There was one key story for investors today, even if they shrugged it off: US jobs data, although seen as a little stale, pointed towards a continued rebound in the American labour market – with surprisingly healthy sub-figures.
It’s time for me to wrap up – these were some of the day’s top stories:
The US added 1.8m payrolls in July, continuing a trend towards recovery but leaving pre-virus level a long way off. Experts have warned the recovery may become more difficult from here.
Industrial production in Germany and France jumped, as the countries continued to head toward a ‘v-shaped’ recovery in factory output.
British Airways began telling thousands of staff whether they will lose their jobs as the airline presses on with painful restructuring of operations in response to coronavirus
The Evening Standard announced plans to sack about a third of its staff, including half its journalists.
Halifax said house prices hit a new record high last month after a July ‘mini-boom’.
Thanks for following along today, and do join us again when we return on Monday!
03:20 PM
Market moves
It’s a quiet end to the week on the equities front, with European and US share trading pretty flat, despite that brief jump on the US employment data at 1:30pm.
02:54 PM
Asos call for suppliers to improve transparency
Asos - REUTERS/Suzanne Plunkett/File Photo
Asos has demanded greater transparency from its third-party brands after asking them to sign up to new commitments in the wake of the industry's “sweatshop” scandal.
My colleague Simon Foy reports:
The fast fashion retailer said the pledge will require brands to publicly and regularly disclose their manufacturing supply chains and share information with Asos about any risks to their supply base.
Asos said that the UK will become the “initial focus area” of the programme after rival Boohoo was accused of using a “sweatshop” factory in Leicester to make some of its clothes.
Boohoo said it was not aware it was using the facility, following allegations in the Sunday Times that it was paying staff illegally low wages and flouting safety measures. Boohoo has denied any wrongdoing.
Last month, the Telegraph revealed that Asos ended contracts with several clothing suppliers after it uncovered possible serious threats to workers’ health, safety or human rights.
TP ICAP, the interdealer broker, reported pre-tax profits of £136m in the first half, a £2m increase on the same time in 2019.
My colleague Michael O’Dwyer reports:
The FTSE 250 group, which acts as middleman in financial trading transactions, boosted revenues by 7.4pc to £990m as market volatility during the pandemic sent trading soaring.
Robin Stewart, the firm’s finance chief, said the broker spent an extra £3m on technology, mostly on cloud technology to ensure the vast majority of staff could work remotely.
A small number of brokers remained in the firm’s offices around the world throughout the pandemic but the firm’s chief executive, Nicolas Breteau, said he wants to get all of his brokers back onto dealing floors once it is safe.
“It’s a better and safer environment to have them operate from dealing rooms,” he said.
Having brokers back in the office would allow for better supervision to ensure strict City rules are met, he said.
The group is the FTSE 250’s biggest faller today:
01:58 PM
Staff braces for shareholder revolt
Major recruitment company Staffline is braced for a shareholder revolt over pay to former bosses, following a torrid 2019 characterised by profit warnings.
My colleague Rachel Millard reports:
Shareholder advice group ISS has raised concerns over a £38,000 loss-of-office payment to former Staffline non-executive chairman John Crabtree, and 22.2pc salary increase to £220,000 for former finance chief Mike Watts.
ISS says it is not appropriate for non-executive directors to get loss-of-office benefits, as they are not employees, while the company had not sufficiently explained the reasons for Watts’ pay increase.
Crabtree stepped down in September 2019 and Watts left two months later, followed by former chief executive Chris Pullen in February 2020.
The company had to delay publishing its 2018 annual results for an accounting review.
01:43 PM
Wall Street opens in the red
US stocks opened lower amid growing speculation that Congress won’t be able to agree on a new round of economic stimulus.
US market data
01:16 PM
US jobs reaction: No ‘v’?
There’s relief in today’s jobs numbers, but no sign of a ‘v-shaped’ recovery, says Pantheon Macroeconomics’s Ian Shepherdson, who noted the margin of error with the ADP reports that arrive ahead of non-farm payrolls data is shrinking.
He wrote:
The consensus-beating numbers are welcome but the Homebase employment data for small businesses, which signalled a decent increase in July, have softened markedly, pointing to flat or even slightly negative payrolls in August. September likely won’t be much better, though we hope to see some re-reopening activity in parts of the South and West by then.
Capital Economics’ Andrew Hunter says the recovery “remains intact”, but notes that renewed restrictions led to an uneven spread of gains by sector:
Unsurprisingly given the renewed restrictions on bars and restaurants in many states, the slowdown was driven by the leisure and hospitality sector. That said, it still added a healthy 592,000 jobs, after a gain of nearly 2 million in June. Most other sectors also saw weaker growth, including retail, professional and business services and, in particular, manufacturing. But government payrolls saw a much stronger gain of 301,000 – although that was mainly due to a seasonal quirk.
01:04 PM
US stock futures unruffled by jobs data
European markets picked up slightly following that US jobs data (returning to merely flat, rather than slightly in the red), but US futures are fairly unchanged.
"Why did the stock market rally so much when the economy was falling apart?"
Well, part of it is because when the economy is starting to look much more stable, the stock market's already priced that in. Lack of futures movement today is one example of the flip side of Q2 rally.
— George "Grants To State & Local Gov NOW" Pearkes (@pearkes) August 7, 2020
Meanwhile, the New York Times’s Ben Casselman has some more details on the numbers:
Note that the "misclassification" issue that has been plaguing the jobs numbers since March is still present, but much smaller. The unemployment rate would have been a bit less than a point higher without that issue. pic.twitter.com/ElbVD1X1Is
As in June, the fall in unemployment rates was widespread across different demographic groups – although the fall among Black Americans was comparatively small.
The most striking shift was for young people aged 16 to 19 – after a huge spike at the start of the crisis, their unemployment rate is normalising compared to other groups.
12:40 PM
Permanent layoffs still steady
In another sign of underlying weakness, the number of job losers who said they are not on temporary layoff (i.e., they have lost their jobs for good) remained pretty steady, while temporary layoff fell.
12:36 PM
Still years of job growth yet to recover
Despite another expectation-beating change in non-farm payrolls, total payroll data shows there’s still a way to go for jobs to return to their pre-pandemic levels. At present, they’ve recovered to 2014 levels, but it will be difficult for the US economy to keep up the momentum of recent months without the impetus of reopenings.
12:34 PM
Unemployment rates fall to 10.2pc
The climb in payrolls has knocked the US unemployment rate downwards for a second month, to 10.2pc (versus the 10.6pc expected by economists).
12:31 PM
US added 1.8m jobs in July
Just in: The US added 1.8m non-farm payrolls in July, beating expectations.
As noted in my previous post, these are ‘stale’ numbers: they reflect a strong week of hiring in a mixed July.
More follows...
12:07 PM
Coming up: US labour report
At 1:30pm, we’ll get the latest report on the US labour market – which should lay bare the impact Covid-19 has had on the country’s labour market.
The crucial number is the change in non-farm payrolls. These are expected to show a rise of 1.48m, which economists say would partially reflect the seasonally adjustments made to smooth out numbers.
It’s a tough think to predict, however, especially against the back drop of both mid-July’s rise in initial jobless claims:
And an ADP private payrolls report on Wednesday that fell well short of estimates:
Bloomberg Economics’s Yelena Shulyatyeva has set the scene nicely:
The July jobs report covers the period in which Covid-19 infections accelerated, jobless claims remained elevated, and consumer sentiment deteriorated. Yet the return of lockdowns in some regions and pickup in hiring freezes occurred beyond the July payrolls survey week, suggesting the economy may still eke out another positive.
High-frequency data indicated a slowdown in economic activity in recent weeks due to the re-acceleration in virus cases. We would not be surprised to see a negative payrolls print in the coming months, possibly as soon as August.
After a brief period of respite, the economy is at a potential inflection point. Unemployment data has indicated nascent signs of recovery, but discouraged Americans have been leaving the labor force at an alarming pace, reducing prospects for a fast and robust economic recovery. Further delays in the next round of fiscal support will only exacerbate deterioration.
11:45 AM
Full report: French and German factories rebound
My colleague Tim Wallace has a full report on this morning’s German industrial production figures, and the numbers from France:
Industrial production in Germany surged by almost 9pc in June compared with May, according to official figures, with exports up by 14.9pc.
At the same time French production climbed more than 14pc, Insee numbers showed.
Output in both countries remains below its pre-coronavirus levels, but factories have closed more than half of the yawning gap that opened up during lockdowns.
Hikma Pharmaceuticals is leading risers on the FTSE 100, up more than 10pc after posting solid first-half results and raising its dividend.
The group’s profit before tax rose to $274m in the six months to the end of June, compared to $226m during the same period last year.
It saw its strongest growth in the United States, with core revenues up 63pc over the period, while injectables were its best performing business segment.
The group declared a 16 cents per share dividend, up 14pc on last year’s.
Chief executive Siggi Olafsson said:
These results are a testament to the steadfast commitment of our people, who are working hard to ensure high quality and affordable medicines are available to patients throughout the Covid-19 pandemic.
10:49 AM
Evening Standard to cut a third of jobs – FT
The Evening Standard plans to cut about a third of its jobs after seeing its business model devastated by Covid-19, the FT reports.
It says:
Staff at the free commuter newspaper were told on Friday morning of management proposals to cut 115 jobs to help save the company, which is owned by Evgeny Lebedev, the Russia-born newspaper proprietor nominated for a peerage last week.
The restructuring plan for the London-based title, which has long faced financial difficulties and reported a pre-tax loss of £13.6m in 2019 under the editorship of former chancellor George Osborne, will keep a print edition but will attempt to accelerate its digital transition.
Subject to consultation with staff, the proposal includes removing 69 editorial positions to reduce the 167-strong newsroom by about 40 per cent. A further 31 commercial jobs and 15 in distribution are also under threat. The overall group employs 341 people.
Brutal cuts at the Evening Standard today cast this in a different light. Thoughts with colleagues losing their jobs. https://t.co/nviVBetU1I
Another bleak day for journalism. Job cuts coming at the Evening Standard: sources saying 69 jobs at risk in editorial, 46 in other areas. Emphasis on revamping the website. Feel hugely for my former colleagues, who work incredibly hard.
Full report: Hargreaves Lansdown puts Woodford fiasco in the past
My colleague Michael O’Dwyer has a full report on Hargreaves Lansdown’s latest set of results. he writes:
Hargreaves Lansdown brushed off the fallout from the collapse of stock picker Neil Woodford’s investment empire as profits jumped by almost a quarter in the 12 months to June.
The FTSE 100 firm added a record 188,000 net new customers to take the total number of active clients to more than 1.4m.
Rightmove is one of the biggest risers on the FTSE 100 today, popping higher after releasing results praised by analysts as reassuring.
The UK’s biggest property portal saw its profit before tax drop to £61.6m during the six months to the end of June, down from £108m for the same period last year.
It said home-hunter demand have been “strong” since viewings began again on May 13th, adding it has beaten its February web traffic on 65 days since then. It added:
Rightmove data suggests that the significant increase in activity is being driven not only from the pent up demand from the period of lock down, but an increased number of home hunters who have decided to move following the experience of lock down.
Peter Brooks-Johnson, its chief executive, said:
Despite the current strong market we're mindful that potential economic challenges and further Covid restrictions in the second half of the year make it hard to predict how sustained the increase in activity will be.
Royal Bank of Canada’s Sherri Malek said the results were “reassuringly in line”, but warned:
[We] do not believe the shares are appropriately discounting the risk of prolonged pressure on the property market, and in turn on Rightmove's customers.
09:28 AM
Rolls-Royce falls as US investor ditches stake
Rolls-Royce shares have fallen again on reports that US activist investor ValueAct has sold off its holding in the troubled engineer.
My colleague Alan Tovey reports:
Rolls fell almost 4pc to 243p on morning trade as investors digested news that ValueAct, once the company’s largest stakeholder with an almost 11pc holding five years ago, had dumped the last of its shares.
In March 2019, ValueAct began offloading its stake, taking it down to about 4.5pc by the spring of this year.
To boost its beleaguered balance sheet, Rolls is in talks about selling its Spanish component business ITP, and other fundraising measures including a £1.5bn rights issue are understood to be under consideration.
09:07 AM
BA staff wait to hear their fate as restructuring goes ahead
BA - British Airways/PA Wire
British Airways has begun telling thousands of staff whether they will lose their jobs as the airline presses on with painful restructuring of operations in response to coronavirus.
My colleague Oliver Gill reports:
Cabin and ground crew will be asked to sign up to steep pay cuts, while others will be told that they have been made redundant.
A third group will keep their jobs on pre-Covid terms and conditions.
More than 6,000 staff have applied for voluntary redundancy, the airline said.
BA announced plans to cut up to 12,000 jobs in April after the pandemic grounded flights and left the airline in a fight for survival.
The Chancellor of the Exchequer has been all over the media this morning, appearing on a slew of breakfast shows.
Rishi Sunak was asked about a variety of topics, but most significantly warned the Government’s hugely popular furlough scheme is unsustainable in the long run, warning that extending the scheme would trap people.
He told Radio Scotland:
It’s wrong to keep people trapped in a situation and pretend that there is always a job that they can go back to
Mr Sunak’s words go against a recommendation by The National Institute Of Economic and Social Research, which last week said extending the furlough scheme (which is due to lapse in October) could prevent a wave of job losses in the Autumn.
"It's wrong to keep people trapped in a situation and pretend that there is always a job that they can go back to," Rishi Sunak says.
Here are some other highlights from the Chancellor’s interview spree:
Mr Sunak said there would not be a return to austerity – but said he wanted sustainable public finances over the medium term
He told Sky the Government expects a Brexit deal in September
He told the BBC the bank of England is right to predict further difficulties ahead
He cautioned some of the emergency loan given to companies will need to be written off
Finally, Mr Sunak said he has no “desire” to be Prime Minister
08:15 AM
UK house prices hit record high in July – Halifax
House prices in the UK jumped 3.8pc year-on-year according to Halifax’s house price index – with the average prices rising to a record high of £241,604.
A ‘mini-boom’ last month sent prices up 1.6pc, but the bank said uncertainty will likely put downwards pressure on prices in the medium term.
Russell Galley, Halifax’s managing director, said:
The latest data adds to the emerging view that the market is experiencing a surprising spike post lockdown. As pent-up demand from the period of lockdown is released into a largely open housing market, a low supply of available homes is helping to exert upwards pressure on house prices…
However, looking further ahead, there is still a great deal of uncertainty around the lasting impact of the pandemic. As government support measures come to an end, the resulting impact on the macroeconomic environment, and in turn the housing market, will start to become more apparent.
07:52 AM
Record jump in German trade surplus
More strong economic news from Germany: its trade surplus (the amount by which its exports exceeded imports) jumped a record 14.9pc month-on-month in June, strong recovering from a drop earlier this year.
Berenberg’s Holger Schmieding noted high levels of demand from China has driven the rise, with exports to the world’s second-largest economy up 15.4pc year-on-year during June.
07:30 AM
FTSE edges higher
The FTSE 100 has pushed slightly high after a mixed open, with continental peers looking pretty flat.
Bloomberg TV - Bloomberg TV
07:15 AM
Hargreaves Lansdown sees profits jump
Profit at investment platform Hargreaves Lansdown jumped 24pc after it added a record number of new clients.
The FTSE 100 group’s full-year profit before tax climbed to £378.3m, with revenue up 15pc to £550.9m.
It assets under administration grew 5pc over the year to £104bn.
Chris Hill, its chief executive, said:
We have delivered a strong performance, despite an external environment of persistent challenge.
The benefits of putting our clients at the heart of everything we do, combined with our investment in the scalability, diversity and resilience of HL’s business model, have been demonstrated through a record 188,000 net new clients, bringing total active clients to over 1.4 million and £7.7 billion of net new business, also a record.
Client-driven share deals soared by 96pc during the year, driven by frenzied trading around Brexit and the market tumult prompted by Covid-19.
It cautioned the path ahead looks uncertain, adding:
The impact on our clients and the wider investment community as a result is difficult to call. Interest rates are at all-time lows, which makes cash savings unappealing, but market uncertainty and volatility can equally deter people from investing and access to liquidity is a key part of building financial resilience.
Shore Capital’s Paul McGinnis said lockdown “had proved to be somewhat of a boom period for retail-focused share dealing platforms”, but said investors should consider taking profits if its share rise tofday – as indeed they have:
07:03 AM
German industrial production begins comeback
Industrial production in Germany jumped strongly during June, putting its factories on track for a ‘v-shaped’ recovery.
Production rose 8.9pc month-on-month, but remains down 11.7pc year-on-year and solidly below its pre-virus trajectory.
ING’s Carsten Brzeski said yesterday’s strong new orders data should be consider a “downpayment on future industrial activity” that suggests the recovery in Germany will continue. He added:
Still, industry has longer to go before returning to pre-crisis levels than the rest of the economy. While most parts of the economy have returned to more than 90pc of pre-crisis levels, today’s data brings industrial production only back to some 85pc of its pre-crisis number. On top of that, German industry had already been on a difficult ride in the two years prior to the start of the Covid-19 crisis…
All in all, today’s data confirm that at least the rebound after the lifting of the lockdown measures is v-shaped. With all the risks of a second lockdown wave, an increase of permanent unemployment and structural changes to the economy stemming from Covid-19, it is however very unlikely that this ‘v’ will last for long.
06:49 AM
Ofgem lowers energy price cap
The price cap on household energy bills will be kept in place beyond this year as the industry watchdog said it would lower the cap from Oct 1.
My colleague Simon Foy reports:
Ofgem said around 15 million households on default energy tariffs and prepayment metres would benefit from the changes, with those on default plans saving around £84 and prepayment customers saving £95.
The cap has been set at £1,042 per year from October to March and will be in place for six months until Ofgem reviews it again. It is the lowest the price cap has been since it was introduced in January 2019.
The reduction was due to a sharp decrease in wholesale gas prices since the cap was last updated in February, Ofgem said.
Read more: Ofgem lowers price cap by £84 a household
06:13 AM
Agenda: Stocks slide on trade tensions
Good morning. The FTSE 100 is set to slide as the open as trade tensions between the US and China escalated overnight.
It came as President Donald Trump moved to ban popular Chinese apps TikTok and WeChat. Mr Trump signed executive orders prohibiting US residents from doing any business with WeChat, TikTok or the apps’ Chinese owners beginning 45 days from now, citing national security risks.
WeChat owner Tencent slumped more than 10pc at one point on the news.
Separately, negotiations between Republicans and Democrats on a fresh US stimulus package hit an impasse, bringing the talks to the brink of collapse.
3) The working from home experiment has been too successful: The Government needs cities to get back up and running to save cafés, pubs and restaurants that rely on office workers. The problem is that the home working experiment has been so successful that the call for commuters to get back on buses and trains is being ignored.
4) Troubled foreign exchange provider Travelex has struck a rescue deal to stay afloat, but with the loss of more than 1,300 UK jobs. Administrators PwC said that a pre-pack administration sale of certain Travelex entities in the UK had been reached, saving 1,800 jobs across the country.
5) Barclays investors fume as Bramson agitates again: Mr Bramson said the lender must consider drastic cuts to boost its share price, and called for it to follow in the footsteps of Germany's Deutsche Bank by focusing on retail operations instead.
The news dragged the Hang Seng down 2.6pc and markets were in the red across Asia this morning. Tokyo ended the morning 0.6pc lower and Shanghai slipped 1.1pc, with Sydney falling 0.7pc. Taipei, Singapore, Manila, Jakarta and Wellington were also well down.
Coming up today
Interim results: Hikma, Rightmove, Standard Life Aberdeen, TP ICAP
Full-year: Hargreaves Lansdown, Scapa
Economics: Halifax house price index (UK); trade balance (China); unemployment (US)
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