UK ‘rebounding sharply’; supply bottlenecks hit German firms; travel shares rally – as it happened

Graeme Wearden

from on 2021-04-26 16:32 (#5H296)

Rolling coverage of the latest economic and financial news

5.31pm BST

Time to wrap up.

Hopes are building that the UK economy will grow rapidly this year. Goldman Sachs told clients that it expects the United Kingdom will grow even faster than the US this year. It predicts UK GDP will rise by 7.8% this year as it rebounds strongly from the pandemic.

Copper prices have risen to the highest since 2011. https://t.co/MMUcG4snnD pic.twitter.com/CCapggnFwU

Some commodities hitting highs:

Copper highest level since 2011
Wheat highest level since 2013
Corn highest level since 2013
Iron ore flirting with new highs

They are a financial company. What they do for customers is look at details, getting rid of vowels and letters makes it look like they've skipped over the most basic details in their name."

5.21pm BST

The EU is at an advanced stage of talks with the US over mutually recognising vaccine passports to boost transatlantic tourism this summer, but Brussels is yet to open discussions with the British government, our Brussels bureau chief Daniel Boffey reports:

A spokesperson for the European commission said that while discussions had been held with US officials and the secretary of homeland security, Alejandro Mayorkas, there were no contacts at present with the UK".

5.15pm BST

European stock markets also closed higher, with the Stoxx 600 up around 0.25%.

Financial stocks, energy companies and miners rallied (along with travel stocks), lifted by economic recovery hopes and higher commodity prices.

4.56pm BST

The FTSE 100 has closed at 6963 points, up 24.5 points or 0.35% today.

Rolls-Royce finished nearly 6% higher, the top riser on the index, after Ursula von der Leyen said that American tourists who have been fully vaccinated against Covid-19 will be able to visit the European Union over the summer.

4.21pm BST

While travel shares are rising, oil is under pressure - with Brent crude down 0.65% today at $65.68 per barrel.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, says the pandemic raging in India, where the virus has brought its healthcare system to its knees amid tragic scenes, pulled oil lower.

A glimpse of a post crisis future was captured today, where the haves and the have nots will be decided on the speed of vaccination programmes in countries around the world.

Travel stocks soared higher during the London session today as hopes lifted that a big rescue could now be on the cards for the summer season, with the introduction of vaccine passports. Comments in the US media made by European Commission President Ursula von der Leyen indicated that European destinations would be open for inoculated Americans. The prospects of vaccine passports put a spring in the step of IAG, the owner of British Airways and jet engine maker Rolls-Royce which were the top risers on the FTSE 100, helping propel the index into positive territory.

3.47pm BST

Commodity prices are continuing to rally too, with copper hitting a 10-year high today.

LME update:#Aluminium 2402 +1.41%#Copper 9741 +2.02%#Nickel 16580 +1.28%#Lead 2089 +1.64%#Zinc 2909 +2.05%#Metals #Commodities

Copper is often considered a good gauge of economic activity, so the rally in copper certainly raises the question of whether this is Dr Copper calling. The recovery trade seems to be increasingly evident through commodities, particularly base metals and lumber.

3.28pm BST

Back in London, travel stocks are still among the risers, amid hopes that Americans may be able to travel to the EU this summer - if they are fully vaccinated against Covid-19.

British Airways parent company IAG is up 4.7%, while Rolls-Royce (which makes and services jet engines) has gained over 5%.

The Americans, as far as I can see, use European Medicines Agency-approved vaccines," Ursula von der Leyen, president of the European Commission, said Sunday in an interview with The Times in Brussels. This will enable free movement and the travel to the European Union.

Because one thing is clear: All 27 member states will accept, unconditionally, all those who are vaccinated with vaccines that are approved by E.M.A.," she added. The agency, the bloc's drugs regulator, has approved all three vaccines being used in the United States, namely the Moderna, Pfizer/BioNTech and Johnson & Johnson shots.

#Breaking:

In exclusive interview with the @nytimes European Commission president @vonderleyen says United States vaccinated tourists will be welcomed to the E.U. this summer. https://t.co/YCFzzeH6yl

3.15pm BST

Wall Street has opened a little higher, with the main indices all rising slightly:

After a minor shake-up last week, the buying and selling of equities and other risky assets in US dollars returned to the markets.

The S&P500 and Dow Jones 30 futures are cruising near historic highs, having found buyers on the slight dip in the middle of last week.

2.59pm BST

Our City editor Nils Pratley has called on Standard Life Aberdeen to abndn its (much-mocked) rebrand as Abrdn".

He points out that this awkward blur" just jars, and will enrage customers' spell-checkers. Here's a flavour:

Stphn Brd, as the asset manager's chief executive presumably now styles himself, called it modern, agile and digitally enabled", but he sounded like a man trying to justify a large bill from the designers to himself. Modern financial firms call themselves things such as Monzo or Revolut, which have a zing about them. In this case, the company had to include a guide to pronunciation. The answer turns out to be Aberdeen, so why bother rinsing out three-quarters of the vowels?

As for the claim to agility, the truth is the opposite. A name that will cause an unfamiliar speaker to pause is clunky. Even Monday, as PwC once wanted to call itself until it succumbed to gales of laughter, was a word. The boast about digitally enabled" also looks premature as digital technology moves on to voice recognition. What the company means is that domain names for Aberdeen" in full are taken, which doesn't qualify as an excuse...

2.58pm BST

March's rise in durable goods orders shows the continued strength" of the US economy, says Capital Economics' Andrew Hunter.

The strong rebound in underlying durable goods orders in March, which partly reflects the unwinding of earlier weather-related disruption, indicates that business equipment investment has continued to expand at a rapid pace, taking it even further above pre-pandemic levels.

2.10pm BST

1.54pm BST

Here's some early reaction to the US durable goods orders, from Joseph Brusuelas, chief economist at RSM US.

1. March Durables full of noise. Topline increase of 0.5% distorted due to cancellations of orders at Boeing. The forward looking cap goods orders none defense ex shipments up 0.9% and near real time look at shipments of same gods advance 1.3%.

2. March Durables: Three month average annualized pace the forward looking components of cap ex was up 7.8% on the quarter, and shipments up 10.3%. Shipments imply robust cap ex with some upside risk for Q1'21 GDP & strong forward look at Q2'21. Productivity going to improve.

1.43pm BST

Demand for US durable goods rose again last month, but not as much as expected.

New orders for manufactured durable goods increased by 0.5% in March, the U.S. Census Bureau reports - below forecasts of a 2.3% rise.

US March Prelim Durable Goods Orders Report - Census Bureauhttps://t.co/CPcuo4EVaF pic.twitter.com/R1lcj8ehN2

ECONOMY WATCH: U.S. durable goods orders rise 0.5% in March. Take out transportation (autos & planes) and orders up decent 1.6%. Manufacturing still pretty strong and likely to get better as economy speeds up. Biggest problem is shortages of chips and other key supplies.

1.35pm BST

Standard Life Aberdeen's CEO, Stephen Bird, has told Sky News that rebranding as Abrdn will help the company run more efficiently.

Supporting one brand, not five, means every pound and dollar spent will go much further, Bird explains here.

It's going to be a lot more efficient, and it was not a lot of money to develop the identity.

Standard Life Aberdeen chief executive Stephen Bird tells @SkyIanKingLive why it's changing its name to Abrdn https://t.co/UUT9BNvmqj

"Another consonant please Rachel..." #abrdn pic.twitter.com/7CotVUngvO

1.17pm BST

PensionBee has made a smooth debut on the London stock market - in a stark contrast to Deliveroo's stumble.

Shares in the pension consolidation business are up over 6% today at 179p, the first day of unconditional trading. That's up from the float price of 165p, which valued PensionBee at 365m, showing that the City hasn't lost its appetite for IPOs.

12.40pm BST

Here's Manuela Finger, partner at the Munich office of law firm Gowling WLG, on the supply chain bottlenecks in Germany (and beyond...):

Supply chain snags can soon become supply chain crises if the right level of insight is not put in place to prevent potential blockages.

While political and regulatory issues are clearly at play here, this clearly highlights the need for forward thinking and scenario planning to help highlight the importance of backing up supply contracts and arrangements."

12.22pm BST

A new report from Resolution Foundation today is warning that older workers have been hit hard by the pandemic.

The Covid-19 crisis has led to the biggest annual employment fall for workers over 50 since the 1980s, Resolution shows.

The Resolution Foundation has warned that older people who lost their jobs during the pandemic could receive worse support than younger people, leading to large numbers of over-50s falling out of the workforce for good.

In its report, A U-Shaped Crisis, supported by the Nuffield Foundation, the independent thinktank voiced concerns that Restart, the recently announced support scheme for the long-term unemployed, carries the risk that older workers receive a lower quality of service than younger workers".

Why we should worry about older workers losing their jobs. Reason #1 - it takes longer for older workers to return to employment. Fewer than two-in-three return to work within six months. pic.twitter.com/P3HP4RigJx

Why we should worry about older workers losing their jobs. Reason #2. When older workers do return to work, they take - on average - a 10% hourly pay cut (and a 17% weekly pay cut due to hours reductions). pic.twitter.com/D0Rm6GVNwd

Why we should worry about older workers losing their jobs. Reason #3. It can materially affect people's retirement plans - either through early retirement (tho @TheIFS has shown this is more associated with high-income households) or people having to work for longer than planned.

"The importance of lifelong training cannot be underestimated. There hasn't been sufficient recognition of specific skills that are taken for granted and needed by those who have not grown up in the current modern workplace" says @rosaltmann on older workers at @resfoundation pic.twitter.com/eE7HrSAsCi

12.15pm BST

Our economics editor, Larry Elliott, has a word of caution about the prospect of a strong UK recovery this year as the economy bounces back.

Previous UK booms have a tendency to end in busts....and the bigger the boom the bigger the bust, he wrote yesterday:

It is, of course, perfectly possible that this boom will be different from the others and that the economy will, in due course, settle down to a period of steady, sustainable growth. That, though, is based on a number of key assumptions.

The first is that the desire to spend will persist and is more than a brief spasm of activity that will fizzle out when the novelty wears off. Currently, this doesn't look all that likely because many consumers have spent the past year paying off their debts and seem confident enough to splash the cash.

12.01pm BST

Goldman Sachs has also predicted the UK economy will grow strongly this year, and even faster than the US.

The UK economy is rebounding sharply from the covid crisis. The April flash PMI was much stronger than expected in the UK, with the services PMI moving sharply further into expansionary territory.

Combined with other recent growth metrics-including a 5.4% jump in March retail sales-our Current Activity Indicator is now running at an annualised pace of 7.1% in April.

UK economy set to grow faster than the U.S. this year -Goldman https://t.co/r78d6RbJvE pic.twitter.com/x3h9b6EPGF

11.37am BST

Computer chips aren't the only product in short supply.

Ifo economist Klaus Wohlrabe has told Reuters that a range of products are causing bottlenecks in Germany:

There are bottlenecks with semiconductors, for example, but also with many other products. There is sand in the engine when it comes to procurement, across almost all industries."

We are being told from the suppliers and within the Volkswagen Group that we need to face considerable challenges in the second quarter, probably more challenging than the first quarter."

NEWS: Volkswagen has warned top managers to brace for a bigger production hit in the second quarter than the first because of the global chip shortage.https://t.co/oLgT3wRLma

11.23am BST

Andrew Kenningham at Capital Economics said the Ifo survey showed that Germany's economy is treading water at the beginning of the second quarter:

April's Ifo Business Climate Index (BCI) is consistent with the economy treading water at the beginning of Q2 as optimism has been dented by supply bottlenecks and the Covid-19 restrictions. https://t.co/WAcdfSqfbT pic.twitter.com/5T0qMgn5qw

11.23am BST

IFO's report also highlights how Germany's factory sector is outperforming the services sector, although supply bottlenecks are a growing problem....

In manufacturing, the business climate rose to its highest value since May 2018. Companies reported greatly improved business. The demand situation is still very good. Capacity utilization rose considerably from 81.9 to 86.2 percent. This brings it above its long-run average of 83.5 percent for the first time in almost two years. However, optimism declined with regard to expectations. Fully 45 percent of companies reported bottlenecks in intermediate products - the highest value since 1991.

In the service sector, the business climate indicator fell somewhat following a steep rise in the previous month. Service providers were slightly less satisfied with their current situation. Recent signs of optimism have disappeared again. While the logistics industry is benefiting from the upswing in manufacturing, other industries are still suffering, in particular hospitality and tourism.

11.05am BST

Econonomic optimism in Germany is being held back by the latest wave of Covid-19 infections, and the global shortages of key parts and components such as semiconductors.

The Ifo institute's latest business climate index has risen slightly this month, to 96.8 from 96.6 in March.

#ifo survey for April shows minimal overall improvement due to ongoing services gloom & rising headwinds to industrial boom

Almost very second firm reported bottlenecks in intermediate production pic.twitter.com/DpmKpe4JeA

Both the third wave of infections and bottlenecks in intermediate products are impeding Germany's economic recovery,"

The vaccination programme is finally getting moving and with the prospect of at least 50% of the adult population having had a first jab before the summer, a more substantial reopening of the economy should not be too far away.

New variants of the virus, however, as currently witnessed in India, could definitely spoil any reopening parties. Add to this potential spillovers from US fiscal stimulus, the implementation of the European Recovery Fund in the second half of the year, a rebound in the construction sector and the fact that the manufacturing sector still has not reached pre-crisis levels, and stronger Ifo readings in the months ahead look highly likely.

Lockdowns in Germany dampened sentiment in April but the prospects for a strong rebound in the second half of the year still look good, says @carstenbrzeski https://t.co/tvJOGzFIrZ

10.45am BST

Travel company shares are rising this morning, with airline group IAG up 4% and jet engine-maker Rolls-Royce gaining 4.6%.

But the wider FTSE 100 is slightly lower (down 7 points at 6931). The stronger pound is weighing on multinationals -- such as British American Tobacco (-1.3%), Diageo (-1.2%) and Unilever (-1%). Online grocer Ocado is the top faller FTSE 100 faller, down 1.8%.

10.32am BST

Here's our news story on Tate & Lyle's break-up plans:

10.14am BST

Copper prices have hit their highest level since 2011 today, lifted by recovery hopes, supply concerns and a weaker US dollar.

Last week, mining unions in Chile (a top copper producer) threatened to take protest action if the government does not drop a bid to block Chileans from drawing down more of their pensions savings early.

Copper prices have risen to the highest since 2011. https://t.co/MMUcG4snnD pic.twitter.com/CCapggnFwU

Corn, soybeans and other crops are trading at their highest prices since 2013. pic.twitter.com/BjmS169LdN

10.11am BST

The pound has begun the new week with some small gains.

Sterling is up 0.2% against the euro at 1.1491, having dropped against the euro for much of last week.

The dichotomy of rising Covid-19 cases globally but a UK that is enjoying reopened bars, restaurants and shops should continue to work in the pound's favour should the vaccination program continue to progress, the hospitalisation rate remain low and border controls stay in place to eliminate the risk of further outbreaks.

9.59am BST

Here's Russ Mould, investment director at AJ Bell, on Tate & Lyle's plan to sell a majority stake in its sweeteners business:

It is becoming increasingly fashionable to break up large businesses, particularly those with conglomerate structures.

Private equity companies are sitting on large amounts of cash and they are becoming more creative with deploying those funds to make future returns. Rather than making outright acquisitions, buying parts of businesses can be a good move as it can unlock hidden value.

The principal attractions of such a deal would be that Tate could increase its focus on FBS and might achieve a higher equity rating as consequence of de-consolidation of Primary.

9.55am BST

Copywriter Tom Albrighton points out that people are going to struggle to pronounce Abrdn:

'Our new brand Abrdn builds on our heritage and is modern, dynamic and, most importantly, engaging for all of our client and customer channels.' Being pronounceable could be important too? https://t.co/yPxeRuzd7h

Oh dear @SLA_plc What have you done? #abrdn Was there no one in that boardroom prepared to say, no, this sucks!?

9.31am BST

Standard Life Aberdeen's name change really isn't going down well this morning.

Few seem impressed by the rebranding to Abrdn, with Shruti Tripathi Chopra of Financial News among the (many) critics on Twitter:

It's like the letter e stopped working on all staff's keyboards so they decided to change the name of the company instead of their keyboards pic.twitter.com/FBbPL59ELl

The best bit is Abrdn (pronounced Aberdeen)"

...well it's not though, is it. Do we just get to identify with our own pronunciations now too?

Standard Life Aberdeen this morning #abrdn pic.twitter.com/NCtM7WAm96

Abrdn?

I'm a marketing guy and a little ashamed at this moment - am going to go into a dark room and curl into a ball for the rest of the day.

I wish I'd gone into corporate branding as Standard Life Aberdeen become simply...Abrdn pic.twitter.com/vdrorpSK8d

@SLA_plc You do realise that to many people Abrdn will be pronounced "A Burden"! Do you really expect people to invest with a company with such a name! #Abrdn

Thghts n pryrs with the Abrdn PR agency. As a colleague remarked you know it's bad when hacks are tweeting screengrabs of the release.

8.57am BST

In what I briefly thought was a tardy April Fool's joke, financial services giant Standard Life Aberdeen is changing its name.... to Abrdn".

The new name (pronounced Aberdeen", disappointingly) will replace five existing brands, following the merger of Standard Life and Aberdeen Asset Management in 2017.

Our new brand Abrdn builds on our heritage and is modern, dynamic and, most importantly, engaging for all of our client and customer channels. It is a highly-differentiated brand that will create unity across the business, replacing five different brand names that have each been operating independently.

Our new name reflects the clarity of focus that the leadership team are bringing to the business as we seek to deliver sustainable growth."

Today we've announced our change of name to Abrdn, part of a modern, digitally-enabled brand we'll use across our businesses globally. Capital at risk. https://t.co/D5YUZx3RPO pic.twitter.com/kOw5NQVH7j

Is this the worse corporate name change in history? Standard Life Aberdeen to become Abrdn "pronounced 'Aberdeen'" as the press release explains...

Standard Life Aberdeen changing its name to Abrdn

Utter madness. Some brand consultancy will have charged mega bucks, saying this new name will really chime with a younger audience.

It will no doubt be changed again to something more traditional in the next few years

s ths n Aprl fl's gn wrng?

Y gt t b fkn kdng m https://t.co/RkINgBxdoS

8.46am BST

Rev Paula Vennells, the former head of the Post Office, has resigned from the boards of the supermarket chain Morrisons and retailer Dunelm after the court of appeal quashed the wrongful convictions of dozens of staff at her former employer.

Vennells, who ran the Post Office between 2012 and 2019, pursued prosecutions against hundreds of subpostmasters, accusing them of theft and false accounting.

8.31am BST

Education group Pearson has seen strong demand for online learning courses in the pandemic.

Its Global Online Learning division grew underlying sales by 25% in the last quarter, Pearson says this morning, with strong demand for its Virtual Schools product.

It's been a good start to the year for Pearson, delivering 5% sales growth in the quarter.

This is despite a longer period of disruption from COVID-19 in the quarter compared to last year. I'd like to thank colleagues for their ongoing dedication and hard work.

8.13am BST

Shares in Tate & Lyle have jumped 6% in early trading, after the firm confirmed it is in talks to sell a controlling stake in its sweeteners business.

That puts them on top of the FTSE 250 leaderboard.

7.35am BST

Tate & Lyle, one of the most famous UK food companies, is preparing to break itself up in a push towards towards healthier foods.

The food ingredients maker is seeking a buyer for a controlling stake in its primary products division" -- which makes and sells artificial sweeteners used in soft drinks and industrial starches.

Tate & Lyle continues to successfully execute its strategy and remains confident in the future growth prospects of the company. However, the Board believes that if a transaction of this nature was completed it would enable Tate & Lyle and the new business to focus their respective strategies and capital allocation priorities and create the opportunity for enhanced shareholder value.

Discussions with potential new partners in the Primary Products business are at an early stage and therefore there can be no certainty that a transaction will be concluded.

The company, which is led by chief executive Nick Hampton, believes splitting off its businesses will allow a greater focus on the food and beverage arm, which has higher profit margins, faster revenue growth and alignment with consumer trends for healthier living.

7.20am BST

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

Optimism is building that the UK economy is rebounding strongly from the economic shock of Covid-19, and that 2021 could see rapid growth.

Businesses and consumers have been innovative and flexible in adjusting to COVID-19 restrictions and, while restrictions have caused disruption, lessons learned over the last 12 months have helped minimise the economic impact.

Reflecting expectations of accelerated growth as the economy reopens, consumer confidence increased at the fastest rate in a decade in the first three months of 2021, as the roadmap out of lockdown fuelled optimism.

Every measure of confidence - from the state of the economy, to general wellbeing and personal debt levels - increased over the period, according to the Deloitte Consumer Tracker.

Overall, we think a surge in retail sales in April will mark the start of a rapid economic recovery that may mean the extra tax hikes and spending cuts that most fear may not materialise.

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