OK, time to wrap up.

The Bank of England’s chief economist has outlined how digital currency could allow interest rates to be cut below zero. Andy Haldane told a conference in London that the move would mitigate, or eliminate, the zero lower bound -- meaning savers could one day be charged on their deposits.

UK house prices have risen to a new alltime high. Prices jumped 4.7% in the last year, partly driven by demand for detached properties from families trying to move to larger homes.

Estate agents and economists said the current stamp duty holiday was fuelling demand, and possibly meaning some buyers are overpaying in the scramble.

The US housing market also looks robust, with house starts rising by 4.9% last month.

But with the wider economy struggling, the boss of JP Morgan has criticised Congress for not agreeing new stimulus measures.

Inflation has been in focus, with the UK’s consumer prices index rising by 0.7% per year in October. Rising clothing, food and second-hand car prices were all responsible, although experts warned that the current lockdown restrictions could pull inflation lower this month.

Inflation also jumped in Canada, while the eurozone remains bogged in deflation.

Stock markets have crept a little higher, after Pfizer/BioNTech’s Covid-19 vaccine proved even more effective than first thought.

US regulators have given Boeing permission for its 737 Max to fly again, 20 months after the manufacturer’s bestselling plane was grounded following two fatal crashes caused by design flaws.

UK property company British Land written down the value of its portfolio by almost £1bn, after the pandemic hit its retail operations.

But Halfords has done better, with profits doubling amid demand for new bicycles.

Goodnight. GW

A quieter day in the European markets has ended, with the main indices a little higher.

The FTSE 100 has closed nearly 20 points higher, or 0.3%, at 6385 points, back towards Monday’s five-month high.

Insurance group RSA led the risers, up 4.6% after agreeing to a £7.2bn takeover from Canadian insurer Intact Financial Corporation and the Scandinavian insurer Tryg.

France’s CAC and Germany’s DAX both gained around 0.5%.

David Madden of CMC Markets says today’s vaccine news lifted sentiment in the markets a little, although obviously not as dramatically as last week.

Stocks are higher as the vaccine race is heating up now that Pfizer and BioNTech confirmed their potential Covid-19 vaccine is 95% effective.

Early last week, the companies announced that it was more than 90% effective so good progress has been made in the short time period. On Monday, Moderna Inc said their hopeful coronavirus vaccine is 94.5% effective so things are neck and neck in the drug race. The optimistic news surrounding a possible vaccine has been doing the rounds for a while now and to a certain extent, it is losing its impact on the markets.

One could argue the news is now less potent. Broadly, speaking the pub sector and airlines stocks are up on the session – the industries have a lot to gain from a vaccine being approved and widely distributed. TUI and Ryanair are the best performers of the airlines, while JD Wetherspoon has gained the most ground in the hospitability sector. Domestic transport stocks are mixed, and FirstGroup is up slightly.

The boss of JP Morgan has blasted Congress for failing to agree a new stimulus deal this autumn, CNBC reports.

Jamie Dimon said the “childish” wrangling over the size of the package risks hurting the economy, as there’s less chance of a good economic outcome without more help.

CNBC has the details:

JPMorgan Chase CEO Jamie Dimon criticized lawmakers for a months-long deadlock over a second round of coronavirus relief to help unemployed Americans and struggling businesses as the pandemic deepens.

“I know now we have this big debate. Is it $2.2 trillion, $1.5 trillion?” Dimon said Wednesday, referring to competing visions for a relief bill from Democrats and Republicans, at the New York Times’ Dealbook conference.

“You gotta be kidding me,” Dimon told Andrew Ross Sorkin. “I mean just split the baby and move on. This is childish behavior on the part of our politicians.”

The Bank of England’s chief economist, Andy Haldane, hailed the recent Covid-19 vaccine trial results in a speech to TheCityUK this morning.

Speaking before Pfizer’s latest update, Haldane told delegates that:

We all live in hope of the three Rs that are the theme of the conference - Recovery, Rebalancing and Revitalisation. With the recent positive news about vaccines, that hope is now justified.

But Haldane also pointed to the cost of the pandemic, saying it will leave lasting financial and psychological scars and a massive loss of lives and livelihoods.

During the speech, Haldane also covered digital currencies, pointing out that they would allow central bankers to cut interest rates even lower -- even below zero, potentially, so that savers would be charged negative interest rates.

He says:

At root, the ZLB [zero lower bound] arises from a technological constraint on the ability to pay or receive interest on physical cash, whether positive or negative.

In principle, a widely-used digital currency could mitigate, if not eliminate, that technological constraint by enabling interest rates to be levied on retail monetary assets.

Haldane argued that there could be significant benefits to removing the current constraints, through a ‘structural shift’ in the monetary regime.

[To be clear, Haldane is talking long-term here. For this to happen, the BoE would need to have issued a digital currency, and the population to have largely moved to digital cash rather than bank notes.

Otherwise savers could simply take their cash out and hide it under the bed - although there are various theoretical ideas, such as ‘time-limited notes’ which expire on a certain date which could thwart that.].

Anyway, here’s the key section of Haldane’s speech:

On the monetary policy side, one of the most pressing issues for monetary policymakers today is the zero (or close to zero) lower bound (ZLB) on interest rates. At root, the ZLB arises from a technological constraint on the ability to pay or receive interest on physical cash, whether positive or negative. In principle, a widely-used digital currency could mitigate, if not eliminate, that technological constraint by enabling interest rates to be levied on retail monetary assets. How far it is able to do so will depend on the supply of physical cash to the public, as well as any impact of the new regime on the financial system.

The potential macro-economic benefits of easing the ZLB constraint appear to be significant. Studies prior to the global financial crisis suggested the ZLB would bind infrequently and have only a modest macroeconomic cost. With global real interest rates having since fallen, recent work suggests the ZLB could bind much more frequently, between 20 and 40% of the time. That, in turn, could lead to significant shortfalls in average output relative to potential (of around 2%) and average inflation relative to target (of as much as 2pp).

The macro-economic costs of the ZLB constraint require thorough exploration. To be clear, what I am discussing here is a structural shift in the monetary regime and carries no implications for the costs and benefits of negative interest rates in the shorter-term. And these costs can of course be mitigated in others ways, including through unconventional monetary policy tools and activist fiscal policy.

Nonetheless, I believe it is important these potentially large macro-economic benefits of a digital currency are explored when evaluating the case for a new monetary order. So far, that has not been the case.

It’s a timely comment, with bitcoin hitting a three-year high of $18,000 earlier today.

During the speech, Haldane also cited cryptocurrencies as an innovation in payments technologies - alongside with minted coins, bank notes, and ATM machines.

It is just over a decade ago that the late Paul Volcker famously remarked: “the ATM has been the only useful innovation in banking for the past 20 years”. Enfield in North London – the home of the first ATM – might be surprised to hear it is the cradle of modern-day financial innovation.

Here’s the full speech.

US regulators have approved Boeing’s 737 Max to fly once more, almost 20 months after the manufacturer’s bestselling plane was grounded following two fatal crashes caused by design flaws.

My colleague Jasper Jolly explains:

The Federal Aviation Administration (FAA) has rescinded an order grounding the aircraft, in a move that could allow the planes to fly again before the end of the year.

The regulator still must approve new training programmes for pilots before the 737 Max will be able to fly again.

However, the confirmation from the regulator that it deems the plane safe is the key step towards allowing the planes back in the air.

More here:

Lloyds Banking Group is pushing ahead with 56 branch closures that were initially paused during the first wave of the pandemic.

The move - first announced in January - affects Lloyds, Halifax and Bank of Scotland branches and will result in 160 job cuts by April next year. Lloyds has now confirmed over 2,000 job cuts since the start of September, when it decided to move ahead with restructuring plans that were put on hold at the start of the Covid crisis.

Union representatives from Unite opposed the cuts, saying:

“The pandemic has highlighted the vital role our local bank branches play in providing an essential service to the community. These closures don’t just cut a vital service from communities but also force customers to travel further to stand in larger crowds of customers queuing outside busier branches.”

While the job cuts keep mounting across the UK, demand for bank services has actually grown due to the launch of government backed loan programmes. However, with incomes increasingly squeezed by record-low interest rates and more customers using online banking during the pandemic, lenders have felt justified in restructuring their back offices and cutting more branches to save cash.

A Lloyds Banking Group spokesperson said:

“In January this year we announced that these branches would be closing due to a decline in use. We paused these closures due to the Covid-19 pandemic and, after careful consideration, these planned closures will take place in March and April 2021.”

Prices of detached houses are rising faster than for smaller houses and flats, the Office for National Statistics’ report shows.

That’s another sign that the move towards remote working has prompted families to look for a larger property (with more rooms to Zoom from), and perhaps leaving the city for somewhere more rural having proved they can work from home.

The ONS says the average price of detached properties increased by 6.2% in the year to September, in comparison to flats and maisonettes which rose by 2.0% over the same period.

Mark Harris, chief executive of mortgage broker SPF Private Clients, explains:

‘The southwest performed best out of all the regions, clearly illustrating the impact of lockdown. More people are considering moving further out, perhaps because they don’t have to be in the capital every day for work, or are looking at holiday homes to take advantage of the staycation boom.

Detached homes have the most space and bigger gardens than say terraced homes, thereby fuelling their popularity among those who can afford them.

UK house prices have hit a record high, as the move towards homeworking and the stamp duty holiday continue to drive demand.

The Office for National Statistics reports that prices jumped by 4.7% over the 12 months to September, up from 3.0% per year in August.

That’s the fastest house price inflation in nearly three years, lifting prices to a new high of £245,000.

Prices rose fastest in England, the ONS reports:

• UK average house prices increased by 4.7% over the year to September 2020, up from 3.0% in August 2020, to stand at a record high of £245,000.
  
  
• Average house prices increased over the year in England to £262,000 (4.9%), Wales to £171,000 (3.8%), Scotland to £162,000 (4.3%) and Northern Ireland to £143,000 (2.4%).
  
  
• London’s average house prices hit a record high of £496,000 in September 2020.

The ONS says:

Recent price increases may reflect a range of factors including pent-up demand, some possible changes in housing preferences since the pandemic and a response to the changes made to property transaction taxes across the nations.

The government is currently operating a temporary stamp duty holiday for residential properties in England and Northern Ireland worth up to £500,000, until 31 March 2021, to encourage home transactions (and thus more demand for builders, painters, home furnishings, etc)

At British Land, one of Britain’s biggest property companies, the pandemic has wiped nearly £1bn off the value of its property portfolio, which is now worth £11.2bn.

Its retail assets have declined nearly 15% in value while its offices have lost 3.1%. The company, which owns the Meadowhall shopping centre in Sheffield and Drake Circus in Plymouth, has offloaded £456m of retail assets since April. It collected only 62% of shop rent due by the end of September, as a further 16 retailers fell into administration or opted for a CVA, an insolvency procedure.

As a result, British Land’s underlying profits before tax fell 30% to £107m in the six months to 30 September from a year ago, while its after-tax loss widened to £730m from £404m.

The pandemic has changed the way we work and shop, with many people now working from home.

Simon Carter, until now the firm’s finance chief who takes over from Chris Grigg as chief executive today, says:

“There is a clear preference from shoppers and retailers for out of town, open air retail parks.”

(Almost half the company’s retail assets are in out of town retail parks, which shoppers drive to, with larger shops where it is easier to avoid contact with other people.)

Like its rival Landsec, British Land is betting on a revival in the office market, and said overseas investors, mainly from Europe, were still looking to buy prime London offices. It will focus on building mixed use campuses, such as the huge 53-acre project at Canada Water in east London, with up to 3,000 new homes alongside offices and shops.

Susannah Streeter, senior analyst at Hargreaves Lansdown, says:

“British Land itself is trying to get its house in order, to prepare for potentially long term changes to the way we use office and retail space in the future.

Trying to second guess the extent to which pandemic habits will stick won’t be easy but it is becoming clear office space and how we shop is undergoing a major rethink.”

Here’s our economics correspondent Richard Partington on the pick-up in inflation last month:

UK inflation rose by more than expected in October, fuelled by an increase in clothing prices.

The Office for National Statistics (ONS) said the consumer prices index (CPI) rose to 0.7% in October from 0.5% a month earlier as clothing prices increased, returning to a more normal seasonal pattern after the disruption this year. City economists had forecast an inflation rate of 0.6% for October.

After steep discounting during the first lockdown as the rapid spread of Covid-19 forced consumers away from the shops, the ONS said prices rose in October at a similar rate to last year.

The cost of food also increased slightly last month, while the price of buying computer games and secondhand cars also rose amid increased demand, with people looking to reduce their reliance on public transport during the pandemic.....

More here:

Here’s my colleague Mark Sweney on the takeover of insurance group RSA:

RSA, the 300-year old insurer that owns the More Than brand, has agreed a £7.2bn takeover from two overseas insurers that will result in the breakup of one of the FTSE 100’s oldest companies.

The board of the London-headquartered company has accepted an all-cash offer from the Canadian insurer Intact Financial Corporation and the Nordic insurer Tryg.

Under the terms of the deal, Tryg will pay £4.2bn and take over RSA’s Swedish and Norwegian businesses, and Intact will pay £3bn to buy RSA’s Canadian, UK and Ireland and international operations. The two companies will co-own RSA’s Danish business. RSA shareholders will also receive a preannounced interim dividend of 8p per share, worth about £82m.

The surge in cycling during the pandemic has helped UK retailer Halfords to double its profits.

Halfords has reported that pre-tax profits in the six months to 2 October 2020 jumped by 101.5% to £55.4m, up from £27.5m, as more people turned to bikes.

Like-for-like sales at its cycling division grew by +54.4%, including a 184% surge in e-mobility (electric bikes and scooters).

Interest in cycling has boomed this year; people have been taking it up as a leisure activity during the spring lockdown, or preferring to cycle to work rather than take public transport.

The current Covid-19 lockdown has also encouraged interest in cycling, Halfords says:

Since the 5th of November we have seen some impact on trading as the second national lockdown came into force. Cycling has continued to grow; we saw an immediate upturn in our Mobile Expert business; and we have seen another shift towards our digital and home delivery channels.

However, sales of motoring products have been impacted, with Government data showing car traffic last week at 70% of pre-Covid-19 levels

Halfords motoring division has had a tough time, with revenues down 23.7% in the first half of the financial year due to the drop in driving.

However, motoring revenues did rise by 3.1% in the second quarter (July-September) after the spring lockdown eased and journeys increased -- meaning more demand for staples like batteries, windscreen wiper blades and light bulbs.

Staycation products, such as roof bars and boxes, grew +28.6% over the same period as customers chose to holiday within the UK, Halfords adds.

CEO Graham Stapleton, says Halfords is making a “substantial investment” in training, including for electric vehicle servicing, and expanding its e-bike and scooter servicing too.

As a sign of our confidence in the long-term prospects of our motoring business, and in order to meet the growing demand for our services in this area, we are in the process of recruiting to fill a wide range of service-oriented roles across our stores, Autocentres and fleet of Halfords Mobile Expert vans.

We are also making a substantial investment in further training for existing colleagues, including in the rapidly growing area of electric vehicle servicing as we work to fill the skills gap that exists in the UK. We will be training 100 more electric car technicians next year, bringing the total to 470.

In addition, we will be growing the number of e-bike and e-scooter servicers in our stores from 400 to over 1,800. This means that, by April, each of Halfords’ garages will have at least one electric car technician, with electric bike and scooter servicers in every store.

A timely move, with the UK planning to ban the sale of new petrol and diesel cars and vans in 2030 (although hybrids can still be sold until 2035 under Boris Johnson’s plan).

Several economists are predicting that the current Covid-19 restrictions will drag inflation down again in the short term.

Here’s Suren Thiru, head of economics at the British Chambers of Commerce:

Debapratim De, senior economist at Deloitte, predicts that weak wage growth and rising unemployment will keep inflation subdued:

“October’s inflation figures have come in slightly above expectations. Yet they reflect a disinflationary environment, given the current backdrop of weak wage growth, rising unemployment and abundant spare capacity.

“Inflation is likely to remain subdued until the economy regains most of the lost activity due to the pandemic.”

Tom Stevenson, investment director for personal investing at Fidelity International, points out that a vaccine rollout should help the economy pick up:

“Inflation crept up to 0.7% in October on the back of slightly higher food. While prices are on an upwards path, rises are likely to be subdued for a while longer. Covid infections are still increasing, large swathes of the UK are under strict lockdown rules, restricting opportunities to spend, and unemployment is climbing. This is not a recipe for inflation reaching its 2% target any time soon.

“Further out, however, there is light at the end of the tunnel in the form of a potential vaccine. Re-opening the economy will rekindle animal spirits. The widely-discussed shift to negative interest rates looks less likely now and this is good news for investors. The Bank of England has increased its quantitative easing programme to encourage consumer spending and investment and it should now keep its powder dry.”

Despite rising to 0.7% last month, UK inflation is still some way below the 2% target:

While this chart shows how clothing and food had the biggest upward contribution to the cost of living last month:

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

Britain’s inflation rate has nudged higher, lifted by rising clothing prices, food, and second-hand cars.

Figures released by the Office for National Statistics this morning show that the Consumer Prices Index rose to 0.7% in October, up from 0.5% in September. That’s the highest in three months, after the CPI fell to just 0.2% in August.

Economists had expected a smaller rise, to 0.6%.

Here’s the details:

• Clothing prices overall rose by 2.8% between September and October 2020, compared with a smaller increase of 0.9% between the same two months a year ago.

• Food prices....rose by 0.1% between September and October 2020, compared with a fall of 0.6% between the same two months a year ago. The largest upward contributions came from vegetables (including potatoes and tubers), and fruit.

Most of the upward contribution to clothes prices came from women’s clothing, the ONS says, with further smaller upward contributions from men’s and children’s wear.

The ONS’s deputy national statistician Jonathan Athow explains:

“The rate of inflation increased slightly as clothing prices grew, returning to their normal seasonal pattern after the disruption this year.”

“The cost of food also nudged up, while second-hand cars and computer games also all saw price rises. These were partially offset by falls in the cost of energy and holidays.

Elsewhere, European stock markets are expected to be subdued as investors ponder rising Covid-19 case growth and tighter restrictions.

Overnight, coronavirus cases in Tokyo have hit a record of 493, and South Australia has announced a six-day lockdown.

Bitcoin, meanwhile, remains on a tear - hitting a new three-year high of $18,000 overnight which puts its record high in sight...

The agenda

• 7am GMT: UK inflation report for October
• 10am GMT: eurozone inflation report for October
  
• 10.30am GMT: Bank of England chief economist Andy Haldane speaks at The CityUK’s National Conference 2020
  
• Noon GMT: US weekly mortgage approvals
  
• 1.30pm GMT: US housing starts and building permits for October
  
• 3.30pm GMT: EIA weekly US oil stocks