Bitcoin plunges then rebounds; UK factory growth surges; government borrowing lower in May – as it happened

Graeme Wearden

from on 2021-06-22 18:58 (#5KC0X)

Rolling coverage of the latest economic and financial news

Latest: Bitcoin falls to lowest since January
UK manufacturing output surges at record pace
EU opens antitrust investigation into Google
UK borrowed 24.3bn in May, down from 43.8bn in May 2020
Reopening of economy improving public finances

7.56pm BST

And finally.... the Labour party has urged the UK government to step in to ensure a potential private equity takeover of supermarket chain Morrisons does not affect Britain's food security, damage farming, or lead to job losses, my colleague Rob Davies reports.

Opposition MPs said ministers must be ready to prevent the Bradford-based company falling victim to the kind of asset-stripping often associated with private equity buyers, who typically look to make their targets more efficient, before selling at a profit.

Morrisons isn't just a big supermarket, it is also an important food producer.

Government must ensure in the event of a takeover that jobs are protected, the business isn't broken apart and that our nation's food security is protected."

7.41pm BST

Over on Wall Street, the Nasdaq hit an intra-day record high, as major tech firms rally.

New record highs for the Nasdaq 100 here:#NDX 14240.7 +0.73% pic.twitter.com/eGS5x7cDHP

So-called value stocks, expected to benefit from the economic recovery, have outperformed in 2021, while growth stocks, including major tech names like Apple and Nvidia, have rallied since the Fed last week took a stance on future rate hikes viewed by many as more aggressive than expected.

The S&P growth index has added over 1% since before the Fed last Wednesday projected an accelerated timetable for interest rate increases, compared to a nearly 2% drop in the value index

FANG+ Constituents:$AAPL 133.31 +0.76%$AMZN 3507.12 +1.55%$BABA 211.12 +0.02%$BIDU 186.54 +0.51%$FB 335.08 +0.83%$GOOG 2529.97 +0.03%$NFLX 509.26 +2.45%$NVDA 751.43 +1.95%$TSLA 624.35 +0.57%$TWTR 63.33 +2.21%$MSFT 264.67 +0.77%

6.59pm BST

6.22pm BST

British factories enjoyed the strongest growth in output on record in June but warned they expected to raise their prices at the fastest pace in nearly 40 years in response to a shortage of key components and materials.

The Confederation of British Industry said its quarterly survey of manufacturing showed that the rebound across the sector was gaining momentum going into the autumn.

5.59pm BST

In the eurozone, consumer confidence has continued to recover as economies reopen, and Covid-19 vaccinations continue.

The flash' reading of consumer morale this month rose by 1.8 points to -3.3.

#Europa

Eurozone Consumer Confidence Jun: -3.3 (est -3.0; prev -5.1) pic.twitter.com/5IgwaAQODo

"Consumers are brushing off the Delta variant, for now." @ClausVistesen on #Eurozone Advance Consumer Confidence, June #PantheonMacro

This suggests little consumer restraint upon the reopening of economies and confirms our optimism about the recovery in domestic demand over the coming quarters

Consumer confidence is close to all-time highs in the eurozone, writes @BertColijn https://t.co/rAm2TaGYKL

5.50pm BST

Travel industry leaders have hit out at the government for looking away during its darkest hour", accusing ministers of inflicting additional damage on businesses left on the brink by the pandemic.

Organisations throughout tourism and aviation will join a travel day of action" on Wednesday to call for the safe reopening of travel, highlighting the impact of Covid restrictions and appealing for more financial help.

The language of embracing an opportunity' will be as a dagger to the heart of many travel agents and tour operators who are fighting for their very survival."

5.44pm BST

The nation's online shopping habit is causing a cardboard shortage as empty delivery boxes are hoarded in homes or stuck in council recycling bins.

UK households have amassed 135m cardboard boxes during the pandemic, keeping valuable raw material out of the recycling chain and pushing up packaging prices, according to packaging specialist DS Smith.

So there is a lot more packaging that's ended up in the home."

5.42pm BST

The global wealth gap widened during the Covid pandemic, swelling the ranks of the world's millionaires by 5.2 million as the rich cashed in on surging stock and house prices.

The figures, detailed in the annual Credit Suisse Global Wealth Report, capture how emergency interest rate cuts and government stimulus measures often benefited those least in need of state support, helping their assets grow in value despite the economic downturn.

5.37pm BST

In the City, the FTSE 100 has closed nearly 28 points higher at 7090, up 0.4% today.

The market was calmer after last Friday's losses (caused by concerns that rising inflation could trigger early interest rate rises).

Exclusive: British Land in talks to sell 1.3bn Paddington Central stake | @JamesDBuckley https://t.co/1TAkHctnZW

5.24pm BST

Bitcoin's volatility is also weighing on MicroStrategy, the enterprise software company that has been buying heavily into crypto.

Yesterday, MicroStrategy reported that it now owns more than 100,000 bitcoins after completing another purchase round, giving it an average price of $26,080.

MicroStrategy has purchased an additional 13,005 bitcoins for ~$489 million in cash at an average price of ~$37,617 per bitcoin. As of 6/21/21 we #hodl ~105,085 bitcoins acquired for ~$2.741 billion at an average price of ~$26,080 per bitcoin. $MSTR https://t.co/gLfnOxZEZc

The fall in bitcoin below the $30k level has seen MicroStrategy shares come under further pressure falling for the second day in succession over concerns that it may have to write down the value of its holdings in the cryptocurrency by several million dollars.

man, MicroStrategy's bitcoin strategy is not playing out for them right now.

not saying that it can't work long-term, but right now it's a house of pain. $MSTR

5.22pm BST

The rebound continues. Bitcoin is now back at $32,600, roughly where it began today's session, after plunging to its lowest point since January.

5.01pm BST

Russia-focused gold miner Nordgold has postponed plans to float on the London Stock Exchange.

Nikolai Zelenski, chief executive officer of Nordgold, said it wasn't sensible to press on, given recent volatility in the resources sector caused by the prospect of earlier interest rate rises.

Recent central bank comments indicating an acceleration in expected interest rate rises have created significant uncertainty and volatility in the resources sector, in particular impacting gold and gold equities. Nordgold has determined that it would therefore not be sensible to pursue an IPO at this particular juncture.

I would like to thank the many prospective shareholders for their interest and support over the last four weeks.

Gold price wobble scuppers $5bn Nordgold IPO. pic.twitter.com/s4OGOOvyvu

4.31pm BST

Bitcoin has now risen back over the $30,000 mark, recovering some ground after hitting its lowest level since January.

It's back over $31,000, so still down over 4% today....

3.11pm BST

Bad day for #Crypto https://t.co/lNbKYZqsRQ #cryptocurrencies #CryptoNews #cryptocrash #Bitcoin pic.twitter.com/b3MLcHu6H3

3.08pm BST

Here's Bloomberg's take:

Bitcoin's decline amid a crypto crackdown from China has pushed it below $30,000 for the first time since January, nearly pulverizing its entire 2021 gain.

The original cryptocurrency has lost more than 50% from its mid-April high of almost $65,000, leaving it up marginally for the year. That compares with a 12% gain for the S&P 500 since the end of December. The coin started 2021 trading around $29,000 following a fourfold increase in 2020.

Bitcoin gives up all year-to-date gains https://t.co/HbuyL6nlCz pic.twitter.com/2SaATENxzM

3.00pm BST

Update: bitcoin officially erases all its 2021 gains https://t.co/sGhlu0tt1U pic.twitter.com/l315efaGxP

2.57pm BST

Bitcoin has fallen through the $30,000 mark for the first time since January, as the cryptocurrency selloff deepens.

A fresh wave of selling has driven Bitcoin down by 11% today to as low as $28,857 on Coindesk, wiping out all this year's gains.

Crypto is continuing to move lower

Bitcoin $BTC is now under $29K
Ethereum $ETH is under $1700 pic.twitter.com/vmrMgfJkYq

China's central bank said on Monday it had recently summoned some banks and payment firms, including China Construction Bank and Alipay, urging them to crack down harder on cryptocurrency trading.

The People's Bank of China's meeting came after China's State Council, or cabinet, last month said it would tighten restrictions on bitcoin trading and mining. Beijing has sharply ratcheted up its campaign in the last few weeks.

Bitcoin sinks below $30,000 as China crackdown deepens https://t.co/oeK6zmfcj5 via @Reuters pic.twitter.com/dZEKA9k5Ds

2.15pm BST

Catherine Mann, the former global chief economist of Citibank, has been appointed to the Bank of England's Monetary Policy Committee.

Mann, also formerly chief economist of the OECD, will join the MPC, which sets UK interest rates and its QE stimulus programme, on 1 September. She replaces Gertjan Vlieghe whose term is expiring at the end of August.

I would like to thank Gertjan Vlieghe for his crucial contribution to monetary policy making over the last 6 years.

I am very happy to announce the appointment of Dr. Catherine L. Mann - her breadth of experience across policy, research and the private sector will be immensely useful to the MPC.

@hmtreasury has announced the appointment of Dr Catherine L. Mann to the Monetary Policy Committee, and the reappointment of Jonathan Haskelhttps://t.co/hallmc5Dh7

UK Treasury just announced that former Citi and OECD chief economist Catherine Mann will replace Jan Vlieghe on the Bank of England's MPC. Jonathan Haskel to serve another 3-year term. https://t.co/RysKTQI4Bz

Catherine Mann, former Citigroup chief economist, will join the Bank of England's Monetary Policy Committee in September. https://t.co/pEcGSnqA49 via @markets @economics $C #BOE

(1) Relationships between financial markets and real economies with international emphasis, particularly climate issues. (2) Structural policies and outcomes, particularly inequality and productivity. 3) US trade deficit, international capital flows and the dollar;, particularly evolving supply chains; (4) Globalization of information technology and business services. Methodological and analytical approach: Investigate macro outcomes using micro data (sectoral, regional, income deciles, firm and individual data, big data).

12.44pm BST

Back in the UK, factories have reported their fastest growth since at least the 1970s.

Manufacturing activity improved considerably as the UK economy has reopened, with output volumes in the three months to June growing at the fastest pace on record.

UK #manufacturing output volumes in the three months to June grew at the fastest pace on record (since 1975). Firms expect output to grow at a quick, albeit slightly slower, pace in the coming quarter.

Note on chart: output questions were first asked on a monthly basis in 1995 pic.twitter.com/O86NgnThqX

Great to see manufacturing activity taking off in our latest #ITS as the UK economy reopens
Output growth fastest since 1975
Total order books strongest since 1988
Export order books firmest since Apr 2019 https://t.co/QonmtWJWhi

The improvement in manufacturing demand conditions was also evidenced by total order books in June reaching their strongest outturn since 1988, while export order books improved to their firmest in more than two years pic.twitter.com/XzFGscNWt4

Manufacturers reported that stock adequacy in June worsened to its weakest on record (since 1977) pic.twitter.com/a6BULf2HUz

Output prices are expected to grow rapidly in the next quarter, with this month's outturn marking the strongest expectations since 1982 pic.twitter.com/cExbhQVwM7

It is hugely reassuring to see the manufacturing sector performing well after a particularly difficult start to the year. There is a real sense of optimism from many in the sector that there are good times ahead.

However, the picture is not all rosy, with firms continuing to face difficulties arising from supply chain disruption and cost pressures. Staff shortages are also causing issues for many manufacturing businesses across the country. It will be critical for the government to continue to work with manufacturers to address these issues if the sector's robust performance is to last over the long-term."

12.02pm BST

The European Union has opened an antitrust probe into whether Google's online advertising technology operations have violated EU competition rules.

Online advertising services are at the heart of how Google and publishers monetise their online services. Google collects data to be used for targeted advertising purposes, it sells advertising space and also acts as an online advertising intermediary. So Google is present at almost all levels of the supply chain for online display advertising. We are concerned that Google has made it harder for rival online advertising services to compete in the so-called ad tech stack.

A level playing field is of the essence for everyone in the supply chain. Fair competition is important - both for advertisers to reach consumers on publishers' sites and for publishers to sell their space to advertisers, to generate revenues and funding for content.

#EUAntitrust Commission opens investigation into possible anticompetitive conduct by Google in the online advertising technology sector https://t.co/l9rcOeuP1e pic.twitter.com/CVs2jKtHrW

Some of the EU's investigation will cover similar ground to a case filed last year against Google by a group of U.S. states led by Texas. Similar areas include Google's allegedly favoring its own ad-buying tools in the advertising auctions it runs.

But the EU probe will also cover complaints that haven't yet been the subject of formal inquiries anywhere, including Google's alleged exclusion of competitors from brokering ad buys on Google-owned video site YouTube.

11.15am BST

In the City, the UK's blue-chip stock index has risen around 0.3% this morning, lifted by property firms and oil producers.

The FTSE 100 has gained 25 points to 7087, with commercial property developers Land Securities (+4.8%) and British Land (+4.7%) leading the risers after JP Morgan raised its price targets and said the sector could be turning the corner.

Landlords are at the top of the pile in the UK this morning, with the likes of Land Securities, British Land, and Hammerson all gaining ground as we push towards a full economic reopening next month.

Despite doubts over international travel, there is a great deal of confidence over the ability to reopen the economy next month, with landlords finally able to breathe a sigh of relief as a result.

Oil flows uphill: Brent crude broke through $75 per barrel this morning. It was at $42 a year ago, and in April last year, it sank to $21 pic.twitter.com/Ht8aU9peJV

11.03am BST

The UK is beginning negotiations to join a free trade alliance with Asia-Pacific countries, a key part of its attempts to pivot trade away from Europe after Brexit.

It is a glittering post-Brexit prize that I want us to seize."

10.50am BST

This chart from the CEBR shows just how sharply borrowing rose last year, compared to 2019 - and how it has fallen during the first two months of this financial year.

Whilst higher tax receipts and reduced government spending - themselves symptoms of a continued economic recovery and a waning requirement for government support - are contributing to a slowing of monthly borrowing, public sector net debt in the UK is still projected to rise by a total of 233.9 billion in the current financial year according to the Office for Budget Responsibility.

Adding to this, the borrowing seen in the last financial year suggests that, two years after the crisis, the public purse will be 533.1 billion further in the red than at its onset.

10.37am BST

Here's Danni Hewson, AJ Bell financial analyst, on the public finances in May:

How you look at today's public sector finances depends if you are a glass half-full or empty person. On the one hand borrowing in May was down by more than 19 billion compared to the previous year, on the other it was the second highest figure for May since records began and almost 19bn more than May 2019.

Income was up by 7.5 billion compared to the same time last year, helped along by a 133% increase in fuel duty and an almost 90% leap in stamp duty income but there's still a huge gap between what's coming in and what's going out and interest payments on all that debt has risen substantially, up 26% year on year, though much of that rise is down to changes in RPI.

10.33am BST

Alison Ring, ICAEW public sector director, believes the chancellor may need to raise taxes in the autumn, despite the pick-up in tax receipts, to tackle some of the demands on the public finances:

With numbers for the second month of the financial year now in, we can see tax receipts are starting to approach pre-pandemic levels, while borrowing continues to increase despite Covid-19 spending starting to decrease.

The public finances remain in a fragile state, and ongoing debates about education spending, adult social care and the pensions triple-lock highlight the difficult decisions facing Rishi Sunak as he seeks to balance pressures on our public services with still-growing levels of public debt.

10.02am BST

Most tax receipt categories rose in May compared with the same month a year ago, as the reopening of the economy helped to improve the public finances.

VAT receipts were up 23% year-on-year, from nearly 10bn to 12.2bn, as consumers returned to the shops as they reopened.

9.28am BST

Jonathan Gillham, chief economist at PwC UK, says today's public finance data is an improvement on previous forecasts for 2021.. but there are many challenges ahead:

Going forward, a relatively positive economic growth story in the first quarter of 2021 will give the Chancellor some flexibility in balancing the books over the next five years in line with his plan set out in the March Budget.

But the path ahead is still challenging, more needs to be done to support workforce upskilling, net zero and levelling up investment at pace and the NHS will require further support as it starts to clear the COVID backlog."

9.10am BST

With the economic outlook improving, and borrowing lower than expected, the chancellor should prioritise the recovery rather than tightening fiscal policy.

So argues Resolution Foundation's James Smith, who points out that the UK economy has performed better than expected this year.

Public sector finances out this morning for May show further evidence of the impact of the recovery on the fiscal position with the deficit for May at 24.3bn - 19.4bn than May 2020.

A short thread ...

Government receipts were up 7.5bn in May 2021 compared with May 2020 to 56.9bn; and gov't spending was 81.8bn, 10.9bn less than in May last year.

Borrowing is 19.4bn less than in May last year and was lower than the OBR forecast in March (24.3bn vs 28.5bn).

The OBR *were* expecting borrowing of 233.9bn for this year. This looks set to be much lower given 2020-21 outturn and a better performing economy... pic.twitter.com/NAn9ct8e62

The chart below just reminds you that the economy was about 5% bigger in April than the OBR expected in its March forecast. pic.twitter.com/qehZpsai0N

Debt to GDP in May was 99.2% - the highest ratio since March 1962.

In March, the OBR had expected it to continue to rise to 107.4 per cent of GDP this year but that level now looks set to be lower. pic.twitter.com/pHvJod29Vs

Overall: still lots of borrowing but outlook is improving and is better than the OBR expected in March.

This just reminds you yields remain low (and interest costs were just 4.3bn in May).

So the Chancellor does not need to tighten and should be prioritising a rapid recovery. pic.twitter.com/0PIgNR8ryE

9.09am BST

Interest payments on the UK national debt rose in May to 4.3bn, up from 3.4bn a year ago in May 2020.

The ONS says that changes in debt interest are largely a result of movements in the Retail Prices Index of inflation which index-linked bonds are pegged to (so if RPI inflation goes up, so does the cost of repaying those bonds).

8.58am BST

Spending on the government's job protection schemes was significantly lower this May than a year ago, as the reopening of the economy allowed people to return to work.

The ONS estimates that the government spent 2.5bn on the furlough scheme (Coronavirus Job Retention Scheme) in May, 75% less than in May 2020.

8.33am BST

The UK's strong economic recovery is starting to feed through into lower government borrowing, says Thomas Pugh of Capital Economics.

He explains:

Total tax receipts of 56.9bn in May were slightly lower than April's 58.1bn, but well above last May's 49.3bn. The trend in tax receipts should continue to improve over the rest of the year as stronger GDP growth than anticipated by the OBR boosts the public coffers.

And current expenditure dropped sharply from 84.7bn in April to 75.6bn in May. That was mainly driven by a reduction in transfers to local governments. As a result, total public borrowing in May was 24.3bn, down from 29.1bn in April (revised down from 31.7bn).

8.23am BST

The ONS have also revised down their estimate of UK borrowing in April by 2.6bn, to 29.1bn (this borrowing measure excludes public sector banks).

And the estimate of public sector net borrowing (ex banks) in the last financial year (to March 2021) has been trimmed by 1.1bn, to 299.2bn.

7.52am BST

On today's public finances, Chancellor of the Exchequer Rishi Sunak says:

As we emerge from the pandemic, we are continuing to support people and businesses to get back on their feet and our Plan for Jobs is working.

It's also important over the medium term to get the public finances on a sustainable footing. That's why at the Budget in March I set out the difficult but necessary steps we are taking to keep debt under control in the years to come."

7.46am BST

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

UK government borrowing dropped last month, as the reopening of the economy helped to improve the public finances, with more firms reopening and people returning to work.

The UK public sector borrowed (PSNB ex) 24.3 bn in May, 19.4 bn less than in May 2020 but still 18.9 bn more than in May 2019. Borrowing makes up the shortfall between spending by the government and pub sector orgs and its income such as taxes. https://t.co/xDUNgifkZz pic.twitter.com/TgAAkqolDY

The reduction in spending from its peak at the start of the Covid-19 pandemic meant that government borrowing was down by 38bn in the first two months compared to last year, amounting to over a half of the improvement forecast by the OBR for the whole year.

It should come as no surprise that borrowing has fared better than expected this year considering the improved economic outlook. We expect the deficit to fall to 211bn this fiscal year, undershooting the OBR's forecast by around 23bn.

Borrowing last financial year was at its highest as a percentage of GDP since 1946, though it was higher during both World Wars https://t.co/wmF7QSA718 pic.twitter.com/Nad9fmmeeC

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