Time to recap

The US jobs recovery has taken another step forward, with the smallest increase in new unemployment claims since the pandemic. Around 444,000 initial claims were filed last week, which economists said showed the labor market continued to pick up.

British firms are looking to hire more staff, with online job adverts rising last week - including a pick-up at hospitality firms as restrictions are lifted.

Barclaycard reported a surge in spending at British pubs and restaurants last week too.

Factories on both sides of the Atlantic continue to report rising costs, as demand for raw materials stretches supply chains.

In Philadelphia, manufacturing growth slowed as input costs rose at the fastest in over four decades - prompting factories to hike their own prices too.

In the UK, factory output is growing at the fastest rate since December 2018, with order books also swelling. UK manufacturers also predicted they would hike prices

DIY chain Kingfisher predicted that supply chain problems would last another six months, not helped by the Suez Canal blockage back in March.

Oat milk maker Oatly has made a splash on the Nasdaq, with shares surging 30% at the start of trading.

In London, stocks recovered from yesterday’s falls.... while bitcoin was calmer after Wednesday’s flash crash. US stocks have pushed higher too.

Oil fell, on the possibility that sanctions on Iran could soon be lifted.... if a nuclear deal with the US is agreed next week.

Royal Mail has reported a surge in profits, as its parcels division saw strong demand in the pandemic. But it wouldn’t set a revenue forecast for this year, due to uncertainty over the pandemic, and the economic recovery.

EasyJet has criticised the government’s “confusing” approach over travel to amber countries, as the airline claimed health data proves the majority of European destinations should be moved to the green list.

Goodnight. GW

The Financial Times have an interesting piece tonight on yesterday’s crypto flash crash, explaining how the use of leveraged bets on prices going up accelerated the wave of selling:

Here’s a flavour:

When the price is crashing, everyone that leveraged and [bet on rising prices] sees their leverage ratio blow up,” said David Fauchier, a fund manager at crypto specialist Nickel Digital, noting that the market went through two so-called “liquidity cascades” in less than an hour when bitcoin crashed.

In established asset markets, traders use cash as collateral to finance leveraged bets. In cryptocurrencies, however, they often use bitcoin. That meant that when bitcoin fell heavily, leveraged bets were quick to fold.

This created a self-reinforcing cycle, which prompted widespread selling and highlighted a number of “systemic issues,” according to Michael Bucella, a partner at crypto hedge fund BlockTower Capital.

Back in London, stocks have finished the day broadly higher.

The blue-chip FTSE 100 index closed 1% higher at 7019.79, up nearly 70 points.

Credit rating firm Experian (+4.7%), online property portal Rightmove (+3.8%), catering group Compass (+3.6%) and betting group Flutter (+3.6%) led the risers.

Mining companies fell further from their recent highs, though, with copper producer Antofagasta down 2.3%

The FTSE 250 index of medium-sized shares gained 0.7%, although ticketing company Trainline ended the day down 23% after the UK government announced it would launch its own tickets website as part of a shake-up of the railways.

European markets also rallied -- helped by the calmer crypto markets, and the encouraging US jobs data which suggested America’s recovery is on track.

Danni Hewson, AJ Bell financial analyst, sums up the day:

“It’s been a bumpy day for the London markets which couldn’t make up their minds initially if they were going to shake off yesterday’s lows or not. By lunchtime optimism was in the driving seat again, partly fuelled by a rally in Bitcoin and given an afternoon shove by US markets responding nicely to better-than-expected jobs news. The FTSE 100 ended the day comfortably back above the 7,000 mark at 7,019.

Much attention is being given to the Nasdaq debut of plant-based milk company Oatly, she adds, whose shares have jumped.

The space is a crowded one but demand is growing fast and the brand is intending to use cash raised through the IPO to expand operations.

Shares in Oatly, the oat milk company backed by Oprah Winfrey. have surged as it joins the US stock market.

After ringing the Nasdaq opening bell, in a virtual ceremony, Oatly jumped 30%, which values the vegan food and drink maker at around $13bn.

Despite recent market turbulence, Oatly priced its IPO at the top of the range - suggesting strong interest in the Swedish plant-based dairy producer.

Bloomberg says:

The IPO underscores plant-based products’ jump into the mainstream, as environmental and health concerns spur consumers to seek alternatives to traditional meat and dairy products.

Investors have been looking for ways to replicate the public-market success of Beyond Meat Inc., whose shares have surged more than 300% since it went public in May 2019.

Fugitive former car magnate Carlos Ghosn has been ordered to repay €5m to Nissan and Mitsubishi after a Dutch court rejected his claims to have been unfairly removed by the carmakers.

The case was brought by Ghosn, who 18 months ago sensationally broke house arrest in Tokyo and fled to Lebanon after being accused of financial misconduct.

He had been seeking €15m of lost wages, but instead the court ruled there wasn’t an employment contract between Ghosn and a Dutch holding company of alliance partners Nissan and Mitsubishi -- and told him to repay €5m of salary instead.

Reuters has more details:

The case, one of a series of legal battles involving one of the best known figures in the auto industry, centres around the Dutch-registered joint venture Nissan-Mitsubishi BV (NMBV), where Ghosn was ousted as chairman in 2019.

Ghosn claimed the Japanese companies violated Dutch labour laws when they dismissed him and had demanded compensation of 15 million euros for missed wages and severance payments.

But the district court in Amsterdam sided with the car companies, stating that Ghosn did not have a valid employment agreement with the joint venture, as it lacked the required consent of the boards of Nissan and Mitsubishi.

Back in the UK, the usually lively bank AGM season was put on pause in 2020, due to social distancing rules. But the gradual relaxing of Covid restrictions has allowed some lenders to open their doors to shareholders this year.

Lloyds Banking Group may be regretting the move, though, after their AGM in Edinburgh was derailed by a shareholder who shouted complaints at the board for nearly 15 minutes, forcing the chairman to temporarily shut down the meeting.

Robin Budenburg, who took over as chair from Lord Blackwell in January, struggled to regain control, as the shareholder accused the bank of bad behaviour and claimed Budenburg was not the rightful chairman, since he had not been voted in until the AGM.

Budenberg said

“Please stop littering allegations, we need to get on with this meeting,”

The shareholder was also raising concerns about the way Lloyds handled fraud at HBOS Reading, which resulted in one of the UK’s largest banking scandals.

The scam led to six people being jailed in 2017, after they were found guilty of pushing business customers into distress or failure between 2003 and 2007 by referring clients to a turnaround consultancy and loading them with unmanageable debts and fees. The fraudsters spent the proceeds on sex workers, superyachts and luxury holidays.

Lloyds has paid out more than £102m in compensation.

The shareholder was eventually removed from the meeting, which restarted after a short adjournment. All of the shareholder resolutions, including Budenberg’s appointment, were passed with more than 90% approval.

In New York, stocks are pushing higher as investors pile back into technology companies.

The Nasdaq is outpacing the other indices, suggesting that concerns over rising inflation prompting central bank tightening are fading (although for how long, who knows....)

• Dow Jones industrial average: up 145 points or 0.4% at 34,041 points
  
• S&P 500: up 31 points or 0.75% at 4,147 points
• Nasdaq Composite: up 161 points or 1.2% at 13,461

Cloud CRM software vendor Salesforce.com (+2.1%) are leading the Dow risers, followed by Microsoft (+1.5%) and Apple (+1.4%).

Tesla (+3.3%) are also higher, recovering yesterday’s losses amid the crypto crash.

Last night, the minutes of the Federal Reserve’s April meeting showed that some FOMC policymakers were pondering how to slow its $120bn/month bond-buying stimulus programme.

The minutes said:

“A number of participants suggested that if the economy continued to make rapid progress toward the Committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases,”

This hint that the Fed was ‘thinking about talking about’ tapering hasn’t caused much alarm in Wall Street.

Raffi Boyadjian of XM explains why:

More crucially, the meeting took place before the weak April jobs report and given that the Fed has made it clear it is prioritizing employment over inflation during the recovery, the minutes have not substantially altered the outlook for the Fed’s policy path.

Even if policymakers were to begin the taper debate as early as June, a decision is unlikely to come before the autumn and many investors still have their sights on August’s Jackson Hole event as the most realistic date that the Fed chief, Jerome Powell, would flag a policy shift.

Manufacturing activity in Philadelphia has cooled this month, with factories in the city being hit by the wider surge in commodity prices.

The Philadelphia Fed Manufacturing Index has dropped to 31.5 in May, from a near 50-year high of 50.2 in April, which was the strongest reading in nearly 50 years.

The report found a slowdown in growth of new orders and shipments, and a dip in new hiring, with firms slightly less upbeat. It suggests manufacturing kept growing, but at slower pace.

The Philly Fed says:

Over 43 percent of the firms reported increases in current activity this month (down from 59 percent last month), while 12 percent reported decreases (up from 8 percent). The index for new orders decreased 4 points to a reading of 32.5.

The current shipments index fell 4 points to 21.0 in May. Over 42 percent of the firms reported increases in shipments this month, while 21 percent reported decreases.

On balance, the firms reported increases in manufacturing employment, but increases were less widespread, as the current employment index decreased 12 points to 19.3

The report also shows that raw material costs are rising sharply, forcing many factories to hike their own prices too:

Price increases were more widespread this month for the firms’ inputs and own goods. The prices paid diffusion index increased 8 points to 76.8, its highest reading since March 1980. Nearly 77 percent of the firms reported increases in input prices, while none reported decreases.

The current prices received index increased 7 points to 41.0, its highest reading since May 1981. Nearly 43 percent of the firms reported increases in prices of their own manufactured goods, up from 36 percent in April; most firms (55 percent) reported stable output prices.

The number of US workers filing new claims for unemployment benefits has fallen to a fresh pandemic low, as American firms cut fewer jobs as the economy strengthens.

There were 444,000 new ‘initial claims’ for unemployment support last week, the Bureau of Labor Statistics reports, down from 478,000 in the previous week (this is on a seasonally adjusted basis).

That’s the lowest since March 14, 2020 (just before the first wave of Covid-19 forced US states to lockdown).

It shows firms are keen to hold onto staff as the Covid-19 vaccination program helps the economy to reopen, with some companies reporting shortage of workers.

Strip out seasonal adjustments, and there were 454,634 new jobless claims -- plus another 95,000 people seeking unemployment support through the Pandemic Unemployment Assistance programme.

AnnElizabeth Konkel of jobs site Indeed.com says the US jobs market is moving in the right direction:

However, the number of continuing claims (people receiving unemployment support for at least two weeks) has risen -- to 3.751m from 3.64m previously, again on a seasonally adjusted basis.

The oil price has dipped today, extending recent losses, on the possibility that sanctions on Iran could be lifted soon, which would boost supply of crude.

Brent crude is currently down around 1.5% at $65.70, on track for its lowest close since late April.

Oil fell after Iran’s President Hassan Rouhani sounded optimistic about the progress of talks with the US to revive the nuclear deal. During a televised speech, he suggested the broad outline of a deal to end economic sanctions, including on its oil, had been reached.

But Rouhani noted there are still some issues to be discussed when delegations return to Vienna next week.

The AP newswire reported:

Speaking at a ceremony inaugurating several petrochemical projects, Rouhani asserted that solutions to “major issues like sanctions” had been agreed to by diplomats, while other issues remained under discussion.

“We have taken a major and big step and the main agreement has been done,” Rouhani said.

Our diplomatic editor Patrick Wintour reported yesterday that negotiators say progress has been made, but there are still some issues to be addressed.

Here’s Reuters take:

Iranian President Hassan Rouhani said in a televised speech on Thursday that sanctions on oil, shipping, petrochemicals, insurance and the central bank had been dealt with in the talks.

However, senior diplomats from Britain, France and Germany offered a note of caution on Wednesday, saying that while there was some tangible progress with the contours of a final deal emerging, success was not guaranteed

The CBI survey found that many UK manufacturers are expecting to lift their prices over the next quarter (to clarify that last post, which is now updated).

That would mean they’ll be charging more for their goods at the factory gate, which could add to inflationary pressures.

Its survey found that 43% of factories expect to book domestic orders at a higher price for the next three months, while just 5% anticipate charging less.

That gives a net balance of +38, up from +27 in April, which is the highest reading for output price growth expectations since January 2018. The long-term average is just +3.

The CBI says “manufacturers expect output price growth to accelerate rapidly in the next three months”, explaining:

The deterioration in stock adequacy (weakest since July 2017) chimes with anecdotes of continued supply chain pressures, which, in addition to higher commodity prices, are feeding into the strongest expectations for price growth since January 2018.

Britain’s factories have racked up their fastest growth since the end of 2018... but also fear that supply chain bottlenecks will drive prices higher.

Manufacturing output grew in May at the fastest rate since December 2018 – the first material growth reported in almost two years. That’s according to the CBI’s latest monthly Industrial Trends Survey.

Chemicals producers, electronic engineering firms, and metal factories reported the strongest growth, with output up in 12 of 17 sub-sectors.

Manufacturers are also upbeat, predicting output will accelerate further in the next three months.

That’s driven by an increase in demand, with orders growing at the fastest rate in three and a half years.

Total order books hit their highest level since December 2017, and were reported to be “above normal” for the first time since February 2019.

Export order books were pretty much unchanged, though, but that’s still the strongest outturn since February 2020.

But... this increased demand means that some firms are struggling to keep up. A majority of manufacturers reported that their stockpiles of finished goods have fallen:

The CBI says:

Present stocks of finished goods (-6 from +5 in April) fell to their weakest position since July 2017. This was also the first time since July 2017 that stocks were considered “less than adequate”.

Factory bosses are also facing rising commodity costs, with creaking supply chains struggle to cope with rising demand (as Kingfisher warned). And that means more expect to raise their prices:

Tom Crotty, Group Director at chemicals firm INEOS, says:

“These latest figures are very positive, and it is great to see the sector bounce back from the bleak situation we saw last year. While this progress is welcome, firms continue to face several supply challenges and cost pressures as the UK moves along the roadmap.

“Manufacturing can be an engine for the UK’s economic growth and renewal over the long-term but, for this to be a reality, it will first be important for government to continue listening to firms to address short term barriers to recovery.”

The number of online job vacancies in the UK has also risen again, as shops and hospitality businesses reopen, and transport and logistics firms keep hiring.

Last Friday, UK online job adverts rose to 114% of their February 2020 average level, up from 106% a week ago, data from Adzuna released by the Office for National Statistics shows.

Job adverts increased across all sectors -- an encouraging sign, adding to the drop in unemployment earlier this week.

The largest weekly increase was for “transport and logistics”, which rose by 20 percentage points to 254% of its February 2020 average level.

Adverts for “wholesale and retail” jumped back to their pre-lockdown levels. They rose by 17 percentage points from last week to 105% of its February 2020 average level.

Bars and restaurants are also looking for staff, due to the relaxation of lockdown restrictions. Online job adverts in “catering and hospitality” increased by 12 percentage points from a week ago to 115% of its February 2020 average level.

The ONS explains:

This continues its recent upward trend and is an increase of 57 percentage points since 9 April 2021, just before the first easing of hospitality restrictions when pubs and restaurants reopened in England.

Spending at British pubs and restaurants has jumped since coronavirus rules were relaxed on Monday to allow people to eat and drink indoors for the first time in months.

Barclaycard Payments has reported that face-to-face takings at UK pubs and bars are up 171% so far this week, compared with the previous week when only beer gardens were open. These “in-store revenues” at restaurants are up 95% week-on-week.

Overall, hospitality spending was up 43% on the previous week, and nearly 9% higher than the same period two years ago.

That shows some people have been grasping the chance to meet, eat, and drink inside again - even though health experts warned people to avoid socialising indoors in pubs and restaurants, due to the latest Covid-19 variant.

There is also a scramble for tables -- hospitality firms say customers will need to book at least five days in advance to secure a reservation this summer. In preparation, SMEs have invested an average of £5,551 to become covid-secure for their reopening, Barclaycard adds.

Rob Cameron, CEO of Barclaycard Payments, said:

“The re-opening of indoor hospitality venues has brought the welcome sound of ringing tills to restaurants, pubs and bars across the country.

I’m delighted to see that transaction values have even risen above 2019 levels, thanks to our pent-up demand for going out to spend time with friends and family.”

Here are the key points:

• With hospitality venues now allowed to re-open indoors, revenues across the sector are up 43% week-on-week, and up 8.6% compared to 2019
  
  
• Pubs and bars have already seen significant growth, with transaction values up 162% week-on-week
  
  
• Similar growth has been recorded at restaurants, which have seen a 58% spike in the total amount spent
  
  
• Due to pent-up demand, consumers are expected to have to book at least five days in advance to successfully reserve a table this summer

Shares in ticketing firm Trainline have taken a shunt this morning, after the government pledged to streamline and simplify rail fares as part of its reform of the sector.

Trainline, which floated in summer 2019, sells rail and coach tickets and railcards through its website and app, for the UK and Europe.

Its business is based on helping passengers navigate their way through the baffling complexity of Britain’s rail network, with its competing operators running trains on a patchwork of different lines.

But shares in Trainline have slumped by a quarter this morning, after the government pledged to strip out this maze of confusion, promising simpler fares and more contactless and pay-as-you-go systems, and a new ticketing website.

The government says:

Great British Railways will simplify the current mass of confusing tickets with new flexible season tickets and a significant roll-out of more convenient Pay As You Go, contactless and digital ticketing on smartphones.

A new GBR website will sell tickets and a single compensation system for operators in England will provide a simple system for passengers to access information and apply for refunds.

That’s clearly a blow to Trainline’s business; shares have fallen 27% so far this morning to around 310p, having floated at 350p in June 2019.

Back in 2018, the then CEO Clare Gilmartin warned that the UK’s ticketing system was not fit for the 21st century, as restrictions such as “peak and off-peak” tickets didn’t fit in a digital world.

Gilmartin pointed out in 2018:

Some of the rules and regulations that were introduced fit and worked in an offline world — things like peak and off-peak — but they don’t necessarily translate into an online or even a mobile world.”

She left last October, having sold £16m worth of shares in the June 2019 IPO, selling another £3.2m last autumn, and £400,000 in February. But she’s still the 14th largest shareholder, with over 7m shares (worth around £24m this morning).

DIY chain Kingfisher has warned that the product shortages and supply chain problems hitting the global economy could last another six months, as it lifts its profit outlook as the DIY boom continues.

Kingfisher has benefitted from the surge in home decorating and improvement projects in the pandemic, and strong demand for garden furniture and plants.

Like-for-like sales at the group jumped 64.2% in the last quarter, to the end of April, due to a “strong performance in the UK and France”.

Sales at the UK’s B&Q were up 82.7%, while they more than doubled at Brico Dépôt in France.

Kingfisher now expects adjusted pre-tax profit in the first half of this financial year to be ahead of previous expectations, in the range of c.£580m to 600m.

But... it also warns that its suppliers are struggling to keep pace with demand. With raw materials in short supply, and the Suez Canal blockage creating shipping chaos, there could be supply problems until the autumn, at least!

Kingfisher says its “overall stock availability is gradually improving”, explaining:

The key risks around stock availability continue to be driven by polarised demand within some of our categories, where our suppliers have been challenged in keeping up with high order levels. This has been exacerbated by challenges around the supply of certain raw materials. In addition, the pandemic (together with events such as the Suez Canal container ship blockage) continue to place a considerable strain, industry-wide, on the international logistics infrastructure (in particular, the cost and availability of shipping containers). We expect these challenges to continue for at least the next six months.

Despite these significant challenges, our overall stock availability is gradually improving. To date, we have been able to manage our supply and logistics needs adequately, and will continue to focus on availability as we progress through the key trading season.

As largely anticipated, we are also seeing inflation pressure from certain raw materials and shipping container costs. We are absolutely committed to remaining competitive with our prices, and are engaging with our suppliers and partners to manage the cost implications that are being felt across the industry as efficiently as possible.

EasyJet has said it can get almost its entire fleet in the air to take holidaymakers to “green list” destinations this summer, as the airline reported a £700m loss and 90% plunge in passenger numbers in the six months to the end of March.

Johan Lundgren, easyJet’s chief executive, said:

“With leisure travel taking off in the UK again earlier this week where we are the largest operator to green list countries… With so many European governments easing restrictions to open up travel again, we are ready to significantly ramp up our flying for the summer with a view to maximising the opportunities we see in Europe.

“We have the ability to flex up quickly to operate 90% of our current fleet over the peak summer period to match demand. We know there is pent-up demand.

“We saw this again when green list countries were released.”

John Moore, senior investment manager at Brewin Dolphin, says Royal Mail’s results are “very strong” - but the key is whether it can maintain this performance.

“Royal Mail has delivered a very strong set of results, buoyed, in particular, by parcel growth and the strength of its GLS business. The benefits of its transformation programme are beginning to come through as well, with references to some of the changes and innovations it has implemented in today’s statement.

The one-off dividend and recent share price performance are rewards for shareholders who have stuck with Royal Mail after a challenging period between 2018 and 2020. The defined dividend policy – backed up by a strong balance sheet providing rare clarity on income – is something that many other UK companies have been unable to do. The group looks well placed to make a return to the FTSE 100; but, key to Royal Mail retaining that status will be maintaining the volume growth and innovation that have so heavily influenced today’s results.”

James Andrews, Personal Finance Expert at money.co.uk, points out that competition in the parcels business is fierce:

Although the past year has been phenomenal for Royal Mail, it still faces competition from the likes of Hermes and DPD. As this is only the start of its transformation, which has included delays to set up new infrastructure, it will need to continue to evolve to keep up with competitors. Amazon, for example, has quickly established an effective delivery service for the online age, while Royal Mail’s development has been slower as it seeks to change a company first set up hundreds of years ago.

As shoppers start to return to the high street this could affect online demand, so it will be down to Royal Mail to offer a tight service to keep their customers interested. Automation is high on the company’s list to implement agile working and cost savings needed to stay competitive.

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

Profits at Royal Mail have soared, as the pandemic drove a surge in demand for parcel deliveries from households during the lockdown.

But with uncertainty rife, the company has held back from providing a forecast for the current year, with parcel volumes dipping slightly last month compared to the first lockdown in April 2020.

After an extremely busy time for Britain’s postmen and women, Royal Mail has reported that pretax profits jumped to £726m in the 12 months to the end of March, up from £180m the previous year.

Adjusted operating profit more than doubled too, jumping to £702m from £325m.

It was driven by a 16% jump in revenues, in the 12 months to the end of March -- driven mainly by strong parcel growth at both Royal Mail and its logistics firm GLS.

Indeed, revenue from parcel deliveries has surpassed letters for the first time last year. Royal Mail parcels revenue jumped by 38.7%, lifted by the boom in e-commerce shopping, while letters revenues declined by 12.5%.

But the pandemic also drove up costs, with Royal Mail’s operating costs up 9.2%.

And in April, parcel volumes dipped as the UK’s lockdown measures eased, and more shops reopened:

April 2021 trading: Royal Mail revenue up 24.1%, GLS up 22.3% year on year. Royal Mail parcel volumes down 2% and addressed letters (excluding elections) volume up 25%. Parcel volume growth at GLS remained strong until mid-April, with a subsequent slowdown given the high volumes observed last year.

Chairman Keith Williams explains how the pandemic has change the business:

Parcels now represent 72% of Group revenue. The pandemic has accelerated trends we have been seeing for years in our markets. Parcels, rather than letters, provided Royal Mail with the majority of its revenue for the first time in its five-century history.

Similarly, in GLS over half of our volume came from B2C, while only five years ago two-thirds came from B2B. GLS has managed this shift successfully, delivering its highest margin in thirteen years.

But, Williams also warns that a “number of uncertainties” could influence volumes and costs in the next year, so it is difficult to provide specific guidance for 2021-22 for Royal Mail.

He says the results are “well above initial expectations”...

However, we incurred significant additional costs associated with COVID-19 across Royal Mail and GLS.

In the UK, we also incurred additional costs associated with delivering more parcels and fewer letters and our UK management restructure.

Also coming up today,

After a chaotic trading yesterday, the crypto currency markets are looking calmer today. Bitcoin, which crashed 30% at one stage to $30,000, has now clawed back to nearly $40,000.

Bitcoin recovered after Ark Investment Management CEO Cathie Wood, who has invested in several crypto-related companies, said that Ark still held a $500,000 price target on Bitcoin.

She told Bloomberg TV.

“We go through soul-searching times like this and scrape the models and, yes, our conviction is just as high,.

I think we’re in a capitulation phase. That’s a really great time to buy, no matter what the asset is.”

Elon Musk, whose recent criticism of bitcoin’s energy use contributed to recent losses, also implied that ‘diamond handed’ Tesla won’t be selling.

But other crypto assets are still under pressure - ether is down 12% over the last 24 hours - as the sector absorbs yesterday’s turmoil.

European markets are set to rally this morning, recovering some of their losses yesterday when a fresh bout of inflation angst hit stocks.

In the transport world, UK railways are going through their biggest shake-up since the 1990s, with a long-awaited overhaul being published by the government today.

Great British Railways will end the franchise system introduced a quarter of a century ago; private companies will still run services, but under a management contract, similar to the system in place on the London Overground.

Our transport correspondent Gwyn Topham explains:

The rail industry will be simplified but still substantially privatised as a rebranded Great British Railways, the government will pledge when it publishes long-awaited overhaul on Thursday.

A white paper will place control of rail infrastructure and services under the new arm’s-length public body, with franchises replaced by contracts that will incentivise private firms on punctuality and efficiency rather than raising revenue.

Great British Railways will run and plan the network, as well as providing online tickets, information and compensation for passengers nationwide.

It will streamline and simplify fares, including extending contactless and pay-as-you-go systems to more parts of the country.

The agenda

• 11am BST: CBI industrial trends survey for May
• 1.30pm BST: US weekly jobless figures