Rolling coverage of the latest economic and financial news, as Federal Reserve voices doubt about the recovery and initial jobless claims rise
- Latest: US jobless claims rise over 1m
- Lunchtime summary: Not a great day in the markets
- South Korea’s market slumped nearly 4%
- US Federal Reserve: economic outlook very uncertain
- Stocks fall across Asia, as cases rise in South Korea
- Coronavirus – latest updates
After a rough day’s trading, the UK stock market has closed at its lowest level in three weeks.
The FTSE 100 has ended the day down 98 points or 1.6% at 6,013 points, its weakest close since 31 July. Miners and financial stocks were among the major fallers, along with airline group IAG (-5%)
European equity markets are deep in the red on the back of the Fed minutes last night. The update warned the US economy could face a ‘considerable’ negative impact over the medium term on account of the pandemic. The Fed also repeated the need for fiscal stimulus, as they feel they can’t tackle the crisis alone. The absence of a coronavirus relief package is playing on traders’ minds even more so in light of the Fed’s comments. It seems a bit strange that traders are all of a sudden worked up about the Fed’s bearish outlook, when it has been known for a while now. The US unemployment benefit scheme ended in late July, so it’s a surprise that dealers are now running scared. Nonetheless, the mood is bearish and in terms of index points, the biggest fallers on the FTSE 100 are mining and energy stocks.
AO World, the online electrical goods retailer, posted a short and sweet trading update for the four months until the end of July. On a yearly basis, UK revenue jumped by 58.9% to £401.3 million, and the German unit saw revenue surge by over 90% to €74.3 million. The group confirmed that demand has remained robust even when competitors’ stores have reopened, and that adds to AO’s view that there is a change in the way that consumers buy electrical goods.
America has now suffered 22 weeks of jobless claims that exceed anything recorded before Covid-19:
US jobless claims – aka layoffs – are still painfully high. But I’d discount the surprise increase in mid-August. Seasonal distortions and who knows what else involved. Claims are falling, just not as fast as we’d like with the coronavirus still rampant.https://t.co/Am3GlO64cM pic.twitter.com/QdJGoy3KEO
Demand for petrol in the UK appears to have flattened out.
New government figures show that fuel sales stabilised last week, having been rising steadily since the height of the lockdown.
Britain’s average weekly fuel sales were at 87% of typical pre-lockdown week levels but the growth trend has stalled, the Department for Business, Energy & Industrial Strategy said on Thursday.
Average fuel sales per filling station in the week to Aug. 16 rose by 0.1% from the previous week, according to the BEIS data.
Stocks are creeping back on Wall Street, with the S&P 500 now flat for the day.
There’s no recovery in London, though, where the FTSE 100 is still down 85 points (-1.4%). Miners are among the fallers, with Antofagasta down 5% after reporting that earnings fell by a fifth this year due to weaker demand for its copper.
Here’s a chart showing how the number of Americans on jobless support is at historic highs:
Weekly Initial Unemployment Claims increase to 1,106,000 https://t.co/QRgghs7Ban pic.twitter.com/n4sIlM9aj8
U.S. Jobless Claims Unexpectedly Increase to More Than 1 Million pic.twitter.com/mhL4mTSlOB
After hitting record highs this week, the US stock market has opened in the red.
The Federal Reserve’s anxiety over the strength of the recovery, and the jump in jobless claims, are both weighing on the markets.
Related: US unemployment claims climbed back up over one million last week
In another blow to the US jobs market, American Airlines has announced it is cutting its service to 15 small U.S. cities with low demand.
The reductions begin in October, once American won’t need to keep running the flights to comply with federal aid received at the height of the pandemic, according to CNBC.
Here are the cities American Airlines is cutting starting Oct. 7 after federal aid requiring minimum service runs out. $AAL https://t.co/SNsFf81OB4
With initial weekly jobless claims still higher than any week during the Great Recession, reminder that airlines are planning to cut service & ton of jobs in October. https://t.co/ESCRwDTUax
The jump in Americans claiming jobless support should jolt Congress into action, says Ronald Temple, head of US equity at Lazard Asset Management:
“While the stock market surges to new highs, over 28 million Americans continue to rely on unemployment benefits to make ends meet.
Even amidst the worst labor market in modern history, Congress has not agreed to extend emergency unemployment benefits or the moratorium on evictions. Politicians should focus on Main Street.
Here’s Associated Press’s take:
The number of laid-off workers seeking U.S. unemployment benefits rose to 1.1 million last week after two weeks of declines, evidence that many employers are still slashing jobs as the coronavirus bedevils the U.S. economy.
The latest figures suggest that more than five months after the viral outbreak erupted the economy is still weak, despite recent gains as some businesses reopen and some sectors like housing and manufacturing have rebounded. A rising number of people who have lost jobs say they consider their loss to be permanent.
BREAKING: 1.1 million laid-off workers seek U.S. jobless aid as layoffs remain elevated in the face of virus. https://t.co/05fozoq31b
The latest figures suggest that more than five months after the viral outbreak erupted, the economy is still weak, despite recent gains as some businesses reopen and some sectors like housing and manufacturing have rebounded. https://t.co/2hvmzPMGKY
Glassdoor senior economist Daniel Zhao says the US labor market took a step backwards last week, with more people losing their jobs and seeking government help.
“Initial claims rebounded above the 1 million threshold, taking a step backward on the path to recovery. The modest jump is a stark reminder that claims will likely encounter some turbulence as they fall rather than gliding in for a soft landing.
It’s been four weeks without the $600/week CARES Act benefits for tens of millions of unemployed Americans. While a handful of states are approved to disburse the new $300/week benefits, it remains unclear how quickly the benefits will be able to flow to unemployed Americans already facing an unsteady recovery.”
Another 1.1 million workers filed for UI last wk, jumping back above the 1M mark.
The jump is likely to be a temporary one, but it’s a reminder that a steady, uninterrupted recovery is no guarantee.#joblessclaims 1/ pic.twitter.com/NJJDPlXwaE
Richard Flynn, UK managing director at Charles Schwab, says today’s rise in initial US jobless claims back over 1 million people will disappoint the market.
Investors had hoped that the jobless claims total would keep falling after last week’s “promising data”, but instead the improvement has reversed.
While hard-hit industries brought workers back in July, the level of weakness remains unprecedented, and the impact of virus-related rolling shutdowns could continue to reverse some of that improvement.
“Current market conditions suggest that we are in the early stages of a secular shift in the drivers of the U.S. economy; from heavily-consumer spending/services oriented, to more investment-driven (technology, health care, housing and infrastructure). The good news is those areas represent a larger share of employment than the aforementioned areas under most pressure. Secular transitions are more ocean liner than speed boat with regard to how quickly they occur—and they’re not without labour market destruction along the way, but we believe the long-term outlook is positive.”
Some US companies are cutting staff because the stimulus provided by the federal government is running dry, warns Dan Alpert of Westwood Capital.
He also points out that unemployment went up last week, even though the $600 a week Federal jobless aid payments have ended.
Keep an eye on weekly unemployment insurance claims in states NOT experiencing a #COVID19 surge. States like NY, NJ, MA, CT – all seeing material jump in claims. This is NOT the virus, these are renewed layoffs due to the end of federal support to small and medium-sized business.
And here’s the thing, folks: These higher claim numbers are DESPITE the cut off of the $600/week federal unemployment benefit supplement. These claimants are not seeking a windfall, they are just desperate for anything.
James Picerno of Capital Spectator says the jump in US jobless claims is worrying, as the economy struggles to recover from the Covid-19 pandemic.
A troubling reversal: US weekly jobless claims bounced higher last week, rising above the 1-million mark–again. New filings for unemployment benefits increased 1.106 million–another huge gain. The labor market’s still reeling from coronavirus blowback: https://t.co/EeuxxCBRcL pic.twitter.com/6o8EtBhuK8
BREAKING: 1.1 million Americans filed *new* unemployment claims last week, an increase of 135,000 from the week before.
This is a red flag that layoffs remain high.
28 million Americans were receiving UI benefits at start of August –when Congress let the $600/week aid expire
Initial unemployment claims ticked up this week, for the most part holding steady. The general trend has been gradual improvement that leaves us with still historically high levels of flows out of the labor market.
U.S. jobless claims rise 135,000 to
a seasonally 1.11 million in week of Aug. 8. Back over 1 million again. Not as bad as it looks, though. Actual or unadjusted claims rose a much smaller 52,000 to 891,000. And somewhat fewer people were collecting benefits as of early August.
Initial claims, both seasonally- and not-seasonally-adjusted, rise week-on-week. Regular state + PUA initial claims come in at +1.4 million NSA. pic.twitter.com/auoCuTgTqQ
Newsflash: the number of Americans filing new claims for unemployment benefit has risen, back over a million.
A total of 1.106m new initial claims were filed last week, dashing hopes that the total would fall to 925,000.
BREAKING! US Initial jobless claims at 1.1 million last week, against 0.92 million expected. pic.twitter.com/L6WrWmfAFR
Estée Lauder is planning to cut up to 2,000 staff and shut stores, after suffering a slump in sales during the pandemic.
In connection with the Post-COVID Business Acceleration Program, at this time the Company estimates a net reduction in the range of approximately 1,500 to 2,000 positions globally, primarily point of sale employees and related support staff in the areas that were the most disrupted, which is about 3% of its current workforce including temporary and part-time employees. This reduction takes into account the elimination of some positions, retraining and redeployment of certain employees, and investment in new positions in key areas like online.
The Company also estimates the closure of between 10-15% of its freestanding stores globally, as well as certain less productive department store counters that the Company elects to close.
Estee Lauder plans to cut up to 2,000 jobs worldwide and boost its digital operations after coronavirus lockdowns hit demand https://t.co/mCQEI3cGnQ
European Central Bank policymakers are concerned that the stock market rally this summer may have got ahead of itself.
In the minutes of last month’s meeting, just released, the ECB cites the “strong recovery in global stock markets” but cautioned:
Optimism in financial markets had, however, gone hand in hand with surging coronavirus (COVID-19) cases in the United States and many emerging market economies, raising fears of a broader relapse in containing the spread of the virus.
This divergence between the evolution of the pandemic and developments in financial markets, together with high uncertainty about the ultimate shape and pace of the economic recovery and the resurgence of global trade tensions, raised questions regarding the robustness and resilience of current investor sentiment.
ECB minutes point to a “premature tightening of financial conditions” that could thwart recovery. Step 1 in jawboning $EUR lower. Another 3-5% appreciation could see more aggressive actions like increasing pace of PEPP purchases or even rate cut threats. Is a theme across G10 2/ pic.twitter.com/dJ4Sflar8i
A quick recap.
Stock markets have fallen in Asia and Europe after America’s central bank warned about the economic damage of the pandemic, and global cases kept rising.
Related: House of Fraser owner threatens landlords with store closures over rent
Related: Qantas blames coronavirus for $2bn loss in worst financial result for a century
Related: UK car dealer sales rise as Covid drives people from public transport
Just in: China’s e-commerce giant Alibaba has report that revenues surged by a third in the last quarter.
Revenue rose to 153.75 billion yuan (£16.6bn) in the quarter to June 30, up from 114.92 billion yuan a year ago, stronger growth than expected.
$BABA posts 34% total revenue YoY growth for the June quarter, driven by strong revenue growth of our China commerce retail and cloud computing businesses. pic.twitter.com/bEvsruSybR
Core commerce revenue was up 34% YoY, recovering from pre-COVID-19 levels across the board, driven by robust revenue growth in our New Retail and direct sales businesses (up 80% YoY). $BABA pic.twitter.com/EWWB6YLqUB
UK car dealerships have reported a jump in new and used vehicle sales in July as buyers rushed to secure alternatives to public transport following the easing of coronavirus lockdowns.
The struggling Lookers chain said sales across new and used cars were up 17% for the usually quiet month compared with 2019, after revenues fell by £1bn in the first half of the year – a 38% slump. Vertu, the UK’s fifth largest dealership, said that new car sales rose by 18% year on year in July, while secondhand sales were up 14%. Vertu said it had made an adjusted profit before tax of £7.4m in July, more than making up for the £5.2m loss during the lockdown months from March to June.
Related: UK car dealer sales rise as Covid drives people from public transport
The slow unwinding of Neil Woodford’s collapsed Equity Income Fund continues.
Fund administrator Link has said it will hand another £183m to investors, following recent asset sales. But it also warned that the remaining assets are less liquid, so could take longer to shift.
“Investors in the shuttered Woodford Equity Income fund will get their next tranche of money before the end of this month. Link has revealed that it will pay out just over £183m of cash to investors next week, following the sale of a number of assets. This payout adds to the £142m distribution made in March and the £2.1bn paid out in January and means investors have received about £2.4bn of their money back.
“However, there’s no sign of Link and the asset managers shifting the remaining illiquid assets in the fund. There’s no mention of a timeline or any progress having been made on the sale of the assets, with Link just saying the sale ‘may take some time’. This means the process will drag on for even longer for investors, who just want to get as much of their money back as possible and move on from the sorry saga.
Britain’s economy will not fully recover from its current historic downturn for at least two year, a new Reuters poll of City economists has found.
That suggests that many experts are more pessimistic than the Bank of England about the pace of the recovery.
Earlier this month the BoE said the economy would not recover to its pre-pandemic size until the end of 2021, but 20 of 23 economists who responded to an extra question said it would be at least two years before that happened. Only three said within two years.
After contracting 9.7% this year – more than most of its peers and more than the 9.1% forecast last month – the economy will expand 6.2% in 2021, the poll of nearly 70 economists predicted. In a worst case scenario, it will contract 14.2% this year.
Interesting to note the UK GDP outlook for this year is still worsening by the month, according to the consensus of economists polled by Reuters. pic.twitter.com/Mx9LklsrpY
One in ten UK firms says it has a “moderate”, or worse, risk of going bust due to the pandemic.
That’s according to the latest healthcheck on the UK economy from the Office for National Statistics. It also found that job vacancies has fallen again,with visits to the high street are still sharply lower.
The hotel industry is one of the sectors worst hit by Covid-19, given the slump in tourism and business travel…. and there are reports today that two major players could combine forces.
France’s Accor is reportedly considering a merger with UK rival InterContinental Hotels Group (IHG) that would create the biggest hotel group in the world.
Accor chief executive Sébastian Bazin put together a team at the start of June to discuss a potential approach for IHG, Le Figaro newspaper reported on Thursday. The investment banks Centerview and Rothschild were also approached to help, Le Figaro said. The global hotels business has been hit hard by the coronavirus pandemic amid widespread lockdowns and travel bans.
Just as Airbnb files for IPO, Le Figaro reports the circulating rumours that Accor has considered a hotel group mega merger with IHG. No comment from either side yet.
Shares in Premier Oil plummeted by a quarter within minutes this morning as the company laid bare a first half financial loss and tough new terms from its lenders to extend the indebted company’s repayment deadlines.
“The BP acquisitions and our proposed long-term refinancing will position Premier to benefit from materially rising near-term production, additional free cash flow generation and a strengthening balance sheet, against a backdrop of a recovering oil price.”
Just in: the recovery across the eurozone construction sector has slowed.
New data from Eurostat shows that production rose by 4% during June – a slowdown from May’s bounceback. This leaves the sector around 6% smaller than a year ago.
In June 2020, a month marked by some relaxation of COVID-19 containment measures in many Member States, the seasonally adjusted production in the construction sector rose by 4.0% in the euro area and by 2.9% in the EU, compared with May 2020.
In May 2020, production in construction increased by 29.4% in the euro area and by 22.3% in the EU. In June 2020 compared with June 2019, production in construction decreased by 5.9% in the euro area and by 5.8% in the EU.
Back in the UK, Mike Ashley’s Frasers Group has threatened to close stores if landlords will not agree to move to rents based on sales figures.
Askley is demanding rent changes after Brexit and the coronavirus pandemic led to “the most challenging year in the history of the company”.
“Long-term leases will be signed with collaborative landlords and those willing to co-invest in the elevated store model. However, it is possible further store closures will occur over the coming year where such terms cannot be agreed.
Related: House of Fraser owner threatens landlords with store closures over rent
Well here we are at the socially distanced Frasers results briefing, you could hear a pin drop in here. I’ll be tweeting to the nation, here we go pic.twitter.com/4kj2QtXybj
Relations with Nike and Adidas are improving but not as quickly as we’d like says Michael Murray. But “elevation is working” overall
Now he does, on business rates again.
“If Boris Johnson wants to give me 10 minutes of his time we can save tens of thousands of jobs”
Without biz rate reform many HoF stores will close by March [when rates holiday ends]. “I’ve held on as long as I can”
Jonathan is only journalist allowed into Frasers Group results conference. A dubious honour? But means we can’t say they’ve banned the press. Rest of us not allowed in because last year descended into farce apparently https://t.co/mlJ1A8PSqB
South Korea’s stock market had a particularly rough day, with the Kospi 200 index sliding by 3.8% by the close.
“This is a grave situation that could possibly lead to a nationwide pandemic.”
Related: Global report: South Korea fears fresh nationwide outbreak
The European selloff is gathering pace, as the latest jump in Covid-19 cases also worries investors.
The FTSE 100 has now shed 99 points, or 1.6%, this morning to 6014 points, its lowest in nearly two weeks. The French, German, Italian and Spanish markets are all down around 1.6%.
With hopes dashed of a Fed intervention in the short term, the latest Covid-19 headlines carried an extra sting
Germany has just posted its highest number of new cases since April, Croatia may be the next country to be removed from the UK’s travel corridor, Australia’s Qantas airline has warned travel to the US is likely not possible until there is a vaccine, and South Korea is in danger of seeing a return to a nationwide outbreak after recording more than 1500 cases in the last week.
Today’s selloff is driven by disappointment that the US Federal Reserve isn’t pledging fresh measures to stimulate the American economy (and prop up the markets)
Some investors had hoped the Fed would start actively targeting long-term interest rates, by long-term government bonds. This unconventional move, called yield curve control, would give policymakers another tool if they couldn’t use short-term interest rates (because they’re at record lows).
Equities dropped late yesterday and overnight in the wake of the FOMC minutes, which seemed to show a rather lukewarm view of yield-curve control and a less aggressive intent to provide guidance on the path of interest rates that had been signalled in an earlier meeting.
Today’s losses mean European stock markets are down 12% on average this year, due to the slump triggered by the Covid-19 pandemic.
The FTSE 100 is one of the worst performers, down nearly 20% since January 1st.
The FTSE 250 index, which tracks smaller UK companies, has also fallen – but just down 0.65% at 17,469.
It’s being cushioned by two UK retailers – Sports Direct owner Frasers, and online electricals group AO World.
The Group now intends to invest in excess of £100 million in its digital elevation strategy. With a particular focus on Flannels and an enhanced customer experience, this investment will be integral in supporting the continued growth of our online channels.
The demand for AO’s products and services has been sustained since competitor stores started to re-open at the beginning of July. This reaffirms our belief that this is a structural shift in demand where customers have found a better way to shop the electricals category.
All the main European bourses have dropped at the open.
France’s CAC lost 1.3% and Germany’s DAX is down 1.1% after America’s central bank flagged worries over the US recovery.
The UK’s FTSE 100 index of blue-chip companies has fallen 79 points at the start of trading, a drop of 1.3%.
That takes the Footsie down to 6032 points, its lowest level since 10 August.
Australian airline Qantas has highlighted the economic damage of Covid-19, by posting the worst results in its hundred-year history.
My colleague Ben Butler explains:
The coronavirus pandemic has driven Australia’s flagship carrier, Qantas, to declare its worst financial result for a century – a $2bn loss – amid widespread devastation in the travel and tourism industries.
Despite concerns in the market that the airline is bleeding cash as much of its fleet remains grounded, the company declared on Thursday that it remains a going concern and its chief executive, Alan Joyce, took a swipe at stricken rival Virgin Australia by declaring that after the crisis Qantas would be “the only Australian airline that can fly long haul”.
Related: Qantas blames coronavirus for $2bn loss in worst financial result for a century
Worryingly, the Federal Reserve’s staff have more pessimistic about the prospects for the US economy, given the spread of Covid-19.
Last night’s minutes show that the Fed’s economists have cut their forecasts for growth and employment gains:
The projected rate of recovery in real GDP, and the pace of declines in the unemployment rate, over the second half of this year were expected to be somewhat less robust than in the previous forecast.
Although the staff assumed that additional fiscal stimulus measures would be enacted beyond those anticipated in the June forecast, the positive effect on the economic outlook was outweighed somewhat by the staff’s assessment of the likely effects of several other factors.
Those factors included the increasing spread of the coronavirus in the United States since mid-June; the reactions of many states and localities in slowing or scaling back the reopening of their economies, especially for businesses, such as restaurants and bars, providing services that entail personal interactions; and some high-frequency indicators that pointed to a deceleration in economic activity.
You can read the Federal Reserve’s views on the US economy here –> Minutes of the Federal Open Market Committee.
Stephen Innes of AxiCorp suggests you might want a strong coffee first…
While the FOMC minutes never make for the best of reads, this one certainly doesn’t go down in the annals as the Next Great American Novel.
Looking across a swath of assets, my take is the market has gone from ‘don’t fight the Fed’ mode, to now keeping an eye on the Fed mode, after the minutes expressed some concerns about the rapidly rising balance sheet.
Indeed this doesn’t sound like the same Fed where the market had assumed an incomprehensibly far fetched policy principle that the FOMC would continue to monetize all debt.
The new that the United States will demand today that all United Nations sanctions be reimposed against Iran is also worrying investors.
Jim Reid of Deutsche Bank tells clients:
This morning in Asia markets are following Wall Street’s lead with the Nikkei, Hang Seng, Shanghai Composite, Kospi and ASX all in the red.
The move for the Kospi hasn’t been helped by the latest virus data in South Korea, with a reported 288 cases in the past 24 hours. Meanwhile, reports that the US has suspended its extradition treaty with Hong Kong and ended reciprocal tax treatment on shipping also isn’t helping broad sentiment this morning, as is the news that President Trump is calling on the UN to renew all nuclear-related sanctions on Iran
Asia-Pacific stock markets have just had their worst day in a month, Reuters reports:
The Fed’s concern about the US economy was one factor, along with the latest jump in Covid-19 cases and tensions between China and Australia:
MSCI’s broadest index of Asia-Pacific shares outside Japan slid 1.79%, the biggest daily decline in five weeks. U.S. stock futures were down 0.55%.
Australian stocks dropped 0.77% due to concern that ties with China will worsen further after a report that Australian regulators will reject acquisitions by a Chinese company.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Uncertainty surrounding the economic outlook remained very elevated, with the path of the economy highly dependent on the course of the virus and the public sector’s response to it
Participants generally agreed that prospects for further substantial improvement in the labor market would depend on a broad and sustained reopening of businesses. In turn, such a reopening would depend in large part on the efficacy of health measures taken to limit the spread of the virus….
Members stated that the path of the economy would depend significantly on the course of the virus. In addition, members agreed that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and was posing considerable risks to the economic outlook over the medium term.
Global mkts turn in Risk-Off mode after Fed spoiled party. Minutes showed no enthusiasm for yield curve control & signaled tempered growth optimism. Bonds stabilized after initial sell-off w/US 10y yields at 0.66%. Dollar strengthens w/Euro at $1.1840. Gold 1945, Bitcoin $11.7k. pic.twitter.com/qhAXM9TgvB
European Opening Calls:#FTSE 6033 -1.29%#DAX 12806 -1.32%#CAC 4906 -1.43%#AEX 553 -1.35%#MIB 19834 -1.10%#IBEX 6998 -1.35%#OMX 1753 -1.24%#STOXX 3272 -1.37%#IGOpeningCall
Continue reading…Rolling coverage of the latest economic and financial news, as Federal Reserve voices doubt about the recovery and initial jobless claims riseLatest: US jobless claims rise over 1mLunchtime summary: Not a great day in the marketsSouth Korea’s market slumped nearly 4%US Federal Reserve: economic outlook very uncertainStocks fall across Asia, as cases rise in South KoreaCoronavirus – latest updates 4.39pm BSTAfter a rough day’s trading, the UK stock market has closed at its lowest level in three weeks.The FTSE 100 has ended the day down 98 points or 1.6% at 6,013 points, its weakest close since 31 July. Miners and financial stocks were among the major fallers, along with airline group IAG (-5%) European equity markets are deep in the red on the back of the Fed minutes last night. The update warned the US economy could face a ‘considerable’ negative impact over the medium term on account of the pandemic. The Fed also repeated the need for fiscal stimulus, as they feel they can’t tackle the crisis alone. The absence of a coronavirus relief package is playing on traders’ minds even more so in light of the Fed’s comments. It seems a bit strange that traders are all of a sudden worked up about the Fed’s bearish outlook, when it has been known for a while now. The US unemployment benefit scheme ended in late July, so it’s a surprise that dealers are now running scared. Nonetheless, the mood is bearish and in terms of index points, the biggest fallers on the FTSE 100 are mining and energy stocks. AO World, the online electrical goods retailer, posted a short and sweet trading update for the four months until the end of July. On a yearly basis, UK revenue jumped by 58.9% to £401.3 million, and the German unit saw revenue surge by over 90% to €74.3 million. The group confirmed that demand has remained robust even when competitors’ stores have reopened, and that adds to AO’s view that there is a change in the way that consumers buy electrical goods. 3.54pm BSTAmerica has now suffered 22 weeks of jobless claims that exceed anything recorded before Covid-19:US jobless claims – aka layoffs – are still painfully high. But I’d discount the surprise increase in mid-August. Seasonal distortions and who knows what else involved. Claims are falling, just not as fast as we’d like with the coronavirus still rampant.https://t.co/Am3GlO64cM pic.twitter.com/QdJGoy3KEO 3.43pm BSTDemand for petrol in the UK appears to have flattened out.New government figures show that fuel sales stabilised last week, having been rising steadily since the height of the lockdown.Britain’s average weekly fuel sales were at 87% of typical pre-lockdown week levels but the growth trend has stalled, the Department for Business, Energy & Industrial Strategy said on Thursday.Average fuel sales per filling station in the week to Aug. 16 rose by 0.1% from the previous week, according to the BEIS data. 3.31pm BSTStocks are creeping back on Wall Street, with the S&P 500 now flat for the day.There’s no recovery in London, though, where the FTSE 100 is still down 85 points (-1.4%). Miners are among the fallers, with Antofagasta down 5% after reporting that earnings fell by a fifth this year due to weaker demand for its copper. 3.00pm BSTHere’s a chart showing how the number of Americans on jobless support is at historic highs:Weekly Initial Unemployment Claims increase to 1,106,000 https://t.co/QRgghs7Ban pic.twitter.com/n4sIlM9aj8U.S. Jobless Claims Unexpectedly Increase to More Than 1 Million pic.twitter.com/mhL4mTSlOB 2.38pm BSTAfter hitting record highs this week, the US stock market has opened in the red.The Federal Reserve’s anxiety over the strength of the recovery, and the jump in jobless claims, are both weighing on the markets. Related: US unemployment claims climbed back up over one million last week 2.28pm BSTIn another blow to the US jobs market, American Airlines has announced it is cutting its service to 15 small U.S. cities with low demand.The reductions begin in October, once American won’t need to keep running the flights to comply with federal aid received at the height of the pandemic, according to CNBC.Here are the cities American Airlines is cutting starting Oct. 7 after federal aid requiring minimum service runs out. $AAL https://t.co/SNsFf81OB4With initial weekly jobless claims still higher than any week during the Great Recession, reminder that airlines are planning to cut service & ton of jobs in October. https://t.co/ESCRwDTUax 2.23pm BSTThe jump in Americans claiming jobless support should jolt Congress into action, says Ronald Temple, head of US equity at Lazard Asset Management:“While the stock market surges to new highs, over 28 million Americans continue to rely on unemployment benefits to make ends meet.Even amidst the worst labor market in modern history, Congress has not agreed to extend emergency unemployment benefits or the moratorium on evictions. Politicians should focus on Main Street. 1.56pm BSTHere’s Associated Press’s take:The number of laid-off workers seeking U.S. unemployment benefits rose to 1.1 million last week after two weeks of declines, evidence that many employers are still slashing jobs as the coronavirus bedevils the U.S. economy.The latest figures suggest that more than five months after the viral outbreak erupted the economy is still weak, despite recent gains as some businesses reopen and some sectors like housing and manufacturing have rebounded. A rising number of people who have lost jobs say they consider their loss to be permanent.BREAKING: 1.1 million laid-off workers seek U.S. jobless aid as layoffs remain elevated in the face of virus. https://t.co/05fozoq31bThe latest figures suggest that more than five months after the viral outbreak erupted, the economy is still weak, despite recent gains as some businesses reopen and some sectors like housing and manufacturing have rebounded. https://t.co/2hvmzPMGKY 1.53pm BSTGlassdoor senior economist Daniel Zhao says the US labor market took a step backwards last week, with more people losing their jobs and seeking government help.“Initial claims rebounded above the 1 million threshold, taking a step backward on the path to recovery. The modest jump is a stark reminder that claims will likely encounter some turbulence as they fall rather than gliding in for a soft landing. It’s been four weeks without the $600/week CARES Act benefits for tens of millions of unemployed Americans. While a handful of states are approved to disburse the new $300/week benefits, it remains unclear how quickly the benefits will be able to flow to unemployed Americans already facing an unsteady recovery.”Another 1.1 million workers filed for UI last wk, jumping back above the 1M mark.The jump is likely to be a temporary one, but it’s a reminder that a steady, uninterrupted recovery is no guarantee.#joblessclaims 1/ pic.twitter.com/NJJDPlXwaE 1.50pm BSTRichard Flynn, UK managing director at Charles Schwab, says today’s rise in initial US jobless claims back over 1 million people will disappoint the market.Investors had hoped that the jobless claims total would keep falling after last week’s “promising data”, but instead the improvement has reversed.While hard-hit industries brought workers back in July, the level of weakness remains unprecedented, and the impact of virus-related rolling shutdowns could continue to reverse some of that improvement.“Current market conditions suggest that we are in the early stages of a secular shift in the drivers of the U.S. economy; from heavily-consumer spending/services oriented, to more investment-driven (technology, health care, housing and infrastructure). The good news is those areas represent a larger share of employment than the aforementioned areas under most pressure. Secular transitions are more ocean liner than speed boat with regard to how quickly they occur—and they’re not without labour market destruction along the way, but we believe the long-term outlook is positive.” 1.47pm BSTSome US companies are cutting staff because the stimulus provided by the federal government is running dry, warns Dan Alpert of Westwood Capital.He also points out that unemployment went up last week, even though the $600 a week Federal jobless aid payments have ended. Keep an eye on weekly unemployment insurance claims in states NOT experiencing a #COVID19 surge. States like NY, NJ, MA, CT – all seeing material jump in claims. This is NOT the virus, these are renewed layoffs due to the end of federal support to small and medium-sized business.And here’s the thing, folks: These higher claim numbers are DESPITE the cut off of the $600/week federal unemployment benefit supplement. These claimants are not seeking a windfall, they are just desperate for anything. 1.42pm BSTJames Picerno of Capital Spectator says the jump in US jobless claims is worrying, as the economy struggles to recover from the Covid-19 pandemic.A troubling reversal: US weekly jobless claims bounced higher last week, rising above the 1-million mark–again. New filings for unemployment benefits increased 1.106 million–another huge gain. The labor market’s still reeling from coronavirus blowback: https://t.co/EeuxxCBRcL pic.twitter.com/6o8EtBhuK8BREAKING: 1.1 million Americans filed *new* unemployment claims last week, an increase of 135,000 from the week before.This is a red flag that layoffs remain high.28 million Americans were receiving UI benefits at start of August –when Congress let the $600/week aid expireInitial unemployment claims ticked up this week, for the most part holding steady. The general trend has been gradual improvement that leaves us with still historically high levels of flows out of the labor market.U.S. jobless claims rise 135,000 to a seasonally 1.11 million in week of Aug. 8. Back over 1 million again. Not as bad as it looks, though. Actual or unadjusted claims rose a much smaller 52,000 to 891,000. And somewhat fewer people were collecting benefits as of early August.Initial claims, both seasonally- and not-seasonally-adjusted, rise week-on-week. Regular state + PUA initial claims come in at +1.4 million NSA. pic.twitter.com/auoCuTgTqQ 1.35pm BSTNewsflash: the number of Americans filing new claims for unemployment benefit has risen, back over a million.A total of 1.106m new initial claims were filed last week, dashing hopes that the total would fall to 925,000.BREAKING! US Initial jobless claims at 1.1 million last week, against 0.92 million expected. pic.twitter.com/L6WrWmfAFR 1.07pm BSTEstée Lauder is planning to cut up to 2,000 staff and shut stores, after suffering a slump in sales during the pandemic.In connection with the Post-COVID Business Acceleration Program, at this time the Company estimates a net reduction in the range of approximately 1,500 to 2,000 positions globally, primarily point of sale employees and related support staff in the areas that were the most disrupted, which is about 3% of its current workforce including temporary and part-time employees. This reduction takes into account the elimination of some positions, retraining and redeployment of certain employees, and investment in new positions in key areas like online.The Company also estimates the closure of between 10-15% of its freestanding stores globally, as well as certain less productive department store counters that the Company elects to close.Estee Lauder plans to cut up to 2,000 jobs worldwide and boost its digital operations after coronavirus lockdowns hit demand https://t.co/mCQEI3cGnQ 12.52pm BSTEuropean Central Bank policymakers are concerned that the stock market rally this summer may have got ahead of itself.In the minutes of last month’s meeting, just released, the ECB cites the “strong recovery in global stock markets” but cautioned:Optimism in financial markets had, however, gone hand in hand with surging coronavirus (COVID-19) cases in the United States and many emerging market economies, raising fears of a broader relapse in containing the spread of the virus.This divergence between the evolution of the pandemic and developments in financial markets, together with high uncertainty about the ultimate shape and pace of the economic recovery and the resurgence of global trade tensions, raised questions regarding the robustness and resilience of current investor sentiment. ECB minutes point to a “premature tightening of financial conditions” that could thwart recovery. Step 1 in jawboning $EUR lower. Another 3-5% appreciation could see more aggressive actions like increasing pace of PEPP purchases or even rate cut threats. Is a theme across G10 2/ pic.twitter.com/dJ4Sflar8i 12.35pm BSTA quick recap.Stock markets have fallen in Asia and Europe after America’s central bank warned about the economic damage of the pandemic, and global cases kept rising. Related: House of Fraser owner threatens landlords with store closures over rent Related: Qantas blames coronavirus for $2bn loss in worst financial result for a century Related: UK car dealer sales rise as Covid drives people from public transport 11.52am BSTJust in: China’s e-commerce giant Alibaba has report that revenues surged by a third in the last quarter.Revenue rose to 153.75 billion yuan (£16.6bn) in the quarter to June 30, up from 114.92 billion yuan a year ago, stronger growth than expected.$BABA posts 34% total revenue YoY growth for the June quarter, driven by strong revenue growth of our China commerce retail and cloud computing businesses. pic.twitter.com/bEvsruSybRCore commerce revenue was up 34% YoY, recovering from pre-COVID-19 levels across the board, driven by robust revenue growth in our New Retail and direct sales businesses (up 80% YoY). $BABA pic.twitter.com/EWWB6YLqUB 11.45am BSTUK car dealerships have reported a jump in new and used vehicle sales in July as buyers rushed to secure alternatives to public transport following the easing of coronavirus lockdowns. The struggling Lookers chain said sales across new and used cars were up 17% for the usually quiet month compared with 2019, after revenues fell by £1bn in the first half of the year – a 38% slump. Vertu, the UK’s fifth largest dealership, said that new car sales rose by 18% year on year in July, while secondhand sales were up 14%. Vertu said it had made an adjusted profit before tax of £7.4m in July, more than making up for the £5.2m loss during the lockdown months from March to June. Related: UK car dealer sales rise as Covid drives people from public transport 11.29am BSTThe slow unwinding of Neil Woodford’s collapsed Equity Income Fund continues.Fund administrator Link has said it will hand another £183m to investors, following recent asset sales. But it also warned that the remaining assets are less liquid, so could take longer to shift.“Investors in the shuttered Woodford Equity Income fund will get their next tranche of money before the end of this month. Link has revealed that it will pay out just over £183m of cash to investors next week, following the sale of a number of assets. This payout adds to the £142m distribution made in March and the £2.1bn paid out in January and means investors have received about £2.4bn of their money back.“However, there’s no sign of Link and the asset managers shifting the remaining illiquid assets in the fund. There’s no mention of a timeline or any progress having been made on the sale of the assets, with Link just saying the sale ‘may take some time’. This means the process will drag on for even longer for investors, who just want to get as much of their money back as possible and move on from the sorry saga. 11.02am BST Britain’s economy will not fully recover from its current historic downturn for at least two year, a new Reuters poll of City economists has found.That suggests that many experts are more pessimistic than the Bank of England about the pace of the recovery.Earlier this month the BoE said the economy would not recover to its pre-pandemic size until the end of 2021, but 20 of 23 economists who responded to an extra question said it would be at least two years before that happened. Only three said within two years.After contracting 9.7% this year – more than most of its peers and more than the 9.1% forecast last month – the economy will expand 6.2% in 2021, the poll of nearly 70 economists predicted. In a worst case scenario, it will contract 14.2% this year.Interesting to note the UK GDP outlook for this year is still worsening by the month, according to the consensus of economists polled by Reuters. pic.twitter.com/Mx9LklsrpY 10.51am BSTOne in ten UK firms says it has a “moderate”, or worse, risk of going bust due to the pandemic.That’s according to the latest healthcheck on the UK economy from the Office for National Statistics. It also found that job vacancies has fallen again,with visits to the high street are still sharply lower. 10.46am BSTThe hotel industry is one of the sectors worst hit by Covid-19, given the slump in tourism and business travel…. and there are reports today that two major players could combine forces.France’s Accor is reportedly considering a merger with UK rival InterContinental Hotels Group (IHG) that would create the biggest hotel group in the world.Accor chief executive Sébastian Bazin put together a team at the start of June to discuss a potential approach for IHG, Le Figaro newspaper reported on Thursday. The investment banks Centerview and Rothschild were also approached to help, Le Figaro said. The global hotels business has been hit hard by the coronavirus pandemic amid widespread lockdowns and travel bans.Just as Airbnb files for IPO, Le Figaro reports the circulating rumours that Accor has considered a hotel group mega merger with IHG. No comment from either side yet. 10.25am BSTShares in Premier Oil plummeted by a quarter within minutes this morning as the company laid bare a first half financial loss and tough new terms from its lenders to extend the indebted company’s repayment deadlines.“The BP acquisitions and our proposed long-term refinancing will position Premier to benefit from materially rising near-term production, additional free cash flow generation and a strengthening balance sheet, against a backdrop of a recovering oil price.” 10.20am BSTJust in: the recovery across the eurozone construction sector has slowed.New data from Eurostat shows that production rose by 4% during June – a slowdown from May’s bounceback. This leaves the sector around 6% smaller than a year ago.In June 2020, a month marked by some relaxation of COVID-19 containment measures in many Member States, the seasonally adjusted production in the construction sector rose by 4.0% in the euro area and by 2.9% in the EU, compared with May 2020.In May 2020, production in construction increased by 29.4% in the euro area and by 22.3% in the EU. In June 2020 compared with June 2019, production in construction decreased by 5.9% in the euro area and by 5.8% in the EU. 9.58am BSTBack in the UK, Mike Ashley’s Frasers Group has threatened to close stores if landlords will not agree to move to rents based on sales figures.Askley is demanding rent changes after Brexit and the coronavirus pandemic led to “the most challenging year in the history of the company”. “Long-term leases will be signed with collaborative landlords and those willing to co-invest in the elevated store model. However, it is possible further store closures will occur over the coming year where such terms cannot be agreed. Related: House of Fraser owner threatens landlords with store closures over rent Well here we are at the socially distanced Frasers results briefing, you could hear a pin drop in here. I’ll be tweeting to the nation, here we go pic.twitter.com/4kj2QtXybjRelations with Nike and Adidas are improving but not as quickly as we’d like says Michael Murray. But “elevation is working” overallNow he does, on business rates again. “If Boris Johnson wants to give me 10 minutes of his time we can save tens of thousands of jobs”Without biz rate reform many HoF stores will close by March [when rates holiday ends]. “I’ve held on as long as I can”Jonathan is only journalist allowed into Frasers Group results conference. A dubious honour? But means we can’t say they’ve banned the press. Rest of us not allowed in because last year descended into farce apparently https://t.co/mlJ1A8PSqB 9.52am BSTSouth Korea’s stock market had a particularly rough day, with the Kospi 200 index sliding by 3.8% by the close.“This is a grave situation that could possibly lead to a nationwide pandemic.” Related: Global report: South Korea fears fresh nationwide outbreak 9.38am BSTThe European selloff is gathering pace, as the latest jump in Covid-19 cases also worries investors.The FTSE 100 has now shed 99 points, or 1.6%, this morning to 6014 points, its lowest in nearly two weeks. The French, German, Italian and Spanish markets are all down around 1.6%. Related: Coronavirus live news: Germany hits highest cases since April; South Korea warns of ‘nationwide pandemic’ With hopes dashed of a Fed intervention in the short term, the latest Covid-19 headlines carried an extra sting Germany has just posted its highest number of new cases since April, Croatia may be the next country to be removed from the UK’s travel corridor, Australia’s Qantas airline has warned travel to the US is likely not possible until there is a vaccine, and South Korea is in danger of seeing a return to a nationwide outbreak after recording more than 1500 cases in the last week. 9.14am BSTToday’s selloff is driven by disappointment that the US Federal Reserve isn’t pledging fresh measures to stimulate the American economy (and prop up the markets)Some investors had hoped the Fed would start actively targeting long-term interest rates, by long-term government bonds. This unconventional move, called yield curve control, would give policymakers another tool if they couldn’t use short-term interest rates (because they’re at record lows).Equities dropped late yesterday and overnight in the wake of the FOMC minutes, which seemed to show a rather lukewarm view of yield-curve control and a less aggressive intent to provide guidance on the path of interest rates that had been signalled in an earlier meeting. 8.43am BSTToday’s losses mean European stock markets are down 12% on average this year, due to the slump triggered by the Covid-19 pandemic.The FTSE 100 is one of the worst performers, down nearly 20% since January 1st. 8.37am BSTThe FTSE 250 index, which tracks smaller UK companies, has also fallen – but just down 0.65% at 17,469.It’s being cushioned by two UK retailers – Sports Direct owner Frasers, and online electricals group AO World.The Group now intends to invest in excess of £100 million in its digital elevation strategy. With a particular focus on Flannels and an enhanced customer experience, this investment will be integral in supporting the continued growth of our online channels. The demand for AO’s products and services has been sustained since competitor stores started to re-open at the beginning of July. This reaffirms our belief that this is a structural shift in demand where customers have found a better way to shop the electricals category. 8.12am BSTAll the main European bourses have dropped at the open.France’s CAC lost 1.3% and Germany’s DAX is down 1.1% after America’s central bank flagged worries over the US recovery. 8.09am BSTThe UK’s FTSE 100 index of blue-chip companies has fallen 79 points at the start of trading, a drop of 1.3%.That takes the Footsie down to 6032 points, its lowest level since 10 August. 7.59am BSTAustralian airline Qantas has highlighted the economic damage of Covid-19, by posting the worst results in its hundred-year history.My colleague Ben Butler explains:The coronavirus pandemic has driven Australia’s flagship carrier, Qantas, to declare its worst financial result for a century – a $2bn loss – amid widespread devastation in the travel and tourism industries.Despite concerns in the market that the airline is bleeding cash as much of its fleet remains grounded, the company declared on Thursday that it remains a going concern and its chief executive, Alan Joyce, took a swipe at stricken rival Virgin Australia by declaring that after the crisis Qantas would be “the only Australian airline that can fly long haul”. Related: Qantas blames coronavirus for $2bn loss in worst financial result for a century 7.55am BSTWorryingly, the Federal Reserve’s staff have more pessimistic about the prospects for the US economy, given the spread of Covid-19.Last night’s minutes show that the Fed’s economists have cut their forecasts for growth and employment gains:The projected rate of recovery in real GDP, and the pace of declines in the unemployment rate, over the second half of this year were expected to be somewhat less robust than in the previous forecast.Although the staff assumed that additional fiscal stimulus measures would be enacted beyond those anticipated in the June forecast, the positive effect on the economic outlook was outweighed somewhat by the staff’s assessment of the likely effects of several other factors.Those factors included the increasing spread of the coronavirus in the United States since mid-June; the reactions of many states and localities in slowing or scaling back the reopening of their economies, especially for businesses, such as restaurants and bars, providing services that entail personal interactions; and some high-frequency indicators that pointed to a deceleration in economic activity. 7.44am BSTYou can read the Federal Reserve’s views on the US economy here –> Minutes of the Federal Open Market Committee.Stephen Innes of AxiCorp suggests you might want a strong coffee first…While the FOMC minutes never make for the best of reads, this one certainly doesn’t go down in the annals as the Next Great American Novel.Looking across a swath of assets, my take is the market has gone from ‘don’t fight the Fed’ mode, to now keeping an eye on the Fed mode, after the minutes expressed some concerns about the rapidly rising balance sheet.Indeed this doesn’t sound like the same Fed where the market had assumed an incomprehensibly far fetched policy principle that the FOMC would continue to monetize all debt. 7.35am BSTThe new that the United States will demand today that all United Nations sanctions be reimposed against Iran is also worrying investors.Jim Reid of Deutsche Bank tells clients:This morning in Asia markets are following Wall Street’s lead with the Nikkei, Hang Seng, Shanghai Composite, Kospi and ASX all in the red. The move for the Kospi hasn’t been helped by the latest virus data in South Korea, with a reported 288 cases in the past 24 hours. Meanwhile, reports that the US has suspended its extradition treaty with Hong Kong and ended reciprocal tax treatment on shipping also isn’t helping broad sentiment this morning, as is the news that President Trump is calling on the UN to renew all nuclear-related sanctions on Iran 7.29am BSTAsia-Pacific stock markets have just had their worst day in a month, Reuters reports:The Fed’s concern about the US economy was one factor, along with the latest jump in Covid-19 cases and tensions between China and Australia:MSCI’s broadest index of Asia-Pacific shares outside Japan slid 1.79%, the biggest daily decline in five weeks. U.S. stock futures were down 0.55%.Australian stocks dropped 0.77% due to concern that ties with China will worsen further after a report that Australian regulators will reject acquisitions by a Chinese company. 7.02am BSTGood morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Uncertainty surrounding the economic outlook remained very elevated, with the path of the economy highly dependent on the course of the virus and the public sector’s response to it Participants generally agreed that prospects for further substantial improvement in the labor market would depend on a broad and sustained reopening of businesses. In turn, such a reopening would depend in large part on the efficacy of health measures taken to limit the spread of the virus….Members stated that the path of the economy would depend significantly on the course of the virus. In addition, members agreed that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and was posing considerable risks to the economic outlook over the medium term. Related: Coronavirus live news: Germany hits highest cases since April; South Korea warns of ‘nationwide pandemic’ Global mkts turn in Risk-Off mode after Fed spoiled party. Minutes showed no enthusiasm for yield curve control & signaled tempered growth optimism. Bonds stabilized after initial sell-off w/US 10y yields at 0.66%. Dollar strengthens w/Euro at $1.1840. Gold 1945, Bitcoin $11.7k. pic.twitter.com/qhAXM9TgvBEuropean Opening Calls:#FTSE 6033 -1.29%#DAX 12806 -1.32%#CAC 4906 -1.43%#AEX 553 -1.35%#MIB 19834 -1.10%#IBEX 6998 -1.35%#OMX 1753 -1.24%#STOXX 3272 -1.37%#IGOpeningCall Continue reading…
