Closing summary
Wall Street is still trading higher, while European markets are in the red again, as the boost from Friday’s strong US jobs data has faded, after last week’s rally.
- The UK’s FTSE 100 down 17 points, or 0.27%, at 6,466
- Germany’s Dax down 0.39% at 12,797
- Franc’e CAC 40 down 0.23% at 5,186
- Italy’s FTSE MiB up 0.1% at 20,211
- Dow Jones up 0.79% at 27,325
- S&P 500 up 0.19% at 3,200
- Nasdaq down 0.3% at 9,784
It’s been one of those days... Germany reported a record plunge in industrial production in April this morning and China released disappointing trade data over the weekend.
Several UK companies have announced major job losses today, including BP, which is cutting its global workforce by 10,000 (reportedly about 2,000 in the UK).
Oil prices climbed by more than 2% this morning following the extension of supply cuts by the Opec oil cartel and its allies, before falling back. Brent crude is now down 2.6% at $41.20 a barrel, while US light crude has lost 3.39%.
In the UK, the 14-day quarantine has come into effect. The bosses of Ryanair and easyJet have expressed confidence that the new rules will either be struck down by the courts, or withdrawn by the UK government by the end of the month.
Good-bye – we’ll be back tomorrow.
Updated
Wall Street has opened higher.
The Dow Jones has risen 161 points, or 0.6%, to 27,272 at the open, while the S&P 500 added nearly 9 points, or 0.28%, to 3,20 and the Nasdaq rose almost 10 points, or 0.1%, to 9,824.
Here is our story on the BP cutbacks, which come as global demand for oil has plunged as the Covid-19 pandemic forced countries around the world to go into lockdown.
BP to cut 10,000 jobs globally
The oil giant BP plans to cut 15% of its global workforce – that’s 10,000 jobs out of a total of 70,100, Reuters reports. It is thought that 2,000 of the cuts will fall in the UK.
Chief executive Bernard Looney told employees about the cuts, which come in response to the coronavirus crisis, on a global online call. He said:
We will now begin a process that will see close to 10,000 people leaving BP – most by the end of this year.
Updated
All of the major European stock indices have reversed earlier declines and are now trading higher again, following last week’s rally on economic optimism. They ended the week at three-month highs after much better-than-expected US jobs data.
- UK’s FTSE 100 index up 9 points, or 0.14%, at 6,493
- Germany’s Dax up 0.37% at 12,895
- France’s CAC up 0.21% at 5,208
- Italy’s FTSE MiB up 0.68% at 20,323
- Spain’s Ibex up 1.3% at 7,977
More job losses... BP intends to cut 2,000 jobs in the UK as part wider cutbacks, Reuters reports, citing a spokesman.
Metro Bank has opened its first drive-thru branch in Wales to offer customers contact-free banking – in Cardiff on Newport Road. It is the bank’s fifth drive-thru in the UK. The others are in England – Slough, Luton, Merry Hill and Southall.
Updated
Lunchtime summary
Oil prices have just turned negative, following earlier gains of over 2% after the Opec oil cartel and its allies extended production cuts to prop up the oil price. Brent crude has slipped 0.17% to $42.23 a barrel while US light crude is down 0.6% at $39.31 a barrel.
The FTSE 100 index is now trading just under 9 points higher at 6,493, a 0.14% gain. Germany’s Dax is flat while France’s CAC 40 is down 0.32%. Italy’s FTSE MiB has advanced 0.67% while Spain’s Ibex is up 1.16%, despite the dire economic forecasts from the Bank of Spain.
Airline stocks easyJet and BA owner IAG are the two biggest risers on the FTSE 100 index. The bosses of EasyJet and Ryanair said they were confident of succeeding in their legal action to overturn the UK government’s 14-day quarantine for air passengers arriving from abroad. The quarantine comes into effect today.
Bank of Spain: Spanish economy to shrink 11.6% in 2020
The Bank of Spain estimates that the Spanish economy shrank by 16% to 21.8% in the second quarter, a massive drop in economic output.
It expects a recovery in the second half of the year after the government began lifting coronavirus lockdown measures... but the Spanish economy is still on track to shrink by 9% to 11.6% this year, in its most likely scenario. Ouch.
If there is a second Covid-19 wave which requires a further lockdown, the economy could contract by up to 15.1% in 2020.
Updated
There are more comments from Ryanair CEO Michael O’Leary on Reuters – he says that while Brits’ bookings abroad are strong, the only notable weakness is inbound bookings into UK.
O’Leary also reckons that the three airlines’ legal action against the UK government over the quarantine has a high likelihood of success. He expects the courts to strike the quarantine down unless the government quietly announces its withdrawal before the end of June.
The pound is now down against the dollar, slipping 0.2% to $1.2636.
BA owner IA is now the biggest riser on the FTSE 100 index, up 5.4%, while easyJet is the third-biggest gainer, up 4.8%.
The easyJet boss, Johan Lundgren, said that the legal case against the UK quarantine is strong. The airline has joined with BA owner IAG and Ryanair to bring legal action against the UK government over the 14-day quarantine, which comes into effect today.
Lundgren told Sky News:
We think that there’s enough evidence and there’s a strong case here that this should be challenged by the courts. This is something that has been rushed through. It’ not in proportion.
He said he hoped the threat of legal action would push the government to replace the quarantine with “a targeted approach that is based on the solutions of air bridges”, which allow people to travel freely between countries with low infection rates.
EasyJet is planning to cut 4,500 jobs or 30% of its workforce because of the coronavirus crisis, and Lundgren said the quarantine would make things worse. When asked if the quarantine could lead to more job losses, he replied:
I fear so...I think and I fear unless there is a change to this (the quarantine rule), that the aviation industry as we know it here in the UK will not be intact.
In other corporate news, Morrisons said today that it will continue to pay its smaller suppliers for a further three months to help them through the coronavirus crisis. Up to 3,000 small suppliers including 1,750 farmers, stand to benefit, according to the supermarket group.
The faster payment scheme applies to firms that have up to £1m of turnover with Morrisons. The company started the scheme in March to help small firms and farmers who are struggling with cashflow because of the crisis. It ran until the end of May, and has now been extended to September.
Morrisons has enjoyed a boost to sales from the Covid-19 lockdown in the first quarter, and said costs related to the pandemic should be offset by the government’s business rates relief.
Here is our story on Lookers.
Here is our story on pub gardens in England possibly reopening from 22 June:
Optimism has returned to many stock markets in Europe and Asia, continuing last week’s rally, and stock futures are pointing to a higher open on Wall Street later.
The FTSE 100 index in London is 0.28% ahead at 6,502 and Italy’s FTSE MiB has gained 0.6%. Germany’s Dax and France’s CAC are still trading lower, down 0.18% and 0.3% respectively. Germany suffered a record decline in industrial production in April, according to data released this morning.
Oil is still pushing higher, with Brent crude up 1.1%, or 48 cents, to $42.78 a barrel, while US crude is 0.94% ahead, or 37 cents, at $39.02 a barrel.
Beauchamp adds:
Also on the up this morning are oil stocks, after Opec+ extended their production cuts until the end of July. It looks like the oversupply story is being replaced by expectations of higher demand, or least by hopes that demand will not be as weak as previously feared.
Overall, markets continue to look past all the bad data and concentrate on the good news, hence the strong reaction to Friday’s job numbers. While this leaves indices vulnerable to a pullback, the strength of the bounce of the past month suggests that such weakness will be only temporary.
Ahead of the open, we expect the Dow to start at 27,262, up 152 points from Friday’s close.
Updated
Chris Beauchamp, chief market analyst at online trading platform IG, says:
The surge in travel- and airline-related names comes on the day when the UK implements a quarantine for overseas travel, perhaps the very definition of shutting stable doors after the horse has bolted.
With lockdowns easing across Europe and no sign of a second infection wave, this move has been staunchly opposed by airlines, and it looks like the market expects the restriction to remain in place for only a limited time.
The government is reportedly ready to let beer gardens open from 22 June as part of plans drawn up by a group of ministers, dubbed the “Save Summer Six”, who are looking at ways to restart the hospitality industry earlier than initially planned, writes my colleague Rob Davies.
The proposals, first reported in the Financial Times, would allow some of the 27,000 UK pubs that have outdoor space to serve customers for the first time in three months.
Opening beer gardens before the end of the month would give struggling pubs a “psychological boost” but most would still lose money, Wetherspoons founder Tim Martin said.
UK airline/travel stocks up despite quarantine rules
UK airline and travel stocks are up, for once, despite the new quarantine rules. The cruise operator Carnival is the biggest riser on the FTSE 100 index, up 14%, while BA owner IAG is 6.9% ahead and easyJet has gained 5.5%.
As reported earlier, Ryanair boss Michael O’Leary said the airline would fly through the 14-day UK quarantine, which he described as “rubbish”. Britain’s three biggest airlines – Ryanair, easyJet and IAG – have begun legal proceedings against the government over the quarantine rules, which they argue are illogical and unfair, and come months late.
Updated
The German Dax and the French CAC 40 indices are now down just 0.07% and 0.1%, and the Stoxx Europe 600 index of Europe’s leading shares is also broadly flat, down 0.08%.
Sterling continues to climb against the dollar, lifted by further plans to ease the coronavirus lockdown in Britain. The pound is trading just below the $1.27 level it touched last week.
Sterling has risen for seven days against the dollar, although analysts are warning that Brexit remains a big risk, as talks with the European Union are not exactly progressing. The pound has gained 2.8% against the dollar so far this month, as several economies are relaxing their lockdowns, weakening demand for the dollar, a safe-haven currency.
According to the Sunday Times, Boris Johnson plans to ease planning restrictions that stop many pubs, cafes and restaurants from using outdoor areas, and also wants to make it easier to hold weddings outside. At the moment, couples cannot marry outside in England or Wales without a fixed shelter. Indoor weddings and funerals with up to 10 guests could also be permitted from early July.
Updated
The UK and Italian stock markets have just turned positive, while shares in Germany and France are still in the red.
- UK’s FTSE 100 index up 11 points, or 0.18%, at 6,496
- Italy’s FTSE MiB up 0.6% at 20,309
- Germany’s dax down 0.67% at 12,762
- France’s CAC down 0.47% at 5,173
Updated
The easyJet chief executive, Johan Lundgren, has warned that there could be more job losses at the budget carrier if the UK’s new quarantine policy continues, according to Sky News.
EasyJet currently intends to cut up to 4,500, or 30% of its global workforce, as it battles the coronavirus crisis which led to the grounding of planes around the world.
Mulberry: up to 470 jobs at risk
The British luxury handbag maker Mulberry has also warned about job losses this morning. It intends to slash 25% of its global workforce and has kicked off a consultation process.
Up to 470 jobs could be at risk across the organisation, from head office to manufacturing, retail, distribution and support. It currently employs 1,390 people worldwide, including 1,140 in the UK.
The company says:
Given the uncertainty as to the impact and duration of Covid-19 on the company and the wider economy, and the consequential effect on demand, we expect the recovery in our overall sales levels over the medium term to be gradual.
The owner of Frankie & Benny’s and Chiquito restaurants has confirmed it is in talks with landlords about restructuring its leases, after reports that it plans to shut up to 120 sites with the loss of up to 3,000 jobs.
The Restaurant Group announced last year that it would close more than 150 restaurants, including Chiquito and Frankie & Benny’s outlets, as part of a major revamp over the next six years, following its £559m acquisition of Wagamama. It may now shut a further 120 Frankie & Benny’s and Garfunkel’s sites, while Wagamama, its airport outlets and pub operators are not affected.
The company says:
As is widely understood our industry is facing exceptional challenges in what is an unprecedented operating environment. The casual dining sector was already facing significant challenges prior to the onset of Covid-19, with overcapacity and significant cost pressures.
In order to meet both the immediate challenges and to build a post-lockdown business with a sustainable future, we are in discussions with our landlords regarding potential restructuring options for our leisure estate. Our Wagamama, airport concessions and pub operations are not affected by these discussions.
Heathrow boss: 'millions' of jobs at risk without government plan
Back to the new UK quarantine rules, which come into effect today. The chief executive of London’s Heathrow airport has warned of massive job losses – potentially in the millions – if the aviation sector does not get back on its feet soon. John Holland-Kay called for a government plan on how to reopen the economy and borders by the end of June.
Air travellers arriving in the UK from abroad now have to self-isolate for 14 days, with the exception of key workers and diplomats. You can read more about the rules here.
Holland-Kay told Sky News:
We cannot go on like this as a country. We need to start planning to reopen our borders.
If we don’t get aviation moving again quickly, in a very safe way, then we are going to lose hundreds of thousands, it not millions of jobs in the UK just at the time when we need to be rebuilding our economy.
Shares in the UK car dealership chain Lookers slumped nearly 16% in early trading and are now down 8.4% to 28.85p. The company announced that its auditor Deloitte would resign and postponed publishing its full-year results again, following an investigation into potential fraud inside the business carried out by another accounting firm, Grant Thornton.
Lookers, which represents 31 car brands in the UK including Ferrari and BMW, said it expects its shares to be temporarily suspended from on 1 July until publication of the 2019 results. Last week it outlined plans to cut 1,500 jobs and close 12 showrooms.
Oxford Biomedica to help scale up production of potential coronavirus vaccine
AstraZeneca said last week that it had doubled manufacturing capacity for a potential coronavirus vaccine it is developing with Oxford University to 2bn doses in two deals involving the Microsoft billionaire Bill Gates to ensure early supply to lower-income countries.
We still don’t know if the vaccine works, though, and won’t know until August when human trials are due to finish, as AstraZeneca boss Pascal Soriot admitted.
This morning, Oxford Biomedica, an Oxford University spin-out that specialises in gene therapy, said it had struck a manufacturing deal with a not-for-profit group backed by the UK government to help scale up production of the vaccine.
The firm has agreed a five-year partnership with the Vaccines Manufacturing and Innovation Centre – both are original members of the Oxford University manufacturing consortium for the potential coronavirus vaccine.
This means Oxford Biomedica will also be producing the vaccine at a new manufacturing site, Oxbox, in Oxford, to help supply UK and European vaccine demand. AstraZeneca has taken over global responsibility for the manufacturing, development and distribution of the vaccine.
In London, AstraZeneca shares are down 2.2% at £82.40 after Bloomberg News reported on Sunday that the British drugmaker – which recently became Britain’s biggest company by stock market value – had approached US rival Gilead Sciences about a potential merger of the two companies.
Also weighing on the UK’s blue-chip index, a City taskforce has warned that up to £36bn worth of government-backed business loans could turn toxic by next year, as companies struggle to repay growing debts during the Covid-19 crisis.
An interim report by the Recapitalisation Group, led by EY and lobby group TheCityUK, predicts that businesses will be saddled with £97bn-£107bn worth of unsustainable debt by March 2021, writes our banking correspondent Kalyeena Makortoff. A third of that total will come from government-backed loans.
Updated
And we’re off.
- UK’s FTSE 100 index down 60 points, or 0.92%, at 6,424
- Germany’s Dax down about 1%
- Italy’s FTSE MiB down 0.6%
Introduction: European stocks to fall in post-US jobs hangover
Good morning and welcome to our rolling coverage of the world economy, the financial markets and business.
There was a massive surge in stocks on Wall Street and Europe on Friday after unexpectedly good news from the US jobs market. The unemployment rate took markets by surprise and dropped to 13.3% in May, rather than rising to close to 20%, as expected. The closely watched US non-farm payrolls data showed the economy added 2.5 million jobs last month, against expectations for 8 million job losses.
The FTSE 100 rose to a three-month high on Friday, the S&P 500 hit its highest level since late February and the Nasdaq set yet another record high, and is now up more than 12% this year.
Asian markets rose today, lifted by Friday’s sentiment and New Zealand’s declaration that it has eliminated coronavirus. Japan’s Nikkei is up 1.37% while Hong Kong’s Hang Seng is flat.
However, European stocks are expected to fall back after last week’s strong gains, as the US jobs boost fades. The FTSE 100 index in London is set to drop about 37 points at the open while Germany’s Dax is seen opening 80 points lower.
Chinese trade data were disappointing over the weekend and German industrial production fell more than expected. It posted a record monthly decline of 17.9% in April, according to official figures released this morning. Economists had expected a 16% drop.
As expected German industrial production fell into an abyss in April, -17.9% m/m. Autos -75% as factories were shut. But a relief is that construction held up (-4.1%) despite nosediving sentiment. A huge difference to FR, IT & ES where sector was largely shut already in March. pic.twitter.com/NLsdE6sWvv
— Oliver Rakau (@OliverRakau) June 8, 2020
Meanwhile in China, exports fell 3.3% in May from a year earlier after a surprising 3.5% gain in April, and imports tumbled 16.7%, worse than April’s fall of 14.2% and the sharpest decline since January 2016.
Oil prices climbed by more than 2% this morning, after the Opec oil cartel agreed to extend production cuts. Brent crude hit $43.16 a barrel while US crude rose 1.6% to $40.18 a barrel, before falling back a bit.
The new quarantine rules take effect in the UK today, which means people arriving from abroad by air will have to self-isolate for 14 days. Britain’s three biggest airlines - BA’s owner IAG, Ryanair and easyJet have launched legal proceedings against the government to try and overturn the quarantine rules. They argue that the quarantine comes several months late to stop coronavirus spreading and will kill off any nascent recovery in air travel.
Ryanair’s outspoken boss Michael O’Leary said this morning that the Irish carrier, Europe’s biggest budget airline, would not cancel flights to and from the UK in July and August because, he said, thousands of Britons are still booking holidays despite the quarantine. He told Reuters:
The flights are full outbound of the UK. British people are ignoring this quarantine, they know it’s rubbish.
Ryanair is operating a thousand daily flights to points all over Portugal, Spain, Italy, Greece from the 1st of July, the 2nd, the 3rd and every day and after that.
Workers at Nissan’s Sunderland factory return to work today, as the Japanese carmaker gradually raises its output towards about 28,000, the monthly total achieved on average last year. The plant was shut in April and May because of the Covid-19 pandemic.
It is Britain’s biggest single car factory and could potentially build 600,000 cars a year, but last broke through the 500,000 mark in 2016. Production this year will be the lowest in years even if it ramps up production again now.
The Agenda
2:45pm BST: ECB President Christine Lagarde to speak before the committee on economic and monetary affairs of the European Parliament
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