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Global markets post best quarter in a decade as China's factories strengthen - business live Global markets post best quarter in a decade as China's factories strengthen - business live
(32 minutes later)
Rolling coverage of the latest economic and financial news, as China’s manufacturers and services companies report growth in JuneRolling coverage of the latest economic and financial news, as China’s manufacturers and services companies report growth in June
The trio of government-backed loan schemes led by commercial banks – covering bounce back loans, CBILS and the scheme for larger businesses known as CLBILS - hit a milestone, with over 1 million firms granted emergency funding so far.
Government data released this morning showed that banks had approved over 1 million loans worth £42.9bn as of 28 June. Over 1.3 million businesses have applied. More details here.
The recovery in the stock market is partly thanks to stimulus measures such as the UK government’s Job Retention Scheme - without which many firms would have slashed their workforces.
New figures show that this scheme is now supporting 9.3m workers, who are currently furloughed on 80% of their wages (up to £2,500 per month). That’s an increase of around 100,000 in the last week, suggesting that some firms are still struggling even as the economy reopens.
The total cost of the furlough scheme has now reached £25.5bn. It runs until the end of October, but today is the last day to add new workers to the list.
Air cargo demand remained extremely weak in May, according to the latest data from industry body IATA.
IATA reports that cargo tonne-kilometres (a measures of how much stuff was flown around the world) slumped by 20.3% last month compared to the previous year.
Global capacity contracted by 34.7% during the month, as many aeroplanes remained grounded during the pandemic.
IATA says that activity appears to be picking up from Aprils lows, as some economies eased out of their lockdowns. However, it’s still hard to predict the length, or severity, of the recession.
The last six months have been pretty grim for savers.The last six months have been pretty grim for savers.
The emergency cut in UK interest rates, to just 0.1%, has prompted banks and building societies to slash their own rates - meaning income on savings is extremely thin.The emergency cut in UK interest rates, to just 0.1%, has prompted banks and building societies to slash their own rates - meaning income on savings is extremely thin.
Comparison site Moneyfacts.co.uk has calculated that variable rate savings accounts have dropped by the largest amount seen over the first six months of any year since 2009.Comparison site Moneyfacts.co.uk has calculated that variable rate savings accounts have dropped by the largest amount seen over the first six months of any year since 2009.
Rachel Springall, finance expert at Moneyfacts, says savers will feel “frustrated and disappointed”, as their incomes are hit by the Coronavirus pandemic and base rate cuts.Rachel Springall, finance expert at Moneyfacts, says savers will feel “frustrated and disappointed”, as their incomes are hit by the Coronavirus pandemic and base rate cuts.
Just in: the eurozone has crept away from deflation, as consumers are hit by rising food prices.Just in: the eurozone has crept away from deflation, as consumers are hit by rising food prices.
Prices across the single currency region rose by 0.3% per year in June, up from just 0.1% y/y in the previous month. Food, drink and alcohol price continued to rise steeply, while energy prices remained much lower than a year ago.Prices across the single currency region rose by 0.3% per year in June, up from just 0.1% y/y in the previous month. Food, drink and alcohol price continued to rise steeply, while energy prices remained much lower than a year ago.
Statistics body Eurostat says:Statistics body Eurostat says:
UK housebuilder Redrow has sent a shiver through the property sector this morning, as it warned that profits will be badly hit by the coronavirus outbreak.UK housebuilder Redrow has sent a shiver through the property sector this morning, as it warned that profits will be badly hit by the coronavirus outbreak.
Redrow told shareholders that it is scaling back its operations in London. Following the lockdown, there is more demand for houses with space to work inside, and nice places to visit nearby.Redrow told shareholders that it is scaling back its operations in London. Following the lockdown, there is more demand for houses with space to work inside, and nice places to visit nearby.
So, the company is focusing more on regional development, and less in the capital.So, the company is focusing more on regional development, and less in the capital.
It says:It says:
Redrow has also found that the new social-distancing rules mean it takes longer to build houses, and also longer to hand them over to customers. This has lengthened its build times, and will continue to drag on its output.Redrow has also found that the new social-distancing rules mean it takes longer to build houses, and also longer to hand them over to customers. This has lengthened its build times, and will continue to drag on its output.
Shares in Redrow have dropped 4% this morning, towards the bottom of the FTSE 250 leaderboard.Shares in Redrow have dropped 4% this morning, towards the bottom of the FTSE 250 leaderboard.
Here’s our economics editor Larry Elliott on today’s UK GDP figures:Here’s our economics editor Larry Elliott on today’s UK GDP figures:
The coronavirus slump has forced energy giant Royal Dutch Shell to slash up to $22bn off the value of its assets.The coronavirus slump has forced energy giant Royal Dutch Shell to slash up to $22bn off the value of its assets.
Shell told the City this morning that it has lowered its long-term outlook on oil and gas prices. As a result it will record a post-tax, non-cash impairment charges of between $15bn to $22bn in the second quarter.Shell told the City this morning that it has lowered its long-term outlook on oil and gas prices. As a result it will record a post-tax, non-cash impairment charges of between $15bn to $22bn in the second quarter.
The companyThe company
Brent crude is currently changing hands at around $40 per barrel, down from around $65 back in January.Brent crude is currently changing hands at around $40 per barrel, down from around $65 back in January.
The astonishing 18% surge in global stock prices since March may show that investors have got ahead of themselves.The astonishing 18% surge in global stock prices since March may show that investors have got ahead of themselves.
Many companies have scrapped their earnings guidance, as they simply don’t know how many goods or services they’ll sell this year. It all depends on the progress in combating Covid-19, which is still accelerating worldwide.Many companies have scrapped their earnings guidance, as they simply don’t know how many goods or services they’ll sell this year. It all depends on the progress in combating Covid-19, which is still accelerating worldwide.
Neil Wilson of Markets.com thinks we could see a “short, sharp pullback” soon:Neil Wilson of Markets.com thinks we could see a “short, sharp pullback” soon:
Britain’s FTSE 100 has dipped by 30 points, or 0.5%, at the start of trading - but is still on track for its best quarter since the financial crisis.Britain’s FTSE 100 has dipped by 30 points, or 0.5%, at the start of trading - but is still on track for its best quarter since the financial crisis.
UK household spending slumped at a record pace in January-March, the ONS adds:UK household spending slumped at a record pace in January-March, the ONS adds:
Britain’s economy suffered an even more bruising blow from Covid-19 than previously thought.Britain’s economy suffered an even more bruising blow from Covid-19 than previously thought.
UK GDP shrank by 2.2% in the first quarter of 2020, according to updated figures from The Office for National Statistics. That’s down from a previous estimate of a 2% decline -- and is the joint-worst quarter since Margaret Thatcher was settling into Downing Street.UK GDP shrank by 2.2% in the first quarter of 2020, according to updated figures from The Office for National Statistics. That’s down from a previous estimate of a 2% decline -- and is the joint-worst quarter since Margaret Thatcher was settling into Downing Street.
The ONS says:The ONS says:
UK gross domestic product (GDP) in volume terms fell by 2.2% in Quarter 1 (Jan to Mar) 2020, revised downwards by 0.2 percentage points from the first quarterly estimate; this is now the joint largest fall in UK GDP since Quarter 3 (July to Sept) 1979.UK gross domestic product (GDP) in volume terms fell by 2.2% in Quarter 1 (Jan to Mar) 2020, revised downwards by 0.2 percentage points from the first quarterly estimate; this is now the joint largest fall in UK GDP since Quarter 3 (July to Sept) 1979.
When compared with the same quarter a year ago, UK GDP decreased by 1.7% in Quarter 1 2020, a downward revision of 0.1 percentage points from the previous estimate.When compared with the same quarter a year ago, UK GDP decreased by 1.7% in Quarter 1 2020, a downward revision of 0.1 percentage points from the previous estimate.
This release captures the first direct effects of the coronavirus (COVID-19) pandemic, and the government measures taken to reduce transmission of the virus.This release captures the first direct effects of the coronavirus (COVID-19) pandemic, and the government measures taken to reduce transmission of the virus.
The services, production and construction sectors provided a negative contribution to growth in the output approach to GDP in Quarter 1 2020; with services output falling by a record 2.3% in the latest quarter.The services, production and construction sectors provided a negative contribution to growth in the output approach to GDP in Quarter 1 2020; with services output falling by a record 2.3% in the latest quarter.
Global stock markets have enjoyed a sizzling quarter, even as the death toll from Covid-19 has marched higher and economies have fallen deep into recession.Global stock markets have enjoyed a sizzling quarter, even as the death toll from Covid-19 has marched higher and economies have fallen deep into recession.
World equities have surged by 18% between the start of April and the end of June, according to MSCI’s All Country World Index. That’s its biggest advance in 11 years, and the second best quarter in at least two decades.World equities have surged by 18% between the start of April and the end of June, according to MSCI’s All Country World Index. That’s its biggest advance in 11 years, and the second best quarter in at least two decades.
It means stocks have recovered some, but not all, of the heavy losses suffered during the crash in the first quarter of the year.It means stocks have recovered some, but not all, of the heavy losses suffered during the crash in the first quarter of the year.
The financial markets have clearly already priced in a recovery, helped by huge stimulus packages, record low interest rates, and a generous flurry of money-printing by the world’s central banks.The financial markets have clearly already priced in a recovery, helped by huge stimulus packages, record low interest rates, and a generous flurry of money-printing by the world’s central banks.
As Bloomberg puts it:As Bloomberg puts it:
Economists and traders are cheered by the news that China’s factories posted growth this month, despite the ongoing pandemic.Economists and traders are cheered by the news that China’s factories posted growth this month, despite the ongoing pandemic.
Iris Pang of ING says today’s manufacturing and non-manufacturing PMIs both send a positive signal for the economy. Can it be sustained?Iris Pang of ING says today’s manufacturing and non-manufacturing PMIs both send a positive signal for the economy. Can it be sustained?
Here’s Stephen Innes of Axicorp:Here’s Stephen Innes of Axicorp:
And Jim Reid of Deutsche Bank:And Jim Reid of Deutsche Bank:
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Some upbeat economic news from China is cheering investors on the final day of June, boosting optimism that the world economy is turning the corner.Some upbeat economic news from China is cheering investors on the final day of June, boosting optimism that the world economy is turning the corner.
China’s factories grew at a slightly faster pace this month, according to China’s National Bureau of Statistics. Its Purchasing Manager’s Index has risen to 50.9 from 50.4 in May (anything over 50 indicates growth).China’s factories grew at a slightly faster pace this month, according to China’s National Bureau of Statistics. Its Purchasing Manager’s Index has risen to 50.9 from 50.4 in May (anything over 50 indicates growth).
It’s the fourth month of (modest) growth in a row, as China emerged from the lockdown imposed to curb the spread of Covid-19 in January and February.It’s the fourth month of (modest) growth in a row, as China emerged from the lockdown imposed to curb the spread of Covid-19 in January and February.
Chinese manufacturers reported that supply and demand are starting to pick up, leading to more new orders. However, new export orders are still down, meaning factories are still shedding jobs.Chinese manufacturers reported that supply and demand are starting to pick up, leading to more new orders. However, new export orders are still down, meaning factories are still shedding jobs.
In a statement, NBS official Zhao Qinghe said there was still much uncertainty about the economic outlook, with small Chinese companies finding conditions particularly tough.In a statement, NBS official Zhao Qinghe said there was still much uncertainty about the economic outlook, with small Chinese companies finding conditions particularly tough.
Services companies also strengthened, with the official non-manufacturing PMI rising to 54.4 in June from 53.6 in May. That’s the best reading of the year.Services companies also strengthened, with the official non-manufacturing PMI rising to 54.4 in June from 53.6 in May. That’s the best reading of the year.
Julian Evans-Pritchard, senior China economist at Capital Economics, explain:Julian Evans-Pritchard, senior China economist at Capital Economics, explain:
Following an unexpected surge in US home sales on Monday, this may bolster hopes that the world economy may be gingerly emerging from the coronavirus slump.Following an unexpected surge in US home sales on Monday, this may bolster hopes that the world economy may be gingerly emerging from the coronavirus slump.
European stock markets are expected to rise a little this morning, at the end of one of the strongest quarters in decades.European stock markets are expected to rise a little this morning, at the end of one of the strongest quarters in decades.
By my reckoning, the FTSE 100 has gained almost 10% since the start of April - its best quarter since 2010. Europe’s Stoxx 600 has rallied by over 12% during the quarter - the best since 2015, while Wall Street has enjoyed its strongest gains since 1998.By my reckoning, the FTSE 100 has gained almost 10% since the start of April - its best quarter since 2010. Europe’s Stoxx 600 has rallied by over 12% during the quarter - the best since 2015, while Wall Street has enjoyed its strongest gains since 1998.
Astonishing, really, given the world is still gripped by the Covid-19 pandemic. Clearly the unprecedented stimulus from central banks has reassured investors, even though a V-shaped recovery looks rather unlikely.Astonishing, really, given the world is still gripped by the Covid-19 pandemic. Clearly the unprecedented stimulus from central banks has reassured investors, even though a V-shaped recovery looks rather unlikely.
And most markets are still deep in the red for the year, due to the crash in February and March.And most markets are still deep in the red for the year, due to the crash in February and March.
The agendaThe agenda
10am BST: Eurozone core inflation for June - expected to remain at 0.8%10am BST: Eurozone core inflation for June - expected to remain at 0.8%
11am BST: Bank of England chief economist Andy Haldane speaks about the economic impact of Covid-1911am BST: Bank of England chief economist Andy Haldane speaks about the economic impact of Covid-19
1.30pm BST: Canadian GDP for April - expected to shrink by 131.30pm BST: Canadian GDP for April - expected to shrink by 13
2pm BST: S&P/Case-Shiller index of US home prices2pm BST: S&P/Case-Shiller index of US home prices
5.30pm BST: US treasury secretary Steven Mnuchin and Fed chair Jay Powell appear before Congressional committee on financial services5.30pm BST: US treasury secretary Steven Mnuchin and Fed chair Jay Powell appear before Congressional committee on financial services