Closing summary
Wall Street is closed for Thanksgiving, and it’s been pretty quiet in European trading. Markets have been flat to slightly lower today, as optimism over future coronavirus vaccines gave way to fears over rising infections and fresh lockdown restrictions. Germany announced that it would extend its partial lockdown into 2021 while France and the UK are set to relax their restrictions.
- UK’s FTSE 100 down 32 points, or 0.3%, at 6,370
- Germany’s Dax up 0.1% at 13,307
- France’s CAC down 0.04% at 5,568
- Italy’s FTSE MiB down 0.2% at 22,253
- Spain’s Ibex down 0.59% at 8,116
Gold has gained 0.4% to $1,812 an ounce, as the dollar weakened and rising Covid-19 cases raised expectations of further fiscal and monetary support.
Oil prices, rallying earlier in the week on hopes of stronger demand next year, have fallen back. Brent crude is down 1.1% to $48.07 a barrel while US crude has lost nearly 1% to $45.26 a barrel.
Consumer confidence has worsened in Germany and France, where morale hit a near-two-year low. In the UK, the Resolution Foundation and the Institute for Fiscal Studies have digested the chancellor’s latest borrowing and spending plans.
The Treasury’s spending watchdog, the Office for Budget Responsibility, has warned. government will need to find up to £27bn worth of spending cuts or tax rises by 2024 to put the public finances on a sustainable footing.
And the Resolution Foundation, a think tank, says that Rishi Sunak’s plans will fail to end a decade-long squeeze on wages, leaving average pay packets by the middle of the decade £1,200-a-year below the level forecast before the virus outbreak.
Thank you for reading. We’ll be back tomorrow. Good-bye! JK
Tomorrow is Black Friday – normally one of the biggest shopping events of the year. But will shoppers splash the cash this year? In England, shops are closed until next week under a one-month lockdown. Obviously, people can shop online but there won’t be crazy queues outside stores as seen in past years.
My colleague Lauren Aratani reports from New York:
Black Friday has long been the traditional start of the holiday shopping season in the US. As dawn breaks after Thanksgiving long lines of shoppers trying to score the best deals camp outside of stores and malls across the country. Not this year.
The pandemic has dramatically altered this year’s Black Friday. Covid-19 is most likely to spread in indoor, crowded spaces. Many state and local governments have enacted regulations that encourage social distancing, including limiting the number of customers in the store at once.
This does not mean holiday shopping is cancelled – far from it. Even as many Americans suffer the economic effects of the pandemic, people are still buying things, especially since they are spending less on traveling, movies and concerts. Consumer spending rose throughout the summer and into early fall. A survey from the National Retail Foundation found that consumers’ budgets for holiday shopping are down just $50 compared with last year.
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Pub shares down on losses/new tiers
Shares in pub chains Fuller, Smith and Turner and Mitchell and Butlers have fallen after they reported heavy losses and said they had axed about 1,700 jobs, highlighting the impact of England’s second lockdown on Britain’s hospitality sector. M&B shares fell 3.6% while Fuller’s lost 2.9%.
The British Beer & Pub Association has warned of thousands, or tens of thousands, of job losses this winter if the government does not give pubs more freedom to open, or offers them grants to help them get through the next few months.
The company results came as the government announced its new tier system. Pubs and bars in cities in tier 2 – such as Liverpool and London – can only open if they sell food.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said:
The rebound in the pub and bar sector, sparked by vaccine breakthroughs, has fizzled out with the dawning realisation that the end of lockdown will offer little short term reprieve.
Thousands of pubs and restaurants in the highest tiers across the UK will have to stay shut, including in cities like Liverpool, Birmingham, Bristol and Manchester, while those in level 2 can only open if they sell food. It’s a huge blow coming right at the heart of the crucial Christmas period.
Premier Inn owner Whitbread also fell, as ongoing travel restrictions look likely to depress bookings well into 2021. However, shares in The Restaurant Group have risen, along with the hopes that it’ll benefit from the pent up demand for eating out.
Whitbread shares were down 0.9% while The Restaurant Group, which owns Wagamama and Frankie & Benny’s, enjoyed a 3.8% gain in its share price.
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Disney now plans to lay off 32,000 people, mainly in its theme parks, in the first half of next year – more than the 28,000 layoffs it announced in September.
It is also considering cutting its investments in film and TV content and furloughing more employees, according to a regulatory filing in the US. Some 37,000 staff were already on furlough as of 3 October.
Disney’s theme parks have been hard hit by the pandemic. While Disney World in Florida was able to reopen in July, Disneyland in California has been shut since March. Disneyland Paris, which also reopened in July, had to close again under the latest lockdown restrictions and won’t reopen until 12 February 2021.
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Bitcoin has fallen sharply today, after breaking through $19,000 for the first time in three years and rising to $19,666 – not far off its record high of just under $20,000 on Tuesday.
The world’s biggest cryptocurrency is down 7.4% at $17,345, after slumping as much as 13% earlier to its lowest level in 10 days.
Other digital currencies, ethereum and XRP, are also sliding, by 13% and 20% respectively.
Here is our full story on the Institute for Fiscal Studies’ analysis of yesterday’s UK spending review:
European stock markets fall
European stock markets are trading lower as the rally of recent days, driven by vaccine optimism, fizzled out. It is pretty quiet, though, with US markets shut for the Thanksgiving Holiday. Asian shares were mostly higher.
- UK’s FTSE 100 down 36 points, or 0.57%, at 6,354
- Germany’s Dax down 0.05% at 13,283
- France’s CAC down 0.18% at 5,561
- Italy’s FTSE MiB down 0.23% at 22,252
- Spain’s Ibex down 0.93% at 8,088
While Germany has decided to extend tighter coronavirus restrictions into next year, the R rate in France has fallen to 0.65 and the health minister, Olivier Veran, the the country was on course to continue lifting restrictions.
The UK is also due to relax restrictions next week and easyJet said bookings had risen this week compared to last week (albeit from a low base).
Under the current lockdown, only essential travel is permitted, but this rule ends on 2 December when people will be free to go abroad again. Over Christmas, restrictions will be eased further across the UK to allow families to mix for five days.
EasyJet said bookings for flights from London and Bristol to Belfast, and from London to Edinburgh, had gone up, and searches for flights and holidays to beach destinations next year had surged 200%.
The airline’s chief executive Johan Lundgren said in a statement today:
We know underlying demand is there, which we see every time travel restrictions are lifted. We continue to closely review our flying programme to ensure we are aligning our schedule with customer demand.
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Meanwhile, the Institute for Fiscal Studies, another think tank, calculates that £40bn of tax increases and spending cuts will be needed to balance the books in the coming years, due to weaker-than-expected growth and growing pressure on the NHS and welfare budgets, reports the Guardian’s economics editor Larry Elliott.
The IFS, which specialises in tax and spending, said it was unlikely that the economy would perform as well as the independent Office for Budget Responsibility has predicted in its latest forecasts.
The think tank added that the chancellor was also likely to bow to demands to extend the one-year £20 a week increase in universal credit and also be forced to continue allocating money to fight the Covid-19 pandemic after the 2021-2 financial year.
Turning back to Sunak Rishi’s Covid-19 rescue plan, it will fail to end long-term wage stagnation, a respected think tank says.
The Resolution Foundation said despite the government’s spending plans, by the middle of the decade average pay packets will still be £1,200-a-year below the level forecast before the virus outbreak.
Household incomes are on course to grow by just 10% in the 15 years since the start of the financial crisis in 2008, compared with the 40% growth seen in the 15 years up to the crisis, it said.
AstraZeneca faces questions over vaccine data
AstraZeneca faces growing questions over its Covid-19 vaccine data, after it admitted that it had made a mistake over the dosing in one clinical trial – which one of its senior executives described as “serendipity”.
On Monday, Britain’s biggest drugmaker reported efficacy of 90% if half a dose was given followed by a full dose a month later, while a different trial showed efficacy of 62% if two full doses were given a month apart. Overall, it calculated the efficacy at 70%.
The AstraZeneca share price fell again, by 0.49%, after losing more than 6% earlier this week.
AstraZeneca and scientists at Oxford University, which developed the vaccine, were unable to explain why there was such a large gap in the effectiveness of the vaccine at different doses and why a smaller dose produced much better results. The company disclosed that fewer than 2,800 people received the smaller dose compared with nearly 8,000 who received two full doses. But it did not reveal how many Covid-19 cases were found in each group.
The head of the US vaccine programme, Operation Warp Speed, said the next day that the smaller dose was tested in younger people.
Oxford University said that a difference in manufacturing processes led to the final stage of the UK trials being given a half-strength dose. When this was discovered, it was discussed with regulators, and it was agreed with regulators to push ahead with the two dosing regimens.
During the phase III trials, our UK study used two dose levels.
The initial dose selection, which was agreed with regulators, was based on the same measurement of the concentration (using spectrophotometry) used in the phase I study, but, as a result of a difference in the manufacturing process for the later study, this method was subsequently shown to over-estimate the dose on the new batches of vaccine resulting in a half dose of the vaccine being administered as the first dose.
We have different ways of measuring the concentration of the vaccine and when it was apparent that a lower dose was used, we discussed this with the regulator, and agreed a plan to test both the lower dose / higher dose and higher dose / higher dose, allowing us to include both approaches in the phase III trial.
The methods for measuring the concentration are now established and we can ensure that all batches of vaccine are now equivalent.
Menelas Pangalos, AstraZeneca’s head of biopharmaceuticals research & development, told the New York Times that the error in the dosage (giving half a dose) was made by a contractor and that regulators were immediately notified.
He had described the dosing error as “serendipity” in an interview with Reuters on Monday. The company’s official announcement of the trial results did not mention that the dosing resulted from an initial error. Pangalos told the New York Times:
The reality is, it could end up being quite a useful mistake. It wasn’t putting anyone in danger. It was a dosing error. Everyone was moving very fast. We corrected the mistake and continued on with the study, with no changes to the study, and agreed with the regulator to include those patients in the analysis of the study as well.
What is there to disclose? It actually doesn’t matter whether it was done on purpose or not.
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Market summary
Markets had been riding high earlier this week on vaccine optimism but this has faded as reality has sunk in. The news is once again dominated by further rises in coronavirus infections globally, prompting more government restrictions such as the extension of Germany’s partial lockdown into next year.
The rally in oil is over, for now, as markets are expecting weaker demand for oil. Brent crude has lost 1.5% to $47.88 a barrel today while US crude is down 1.55% to $45 a barrel.
European stock markets are trading flat to lower.
- UK’s FTSE 100 down 33 points, or 0.5%, at 6,357
- Germany’s Dax flat at 13,293
- France’s CAC up 0.01% at 5,573
- Italy’s FTSE MiB up 0.19% at 22,346
- Spain’s Ibex down 0.57% at 8,118
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Carmakers also produced fewer vehicles for the UK market: down 13.6% to 18,629.
The latest decline in output rounds off an extremely tough 10 months for UK carmakers and suppliers, the SMMT said. Production is down more than a third (33.8%) since January to 743,003 vehicles, compared with the same period last year. This translates into 379,308 fewer cars worth some £10.4bn.
Mike Hawes, the SMMT’s chief executive, stressed the importance of getting a Brexit deal:
These figures are yet more bad news for an industry battered by Covid, Brexit and, now, the unprecedented challenge of a complete shift to electrified vehicles in under a decade. While the sector has demonstrated its resilience, we need the right conditions to remain competitive both as a manufacturing nation and a progressive market.
Yesterday’s Spending Review recognised the need to invest in a green industrial revolution, but this must be at globally competitive levels and equal to the scale of ambition to keep this sector match fit.
Above all, we must have a Brexit deal, one with zero tariffs, zero quotas and rules of origin that benefit existing products and the next generation of zero emission cars, as well as a phase in period that allows this transition to be ‘made in Britain’.
SMMT warns over Brexit as UK car production falls 18%
Car production in the UK fell 18.2% in October, when 110,179 vehicles left the factory gates, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT). The Covid-19 pandemic and fresh lockdowns in many countries has led to weaker demand for cars.
This was largely due to a 19.1% fall in exports, particularly to the EU and the US. Shipments to the US fell by 26% and to the EU by 25.7%. However, thanks to less stringent lockdown measures in Asia, exports to Japan and China were up 57.1% and 9.7% respectively.
And Brexit will make things much worse, the SMMT warned.
In the event of a ‘no deal’, production losses could cost as much as £55.4bn over the next five years, and even with a so-called ‘bare-bones’ trade deal agreed, the cost to industry would be some £14.1bn.
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Bank of England governor Andrew Bailey has backed Rishi Sunak’s latest spending plans. He told BBC radio Devon, before speaking to local businesses:
It is absolutely sensible that public resources, resources of the state, are being used to cushion the huge impact of this absolutely unprecedented shock.
We are smoothing the [financial] impact over a number of years to come, and that is the right thing to do.
Most major European markets are now in the red.
- UK’s FTSE 100 down 0.25%
- Germany’s Dax down 0.02%
- France’s CAC flat
- Italy’s FTSE MiB up 0.1%
The UK chancellor, Rishi Sunak, has said that the public finances are on an unsustainable path, after unveiling record borrowing of almost £400bn in his spending review yesterday. He refused to comment on future tax rises, though. He told the BBC:
The forecasts that were set out yesterday show us on a path where that [borrowing and debt] continues to be at a very elevated level, so that’s not a sustainable position.
Once we get through this [the pandemic] and we have more certainty about the economic outlook, we’ll need to look at how we can make sure we have a strong set of public finances.
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Despite the worsening in consumer confidence in Germany and France, Europe’s two biggest economies, European stock markets have mostly opened higher – but some are now giving up their gains. The FTSE 100 index in London rose 0.3% at the open but has just dipped into negative territory.
- UK’s FTSE 100 index down 0.13%
- Germany’s Dax up 0.2%
- France’s CAC up 0.4%
- Italy’s FTSE MiB flat
- Spain’s Ibex flat
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Insee, the French economic institute, says that French households’ fears of job losses have worsened considerably. Here are its main findings:
- Households’ fears about the unemployment trend have grown in November. The corresponding balance has gained four points. It hits its highest level since 2013, and remains well above its long-term average.
- In November 2020, households’ confidence in the economic situation has decreased sharply: the index has lost four points compared to October. At 90, it has hit its lowest level since December 2018 and remains below its long-term average (100).
- In November, households have been much less optimistic concerning their future financial situation: the corresponding balance has lost five points and moves even further away its long-term average.
- In November, households’ opinion balance related to their current saving capacity has declined by three points but remains well above its average.
- In November, the share of households considering that the standard of living in France will improve in the next twelve months has decreased sharply again: the corresponding balance has lost nine points and remains well below its long-term average.
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French consumer morale at two-year low
In France, consumer confidence is also worse than expected and has hit its lowest level since December 2018, according to the Insee economic institute. The reading is 90, against expectations of 92.
#France Nov 2020 #Consumer confidence 90 vs 92 exp, prior 94.
— ForexFlow (@forexflowlive) November 26, 2020
Following #Germany's lower GFK consumer climate at -6.7 vs -5 exp, -3.2 prior, which came out 45 mins ago.
Reflecting current virus restrictions worries.Not affecting $EUR, which slowly zooms higher 1.1939 vs $USD.
You can read the report here.
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Introduction: Asian shares rise; German morale worsens
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s been a good week/month for markets. The Dow Jones closed above 30,000 for the first time ever on Tuesday, and other major stock markets also recorded chunky gains. Traders in New York wore “Dow 30,000” baseball caps to mark that moment.
Markets have been boosted by hopes of a return to normal life after positive results from three coronavirus vaccines in as many weeks, as well as hopes of further fiscal stimulus in the US after Joe Biden’s victory (although he is hamstrung by a Senate with a Republican majority).
After the global stock market rally fizzled out yesterday, Asian shares have risen again today, with Japan’s Nikkei up 0.9% and Hong Kong’s Hang Seng gaining 0.39%.
But despite the optimism over vaccines, the reality is stark, with Covid-19 infections rising around the globe. South Korea has reported the highest daily cases since March.
US jobless claims were higher than expected yesterday: 778,000 workers made claims for jobless benefits last week. Investors are betting that this means that interest rates will stay ultra-low for longer. The data was released early because of the Thanksgiving Holiday in the US today.
In the UK, the chancellor, Rishi Sunak, announced yesterday that the government would borrow almost £400bn this year – a peacetime record – as it battles the worst recession in more than 300 years.
Presenting his one-year spending review (the spending review is usually for three years but these aren’t normal times), he said the UK faced an “economic emergency” that required a public sector pay freeze for millions and a cut in the overseas aid budget. The Institute for Fiscal Studies will publish its analysis of the spending review later this morning.
German consumer confidence, out just now, has come in worse than expected at -6.7 in November versus expectations of a -5 reading, and down from -3.2 the month before. The tighter Covid-19 restrictions and rise in infections are weighing on consumer morale.
The German chancellor, Angela Merkel, and the country’s 16 state governors have agreed to extend the partial shutdown well into December, in an effort to reduce the rate of Covid-19 infections ahead Christmas. (More in our coronavirus live blog)
GfK notes that while shops have been kept open, the closure of restaurants, bars and hotels clouded consumers’ mood. GfK consumer expert Rolf Bürkl explains:
The hopes for a rapid recovery that arose in early summer have definitely been dashed. Only a noticeable decrease in infections and a relaxation of restrictions will bring more optimism again.
Business morale also worsened in November, suggesting that the economy will shrink in the fourth quarter because of the new lockdown, the Ifo institute said on Tuesday.
#Germany GfK Consumer Confidence at -6.7 https://t.co/ZsGWsCVcSP pic.twitter.com/fXnGnmbdcz
— Trading Economics (@tEconomics) November 26, 2020
- 7.45am GMT: France Consumer confidence for November (forecast: 92)
- 9am GMT: UK Car production for October
- 10.30am GMT: Institute for Fiscal Studies’ analysis of UK spending review
- 12.30pm GMT: European Central Bank monetary policy meeting accounts
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