Time for a recap

Stock markets have surged across the globe today after strong data from China lifted hopes for the global economy.

Profits at Chinese industrial companies jumped by 19% in August, the fourth straight month of gains. The figures suggest that China’s economy is continuing to recover from the Covid-19 pandemic, with demand picking up at home and abroad.

The news sparked a rally in Asia, and helped European stocks to rally by over 2% today - in their best session since June (a day after the worst session since June!).

Wall Street is also higher, with the Dow currently up 492 points or 1.8% at 27,666.

A deputy governor at the Bank of England has indicated that he doesn’t believe interest rates should be cut below zero.

Sir Dave Ramsden’s comments helped to send the pound sharply higher today, with sterling up 1% against the US dollar, and 0.7% higher against the euro.

The pound also benefitted from hopes of a Brexit deal, with crunch talks between the UK and EU resuming this week.

In other news...

• ECB president Christine Lagarde has warned that the eurozone recovery is fragile, so politicians need to provide job retention schemes and loan guarantees
  
  
• Uber has been granted a further 18-month licence in London after an appeal found it was a “fit and proper” company to run private hire car services.
  
  
• The owner of Pizza Hut restaurants in the UK is pressing on with plans to shut 29 sites, putting 450 jobs at risk
  
  
• Caesars, the US gambling firm, says it is in “advanced discussions” concerning a possible cash offer for William Hill
  
  
• Budget supermarket chain Aldi is creating 4,000 UK jobs...
  
  
• .. as the race to takeover rival ASDA speeds up

Goodnight. GW

Boom! European stock markets have posted very strong gains, as a burst of optimism sends share up across the globe.

The Stoxx 600 index of European listed companies has closed 2.3% higher tonight, as it made a strong recovery from last week’s losses.

Germany’s DAX led the rally, surging 3.2%, with France’s CAC gaining over 2.3%.

Every sector gained ground, led by banks and consumer cyclical firms. Hearing aid manufacturer Sonovo surged 13%, and steelmaker ArcelorMittal gained 11%.

In London, the FTSE 100 index ended the day 85 points higher at 5927, a one-week closing high. Banks including HSBC, Natwest and Lloyds were among the risers, on relief that the Bank of England may not impose negative interest rates, along with property firm Land Securities.

Fawad Razaqzada, analyst at ThinkMarkets, reckons investors appear to be warming towards equities and other risk assets again.

After all, ‘nothing has fundamentally changed so why not buy everything at slightly discounted prices again after the recent sell-off,’ is a question the bulls will be asking themselves. Central bankers have made it crystal clear that interest rates will remain very low for a long time to come and will be there to provide further support should it be required.

The relatively low COVID-linked deaths mean investors are not showing too much concern towards rising virus cases. Instead, they remain optimistic over the potential approval of a vaccine soon, which together with ongoing central bank support will probably help accelerate the recovery.

What’s more, we have had data showing profits at industrial companies in China grew for a fourth consecutive month in August, underscoring economic recovery signs. Sentiment has also been supported, among other things, by hopes that the UK and EU officials will make progress as a key week of Brexit talks begins. This may help explain why the pound was clearly the biggest riser among the major currencies this morning.

The head of the European Central Bank, Christine Lagarde, has warned that the eurozone economy is weak - and needs fiscal support.

Testifying to the Committee on Economic and Monetary Affairs of the European Parliament, Lagarde warns that the recovery is highly dependent on the Covid-19 pandemic - so government packages to protect loans and jobs are vital.

Lagarde explains:

The impact of the coronavirus (COVID-19) pandemic is still being felt across the euro area. Businesses are facing difficulties, people are losing their jobs, and prospects about the future remain uncertain.

While euro area economic activity rebounded in the third quarter, the recovery remains incomplete, uncertain and uneven. Consumer spending has resumed significantly, but consumers remain cautious owing to anxiety about their job and income prospects.

Similarly, business investment has been picking up, but weaker demand and elevated uncertainty continue to weigh on firms’ investment plans.

In this context, job retention schemes and national guarantees on bank loans remain critically important factors in reducing uncertainty and softening the impact of the pandemic.

The public health crisis will “continue to weigh on economic activity and poses downside risks to the economic outlook”, Lagarde adds.

The New York stock exchange has opened sharply higher, as investors try to put recent losses behind them.

The Dow Jones industrial average has jumped by 376 points, or 1.4%, to 27,550.

The broader S&P 500 is up 48 points or 1.5% at 3,346, while the tech-focused Nasdaq is up 159 points or 1.4% at 11,072.

This follows some choppy weeks - with the Dow falling over 4% during the last four weeks.

The jump in Chinese industrial profits overnight may have lifted the mood on Wall Street. There’s also renewed hope that Congress might agree a new package to protect the US economy from the pandemic.

Marios Hadjikyriacos of XM explains:

The recovery in stocks likely comes down to hopes that a US stimulus deal isn’t entirely dead after all. The market selloff has evidently put enough pressure on politicians to water down their demands, with the Democrats unveiling a new proposal of $2.4 trillion and keeping the door open for an even smaller package of $2.2 trillion.

Brexit deal optimism has lifted the pound to a three-week high against the euro, up one euro cent at €1.105.

Some traders are hopeful that the crunch talks between UK and EU negotiators this week could lead to a breakthrough.

John Hardy of Saxo Bank says there is a “more positive tone” surrounding the negotiations, but points out there are still serious hurdles to overcome:

The Brexit talks are set to get more formal this week and starting tomorrow, with this round seen as a last dash effort if any agreement is to be made on Boris Johnson’s timeline aiming for mid-October agreement.

Particular focus from the EU side will apparently be on how any trade deal will be enforced after the recently passed Brexit bill could walk back key portions of the Withdrawal Agreement, which effectively stipulated a customs border across the Irish Sea (separating Northern Ireland from the rest of the UK.)

Brad Bechtel of Jefferies is somewhat sceptical, though, telling clients:

There were some positive articles in the press about the prospects for Brexit.

The 9th week of negotiation begins today and there were articles indicating that both sides seem to be getting closer which will allow them to enter the ‘tunnel’ or final stage of talks for an agreement. I’ll believe it when I see it but for now its helping the GBP.

Back in the markets, the pound is surging even higher.

Sterling is now up 1.7 cents against the US dollar today to $1.29, a new one-week high.

Brexit optimism is one factor. Another is that deputy Bank of England governor Dave Ramsden has dampened suggestions the UK could impose negative interest rates.

Ramsden told the Society of Professional Economists that he didn’t believe interest rates could be cut below their current record low, saying:

“For me, I see the effective lower bound still at 0.1 which is where Bank Rate is at present.

Ramsden added, though, that the BoE had a duty to examine whether negative rates could play a role in the recovery.

This is a hot issue at the Bank. Over the weekend, BoE rate setter Silvana Tenreyro said there are “encouraging signs” that negative interest rates could boost the struggling economy.

She told the Sunday Telegraph:

“We have been discussing our toolkit in recent months, including how effective negative rates might be in the current context.

The evidence has been encouraging.”

Here’s my colleague Gwyn Topham on Uber’s London licence ruling:

Uber has been granted the right to a fresh licence in London after an appeal found it was a “fit and proper” firm to run private hire car services.

Westminster magistrates court ruled in favour of Uber almost a year after Transport for London refused the ride-hailing firm a licence extension over safety concerns.

The deputy chief magistrate Tan Ikram said he had “sufficient confidence that Uber London Ltd no longer poses a risk to public safety … despite historical failings,” after hearing three days of arguments this month.

He said Uber had tightened up review processes to tackle document and insurance fraud and it now “seems to be at the forefront of tackling an industry-wide challenge”.

You can read the Uber ruling online, here.

In it, senior district judge Tanweer Ikram says Uber has taken steps to improve its operations in London and reduce regulatory breaches, so deserves to have its London licence handed back.

He says:

ULL [Uber London Limited] does not have a perfect record but it has been an improving picture. The test as to whether ULL are a ‘fit and proper person’ does not require perfection. I am satisfied that they are doing what a reasonable business in their sector could be expected to do, perhaps even more.

But he concludes by suggesting that Uber could face certain (undefined) conditions.....

Despite their historical failings, I find them, now, to be a fit and proper person to hold a London PHV operator’s licence.

I do, however, wish to hear from the advocates on conditions and on my determination as to the length of a licence.

Taxi app operator Uber is celebrating this morning, after winning back its licence to operate in London.

A judge at Westminster Magistrates court has just decided that Uber should be allowed to keep operate, despite its historic failings including allowing drivers with fake IDs to conduct thousands of journeys.

Reuters has the details:

Uber has won a legal bid to restore its London operating licence, a judge decided on Monday after the city’s transport regulator stripped it from the taxi app over safety concerns.

Transport for London refused to grant the Silicon Valley-based company a new licence in 2019 due to what it called a “pattern of failures” and Uber argued it has since assuaged concerns over insurance verification and driver identification.

Uber has still been running in London on a provisional licence.

The race to take over UK betting group William Hill has moved forwards this morning.

Caesars, the US gambling firm, says it is in “advanced discussions” concerning a possible cash offer for William Hill, which runs high street bookmakers shops and online betting services.

Tom Reeg, CEO of Caesars, told the City:

“The opportunity to combine our land based-casinos, sports betting and online gaming in the US is a truly exciting prospect. William Hill’s sports betting expertise will complement Caesars’ current offering, enabling the combined group to better serve our customers in the fast growing US sports betting and online market.

This follows the news on Friday that Caesars and private equity firm, Apollo Management International were both considering a bid.

That sent William Hill’s shares soaring 40% on Friday, hitting 312p for the first time in over two years. Caesars and William Hill are already partners on sports betting in the US, and there’s been rising speculation that they could combine their operations in some way.

However... traders may have got over-excited last week. Caesars says today it is considering offering 272p per share. William Hill’s shares have now fallen back to that level, a drop of 12% today.

Budget supermarket chain Aldi is bucking the trend of rising job losses in the UK, by unveiling plans to create thousands more positions across the country.

My colleague Julia Kollewe explains:

Aldi is to create another 4,000 jobs and open 100 new stores as part of a £1.3bn investment drive in the UK.

The new jobs are on top of 3,000 permanent roles the discount supermarket chain has created this year after grocery sales surged during the coronavirus pandemic, while many other businesses have laid off staff.

The German retailer is targeting 1,200 stores in the UK by 2025. Aldi is Britain’s fifth-largest grocer with 894 stores and more than 36,000 staff. It is also upgrading more than 100 existing shops, as well as expanding its warehouses.

Sterling has risen against other major currencies this morning, as a crucial week of Brexit deal talks begins.

The pound has hit its highest level against the euro in over a week, at €1.1003, and is also up 0.5% against the US dollar at $1.28.

Formal negotiations on the post-Brexit UK-EU trade deal resume tomorrow, with top negotiators Michel Barnier and David Frost meeting on Friday. Cabinet Office minister Michael Gove is heading to Brussels today for talks with EC vice president Maros Sefcovic for talks.

Given the disruption caused by Covid-19, both sides are under pressure to reach an agreement - ideally in time for an EC council meeting in the middle of October (Boris Johnson’s imposed deadline).

Most UK businesses have been unable to prepare for restrictions on EU trade, due to the pandemic, and are desperate for a deal that avoids chaos at the UK border.

The prospect of queues of 7,000 lorries snaking across Kent does not appeal to CEOs already trying to cope with the latest rules on Covid-19.

Mohit Kumar of Jefferies says:

The last scheduled talks between the UK and Europe start this week and if there is to be an agreement by 15^th October, then positive breakthrough should happen before end of the week.

We are hopeful that a last minute deal would be reached, but the negotiations have become complicated following the recent UK Internal Markets bill, which is likely in breach of international law.

Drinks firm Diageo is also rallying, after reporting that its outlook has improved.

Diageo, which make Johnnie Walker and Talisker whisky, Smirnoff vodka, Tanqueray and Gordon’s gin and Guinness stout, has seen stronger sales in America, Europe, and China.

CEO Ivan Menezes told the City:

Our US business is performing strongly and ahead of our expectations, reflecting resilient consumer demand and the spirits category continuing to gain share within the total beverage alcohol market. Increased retailer confidence is resulting in some re-stocking in the off-trade channel. The on-trade channel is now open in all states, with some capacity restrictions.

In Europe, off-trade demand remains robust and the on-trade channel has largely re-opened with the easing of lockdown measures in most countries, although the risk of additional restrictions remains where infection rates are worsening. In China, the on-trade channel continues to recover, although larger banqueting occasions are returning more slowly.

Diageo shares have jumped by 5.5% to £26.60, a two-week high.

Britain’s FTSE 100 has opened 1.3% higher, gaining 78 points to 5921.

HSBC is the top risers, surging by 10% at the open after Chinese insurance group Ping An increased its stake in the banking giant. HSBC’s shares hit a 25-year low last week, amid worries that US-China relations were worsening.

Other European markets have also opened higher, with Germany’s DAX gaining 1.7% and France’s CAC up 1.4%.

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

There’s an autumnal chill in the air this morning, but investors are warming to equities again after an encouraging jump in Chinese factory earnings.

Profits across China’s manufacturing companies have grown for the fourth consecutive month, government figures released over the weekend show. In August alone they jumped 19.1% year-on-year, as the world’s second-largest economy continued to recover from the shock of the Covid-19 pandemic.

This means that industrial profits so far this year are only 4.4% lower than in January-August 2019 -- quite a recovery, given the turmoil in the global economy.

Raw material producers, equipment makers and electrical manufacturers all posted particularly solid jumps in profits

The figures suggest that China’s recovery gained momentum over the summer, as Beijing’s stimulus efforts kick in.

This is a welcome sign for the markets, amid fears that Europe’s recovery could fizzle out in the next three months as rising Covid-19 cases.

Stephen Innes of AXIcorp explains:

Profits of China’s major industrial firms remained on the steady path to recovery in August. Indeed robust earnings in China’s colossal production and operations engines provided further evidence of a strong economic comeback.

The data augers well for the China growth story and the outlook for commodity prices.

So, after losing ground last week, European stock markets are set to rebound this morning. The UK’s FTSE 100 is expected to gain over 1%, having flirted with a four-month low on Friday.

Asia-Pacific indices have already posted gains, with Japan’s Nikkei rising 1%, China’s CSI 300 up 0.6% and South Korea’s KOSPI rallying 1.3%.

Also coming up today

Christine Lagarde, president of the European Central Bank, is testifying to MEPs about the eurozone economy today. She may face questions about the strength of the euro, Europe’s faltering recovery, and the prospect of another ECB stimulus package soon.

The agenda

• 2.45pm BST: ECB chief Christine Lagarde testifies to the the European Parliament’s ECON committee