact of CHF 600mn from the failure in the second quarter.

Press reports indicate that Credit Suisse built-up a position of over $20bn on Achegos.

8.49am BST

Ovenight, the Wall Street Journal reported that Credit Suisse's exposure to Archegos Capital Management had reached $20bn, before its collapse.

The WSJ says CS was struggling to monitor this exposure, as the value of Archegos's assets changed rapidly.

The U.S. family investment firm's bets on a collection of stocks swelled in the lead-up to its March collapse, but parts of the investment bank hadn't fully implemented systems to keep pace with Archegos's fast growth, the people said.

Today in risk management..https://t.co/ITuMYfRnc5 pic.twitter.com/T8rldeiBxY

Curios how frequently Credit Suisse had been planning on checking into its $20bn exposure.... pic.twitter.com/p5XYzusQFd

8.37am BST

Here's the statement from Swiss financial watchdog FINMA, announcing it has begun an investigation into Credit Suisse over its Archegos losses, and confirming it is investigating its involvement with now-collapsed Greensill Capital.

The Swiss Financial Market Supervisory Authority FINMA has opened enforcement proceedings against Credit Suisse after the bank suffered significant losses in connection with a US hedge fund (Archegos").

Furthermore, FINMA announces that it opened proceedings against the bank in the context of the Greensill" case in March 2021. Supplementing measures taken by the bank, FINMA has in addition required various risk-reducing measures.

8.24am BST

Oh dear...

SHARES IN CREDIT SUISSE EXTEND LOSSES, DOWN 5.4% AFTER RESULTS

8.24am BST

Shares in Credit Suisse have dropped 5% in early trading, and are at their lowest since last November:

Fallout from Greensill and Archegos: Credit Suisse's renewed share price plunge today means its stock has underperformed BE Banks benchmark index by ~35 %age points YTD pic.twitter.com/qPdsEfF7vc

8.12am BST

Credit Suisse's Archegos pain isn't over, either.

It expects to lose another 600m Swiss francs (470m) in the current quarter from the US-based hedge fund matter' (rather like superstitious actors and Macbeth, bankers seem reluctant to name Archegos!)

Overall, we would expect market volumes to return to lower, and more normal, levels in the coming quarters.

We expect a residual impact of approximately CHF 0.6 bn from the US-based hedge fund matter in 2Q21, as we have now exited 97% of the related positions.

What next? Another hit for Credit Suisse in Q2 from collapsed family office Archegos #Archegos #CreditSuisse https://t.co/PsJMP2pPMg

7.53am BST

#CreditSuisse CEO tells @GeoffCutmore he absolutely did not offer his resignation in the wake of the #ArchegosCapital scandal

Shares down -2.9% in pre-market trade after results https://t.co/tX0Dm2eJG3

7.37am BST

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

Our results for the first quarter of 2021 have been significantly impacted by a CHF 4.4 bn charge related to a US-based hedge fund. The loss we report this quarter, because of this matter, is unacceptable.

Together with the Board of Directors, we have taken significant steps to address this situation as well as the supply chain finance funds matter.

Among other decisive actions, we have made changes in our senior business and control functions; we have enhanced our risk review across the bank; we have launched independent investigations into these matters by external advisors, supervised by a special committee of the Board; and we have taken several capital-related actions.

Alongside announcing its earnings, the bank said it will issue mandatory convertible notes (MCN) convertible into 203 million shares, which should net the bank more than 1.8 billion Swiss francs. That would boost its core capital level to around 13% from 12.2%.

Thomas Gottstein, CEO, comments on the first quarter 2021 financial results. More details are available here: https://t.co/40CU4bUl6Q pic.twitter.com/Ixd3P2f4js

We believe that lockdowns increase the probability of prolonged dovish ECB policy. Restrictions put pressure on European economic activity, especially in the services sector, limiting the aggregate demand.

As long as economic activity remains subdued, the ECB will probably keep the key rate at historical lows and will continue to purchase bonds as they try to preserve favorable financing conditions. The ECB has already increased the pace of bond purchases at one of the latest meetings, so changes to the current monetary policy look very unlikely at the upcoming meeting. The economy will likely gather pace in the second half of 2021 amid a better epidemic situation, massive vaccination, and global economic recovery.

European Opening Calls:#FTSE 6930 +0.50%#DAX 15270 +0.49%#CAC 6243 +0.52%#AEX 714 +0.62%#MIB 24323 +0.67%#IBEX 8570 +0.59%#OMX 2240 +0.53%#STOXX 4000 +0.58%#IGOpeningCall

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