Kalyeena Makortoff and Jasper Jolly 

UK and German stocks hit record highs on Covid recovery hopes – as it happened

Rolling coverage of the latest economic and financial news as Covid recovery hopes lift stocks
  
  

Digital market boards are seen at the Australian Securities Exchange (ASX).
Global indexes including the Germany Dax and FTSE 250 hit record highs as stimulus hopes push stocks higher. Photograph: Bianca de Marchi/AAP

Closing summary: Stock market gains and vaccine updates

Wall Street stock market indices have now edged up in early trading. With an hour of trading left on Wednesday, the FTSE 100 is still up by 1% at about 6,889 points - on a day that the benchmark index hit pre-pandemic lockdown levels.

Here are some of the top business stories from today:

Meanwhile, in our UK coverage, the European Medicines Agency (EMA) has confirmed that the “overall benefit-risk remains positive” for the Oxford/AstraZeneca jab despite rare cases of blood clots.

However, in the UK adults under 30 should be offered an alternative vaccine instead of the AstraZeneca jab if there is one available in their area and they are healthy and not at high risk of Covid, the government’s vaccination advisory body has said.

You can read all of the details here:

You can also continue to follow our live coverage of the international reaction to the EMA’s findings, as well as updates on coronavirus from around the world.

Thanks for joining us today, and please do come back bright and early tomorrow for more coverage of business, economics and financial markets. JJ

JP Morgan boss: 'Higher costs could force bank to move more out of London'

Dimon also had some uncomfortable words for the UK government: the unfolding Brexit process “cannot possibly be a positive for the United Kingdom’s GDP”, he said.

The JP Morgan boss’s words on Brexit particularly matter because of the US bank’s large presence in London - both its investment bank and its asset management services.

Brexit has added to costs for the bank because it has had to duplicate services. Further difficulties could spell trouble for London employees servicing EU customers, he said:

We may reach a tipping point many years out when it may make sense to move all functions that service Europe out of the United Kingdom and into continental Europe. But London still has the opportunity to adapt and reinvent itself, particularly as the digital landscape continues to revolutionize financial services.

More work will inevitably move from London to European cities such as Paris, Frankfurt, Dublin and Amsterdam, Dimon wrote - although he does not expect many clear winners to emerge. He wrote:

It is clear that, over time, European politicians and regulators will make many understandable demands to move functions into European jurisdictions.

Jamie Dimon: 'Goldilocks moment' is possible

The flat opening on Wall Street in part reflects the lack of a strong narrative driving global markets today, while traders are also waiting for minutes from the Federal Reserve that might give more hints on the path of US interest rates.

The Fed has had to contend with concerns that inflation might jump even as economies stutter back to pre-pandemic life. Yet Jamie Dimon, the boss of investment bank JP Morgan, reckons a “Goldilocks moment” might be coming for the US economy - albeit Goldilocks and at least two bearish signs.

Dimon’s comments, made in an annual letter to shareholders published on Wednesday, comes in at a novella-sized 30,000 words for the brave. But perhaps most interesting from the boss of the world’s most systemically important bank are his thoughts that everything might be about to go just right in the world economy.

Dimon wrote:

It is possible that we will have a Goldilocks moment – fast and sustained growth, inflation that moves up gently (but not too much) and interest rates that rise (but not too much). A booming economy makes managing US debt much easier and makes it much easier for the Fed to reverse QE and begin raising rates – because doing so may cause a little market turmoil, but it will not stop a roaring economy.

And, of course, being who we are, while we are going to hope for the Goldilocks scenario – and we think there is a chance for that to happen – we will anticipate and be prepared for two other negative scenarios: 1) the new Covid-19 variants may be more virulent and resistant to the vaccine, which could obviously reverse a booming economy, damage the equity markets and reduce interest rates as there is a rush to safety, and 2) the increase in inflation may not be temporary and may not be slow, forcing the Fed to raise rates sooner and faster than people expect.

It’s a mixed opening for stocks on Wall Street at the opening bell, despite the relatively positive mood in London.

Here are the opening snaps:

  • S&P 500 UP 0.10 POINTS, OR 0.00 PERCENT, AT 4,074.04
  • NASDAQ DOWN 20.11 POINTS, OR 0.15 PERCENT, AT 13,678.27
  • DOW JONES DOWN 20.58 POINTS, OR 0.06 PERCENT, AT 33,409.66

IMF suggests 'solidarity' taxes for pandemic profit-makers

The International Monetary Fund has suggested that companies that made the biggest profits during the coronavirus pandemic should pay higher taxes.

In an interview with the Financial Times (£), Vitor Gaspar, the IMF’s head of fiscal affairs, said large economies should increase their top rates of income tax temporarily so that companies who made big profits in 2020 should pay more. Gaspar said:

The symbolic impact of this type of contribution is sometimes very important... typically, they occur in a very exceptional circumstances where social solidarity plays a particularly strong role.

The Washington-based organisation had already said that a tax on “excess” corporate profits might be useful to tackle inequalities from the pandemic, but Gaspar’s comments represented a further justification of the proposal.

The IMF also said that governments should increase spending on vaccine programmes in order to benefit their economies - as well as public health. The tax revenue gains on offer for extra vaccine spending are “in excess of $1 trillion” by 2025 for big economies, the IMF said.

Its report said:

Vaccination will, thus, more than pay for itself, providing excellent value for public money invested in ramping up global vaccine production and distribution.

Updated

Some unsurprising figures on air traffic from February, but there are signs of hope as restrictions start to ease.

The International Air Transport Association’s (Iata) director general Willie Wash has said international passenger traffic was down 89% in February, showing no no sign of recovery in the current environment.

However, Walsh said Iata is optimistic that when restrictions are removed, passenger traffic with recovery strongly, according to Reuters.

He adds that the group is focused on working with governments to get airlines moving again.

HSBC moving over 1,200 UK staff to permanent home working

BREAKING: HSBC is moving more than 1,200 UK staff onto permanent home working contracts, according to Reuters, which is citing the Unite union.

The news comes weeks after HSBC confirmed plans to slash its office space around the world by nearly 40% as part of sweeping cost cutting designed to capitalise on new part-office-part-homeworking arrangements after the pandemic.

Staff will then be squeezed into less space though they will also work from home.

HSBC has 66 offices in the UK, at least 10 of which are in London, according to its annual report.

The pub chain Marston’s is among the raft of pubs and restaurants gearing up for outdoor service as Covid restrictions are ease further in England on 12 April.

The company confirmed this morning that it expects to reopen around 70% (around 700) of its managed and franchised pubs in England with outdoor spaces on or around 12 April and,

And if regulations allow, it plans to open the majority of its Scottish and Welsh pubs on 26 April.

If the government’s reopening roadmap stays on track, it expects to reopen the rest of its sites with restricted indoor service on or around 17 May.

“We are assuming a return to normal trading conditions from 21 June,” Marston’s said in a statement.

Marston’s, formerly known as Wolverhampton & Dudley Breweries until a 2007 rebrand, owns about 1,400 pubs, restaurants, cocktail bars and hotels across the UK, including the Pitcher & Piano chain.

Oil prices steady, rising amid stronger growth outlook

Oil prices have been see-sawing throughout the trading session, but seem to have steadied.

Brent crude prices are now trading higher by around 0.8% at $63.28 per barrel, while WTI is up 0.7% at $59.76.

Stephen Innes, chief global markets strategist at axi, says liquidity issues are partly to blame for the see-sawing price moves:

The whipsaw effect remains in the full-blow as liquidity is still low across all markets post-Easter, which may be exaggerating moves and keeping active oil investors sidelined...I still feel oil traders may find comfort-buying dips [in prices] knowing OPEC+ will closely monitor macro conditions via monthly meetings on the flip side of the coin. There should be little doubt the group will step in to put a floor on the oil price, [if] macro conditions deteriorate.

Royal Dutch Shell expects its oil production business to turn a profit this quarter for the first time since the outbreak of Covid-19 pandemic, our energy correspondent Jillian Ambrose writes.

The oil giant told investors that adjusted earnings from its ‘upstream’ oil business would turn positive, after three consecutive quarterly losses, after the company was able to capture higher oil market prices.

The global oil price reached a 21-year low last April after the price of Brent crude dipped below $20 a barrel in reaction to lockdown measures which brought major economies to a standstill, and sapped demand for transport fuels.

Today, oil barrels are trading at just below $63 a barrel, boosting the fortunes of oil producers.

Shell’s trading update included a warning that the deadly winter freeze which swept Texas earlier this year would deal a $200m blow to the group’s adjusted earnings in the first quarter, including a $40m hit to its upsteam oil business.

The storm will take a bigger toll on Shell’s oil products and chemicals business units due to the impact of the cold on its refineries.

Returning to protests at Barclays’ HQ in Canary Wharf, Reuters is reporting that 7 people have been arrested after activists broke windows as part of a protest against the financial sector’s role in the climate crisis.

Activists used hammers and pasted messages on the front of the building, which read “In Case of Climate Emergency, Break Glass.”

The group has accused the bank of “continued investments in activities that are directly contributing to the climate and ecological emergency.”

It is part of wider Money Rebellion protests that aim to use “non-violent direct action, causing damage to property to prevent and draw attention to greater damage.”

Barclays has issued a statement, criticising the property damage and defending the bank’s own climate policy:

Extinction Rebellion are entitled to their view on capitalism and climate change, but we would ask that in expressing that view they stop short of behaviour which involves criminal damage to our facilities and puts people’s safety at risk.

We have made a commitment to align our entire financing portfolio to the goals of the Paris Agreement, with specific targets and transparent reporting, on the way to achieving our ambition to be a net zero bank by 2050, and help accelerate the transition to a low-carbon economy.

Lutz Schuler, the chief executive of Virgin Media, has been appointed to head up the new £31bn company being created by the merger of the cable TV company with O2, the UK’s largest mobile operator, our media business correspondent Mark Sweney writes.

The appointment of Schuler means that Mark Evans, who has run O2’s owner Telefonica UK for the last five years and was also vying for the role of chief executive of the new company, is to leave when the merger completes later this summer.

The merger of the UK businesses owned by Liberty Global and Spanish telecoms group Telefonica is currently being investigated by the Competition and Markets Authority to see whether it could lead to higher prices or reduced quality of service for consumers.

Schuler, who was appointed chief executive of Virgin Media in 2019, was considered to have the edge to land the top job having worked at both Telefonica and Liberty Global in Germany during his two decade career.

The deal will create a new telecoms heavyweight combining the UK’s second-largest broadband network and the largest mobile operator to create a stronger competitor to BT.

Virgin Media has 5.3 million broadband, pay-TV and mobile users, while O2 has 34 million mobile customers.

US futures are pointing to a lacklustre start on Wall Street, with futures for the S&P 500, Dow and Nasdaq all flat, following a lower close on Tuesday.

Bit Neil Wilson, chief market analyst, for Markets.com, said investors will be eyeing the US Fed’s Federal Open Market Committee (FOMC) minutes from their meeting on 17 March.

At that meeting, the Fed revised its growth forecasts but said it didn’t expect any interest rate hikes though to 2023.

FOMC minutes tonight will one to watch. The minutes could help explain how the Fed plans to communicate future policy decisions and shed light on how some policymakers could change their view on monetary policy if inflation and growth does accelerate as expected this summer.

Whilst Jay Powell has kept market speculation at bay, the minutes could allow participants to focus on when the Fed will tighten.

As detailed after the meeting statement, it looks as though the Fed is happy to let the economy run hot and won’t intervene to cool it down.

Even with growth in excess of 6.5% this year, 3% in 2022 and 2% in 2023; it still sees no need to tighten policy within the next almost three years.

This reflects what we know already about the Fed’s view on employment and inflation and the new outcome-based regime focused on absolute employment levels, not on the Philip’s Curve.

It also doesn’t really think the sharp bounce back this year is sustainable, meaning now is not the time to remove the punchbowl. US 10-year yields have retreated to under 1.64% - given the pullback from the recent highs there is a risk the market sees something in the minutes which signals it could tighten policy sooner than it is currently guiding.

Those minutes will be released at 7pm BST.

Saga, the travel and insurance company for the over-50s, has revealed it made a £61m loss before tax last year after the Covid-19 pandemic prevented it from operating its tours and cruises and forced it to refund customers, Joanna Partridge reports.

The company cut more than a third (36%) of its workforce during 2020, as it moved to slash costs, while it also raised £150m from shareholders in September.

The group is ready to restart its tours and cruises as soon as government restrictions allow and reported that there is significant pent-up demand from customers who want to travel.

In January, Saga became the first UK travel operator to tell cruise and holiday customers that they must be fully vaccinated to travel with them this summer.

Total cruise bookings at Saga for 2021-22 and 2022-23 have reached £154m so far, compared with £128m at the the same point last year, which Saga says is a 20% improvement.

Saga Group’s chief executive, Euan Sutherland, said the company was retaining high levels of customers, with a majority of cruise goers opting to receive vouchers rather than a refund, demonstrating their loyalty to the brand:

Looking ahead, while we are mindful of economic headwinds and the potential ongoing impacts of Covid 19, it is clear that there is significant pent-up demand among our customer base, the vast majority of whom have now been vaccinated and are ready to enjoy post-lockdown freedom.

FTSE 100 rises to pre-pandemic lockdown levels

UK stocks are surging ahead, supported further by the composite PMI reading showing the first expansion in three months.

Now the FTSE 100 us up more than 0.8% to around 6880 points.

That pushes the blue chip index to the highest closing level since late February 2020 – weeks before the Covid pandemic hit the UK hard enough to prompt the first national lockdown.

UK business activity revised lower, but PMI signals rebound for March

DATA FLASH: UK business activity for March has been downgraded slightly, compared to flash estimates, but the UK has still logged its first PMI expansion in three months.

The IHS Markit/CIPS composite PMI - again, the combined reading of services and manufacturing business activity – came in at 56.4 for March, compared to 49.6 in February.

It marked the first expansion – a reading above 50 – in three months

However, the final reading was lower than flash estimates of 56.6.

The UK economy contracted by nearly 10% last year, so numbers like these are broadly welcomed, and optimism has been further buoyed by the IMF higher UK growth forecasts.

The IMF said yesterday that the UK is expected to grow by 5.3% in 2021 and by 5.1% in 2022 – an upward revision of 0.8 and 0.1 percentage points respectively since January.

Eurozone PMI: Business activity returns to growth

Time for a PMI round-up.

The final reading of the Eurozone’s composite PMI for March – which combines both manufacturing and service sector activity – showed a surprise increase to 53.2 from 48.8, higher than initial estimates for 52.5.

A reading above 50 indicates expansion.

IHS Markit’s Eurozone services PMI survey was less buoyant, rising to 49.6 last month, compared to 45.7 in February. It was also higher than analysts forecasts for 48.8 – but was still just shy of the 50 mark.

Chris Williamson, chief business economist at IHS Markit, said:

The economy has weathered recent lockdowns far better than many had expected, thanks to resurgent manufacturing growth and signs that social distancing and mobility restrictions are having far less of an impact on service sector businesses than seen this time last year.

We also has initial prints for Spanish and Italian services PMI this morning, and final readings from France and Germany.

Spain, France and Germany all beat analyst expectations.

Deliveroo shares rise 3.5% as retail investors join trading

Deliveroo shares have opened slightly higher on the first day of unconditional trading, as retail investors were allowed to take part for the first time.

Shares are up 3.5% at 289p each, but roughly 25% below the initial IPO price of 390p each.

Overnight, the FT reported that Deliveroo’s underwriters Goldman Sachs ended up picking up around £75m worth of stock following last week’s flopped IPO.

A number of institutional investors refused to take part in Deliveroo’s IPO, with some citing ethical concerns about working conditions for riders who not entitled to earn a minimum wage, holiday or sick pay.

Those concerns are being highlighted in a Deliveroo rider strike today.

Hundreds” of Deliveroo riders from the Independent Workers’ Union of Great Britain (IWGB) are expected to hold socially distanced protests in London, York, Sheffield, Reading and Wolverhampton on Wednesday, the union said.

They’re demanding fairer firing policies, better pay, and health and safety protection for riders.

Updated

FTSE 250 hits fresh all-time high

And another!

The FTSE 250, which returned to pre-pandemic levels on Tuesday, has surpassed the record closing high of 22,108 reached in January 2020.

Intraday highs have been easily surpassed in recent days.

The domestically-focused FTSE 250 has been riding the wave of optimism linked to the UK’s rapid vaccine rollout and the easing of Covid restrictions following a three-month lockdown.

The index is currently up nearly 0.6% at 22,124.

Germany's DAX hits fresh record high

Germany’s DAX has hit a fresh record high of 15,235 points at the start of trading, and the blue chip index is continuing to climb:

European trading subdued as markets open

It’s a lacklustre start across Europe, but stocks are broadly edging higher:

  • FTSE 100 is up 0.3%
  • FTSE 250 is up 0.4%
  • Germany’s DAX is flat
  • France’s CAC is flat
  • Spain’s IBEX is up 0.1%
  • Europe’s Stoxx 600 is down 0.1%

BREAKING: Climate activists have been arrested in London after windows were broken at the Barclays headquarters in Canary Wharf, according to Reuters.

The protests have been launched by activists from Extinction Rebellion, aiming to highlight the role of the financial sector in fuelling the climate crisis.

It comes a week after other activists splashed black dye on the facade of the Bank of England.

There are no details yet about how many protesters are involved. Will bring you more details as we get them.

Updated

Introduction: Stocks hovering near record highs

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

European indexes including Germany’s DAX and the FTSE 250 are hovering near record highs, as investors reacted positively to upgraded global growth forecasts by the IMF, which said yesterday that a stronger than expected recovery from the Covid crisis was on the horizon.

The IMF said successful vaccine programmes, businesses adapting to the challenges of lockdown and Joe Biden’s $1.9tn (£1.4tn) stimulus package were helping to support the recovery.

And while Wall Street closed lower - with the Dow down 0.3% the S&P down 0.1% and the Nasdaq down 0.05% – both the Dow and S&P 500 are still within reach of record highs hit during Monday’s trading session.

It helped that US president Joe Biden announced an accelerated vaccine rollout, with all US adults to be eligible for jabs by April 19 (pushing up his earlier deadline of May 1 by about two weeks.)

US job opening figures, which increased 268,000 to 7.4 million as of the last day of February, are also helping support appetite across equity markets.

As Naeem Aslam, chief market analyst at Ava Trade, explains:

European and US stock futures are trading lower, but they are still hovering near their all-time high as investors remain optimistic about stimulus-supported recovery.

One particular takeaway from Joe Biden’s speech yesterday was that he has full confidence in his team.

This is because he mentioned that he hasn’t spoken to the Chairman of the Federal Reserve, Jerome Powell, for nearly two months.

This means that he is fully on board with the Fed’s monetary policy, which for the time being remains ultra-dovish despite the fact that we have seen more than decent recovery in the US labour market.

We’re expecting a positive start across Europe:

Meanwhile, PMI data is dominating the economic agenda, though the slower pace of the EU’s vaccine rollout is expected to confirm a further slowdown for its services sector.

The agenda

  • 8.15am BST: Spanish services PMI for March
  • 8.45am BST: Italian services PMI for March
  • 8.50am BST: French services PMI for March (final)
  • 8.55am BST: Germany services PMI for March (final)
  • 9am BST: Eurozone composite PMI for March (final)
  • 9:30am BST: UK composite PMI for March (final)
 

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