US stocks open in the green after data from the US, China and Germany suggested the economic recovery is gaining traction.
Time for me to hand over to my colleague Simon Foy, who will steer the blog through the US open and into the mid-afternoon. Thanks for following along!
Almost two-thirds of the way through the session, European stock markets have gathered some pace, although the FTSE 100 is still leading.
The European Commission is preparing to offer banks an 18-month extension on their access to UK-based clearing house, the FT reports.
B&Q owner Kingfisher is leading fallers on the FTSE 100, after a monthly survey by Banque De France showed DIY sales dipped 3.1pc in August.
The group – which owns French retailer Castorama – is set to report first-half results on September 22nd.
It has already had something of a rollercoaster year – falling out of the blue-chip index in March, only to regain its spot in June.
Chancellor Rishi Sunak has said he may extend the UK’s job support measures beyond the end of the furlough scheme next month.
Responding to a question from Treasury Select Committee chair Mel Stride, Mr Sunak said:
Defence engineer Chemring is among the FTSE 250’s bigger risers, after saying its full-year trading performance should be at the “upper end of current analyst expectations”.
The group said its order intake for the financial year from last October to August was 4pc higher than the same period the year before, with momentum building in parts of its business.
Currently estimates for the group’s operating profit stand between £47m and £53m, Chemring noted.
Chief executive Michael Ord said:
This has been a busy period in which the resilience of the Group has been demonstrated as we continue to make good progress despite the challenges presented by Covid-19… We have good momentum as we near the end of FY20 and move into FY21.
Stifel’s Annabel Hewson praised the update, saying Chemring’s technology focus “keeps it relevant for a new defence environment”.
Marshalls falls after update
Paving and concrete specialist Marshalls has fallen today, after analysts said its trading looks “less exciting” than anticipated.
The FTSE 250 group reported lower revenues for the six months to the end of June than in 2019, and swung to a £16m loss for the period compared to a £37m profit the year before.
It said sales have improved since the end of the half-year period, with revenue in July and August at 94pc and 100pc of 2019 levels respectively.
Chief executive Martyn Coffey said:
Although business confidence and market demand remain uncertain, recent trading has been better than expected and continues to improve. Our restructuring programme is now complete and the new bank facilities have further strengthened the group.
Canaccord Genuity analyst Aynsley Lammin said there were no “big surprises” in the report, adding that flat year-on-year sales may not justify the group’s price premium compared to rivals. Shore Capital’s Graeme Kyle concurred that the results were slightly underwhelming, saying Marshalls’ shares look close to “fair value”.
RSA and Hiscox respond to case
Insurers Hiscox and RSA have both responded to the judgment on business interruption payouts.
- Hiscox says it expects additional claims as a result of the decision to be “less than £100 million net of reinsurance”, £150m below its previous worst-case scenario estimate
- RSA estimates a gross financial impact of £104m across its portfolio
FCA statement on business interruption case
The FCA has welcomed the judges’ decision on payout for companies with business interruption insurance who had been denied payouts.
Interim chief executive Christopher Woolard said:
We brought the test case in order to resolve the lack of clarity and certainty that existed for many policyholders making business interruption claims and the wider market. We are pleased that the Court has substantially found in favour of the arguments we presented on the majority of the key issues.
Today’s judgment is a significant step in resolving the uncertainty being faced by policyholders. We are grateful to the court for delivering the judgment quickly and the speed with which it was reached reflects well on all parties…
Insurers should reflect on the clarity provided here and, irrespective of any possible appeals, consider the steps they can take now to progress claims of the type that the judgment says should be paid. They should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.
The watchdog added:
Although the judgment will bring welcome news for many policyholders, the judgment did not say that the eight defendant insurers are liable across all of the 21 different types of policy wording in the representative sample considered by the Court.
Each policy needs to be considered against the detailed judgment to work out what it means for that policy. Policyholders with affected claims can expect to hear from their insurer within the next 7 days.
BBC’s Kuenssberg: Sunak tells Cabinet economy is ‘nowhere near’ pre-virus levels
Sunak also told colleagues ‘greatest currency’ is ‘confidence’ – says govt needs to do ‘everything we can to boost that’ – does that sit comfortably with rising levels of alarm about covid case rise?
— Laura Kuenssberg (@bbclaurak) September 15, 2020
In other words, Sunak is still adamant he won’t extend the furlough scheme, but recognition Treasury may have to find other ways of helping people whose particular industries have tanked
— Laura Kuenssberg (@bbclaurak) September 15, 2020
Policyholders claim victory in Covid claims dispute
Lawyers representing UK policyholders in a landmark case over pandemic-related payouts have said a court ruling this morning is a victory for their clients.
Judges in the case, which was brought by the Financial Conduct Authority, said there was “coverage in principle” related to some policies.
The FCA said insurers should immediately begin to process some claims.
Hiscox, RSA Insurance, Zurich Insurance and five other companies had objected to the FCA case, which was brought in an effort to bring legal clarity to dozens of policies under dispute. The ruling could lead to tens of millions of payouts for the insurance industry in the wake of the coronavirus pandemic.
New: Lawyers for the FCA claiming partial victory in its groundbreaking legal test case on Covid-19 and business interruption insurance, which could affect up to 370k businesses. Story unpicking the long and complex judgment to follow on @telebusiness
— Michael O’Dwyer (@_MODwyer) September 15, 2020
Klarna leapfrogs Revolut to become Europe’s top fintech
Swedish online payments business Klarna has become the most valuable financial technology start-up in Europe after its valuation rose to more than $10bn (£7.7bn) in a new funding round.
My colleague James Cook reports:
The company, which lets customers pay in increments for their purchases, has raised around $650m in funding from backers, bringing its valuation to $10.65bn.
The investment was raised from Silver Lake, Singapore’s sovereign wealth fund GIC, BlackRock and HMI Capital have helped Klarna beat British rivals such as Revolut and Checkout.com whose valuations remain at $5.5bn.
Klarna plans to use the fresh injection of funding to continue its global expansion, including in the US where it now has more than 9 million customers.
Here are some of the day’s top stories from the Telegraph Money team:
Former Nissan executive pleads not guilty in Ghosn pay case
Greg Kelly, a former executive of Nissan, pleaded not guilty in his first hearing at the Tokyo District Court on Tuesday to allegations that he conspired with Carlos Ghosn, the car firm’s former chairman, to under-report his pay by millions of yen.
My colleague Julian Ryall reports:
“I deny the allegations that have been made by the prosecutors,” Mr Kelly said. “I was not involved in a criminal conspiracy.”
Mr Kelly and Mr Ghosn were both arrested in November 2018 immediately after being summoned to a meeting called by the Nissan board in Japan.
Mr Ghosn was accused of accepting about ¥9bn (£65m) in deferred payments after he left the company to which he was not entitled, while Mr Kelly is accused of helping to arrange the payments. Both men denied the charges, with Mr Kelly claiming that he was working with others at the carmaker to find a “lawful way” to pay Mr Ghosn.
German investor sentiment improves
Sentiment among German investors rose more than expected this month, with gauges of both current conditions and future expectations rising more than expected.
Although optimism for the future has been rising steadily, the measure of current conditions has remained markedly low for some time.
“Experts continue to expect a noticeable recovery of the German economy,” ZEW president Achim Wambach said. “Stalled Brexit talks and rising Covid-19 cases could not dampen the positive mood.
Lawyer to be named new interim chief of competition watchdog
A former City lawyer will become the interim head of the competition watchdog after Lord Tyrie resigned in the summer.
My colleague Ben Gartside reports:
Jonathan Scott, who is already a board member of the Competition and Markets Authority, is expected to become its new chairman on a temporary basis.
He set up the Brussels office of the law firm Herbert Smith and subsequently lead its competition practice for 12 years.
Alok Sharma, the Business Secretary, could confirm the decision as soon as Tuesday.
Mr Scott will replace Lord Tyrie, the former Conservative MP who left the CMA following a stand-off with Andrea Coscelli, its chief executive. The decision was first reported by Sky News.
Next rises after Victoria’s Secret tie-up
Shares in retailer Next have risen after L Brands, owner of Victoria’s Secret, said the companies have agreed to form a joint venture that will acquire most of the lingerie group’s UK business out of administration.
Under the agreement, which will need to be cleared by regulators, the JV (split 51pc/49pc between Next and L Brands) will acquire the “majority” of the Victoria’s Secret UK businesses.
It will operate all of the group’s stores in the UK and Ireland, with the digital business set to be “folded into“ the business from Spring next year.
Lord Wolfson, Next’s chief executive, said:
Next is very pleased at the prospect of working in partnership to expand the Victoria’s Secret brand in the UK and Ireland both in stores and online.
The agreement will protect the jobs of around 500 UK employees.
Shore Capital’s Greg Lawless said the join venture looks like a “sensible bolt-on acquisition” for Next.
IEA cuts oil demand forecast
The International Energy Agency has cut its outlook for 2020 oil demand by 200,000 barrels per day, saying most “easy gains” have already been grabbed,
The Paris-based group said it was cautious about the pace of recovery from the pandemic, warning things have grown “even more fragile” and predicting that heightened inventories will take a while to whittle down.
Brent crude oil has been trading beneath $40 a barrel in London over recent days, its lowest in more than two months.
FirstGroup jumps after update
Shares in transport operator FirstGroup have popped higher after it said its performance since April has been ahead of expectations.
The FTSE 250 group also said it is “encouraged by significant interest from potential buyers” for its US operations, although it said the pandemic has slowed the sale down.
Ahead of its annual general meeting today, FirstGroup said:
Stronger than expected financial performance, with adjusted operating profit and cash from operations ahead of our expectations during the period, driven by better revenue recovery and strong cost control.
It added that it now anticipates a “small adjusted operating profit” for the first half of its financial year, ahead of previous expectations.
Chief executive Matthew Gregory said:
Passengers can be confident that public transport is safe and we are encouraged that activity levels are increasing, especially since the start of the new school year on both sides of the Atlantic…
As we head into the autumn, our priorities are to continue delivering safe, reliable transport services that meet the changing needs of our customers and communities, and to execute the sale of the North American businesses as expediently as possible and in the best interests of all shareholders.
The FTSE 100 is also shaking off a slight rise in the pound, which is being lifted by a tentative ‘risk-on’ mood across global markets. Once again, it’s China’s economic strength that seems to be setting the mood among investors.
FTSE 100 edges higher
The FTSE 100 is outperforming its European peers, lifted by Ocado and London’s listed miners – which are climbing following this morning’s better-than-expected Chinese industrial production data.
Supermarket sales surge begins to slow
Take-home grocery sales in the UK chalked up a fifth consecutive period of double-digit growth, rising 10.8pc year-on-year over the 12 weeks to September 6th, according to data firm Kantar.
Annual growth slowed to 8pc in August, however, as Eat Out to Help Out encouraged restaurant visits and more people returned to pre-Covid routines.
Online sales were 77pc higher year-on-year, marking a slight slowdown as people began to venture out more and many ended shielding.
Kantar’s Fraser McKevitt said:
Grocery growth tailed off in August as the Government’s Eat Out to Help Out scheme got underway and people were encouraged to return to offices and resume normal routines. Diners’ confidence built throughout the month and footfall increased during each week of the scheme, culminating in the final bank holiday Monday when dining out accounted for a two and a half times greater share of consumer spend than the pre-Covid average.
Ocado was the fastest-growing retail over the past 12 weeks, with Co-op also performing strongly, especially in its North of England stores. Iceland continued to benefit from high demand for frozen foods.
Labour market: expert reaction
Paul Dales from Capital Economics said this morning’s labour market figures show the scaling back of Britain’s furlough support has not yet several hurt employment. He wrote:
So it looks as though the overwhelming bulk of the 3m or so workers that may have come off the furlough since June are going back to their jobs rather than into unemployment or inactivity. That probably explains the rebound in the 3myy rate of average earnings growth from -1.2pc in June to -1.0pc in July as lots of those workers will have gone from receiving 80pc of their salaries on the furlough to 100pc.
Samuel Tombs from Pantheon Macroeconomics said “a sharp downturn remains in motion”, saying sampling issues have “disfigured” the Labour Force Survey data which underpins the ONS’s analysis:
The Labour Force Survey measure of employment continues to understate the blow to employment caused by Covid-19. The ONS believes the switch to interviewing households by phone, instead of in-person, has meant that the sample has become unrepresentative of the population. For instance, the proportion of home-owners in recent samples has been too high. PAYE data continue to give the best steer on the state of the labour demand, though furloughed staff still are counted as employed in this measure too.
Payroll employee numbers likely will fall much further in September, when firms must cover 10pc of furloughed staff’s pre-Covid wages, and then in October, when firms will have to cover 20pc of pre-Covid wages before the scheme closes at the end of the month. Indeed, the number of people searching on Google for phrases including “redundancy” rocketed to a record high in July, consistent on past form with the official measure of redundancies peaking in September.
Pay remains beneath pre-virus levels
Annual pay growth in July is estimated at –1pc, continuing a trend of pay falling below pre-virus levels. That translates to a 1.8pc drop in real terms, beneath the rate of inflation (so prices are increasing faster than pay).
Pay in real terms remains below pre-financial crisis levels, despite having briefly tipped over that level in December last year.
The ONS said:
For July 2020, average regular pay, before tax and other deductions, for employees in Great Britain was estimated at £512 per week in nominal terms. The figure in real terms (constant 2015 prices) fell to £469 per week in July, after reaching £473 per week in December 2019, with pay in real terms back at the same level as it was in May 2019.
Number of Brits temporarily away from work remained elevated in June
The total number of people who were temporarily away from paid work – include those who had been furloughed – remained elevated during July at 5m.
That’s more than 3m higher than typical levels, with over 2.5m of those being away for three months or more. However, it’s a continued step down from the 9m temporarily away from work in late April.
Ocado says M&S products have proved a hit
Ocado has said that in the two weeks since it launched its joint venture with Marks & Spencer, more customers are buying M&S products than they bought Waitrose goods before the switch.
My colleague Simon Foy reports:
Ocado’s sales jumped by more than 50pc for the three months to the end of August as demand for online grocery shopping remained robust post-lockdown.
Revenues climbed 52pc to £587.3m for the 13 weeks to Aug 30, compared to the same period last year, while the average number of orders Ocado received per week rose by almost 10pc to 345,000.
It said: “The weighting of M&S products in the average Ocado basket is higher than Waitrose prior to the switchover, reflecting positive customer reaction to the addition of M&S to the range.
“Demand for the new range [is] driving both an increase in the number of products in customer baskets and strong forward demand.”
Record hit to youth employment
A closer look at the ONS’s stats reveals young people have taken the heaviest jobs hit from the virus, with employment of 16 to 24-year-olds down by about 150,000 since March. The oldest workers also saw an employment hit.
The ONS said:
Looking more closely at the change in employment over the quarter by age group, those aged 16 to 24 years decreased by 156,000 to 3.63 million (with a record decrease of 146,000 for those aged 18 to 24 years), while those aged 65 years and over decreased by 92,000 to 1.28 million (with a record decrease of 79,000 for women in that age group).
In contrast, there was a combined increase of 236,000 on the quarter for those aged 25 to 64 years to 28.07 million (with a record increase of 67,000 for women in the 25 to 34 years age group).
Job vacancies continue to recover
A recovery in job openings continued in August, pulling the three-month total to 30pc above the nadir between April and June.
That’s a healthy sign for the UK’s labour market, although total vacancies remain well below their pre-pandemic levels, meaning Britons who have lost their job are likely finding it harder to get a new one.
Claimant count continues to rise
The total number of of Britons claiming either Jobskeer’s Allowance or certain forms of Universal Credit (collectively referred to as the claimant count) rose by 73,700 last month – adding to a surge that has occurred since the pandemic first hit.
The total now stands at 2.7m, having more than doubled since the onset of the crisis.
As the ONS notes:
Enhancements to Universal Credit as part of the UK government’s response to the coronavirus mean that an increasing number of people became eligible for unemployment-related benefit support despite still being in work.
Consequently, changes in the Claimant Count will not be wholly because of changes in the number of people who are not in work. We are not able to identify to what extent people who are employed or unemployed have affected the numbers.
Hours worked shows signs of recovery
Total hours worked across the UK pushed slightly higher in July, pulling up the three-month average from the sheer drop it experienced between April and June.
The ONS said:
Over the year, total actual weekly hours worked in the UK decreased by 183.8 million to 866.0 million hours in the three months to July 2020. Over the same period, average actual weekly hours fell by 5.8 hours to 26.3 hours. The accommodation and food service activities sector saw the biggest annual fall in average actual weekly hours, down by 15.4 hours to 13.5 hours per week.
Experimental estimates based on returns for individual weeks suggest that the average number of weekly hours worked started to slowly increase in July.
Unemployment rates finally rises
After months of defying expectations but holding steady, the UK’s unemployment rate finally rose in July, to 4.1pc.
That’s still extremely low by historic standards, and means there will have to be a severe autumn spike to reach the 7.5pc rate predicted by the Bank of England for the end of the year.
The ONS notes:
In the three months to July 2020, UK workers were largely shielded from the adverse effects of the coronavirus pandemic by the job retention schemes.
ONS: Nearly 700,000 jobs lost since March
The latest revised experimental figures from the HMRC< released by the Office for National Statistics, show the UK lost tens of thousands more payrolls during August – taking the total lost since March to just shy of 700,000.
The ONS said:
The latest figures show a fall in payroll employees in recent months. Early estimates for August 2020 from PAYE RTI indicate that the number of payroll employees fell by 2.4pc compared with March 2020. In August, 695,000 fewer people were in paid employment than in March 2020 and 36,000 fewer than in July 2020.
The figures have been revised, so actually that looks a little better than the number in the last release.
Chinese retail sales top 2019 levels for first time
Defying expectations that they would be flat, last month’s Chinese retail sales were up 0.5pc on August 2019’s figures. That’s the first time the measure has topped last year’s levels, amid virus-depressed demand.
Industrial production continued its steady acceleration after a dip early this year.
Deutsche Bank’s analysts said the figures underscore “a rebound in economic activity due to fiscal stimulus and strong exports”.
Agenda: Jobs report set for release
Good morning. All eyes are on the UK’s latest labour market report, due out at 7am. As with most recent release, the headline figures on the change in payrolls to mid-August will be closely watched, although the lagging measure of unemployment (which will cover July) is also expected to finally tick upwards.
Elsewhere this morning, Chinese imports data disappointed, signalling the country’s consumer demand rebound may be slowing. Retail sales picked up, however, and industrial production also beat estimates.
5 things to start your day
1) Emirates to swing the axe in UK as London City culls staff. Dubai-based Emirates is scrambling to cut costs in a bid to survive the pandemic’s economic fallout
2) UBS eyes blockbuster tie-up with rival Credit Suisse. The deal would be the biggest bank merger since the financial crisis, creating a business with over £4 trillion worth of assets.
3) BP can thrive without oil, boss vows. Boss concedes that many investors doubt that the oil giant can turn itself into a renewables champion.
4) Luxury holiday park boss could be made bankrupt over debts. Deloitte is pursuing Dream Lodge founder Simon Moir over £414,000 of unpaid debts.
5) G4S rejects £3bn takeover bid. Canada’s GardaWorld reveals offer that could result in a hostile bid for G4S after management rejects its overtures.
What happened overnight
Asian equities extended gains on Tuesday and the dollar slipped, with investor sentiment supported by Chinese data and optimism about Covid vaccines.
Chinese blue chips added 0.4pc, buoyed by data showing China’s industrial output rose 5.6pc in August from a year ago, expanding for a fifth straight month.
MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.3pc, for a fourth straight day of gains.
Japan’s Nikkei shed 0.8pc, while South Korean shares rose 0.3pc and Australia’s S&P/ASX 200 index added 0.1pc.
E-Mini futures for the S&P 500 slipped 0.3pc, while EUROSTOXX 50 futures eased 0.2pc.
So far this year, gains in Asia have been led by technology stocks.
Coming up today
Unemployment, earnings (UK), industrial production (US and China), retail sales (China), ZEW sentiment surveys (Germany)