The FTSE 100 dropped to a two-month low on Friday, with Burberry and mining stocks pulling the index below the 7,000 mark before it recovered slightly to close 3.9 points down at 7008.1.
Burberry fell 104p to £19.66 after the British brand said European sales were still 38pc below pre-Covid levels, as tourists stayed away. By comparison, growth in Asia and the Americas was strong, up 7pc and 34pc respectively.
Shares of Rio Tinto, Glencore and Anglo American also weighed on the FTSE 100, with the mining stocks all down between 2.8pc and 3.5pc, tracking weaker metal prices.
Rio Tinto’s 211p drop to £59.31 was also influenced by its second-quarter results, where the company blamed a 9pc fall in production from the key Pilbara region in Western Australia on heavy rain, mine upgrades and efforts to protect cultural heritage.
Elsewhere, optimism surrounding Monday’s lifting of Covid-19 restrictions provided some welcome respite for beleaguered travel stocks.
InterContinental Hotels climbed 77p to £47.03, while Premier Inn owner Whitbread also rose 50p to £29.24 as investors pondered if the companies’ UK hotels were in line for a boost if holidaymakers chose to stay local this summer.
Airline stocks were also rising despite variant fears, with British Airways owner IAG lifting 2.4p to 167.8p after Joe Biden, the US president, signalled the possible restart of transatlantic travel.
In a meeting with Angela Merkel, the German chancellor, on Thursday, he said the US is reviewing when it can lift restrictions on European travellers and he would be able to reveal more information “within the next several days”.
However airline shares’ modest gains yesterday were not enough to make up for their falls earlier in the week. Compared to Monday, IAG was 9.2pc lower and easyJet was down 12pc.
The FTSE 250 shed 32.9 points to 22,467.3 yesterday but its top riser, Cineworld, made a dramatic turnaround after a torrid week. The cinema chain surged 5.6p, or 9.8pc, to 62.9p, as investors on social media advocated for squeezing its short sellers.
Short sellers have been drawn to FTSE 250-listed Cineworld due to doubts about how the company will manage its $8.3bn (£6bn) debt pile. The company is currently Britain’s most shorted stock, with around 7pc of its shares held by six major investment managers in short positions.
A handful of accounts on the social network Reddit shared articles about whether the stock could replicate the path of US cinema chain AMC, which has skyrocketed 1,758pc since January.
The pound dropped 0.3pc against the dollar to $1.3786, as investors flocked to the greenback as a safe haven amid concerns over a global surge of coronavirus cases. Against the euro, the pound was up 0.2pc at €1.1673.
Brent crude spent the session flip-flopping between gains and losses. In late trade, it was priced at $73.81 per barrel.
“It was a one-two punch for the petroleum complex this week: the compromise agreement between Opec+ and the UAE signalled that more supply will be forthcoming to the market, after all,” John Kilduff, partner at Again Capital, told Bloomberg. “The other factor is the impact of the Covid-19 delta variant, which is a threat to the pace of demand recovery.”
05:07 PM
Wrapping up
That is all from us today – here are some of our top stories:
Thank you for following along and have a great weekend!
04:58 PM
Wetherspoon’s to relax rules on Monday
Pub chain J D Wetherspoon will relax face mask and table service rules for customers from Monday, reverting back to “successful measures” it had in place last summer.
The pub giant, which runs 860 sites in the UK, said it will allow customers to order at the bar again, though encourage people to use its app to reduce contact.
Face masks will not be enforced and customers and staff “will be able to wear them at their discretion”, limits on groups of six will no longer apply and the test and trace system in place will be retained on a voluntary basis.
Wetherspoon’s is, however, set to keep a number of its current safety measures in place, such as screens between tables and hand sanitiser stations. The FTSE 250 firm will also continue giving masks to customers and staff.
Tim Martin, founder and chairman of the chain, said: “When pubs reopened after the first lockdown, in July last year, a sensible set of measures were agreed between the hospitality industry, the health authorities and other interested parties – and kept transmission in hospitality venues at low levels.
“While risks from Covid-19 cannot be eliminated completely, we believe that the July 2020 guidelines are a sensible backstop for the industry and strike a fair balance between health, employment and the economy.”
Mr Martin added that some rules in place across his venues have been considered “absurd” by staff and called for reason from Government.
He said: “It is hoped that arbitrary and capricious government rules, which have been a regular feature in recent months, such as the requirement for substantial meals, curfews and table service, which have no scientific provenance, can be avoided in future.
“These sorts of rules damage the economy, are extraordinarily difficult for pub staff to implement and are invariably regarded by customers as absurd.”
04:45 PM
Wells Fargo adds flexibility to post-pandemic office life
Wells Fargo – the US bank with the most employees – has said its return to the office will be ‘mostly’ like pre-Covid times, as it laid out plans to call those who have been working remotely back to the office on September 7.
The process of bringing its almost 260,000-strong staff back will continue through October, according to an internal memo seen by Bloomberg. It will also start collecting employees’ vaccination statuses next week.
Chief operating officer Scott Powell said schedules will have “additional flexibility” compared to pre-pandemic. He added that “choosing not to get vaccinated will not influence your ability to work remotely.”
Employees in operations and contact centers will return on a temporarily rotational basis, those in areas like risk, finance and legal will have flexibility to work remotely as many as two days a week. Tech staff will have more flexibility to work remotely.
“If something dramatic starts to happen with the variants, we would change our plans if we have to change our plans,” said Mr Powell.
It comes as Goldman Sachs, JP Morgan and KPMG staff are told to wear masks in the office upon return.
04:36 PM
Amazon-backed electric pickup maker pushes back production amid shortages
An electric pickup maker backed by Amazon is pushing back plans to start production of its debut vehicle, which was supposed to begin this month, until September.
Rivian Automotive also pushed back its second planned model, an electric sports-utility vehicle, from August until an unspecified time in the Autumn, it said in a letter to customers, seen by Bloomberg. It cited a shortage of component supplies for the delay – an issue that has hit the automotive sector worldwide.
Chief executive RJ Scaringe said in the letter: “The cascading impacts of the pandemic have had a compounding effect greater than anyone anticipated.
“Everything from facility construction, to equipment installation, to vehicle component supply (especially semiconductors) has been impacted by the pandemic.”
The Irvine, California-based company is a front-runner startup seeking to challenge Tesla in electric vehicles. It has raised more than $8bn from high-profile investors that include Ford and investment manager T Rowe Price Group. According to Bloomberg, Rivian is considering floating this year.
Read our previous report on Rivian scouting manufacturing sites in the EU and UK
04:15 PM
Company updates
In some more company updates from today…
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Online mattress retailer Eve Sleep said group sales jumped 13pc to £13.9m in the first half of the year as it continued to be buoyed by pandemic trends. It was boosted by 18pc growth in its UK and Ireland business. The Aim-listed firm said it believes the broad economic recovery and improvement in consumer confidence is likely to “bode well” in the second half of 2021, adding that “some industry supply challenges around raw material inflation and componentry shortages” during the first half have abated.
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London-listed industrial landlord Segro sold its portfolio of six Italian warehouses – with a total floor space of 56000 square metres – to French asset manager Axa IM for €127.5m (£109m), amid soaring demand for distribution sites. Five of the sales have already completed, while the sixth is due later this year following the completion of additional works.
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Packaging business DS Smith has sold off its De Hoop paper mill in the Netherlands for €50m (£43m) to the country’s De Jong Packaging, which will buy it in cash. It is expected to complete in the second quarter of the 2022 financial year. The site produces around 370,000 tonnes each year of mainly heavier grade recycled paper. FTSE 100 DS Smith – which will continue to buy and supply a certain amount of containerboard from the plant – said it will use the money to “partly offset this year’s enhances investment in packaging capacity”.
03:50 PM
Chapel Down toasts £6.8m fundraiser for expansion
English sparkling winemaker Chapel Down has secured £6.8m in new funding to expand its growing Kent empire.
The company revealed more than 4,000 investors bought into the fundraiser, with the cash raised in just 33 days following the issuing of new shares.
Chief executive Frazer Thompson said: “We are truly humbled that so many more investors have decided to join us on our journey to change the way the world thinks about English wine forever.
“More people than ever are aware of the extraordinary potential of English wines. 20 years ago people thought we were mad. No longer. This is the genesis of a new wine region – something special.”
03:21 PM
US stocks erase gains
US Stocks erased their earlier gains after a report showed American consumer sentiment unexpectedly declined to a five-month low and crude oil futures extended losses.
Energy shares led the S&P 500 lower, reversing an earlier gain posed after a report showed June retail sales topped all estimates in a Bloomberg survey.
”The market has been flip-flopping back and forth every day,” Mike Wilson, chief U.S. equity strategist at Morgan Stanley, said in an interview on Bloomberg TV. “Is it going to be growth today or value today and nobody knows because it’s confusing.”
03:02 PM
Bank of Japan warns of “highly uncertain” outlook days before Olympics
The Bank of Japan warned the country’s economic outlook is “highly unclear” as it faces the onset of a Covid-19 wave just days before the Olympics start, reports Louis Ashworth.
The country’s central bank revised down its growth forecast for the fiscal year to March from 4pc to 3.8pc on Friday – saying the downgrade was “due to the impact of Covid-19”.
But it raised growth forecasts for the subsequent year, from 2.4pc to 2.7pc, on expectations consumer demand will pick up on the back of vaccination efforts.
Governor Haruhiko Kuroda said the country’s economy “is likely to gradually recover as vaccinations progress and the impact of the pandemic subsides”.
It kept its monetary policy stance unchanged, and stood by an aim for 2pc inflation – despite having fallen short of that target for years. The BoJ expects consumer price inflation to hit 0.6pc this year, largely as a result of rising energy costs.
The central bank also laid out details of its first green fund, which was announced last month. Under the scheme, set to be launched this year, it will offer zero-interest loans that can be rolled over until March 2031 to banks that invest in sustainable initiatives.
Derek Halpenny, head of research at the European arm of Japanese bank MUFG, said the BoJ had offered few surprises.
“Overall though the impact the BoJ can have on the economic outlook remains marginal,” he said. “The onus really has shifted to fiscal policy and the government.”
It comes amid speculation the Japanese government is preparing a new stimulus package to help its economy recover from the virus. Prime Minister Yoshihide Suga has seen his popularity slide over recent months, and faces a further blow if he cannot contain the latest uptick in cases.
02:52 PM
Behind the Cineworld surge
Cineworld shares have surged 9pc, as investors on social media advocate for turning the cinema chain into a UK memestock and squeezing its short sellers.
Shortsellers have been drawn to FTSE 250 listed Cineworld, due to doubts about how the company will manage its $8.3bn debt pile. The company is currently Britain’s most-shorted stock, with around 7pc of its shares held by six major investment managers in short positions.
But after a torrid week, Cineworld shares rose sharply on Friday, as a handful of accounts on social network Reddit shared articles about whether the stock could replicate the path of US cinema chain and memestock AMC which has sky-rocketed 1,757.7pc since January.
02:27 PM
Birth rate will take years to recover from Covid baby bust
Analysts have warned that populations will take years to recover from a Covid baby bust as delayed weddings, job worries and multiple Covid waves put couples off starting families, reports Tom Rees.
He writes:
A V-shaped recovery from the plunge in global births is “highly unlikely” as the pandemic worsens deteriorating demographics that threaten to cripple economies, according to Morgan Stanley.
Its analysts pointed to slow rebounds in births in the aftermath of the Spanish Flu and previous economic crises as a warning sign for policymakers.
Economists have predicted that ageing populations and shrinking workforces will have a huge impact on developed economies and public finances in the coming decades.
“We believe that optimism in rebounding birth rates or a ‘catch-up’ is misplaced,” said Edward Stanley, Morgan Stanley analyst.
02:08 PM
Mining stocks and Burberry weigh on FTSE
Mining stocks and retailer Burberry are dragging on the FTSE 100 this afternoon, pulling the index below the key 7,000 mark.
Burberry fell more than 5pc after the British brand said sales were struggling to recover in Europe, despite surging in Asia and the Americas.
Miners Rio Tinto, Glencore and Anglo American were all down between 2.7 and 2.8pc.
The FTSE 100 is currently trading at 6,997.6 points, down 14.3 points since yesterday’s close.
01:55 PM
FTSE 100 drops below 7,000
01:41 PM
Wall Street pushes higher
Wall Street stocks have bucked the global trend downwards to open higher after yesterday’s retreat, following a surprise 0.6pc rise in US retail sales for June.
The Dow rose 0.11pc after the opening bell while the S&P 500 opened 0.17pc higher. The tech-heavy Nasdaq jumped 0.37pc before extending that to a 0.53pc increase.
Reuters reported that traders buoyed economically sensitive energy, banks and travel stocks following the jump in retail sales.
While the steady reopening of the US economy, kept liquid by the Federal Reserve, has underpinned US markets this year, the shadow of inflation fears has loomed large over traders in recent weeks.
“We got a lot of optimism for the earnings, but then you’ve got fear of inflation and that’s kind of giving us a whipsaw market,” said Dennis Dick, a proprietary trader at Bright Trading LLC.
“The tech earnings starting next week can make the market forget about those fears (inflation).”
01:23 PM
US futures rise
Looking at markets, the FTSE 100 is the sole riser across Europe at the moment. It has eked out a 0.1pc increase despite Germany’s Dax running flat and France’s Cac dropping 0.41pc. The Eurostoxx 600, a pan-European selection of stocks, is down 0.07pc.
The FTSE may soon be joined by a climb in Wall Street stocks, with all three indices set to open in the green. The Nasdaq is due to rise 0.37pc after a 0.7pc drop yesterday, while the Dow could build on its 0.15pc gain from Thursday with a 0.21pc jump at the open. The S&P 500 is set to wipe out yesterday’s losses with a 0.29pc increase when the markets open after today’s retail sales data.
Earlier on today, yields on US 10-year Treasuries edged off lows to trade up 2.3 basis points at 1.322pc, albeit still near the five-month low of 1.25pc touched last week.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said he expected rates to continue to move higher as confidence in the economic recovery took hold.
“We believe the downward trend in yields will reverse as confidence in the economic recovery mounts. However, we see a rebound in 10-year yields to 2pc by year-end as consistent with a continued rally in equities.”
01:12 PM
US retail sales bump reflects pace of reopening, but auto sector suffers
The surprise rise in US retail sales underlined broad gains across spending categories as America’s economy reopens, topping estimates including Bloomberg’s, which had pointed to a 0.3pc decline for last month.
Federal Reserve stimulus helped to boost retail sales, alongside bumper savings among households that had little to spend their money on during the pandemic.
“With the economy reopening, services spending has begun to pick up and could pull some spending away from goods toward some services that are not captured in the retail sales report,” Kevin Cummins, chief US economist at NatWest Markets in Stamford, Connecticut.
However, the ongoing semiconductor processor shortage hurt motor vehicle sales, which dropped 2pc.
“We expect supply issues and dwindling auto inventories to continue to limit auto sales in the coming months,” said Veronica Clark, an economist at Citigroup in New York.
12:53 PM
US retail sales bolstered by reopening economy
US retail sales increased unexpectedly last month, as demand for goods remained strong even as retail spending had to compete with service.
Economists had forecast retail sales dropping 0.4pc.
Retail sales rebounded 0.6pc in June, the Commerce Department said today, boosting expectations that economic growth accelerated in the second quarter. Data for May was revised down to show sales falling 1.7pc instead of 1.3pc, as previously reported.
Nine of 13 retail categories reported sales increases, including electronics and appliance outlets, clothing stores and restaurants.
Sales at motor vehicle and parts dealers however fell 2pc in June, likely in response to limited inventory as automakers wrestle with a global semiconductor shortage has restrained vehicle production and pushed up prices.
12:33 PM
US retail sales in June rise 0.6pc
12:28 PM
Ericsson warns of slowdown in China as Huawei ban bites
Sweden’s Ericsson warned of an impending backlash in China against Europe’s telecoms makers after Western bans on Huawei, reports Matthew Field.
The telecommunications equipment maker said it no longer expected to win 5G contacts in China, sending its shares down 8pc amid fears of a slowdown of the rollout.
Sales in China fell by 2.5bn krona (£208m), a fall of roughly 60pc year-on-year, although the Stockholm company said its overall sales increased by 8pc.
As the world’s biggest 5G market, China has been a key target for telecoms vendors that had been hoping to win market share.
However, a US campaign against China’s Huawei, which its officials alleged posed a security risk, has led to a backlash against Western telecoms companies.
In June, a court in Sweden upheld a government ban against Huawei selling 5G kit in the country. Chinese state-owned media slammed the decision as “politicised” while local analysts said the decision would imperil Ericsson’s market position in the country.
China’s ambassadors have claimed that the success or failure of Ericsson and in China will be decided by the market. Domestic firms Huawei and ZTE have won the lion’s share of contracts.
Börje Ekholm, Ericsson’s chief executive, blamed the slowdown in China on the political situation.
He said: “It is prudent to forecast a materially lower market share in Mainland China for networks and digital services as the earlier decision to exclude Chinese vendors from the Swedish 5G networks might influence market share awards.”
In quarterly results on Friday, Ericsson also reported it had secured a major contract win with US telecoms firm Verizon, worth $8.3bn (£6bn) to supply it with 5G kit, the single biggest contract win in its history.
12:15 PM
Rocketing numbers of port staff told to isolate
Britain’s supplies of food arriving through ports from abroad now face a greater risk of being disrupted by workers getting “pinged” by the NHS Covid app than they did at the height of the pandemic, reports Alan Tovey.
The country’s ports are seeing “rocketing” numbers of staff being told they must stay at home.
In some cases more than 10pc of docks staff are being informed they cannot go to work.
“This is the most significant threat to ports’ resilience we have seen yet,” said Tim Morris, chief executive of the UK Major Ports Group (UKMPG), confirming that surging levels of port workers being forced to isolate could cause shortages of food.
He added: “In many cases this is the worst absence situation that ports have experienced through the whole pandemic.”
Many of the country’s busiest trade gateways are members of UKMPG, including Associated British Ports, which has 21 locations around the coast, The Bristol Port Company and DP World, which operates the giant London Gateway and Southampton Ports.
About 75pc of all freight flowing through ports into the UK travel via members UKPMG.
It is understood that ports in the Liverpool, Teesside and Bristol regions are being particularly hard hit by the problem.
In one case, 10 members of a 12-person shift working on the docks were “pinged” after their phones were close together in their lockers while they were at work.
They were ordered to isolate even though they worked under strict protocols of operating in pairs and keeping away from others.
Mr Morris said that many port workers have been doubled jabbed reflecting their status as key workers, and called for a change in how people are identified to self-isolate.
11:57 AM
WhatsApp aims to liberate users from their smartphones
Facebook has announced a trial aimed at liberating users of its messaging service WhatsApp from their smartphones.
In a blog post, Facebook said the new feature would allow for the service to be used on multiple “non-phone” devices, without needing to connect to the smartphone app.
“With this new capability, you can now use WhatsApp on your phone and up to four other non-phone devices simultaneously – even if your phone battery is dead,” the blog post said.
WhatsApp can already be used on “companion devices,” such as laptops, but messages can only be sent and received if a person’s smartphone is close by and has battery.
“The new WhatsApp multi-device architecture removes these hurdles” by no longer requiring a smartphone to perform every operation, the company said.
Facebook also made assurances that WhatsApp’s security measures will still work under the new system.
“Each companion device will connect to your WhatsApp independently while maintaining the same level of privacy and security through end-to-end encryption that people who use WhatsApp have come to expect.”
11:39 AM
London-listed airline shares attempt to rebound
Airline shares are staging a recovery today, with RyanAir (up 1.1pc), Wizz Air (up 1pc) and IAG (up 1.7pc) all rising after falling throughout the week.
Tui’s rebound was most striking, as the share price surged 4.3pc on reopening optimism.
However they all remained down compared to their share price at the start of the week.
11:22 AM
US stock futures edge higher ahead of retail sales data
US stock index futures inched higher this morning in New York, with investors piling into economically sensitive energy, banks and travel stocks ahead of key retail sales data that is expected to shed light on the strength of the economic recovery.
The Commerce Department’s report, due at 1.30pm UK time, is expected to show US retail sales edged higher in June after dropping 1.3pc in May.
Markets have largely cheered a steady recovery in the labour market this year, but concerns about higher inflation due to a faster-than-expected rebound has hurt sentiment, with investors oscillating between “value” and tech-heavy “growth” names in the past few sessions.
Dow e-minis were up 0.1pc, S&P 500 e-minis were up 0.2pc and Nasdaq 100 e-minis were up 0.2pc.
Rate-sensitive lenders Citigroup Inc, JPMorgan Chase & Co, Goldman Sachs Group Inc, Morgan Stanley and Bank of America Corp lifted between 0.2p and 0.3p, tracking a rise in benchmark 10-year Treasury yield .
Moderna Inc jumped 7.8pc after S&P Dow Jones Indices said the drugmaker will join the S&P 500 index as of the start of trading on July 21, replacing Alexion Pharmaceuticals .
11:06 AM
McLaren races towards £550m Saudi fundraising
McLaren is close to a deal that will give Saudi Arabia’s sovereign wealth fund and Ares Management big stakes in the supercar manufacturer in a £550m fundraising, reports my colleague Alan Tovey.
He writes:
The Woking-based company is understood to be nearing an announcement as soon as Friday on the equity raise, in which the two new investors will inject £400m while existing stakeholders will pump in £150m.
The agreement with the Saudi Public Investment Fund and Ares, first reported by Sky News, will underwrite McLaren’s strategy over the next five years that includes electrifying its vehicle range.
It is the latest part of a restructuring following the pandemic-induced sales collapse that temporarily halted vehicle production last year.
10:47 AM
Sterling slips against the dollar
Sterling has slipped against the dollar today and is heading for its worst week in a month, as investors sought safety in the greenback amid concerns over a global surge of coronavirus cases.
The pound fell 0.1pc against the dollar at $1.3814 and was poised for a similar weekly loss.
Solid US data and a shift in interest rate expectations after the Federal Reserve hinted at sooner-than-expected hikes last month have supported the greenback in recent weeks.
Against a stronger dollar, the pound struggled to gain ground on the back of growing market speculation that the Bank of England could halt its bond-buying programme early because of an unexpectedly sharp rise in inflation.
The pound was flat against the euro at 85.48 pence.
10:34 AM
Binance stops selling “stock tokens” after regulatory scrutiny
One of the world’s largest Bitcoin exchanges, Binance, said today that users can no longer to buy its digital tokens linked to stocks, a day after Italian regulators joined a string of financial watchdogs to crackdown on the platform.
“Effective immediately, stock tokens are unavailable for purchase on Binance.com, and Binance.com will no longer support any stock tokens after 2021-10-14 19:55 (UTC),” the exchange said, adding it would shift its focus to other product offerings.
Italy’s market regulator said yesterday that Binance was not authorised to provide investment services and activities in Italy, even via its main website which has offered information in Italian on derivatives and so-called stock tokens
BaFin, the German regulator, said in April that Binance risked being fined for offering so-called “stock tokens” without publishing an investor prospectus.
Last month, Binance was banned from offering regulated services in Britain.
10:16 AM
Cineworld claws back losses
Shares of Cineworld have spiked 11pc today, as optimism about Monday’s reopening begins to outweigh concern about weather people will return to the cinema if face mask guidance remains in place.
The heavily shorted stock has had a difficult month, reaching seven month lows yesterday. Despite today’s gains, it remains 22pc down on the month.
It is currently trading at 64.6p.
10:01 AM
Didi shares drop after visit from Chinese regulators
Shares in Chinese ridehailing company Didi dropped as much as 7pc in pre-market trading after Beijing officials raided its offices over data security concerns, reports my colleague Matthew Field.
Officials from seven Chinese regulators launched investigations into Didi, the country’s cyber watchdog said on Friday, and conducted on-site visits and a review of its data practices.
Days after its $68bn stock market debut in New York, China launched a crackdown on the ridehailing app, whose investors include Uber and Apple.
App stores were ordered to remove its services in China, blocking new downloads or updates, although it remains available to use for people who already have the app. New rules in China have been introduced that will require technology companies with more than 1 million users to undergo a data audit before listing overseas.
Didi did not immediately respond to a request for comment.
09:48 AM
Money round-up
Here’s the daily round-up from The Telegraph’s Money team:
09:27 AM
Expert reaction: recovery stocks fight back
Joshua Mahony, Senior Market Analyst at IG, comments on the day’s market movements:
The FTSE 100 is leading the way higher in early trade today, with value names finally staging a fight-back in the wake of a destructive period for recovery stocks.
Airlines and high-street names are enjoying some welcome respite after a period which has seen those sectors weighed down by fears around a surge in Covid cases. With UK Covid cases up to a six-month high yesterday, the government’s plans to reopen in the hope that hospitalisations fall short of max NHS capacity provide a major risk of further future restrictions.
Cineworld is a particular outperformer, with the heavily shorted stock finally seeing a pop as traders look for bargains.
This week has seen a significant shift in the monetary policy mindset, with the Fed’s increasingly hawkish stance starting to look like the norm rather than an outlier.
Overnight inflation data out of New Zealand highlighted exactly why the RBNZ chose to end bond buying this month, with the CPI reaching a near 10-year high of 3.3pc. In the UK, we are also seeing a change in tone from two MPC members, with Ramsden and Saunders alluding to a potential need to begin tapering in the wake of a 2.5pc inflation reading this week.
09:12 AM
IAG rises as Biden hints at return of transatlantic travel
Shares of British Airways owner, IAG, are surging 3pc, after President Biden signalled the possible restart of transatlantic travel.
In a meeting with German Chancellor Angela Merkel on Thursday, he said the US is reviewing when it can lift restrictions on European travellers.
He described discussions on the timeline of lifting the travel ban as “in process now” and said that he would be able to reveal more information “within the next several days.”
08:55 AM
Rio Tinto’s iron ore shipments fall 12pc
FTSE 100 miner Rio Tinto’s iron ore production has been slowed down by storms in Western Australia, threatening its position as the world’s biggest producer, writes Rachel Millard.
The company reported a 9pc fall in production from the key Pilbara region to 75.9m tonnes. It blamed heavy rain as well as work to upgrade the mine and efforts to protect cultural heritage.
Bosses are now expecting to ship towards the lower end of its predicted range of 325m-340m tonnes during the year. That means it could be overtaken by Brazilian rival Vale which predicts it could reach the upper end of its 315m-335m guidance.
Despite the production fall, soaring iron ore prices mean Rio Tinto is still in line to report bumper financial results this month.
Since the start of the year, prices have risen from around $150 per tonne to above $200 per tonne, as post-pandemic recovery fuels demand for the key steel-making ingredient in China and elsewhere.
Analyst David Lennox told Reuters: “We would have liked to have seen higher production to capitalise on these iron ore prices. Still, they are going to be swimming in cash at results time.”
Rio Tinto’s chief executive, Jakob Stausholm, said: “The global economy, in particular China, recovered strongly and we are intensely focused on servicing our customers with as much product as we can. However, we faced some challenges in the first half notably at our Pilbara operations.”
The company reported 6pc lower bauxite production, at 13.7m tonnes. However, aluminium production rose 4pc to 816,000 tonnes.
Rio has had to halt work at its Richards Bay mineral sands project in South Africa after general manager Nico Swart was shot and killed on his way to work on May 24, amid growing community unrest around the site.
“Our sympathies are with Nico’s family and we are offering ongoing support to his family, friends and colleagues,” Rio said yesterday.
Separately, Mr Stausholm is working to rebuild Rio’s reputation after, under his predeccessor J-S Jacques, it blew up 46,000-year-old Aboriginal rock caves in western Australia while searching for iron ore.
08:34 AM
Goldman Sachs employees asked to wear masks in the office
The boss of Goldman Sachs said the bank’s employees will be required to wear masks when they return to the office on Monday, when government advice telling office workers to work from home will be officially lifted.
Richard Gnodde said the company was committed to an office-based way of working.
“For us we’ve been very clear, the centre of gravity for our workforce is our buildings, and in London it will be this building,” he told the BBC.
“We believe it’s really important to have our people together.”
08:20 AM
GSK plans Europe’s ‘largest biotech clusters’ in Hertforshire
GlaxoSmithKline today unveiled its ambition to build Europe’s largest life science campus and create 5,000 new jobs in Stevenage over the next decade.
The company said today it had formally started seeking a development partner to help transform GSK’s existing 92-acre Research & Development site into “one of Europe’s largest ‘clusters’ for biotechnology and other early-stage life science companies”. Work is expected to start next year.
The pharmaceuticals group will sell 33 acres of land on its Hertfordshire site to raise funds for the project. Initial estimates suggest the plan could ultimately deliver up to £400m of investment, GSK said.
Tony Wood, Senior Vice President, Medicinal Science & Technology, GSK commented:
The past 18 months has shown the UK life sciences sector at its best and the UK has recently unveiled an ambitious 10-year vision for the UK life sciences sector.
Our goal is for Stevenage to emerge as a top destination for medical and scientific research by the end of the decade. We are excited to find a development partner to realise our vision to foster the next generation of world-class scientists and biotechnology firms in Britain.
07:54 AM
Burberry sales surge in Asia, remain deflated in Europe
Sales bounced back to pre-pandemic levels at Burberry as partnerships with influencers Kendall Jenner and FKA Twigs helped draw younger people to the luxury fashion brand, writes my colleague Hannah Boland.
Burberry said it had made an “excellent start” to the year after retail revenue hit £479m in the 13 weeks to June 26.
This was up almost 90pc on the same period last year, when most of its 454 stores, concessions and franchises were closed. It also marked a 1pc rise in comparable store sales compared to the 2019 figures, something Burberry chief executive Marco Gobbetti said was partly driven by strong growth in its leather goods and outerwear lines.
Mr Gobbetti said: “Full-price sales accelerated as our collections and campaigns attracted new, younger luxury customers to the brand.”
It comes after the brand chose Kendall Jenner to front one of its campaigns last summer, and recently chose the star, a model who is part of the Kardashian family, to promote its new Olympia bags. Performers FKA Twigs and Shygirl were also part of the latest campaign.
Burberry said sales were particularly strong in the Americas, in mainland China and in Korea, but in Europe it was still operating on reduced hours. It said weaker tourist footfall was also hitting trading in the Europe, Middle East, India and Africa regions.
Slower trading in Europe is something which has been felt across the luxury retail sector, and Cartier owner Richemont on Friday said sales in the continent were down 15pc compared to 2019 figures.
07:27 AM
Travel stocks boost FTSE 100
Travel stocks are among the top risers on the FTSE 100 this morning, with two different visions of the summer ahead competing for gains.
InterContinental Hotels Group and Premier Inn owner Whitbread, which could both benefit from a staycation summer thanks to their UK hotel portfolios, were up around 3pc each after reports that France could be added to the travel red list.
However airline stocks were also rising despite variant fears, with British Airways owner IAG up 3.1pc and plane engine maker Rolls Royce up 2.2pc.
07:14 AM
Why have markets struggled for direction this week?
Michael Hewson, Chief Market Analyst at CMC Markets UK, explains:
The lack of follow-through on this week’s new highs in Europe, as well as the US, appears to speak to uncertainty about a trifecta of factors, the continued increase in virus cases, the pace of recovery which appears to be slowing, and the concerns that the rise in inflation may well not be as transitory as central bankers would like.
We’ve seen this week two central banks start to pare back the scope of their asset purchase programs, with the Reserve Bank of New Zealand and the Bank of Canada announcing changes to that effect.
For now, the Federal Reserve, and in particular Fed chair Jay Powell, has insisted that the Fed is a long way from seeing “substantial progress” when thinking about altering monetary policy. Bond markets appear to buying it for now, but given the strength of recent inflation data you have to ask for how long this can continue?
[…] Two Bank of England officials, Deputy Governor Dave Ramsden, and external MPC member Michael Saunders have also articulated their unease at what appears to be happening with inflation, saying that the case for considering the paring back of some stimulus measures was rising.Yesterday’s unemployment numbers only serve to reinforce those concerns, particularly since there appears to be up to 1m vacancies which UK business is struggling to fill, as the economy starts to reopen.
This inability to fill these positions could well lead to wage inflation on both sides of the Atlantic, and it this mismatch in the labour market where we could well see the effects of higher inflation, as benefits and furlough comes to an end.
07:08 AM
FTSE edges higher
The FTSE 100 has inched 0.3pc higher after opening, rising 19.13 points to 7,031.2.
The FTSE 250 is also up 0.4pc at 22,580.
06:33 AM
FTSE tipped to open up
Good morning. The FTSE is called to open higher after sliding yesterday.
5 things to start your day
1) Revolut boss becomes multi-billionaire after £24bn valuation: Revolut has become Britain’s most valuable fintech firm of all time after an $800m (£578m) fundraising gave it a £24bn price tag.
2) Inflation may force Bank to slam the brakes on QE, warns rate-setter: Michael Saunders’ warning comes as a powerful House of Lords committee warns Bank of England is ‘addicted’ to quantitative easing.
3) Shell and Scottish Power plot giant, floating offshore wind farm: The oil giant and utility submit multiple bids for first offshore wind leasing round in Scotland in a decade.
4) Soho House shares fall on first day of trading: Shares in the private members club dropped almost 10pc to less than $13 in US market debut after pricing at the lower end of its marketed range.
5) Broadcasters must better reflect Britain’s diversity, warns watchdog: Ofcom says the BBC, ITV and channels 4 and 5 should stop being so focused on London and become more representative of the UK’s regions.
What happened overnight
Asian shares headed lower on Friday as profit-taking in Taiwanese chip giant TSMC, despite record profits, weighed on other tech firms and broader risk sentiment, while a more dovish US rates outlook kept bond yields near multi-month lows.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.35pc, weighed by a 1.2pc fall in Taiwanese shares after TSMC’s earnings on Thursday.
TSMC, Asia’s biggest firm by market capitalisation outside China, fell almost 4pc following its earnings on Thursday.
While the world’s largest contract chipmaker posted record quarterly sales and forecast higher revenue for the current quarter, investors took profits, fearing its best times could already be behind it.
TSMC’s fall weighed on many other semiconductor-related shares in the region, with South Korea’s Kospi down 0.6pc and Japan’s Nikkei losing 1.1pc.
Weakness in chip-related shares also helped to bring down the S&P 500 0.33pc and the Nasdaq Composite 0.70pc on Thursday.
Coming up today
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Corporate: Frasers (Full year); Rio Tinto, Burberry (Trading update)
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Economics: Inflation, balance of trade (EU), retail sales (US)
