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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Pound at 33-month high against US dollar, as economic recovery hopes lift markets – business live

A dragon boundary mark at the edge of the City of London.
A dragon boundary mark at the edge of the City of London. Photograph: Vuk Valcic/SOPA Images/REX/Shutterstock

Closing summary

Time to wrap up.

The pound has risen to a new 33-month high against the US dollar, as Britain’s vaccine rollout spurs hopes of an economic recovery. Sterling hit $1.3866 today, for the first time since late April 2018, with some analysts suggesting it could soon hit $1.40.

The Bank of England governor has warned against the UK and EU ending up in a regional argument over financial services post-Brexit.

In the US, inflation has remained subdued, with consumer prices only rising by 1.4% per year in January. The CPI figures calmed worried that rising prices could force policymakers to rein in stimulus packages.

Stock prices across emerging economies had earlier hit record highs, on hopes of an economic rebound.

With China’s factories putting up their prices for the first time in a year, and platinum hitting a six-year high, there are signs that demand is rising.

But there are signs of weakness too, with French industrial production falling again and brewer Heineken outlining 8,000 job cuts.

In other news:

AstraZeneca has unveiled plans to build a new Covid-19 vaccine manufacturing facility in partnership with IDT Biologika at the German firm’s Dessau site, in a move aiming to speed up production and defuse a row with the EU over vaccine supply.

Housebuilder Persimmon has set aside £75m to pay for any work needed to remove cladding on its high-rise buildings after a review of its past developments. The move comes as the government outlines a £3.5bn fund to fix dangerous cladding on high-rise buildings in England.

Former Labour MP Chuka Umunna is joining JP Morgan, to work on its ESG operations.

The transport secretary has told people in Britain not to book holidays domestically or abroad, provoking an immediate backlash from the UK’s embattled travel industry.

European workers are facing months more home-working, with many not expecting to return to the office before the summer.

In the fashion world, Rihanna’s ready-to-wear line Fenty has been discontinued.

And Twitter’s CFO has revealed that the company has been considering whether it should hold the cryptocurrency on its balance sheet - but hasn’t made any changes yet.

Goodnight. GW

BoE governor: Let's not fall out over financial services after Brexit

Bank of England Governor Andrew Bailey urged the European Union to work with Britain over financial services trade after Brexit, rather than engaging in a ‘regional argument’

In the annual Mansion House speech, Bailey argues that the EU is demanding more of London than other partners, and demanding concessions from the UK that it wouldn’t accept itself.

Here’s the key part of the speech (online here).

As is well known, the post-Brexit equivalence process between the UK and EU has not been straightforward. It is, of course, two distinct processes – one for the UK to recognise the EU as equivalent to the UK, and one for vice versa. The UK has granted equivalence to the EU in some areas, but the EU has not done likewise to the UK. In a few areas – involving central clearing and settlement – there has been agreement by the EU to extend temporary equivalence to the UK, recognising, I think, the clear risks to financial stability that would have arisen had this not been done at the outset.

It would be reasonable to think that a common framework of global standards combined with the common basis of the rules – since the UK transposed EU rules from the outset – would be enough to base equivalence on global standards. Less than this was enough when Canada, the US, Australia, Hong Kong and Brazil were all deemed equivalent. Continuing with the example of central clearing, the EU has recently made the US SEC equivalent for CCPs, subject to certain conditions. These conditions are already met by UK CCPs as they are a legal requirement in the onshored legislation, but equivalence beyond the temporary extension remains uncertain.

The EU has argued it must better understand how the UK intends to amend or alter the rules going forwards. This is a standard that the EU holds no other country to and would, I suspect, not agree to be held to itself. It is hard to see beyond one of two ways of interpreting this statement, neither of which stands up to much scrutiny.

The first interpretation is that the rules should not change in the future, and to do so would be unwelcome. This is unrealistic, dangerous and inconsistent with practice. As the world around us changes, so must the rules to accommodate these changes. As evidence of this, look at what the authorities have had to do in response to Covid and the shock that created for financial markets. The EU is almost constantly revising, or contemplating revising its own rules, and that’s a good thing. So, I dismiss this argument.

The second argument is that UK rules should not change independently of those in the EU. I am being careful to phrase this point. It’s not that UK rules might change independently – the equivalence process provides for re-assessment of such decisions, so this should not be a problem. So, it must be the stronger form that they should not change independently. But that is rule-taking pure and simple. It is not acceptable when UK rules govern a system 10 times the size of the UK GDP and is not the test up to now to assess equivalence.

Bailey ends by insisting that an open financial system must be based on a global, not regional, regime if it is to work.

“We have an opportunity to move forward and rebuild our economies, post-COVID, supported by our financial systems.

Now is not the time to have a regional argument.”

European markets closer lower

After a bright start, the US stock market has now dropped back from its earlier highs - with the tech-focused Nasdaq currently down around 0.3%.

European markets have also subsided, with the Stoxx 600 closing down 0.25% tonight. Germany’s DAX lost 0.5%, with France dipping 0.35%.

The UK’s FTSE 100 only lost 0.1%, despite the stronger pound. Mining stocks rallied, supporting the index, on hopes of an economic rebound this year that would drive demand for commodities.

But UK housebuilders fell, along with travel and hospitality companies.

The close of the European stock markets, February 10th 2021
The close of the European stock markets, February 10th 2021 Photograph: Refinitiv

David Madden of CMC Markets reports that investors are hoping that Covid-19 vaccinations will allow economies to reopen in the coming months.

Here in Europe, governments continue to distribute vaccinations so there is an overall feeling that things are heading in the right direction health wise. Nobody is expecting the process to be fast but while vaccinations are being rolled out, that bodes well for the prospects of governments easing up in restrictions in the next few months.

In London, firmer metal prices have helped Rio Tinto, Anglo American, Glencore and BHP Group – they are some of the biggest gains on the FTSE 100.

On bitcoin... Twitter’s CFO Ned Segal has revealed that the microblogging site has considered whether it should hold the cryptocurrency on its balance sheet - but hasn’t made any changes yet.

Segal told CNBC that Twitter had done a lot of ‘upfront thinking’ about how it might potentially pay vendors or employees using bitcoin, should they ask to transact using the virtual currency.

He explained:

“We might consider whether we would be transferring dollars to bitcoin at the time of the transaction or if we wanted bitcoin on our balance sheet ready to complete that transaction.”

Segal was speaking after being asked about Tesla’s decision to buy $1.5bn of bitcoin, news which sent bitcoin to record highs earlier this week.

Bitcoin has dropped back from Tuesday’s peak, though; currently down nearly 6% at around $44,600.

Oracle and Walmart’s plan to buy TikTok’s US operations has reportedly been pushed back indefinitely, as the US president, Joe Biden, reviews the previous administration’s efforts to address potential security risks posed by Chinese tech companies.

The administration of the former president Donald Trump had cited national security concerns in its targeting of TikTok, arguing the personal data of US users could be obtained by China’s government. TikTok denies the allegation.

It comes as TikTok’s owner, ByteDance, finds itself in a legal tussle with the US government, with many federal courts barring the commerce department’s attempt to shut down TikTok’s operations in the US.....

Oil pump jacks operating at Willow Springs Park in Long Beach, California.
Oil pump jacks operating at Willow Springs Park in Long Beach, California. Photograph: Apu Gomes/AFP via Getty Images

Back in the energy sector, US oil stocks have fallen by more than expected.

The Energy Information Administration reports that U.S. crude inventories fell by 6.6 million barrels last week, much more than the 2.7m barrel drop which analysts expected.

This is helping to keep crude prices at their highest levels in a year, with Brent crude trading around $61.38 per barrel.

Another vaccine development: World Health Organization experts have recommend the use of AstraZeneca’s Covid vaccine in adults of all ages, including the over-65s.

Reuters has more details:

In interim recommendations on the shot, the Strategic Advisory Group of Experts on Immunisation (SAGE) panel said the vaccine should be given in two doses, with an interval of around 8 to 12 weeks between the first and second doses.

SAGE also said that even where questions have been raised about the vaccine’s efficacy against a South African variant of the coronavirus, “there is no reason not to recommend its use”.

Our Coronavirus liveblog has the latest developments:

Updated

AstraZeneca and Germany's IDT Biologika in vaccine production push

AstraZeneca has unveiled plans to build a new large Covid-19 vaccine manufacturing facility with Germany’s IDT Biologika at the firm’s Dessau site, in an attempt to defuse a row with the EU over vaccine supply.

IDT Biologika, one of AstraZeneca’s manufacturing partners, provides glass vials and injects the liquid vaccine – which is made at other European sites – into vials, before capping and boxing them.

The two companies said they were exploring options to speed up this process in the April to June quarter to support Europe’s vaccine rollout, after a slow start to vaccination campaigns in EU countries amid supply shortages.

The two companies are also building a large additional facility to ramp up vaccine production at IDT Biologica’s production site in Dessau in east Germany.

They plan to build up to five 2,000-litre bioreactors capable of making tens of millions of doses per month of AstraZeneca’s Covid-19 vaccine. However, the new facility won’t be up and running until the end of next year.

The factory could also manufacture other vaccines that have a similar manufacturing process. This means that IDT Biologika will have one of the largest vaccine manufacturing sites in Europe.

Jürgen Betzing, chief executive of IDT Biologika, said:

“We are proud that AstraZeneca has chosen us as a strategic partner for the manufacturing of their vaccines. The agreement underscores our expertise in the production of demanding vector-based vaccines and our ability to provide a one-stop solution, from creating drug substance, through to “fill and finish” and secondary packaging.”

Pascal Soriot, AstraZeneca’s chief executive, added:

“This agreement will greatly help Europe build an independent vaccine manufacturing capability that will allow it to meet the challenges of the current pandemic and create strategic supply capacity for the future.”

IDT Biologika produces viral vaccines for pharmaceutical companies, and has suffered a recent setback in developing its own vaccine against Covid-19, Reuters reported.

Earlier today, European commission president Ursula von der Leyen conceded to MEPs that the EU is “not where it wants to be” with its coronavirus immunisation programme, amid mounting criticism of the bloc’s slow deployment of vaccines.

Last month, the EU threatened to block exports of coronavirus vaccines to countries outside the bloc such as Britain, after AstraZeneca warned that it could only deliver half as many doses as planned in the first quarter of 2021, due to production problems.

Here’s some early reaction:

Updated

Wall Street hits fresh record highs

Th US stock market has opened at fresh record highs, after January’s tame inflation data reassured investors.

The main indices all hit new peaks, as traders continue to anticipate major new stimulus package from the Biden White House, and loose monetary policy from the Federal Reserve.

Here are some early prices:

  • Dow: up 108 points or 0.3% at 31,484
  • S&P 500: up 16.8 points or 0.4% at 3,928
  • Nasdaq: up 74 points or 0.5% at 14,081

US inflation: What the experts say

Here’s Neil Birrell, chief investment officer at Premier Miton Investors, on the subdued US inflation report:

“The reflation trade is the hot topic, but there is no sign of it becoming a bigger issue in the short term data, with the US CPI for January coming in as expected at 0.3% month-on-month and a little lower than expected year-on year at 1.4%.

Investors will be looking further out but with the 10 year yield bouncing off 1.2% again, the reflation trade is clearly not a one way bet.”

Investment manager Michael Ashton has pulled out some important points from the report:

Andrew Hunter, Senior US Economist at Capital Economics, reckons that inflation will start to pick up ‘sharply’ in the next few months:

It isn’t a huge surprise that the recent virus-induced weakness in activity and employment appears to be weighing on inflation, but with virus cases now falling sharply and states starting to ease restrictions on activity, that weakness is unlikely to last for long.

In any case, as the big falls in prices last year drop out of the annual comparison inflation will pick up sharply in March and April.

More generally, with growth in unit labour costs surging and a range of survey indicators also pointing to rising price pressures, we still think inflation will be much stronger over the rest of this year than most others currently expect.

The US dollar has dipped following the inflation report, with traders relieved that prices aren’t rising faster than expected.

If inflation was accelerating, it would put pressure on the US Federal Reserve to consider easing back on its huge stimulus programme.

This is keeping the pound at a 33-month high (it’s now trading around $1.385, up a third of a cent today).

January’s inflation data shows that the US economy isn’t overheating, says Oxford Economics’ Greg Daco.

He also flags up that energy prices picked up last month, matching the rise in crude prices:

US inflation below expectations

Just in: US inflation was a little lower than expected last month, which could calm fears that prices are taking off.

Consumer prices rose by 1.4% per year in January, below consensus of a 1.5% rise.

On a monthly basis, prices were 0.3% higher than in December.

But core inflation (stripping out food and energy) were unchanged month-on-month, and also up 1.4% year-on-year.

Back in the City, shares in travel and hospitality companies have lost ground today,

British Airways parent company IAG has dipped by 3%, while easyJet has lost 4% and Intercontinental Hotels is down 2.1%.

The selloff comes after transport secretary Grant Shapps has told people in Britain not to book holidays domestically or abroad, in another blow to the UK’s embattled travel industry.

Shapps told BBC Radio 4’s Today programme it was too soon to be planning trips:

“People shouldn’t be booking holidays right now – not domestically or internationally.”

Travel companies faces a difficult summer, with the UK threatening to impose 10-year jail sentences on travellers who try to conceal journeys from coronavirus hotspots, and mandating £1,750 10-day quarantine period on people returning from 33 “red list” countries.

Over in the US, the number of new mortgage applications fell last week - suggesting the property market might be cooling.

Overall mortgage application volume fell 4.1% last week compared with the previous week, according to the Mortgage Bankers Association.

CNBC reckons that rising mortgage rates, low supply and high home prices have all hit demand.

Joel Kan, the MBA’s associate vice president of economic and industry forecasting, says:

“Despite some weekly volatility, Treasury rates have been driven higher by expectations of faster economic growth as the Covid-19 vaccine rollout continues.”

Despite the optimism over vaccine rollouts, the UK hospitality sector continues to suffer from the current lockdown.

Oliver Shah, business editor at The Sunday Times, reports that Italian restaurant chain Prezzo has filed for administration. This could lead to around 200 job losses (with its owners buying back most of the sites through a ‘pre-pack’ rescue).

Prezzo has around 180 UK outlets, but is currently only able to offer takeaway and delivery meals from some of its sites.

Sky News reported yesterday that its owners were pondering an insolvency process amid continued uncertainty about the industry’s reopening timetable and discussions with its landlords over future rent arrangements and the payment of arrears.

Updated

If the current rally continues, the pound could soon approach the $1.40 mark for the first time in almost three years

Fawad Razaqzada, market analyst with ThinkMarkets, says sterling (currently trading around $1.384) could push higher, if investors remain optimistic about economic prospects.

The GBP/USD has today risen to its best levels since April 2018 as investors continue to pile into the racier pound and out of the US dollars amid ongoing “reflationary” and “risk-on” trades.

The pound has been pushing up across the board since the turn of the year due to a no-deal Brexit being avoided and the UK is currently well ahead of many countries in the race to vaccinate its population.

Together, these developments have boosted expectations that the UK economy could potentially recover quicker and stronger once lockdowns end.

The Pound/US dollar exchange rate
The Pound/US dollar exchange rate Photograph: Think Markets

Updated

European office workers don't expect office return until June

A computer scientist works in his home office in Dortmund, western Germany, last month.
A computer scientist works in his home office in Dortmund, western Germany, last month. Photograph: Ina Fassbender/AFP/Getty Images

European office workers aren’t expecting to return to their desks until the summer, according to a new survey, as the date for going back to work has slipped despite ongoing vaccination programmes and tight coronavirus restrictions.

Research by the Alphawise unit at US bank Morgan Stanley found that workers in the UK, France, Germany, Italy and Spain now expect to go back to the office in June, compared with previous expectations for an April return.

After almost a year of working from their kitchens, living rooms and bedrooms, Morgan Stanley found that demand from office workers to continue working flexibly in future has faded since last year, with staff in the five European countries hoping to work from home for two days per week.

The pandemic has permanently altered working habits for some of the biggest tech firms - and business software maker Salesforce has joined the ranks of Twitter and Facebook in embracing remote working in future.

The San Francisco-based firm has announced that it will let its employees work from home in future for at least part of the week.

Marios Hadjikyriacos of XM agrees that the UK’s vaccine programme is pushing up the pound, as it could lead to a faster economic recovery.

The British pound continues to capitalize on the dollar’s troubles, with Cable [the £/$ exchange rate] exploring heights not seen since early 2018.

The UK economy is still in a deep hole, but the swift pace of vaccinations implies a stronger recovery ahead.

The cheerful market mood is another element underpinning the pound, which has become linked to risk appetite during this crisis thanks to the UK’s chronic twin deficits that require capital flows from abroad

Asset price moves, 10th February 2021
Asset price moves today Photograph: XM

Geoffrey Yu, senior EMEA market strategist at BNY Mellon, makes a similar point (via Reuters):

“The UK’s advanced vaccination rates may also start to show its impact in health outcomes and that certainly will strengthen the Bank of England’s current relatively optimistic case.”

French industrial sector struggles as output falls

France’s factories are continuing to struggle, highlighting concerns that its economy may lag behind the global recovery.

French industrial output fell by 0.8% month-on-month in December, much weaker than the 0.2% growth expected. The narrower measure of manufacturing output shrank 1.7% compared with November.

On an annual basis, French industrial production is 3.8% lower than a year ago - which ING economist Charlotte de Montpellier points out is weaker than its neighbours.

The drop in production observed in December 2020 compared to December 2019 in Italy (-1.9%), Germany (-0.7%) or Spain (-0.6%) is much less than the 3% drop observed in France.

Compared to February 2020, the last month before the lockdown, the fall in French industrial production is also much greater than that of its European neighbours (-4.9% compared to -3.7%, -3.6% and -0.5% for Italy, Germany and Spain respectively).

Why the shortfall? De Montpellier says that the structure of France’s industrial sector has left it particularly exposed to the pandemic:

The production of machinery and capital goods is a smaller share of industrial production in France than in Germany or Italy. This implies that France benefits less from the economic recovery in China than its neighbours.

Moreover, production in France is strongly oriented towards the aeronautics sector, which is suffering much more during the pandemic. This being the case, the weakness of the construction sector (-10.9% since February) also indicates that the sectors oriented towards the domestic market are also suffering significantly.

Former Labour MP Chuka Umunna has become the latest UK politician to take a senior role in the financial world.

Umunna, the ex-shadow business minister who was once tipped as a future prime minister, is joining JP Morgan, to lead its European environmental, social and governance (ESG) work.

It’s a well-trodden path. Last year, former UK chancellor Sajid Javid was hired as a senior adviser to JP Morgan, who famously took on former PM Tony Blair as a global adviser back in 2008.

And last week, another ex-chancellor, George Osborne, moved to become a full-time banker at investment bank Robey Warshaw.

Most government funding for Covid-hit start-ups benefits London and South-East

The UK government’s main funding scheme for start-up businesses hit by the Covid-19 crisis has handed firms in the south east five times as much money as those in the Midlands and the north.

According to figures compiled by the Labour Party from official data, businesses in the South East and London received in total of more than £700m in funding, while businesses in the north, Yorkshire and the Midlands received just £140m.

In a further erosion of government plans to level up the regions outside the south and east of England, the average awards from the Future Fund to individual firms in the West Midlands, Yorkshire, Scotland and Wales were substantially smaller than to those in London and the south east.

This discrepancy is even starker when compared to the population, with 18m people in the South East and London compared to a combined 28m in the north, Yorkshire and Midlands.

Start-up businesses in Yorkshire received £27m while those in London received in £590m, despite London’s population being less than twice as large as Yorkshire’s – 8.9m compared with around 5.5m in Yorkshire.

The West Midlands had just 30 applications approved at an average loan total of £686,000 while 112 firms in the south east, excluding London, secured loans at an average £1m.

The Future Fund, which offers loans of up to £5m, was criticised last year following its launch in April for being poorly targeted at small businesses. The head of the British Business Bank, a quango given the job of dispensing much of the funds, complained to parliament that the scheme was poorly designed and risked landing the government with stakes in companies with highly uncertain futures or handing making loans to firms that didn’t need it.

Ed Miliband, Labour’s shadow business secretary said the latest analysis of the scheme showed that it failed to achieve the aim of levelling up the regions by giving them a fair share of the funds.

“While the Government talks about backing the north and Midlands, the reality is starkly different. Their interventions are making regional inequality worse not better.

“By investing much more heavily in start-ups in the south of England and squeezing out other parts of the country, they will be simply reinforcing economic imbalances.”

A Treasury spokesperson said:

“The Future Fund uses a set of standard terms with published eligibility criteria, independent of ministers. This a clear, efficient way to make funding available as widely and as possible, irrespective of location.

“In addition to the Future Fund, the British Business Bank has provided nearly half a billion pounds to high-growth firms outside of London.”

Optimism about the UK’s speedy Covid-19 vaccine rollout is also boosting the pound.

It’s trading close to a nine-month high against the euro, at €1.1413, on top of its gains against the dollar.

Jane Foley, head of FX strategy at Rabobank, explains (via Reuters):

“GBP bulls have been flexing their muscles since the start of the year based on relief about the EU/UK trade deal and on hopes that the relatively rapid vaccine roll-out programme will lead to a fairly fast economic recovery this year,”

Pound at 33-month high against US dollar

The pound has hit its highest level against the US dollar in close to three years this morning.

Sterling has hit $1.384 for the first time since the end of April 2018, amid hopes of economic recovery - and with the prospect of major new US stimulus measures weakening the dollar.

The pound vs the US dollar
The pound vs the US dollar Photograph: Refinitiv

Michael Hewson of CMC Markets explains:

The US dollar has continued to drift lower in the wake of last Friday’s disappointing US payrolls report hitting its lowest level this month, as increased confidence fuels a move out of the greenback into riskier areas of the market.

The pound has continued its move towards the $1.4000 level after breaking the 1.3750 resistance area that had been capping gains for most of January, bringing it closer to its highest levels in over three years.

The pound has also been lifted by the Bank of England inching away from negative interest rates (last week, it gave commercial banks six months to get ready for a potential cut below 0% - by which time the recovery should be underway)

Heineken to cut 8,000 jobs

Glasses of Heineken beer.
Glasses of Heineken beer. Photograph: Nguyen Huy Kham/Reuters

Grim news of the morning - Heineken is cutting around 8,000 jobs as part of a restructuring plan, after its sales were hit by the pandemic.

The Danish brewer announced the cuts, which equal around 10% of its global workforce, this morning, as part of a €2bn cost savings plan.

The job losses a review of the “effectiveness and efficiency” of Heineken’s head-office, regional offices and local operations, after the company was badly hit by the closure of bars and restaurants during the pandemic.

Heineken reports that:

In Europe in particular, we estimate that at the end of January 2021, less than 30% of on-trade outlets were operating. Product and channel mix is expected to continue to adversely impact results, especially in Europe.

The company reported a net loss of €204m for 2020, with revenues down 16.7% and organic beer volumes down 8.1%.

It also predicted that sales in Europe’s hospitality sector would only recover slowly.

We expect market conditions to gradually improve in the second part of 2021 and to continue improving into 2022, with significant differences across markets and channels. In particular, we see a slow recovery of the on-trade channel in Europe.

Another UK housebuilder, Redrow, has reported that demand for larger homes away from the cities remains strong, after the pandemic lockdowns encouraged some families to move.

Redrow reported a 20% rise in revenues in the last six months of 2020, lifting profits by 11%.

Redrow, which is scaling back its operations in London, says the market was strong thanks to ‘pent-up demand’ after the first lockdown ended, the stamp duty holiday (which ends next month), and the impending end of the Help to Buy scheme for existing home owners.

Demand in the regions for our Heritage homes has been particularly high as more buyers reflect on their lockdown experiences and prioritise space in their homes and access to green areas.

Persimmon sets aside £75m for cladding safety work

The housebuilder Persimmon has set aside £75m to pay for any work needed to remove cladding on its high-rise buildings after a review of its past developments.

The developer is mostly known for constructing family homes but has identified 26 multi-storey buildings it constructed that have cladding that may need to be removed.

The company’s financial commitment came before an expected ministerial announcement from the government about providing billions of pounds of extra support for the owners of flats in buildings covered with cladding.

The Grenfell Tower disaster in 2017 exposed the dangerous defects in thousands of apartment blocks across the UK, many of which were covered in flammable cladding.

Here’s the full story:

Prices charged by Chinese manufacturers haver risen year-on-year for the first time since the Covid-19 pandemic began - another sign that the economic recovery is building.

Figures released overnight showed that China’s factory gate prices increased by 0.3% in annual terms in January.

That’s the first rise in 12 months, and the fastest rate since May 2019. It suggests that manufacturers are able to raise prices as demand picks up, and as rising commodity prices push their raw material costs higher.

Consumer prices fell last month, though, with clothing, housing transport and communication costs dropping.

Updated

Mining stocks are rallying this morning, on expectations of stronger demand for commodities such as iron ore, copper and coal.

Antofagasta (+2%), Glencore (+2%) and Rio Tinto (+1.9%) are all among the FTSE 100 risers.

Economic optimism has also lifted platinum, which is trading at its highest level since 2015.

Updated

Introduction: Emerging markets back at record levels

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

Stock markets across the emerging economics are pushing higher today as investors continue to price in a solid recovery once the Covid-19 pandemic has been driven back.

MSCI’s emerging market equity index has hit a fresh record high of 1,422.54 today.

Reuters has the details:

MSCI’s main emerging-market index, which covers nearly 1,400 companies across 27 developing-world countries, rose 0.9% on the day and has gained seven out of the last eight sessions.

The index, which is heavily skewed towards Asian tech and internet stocks, last hit a record high in early January.

As this chart shows, the index has rebounded sharply since the global market crash a year ago, with massive government spending programmes and central bank stimulus packages lifting stocks.

The MSCI emerging markets index

Stocks in the Asia-Pacific region have also hit record highs this morning, as the prospect of president Joe Biden pushing through a large US stimulus package continues to bolster optimism.

MSCI’s ex-Japan Asian shares index has risen around 0.86%, clearing its previous peak set in January.

European markets have also opened on the front foot, with the FTSE 100 gaining 36 points or 0.5% to 6569 points. Oil continues to trade at its highest levels since the pandemic began, with Brent crude holding firm at $61 per barrel this morning.

Kyle Rodda of IG says investors are

After a mid-week lull, markets appear to be perking-up again. There’s been little to really catalyse the latest move higher in risk-assets. But after a bit of a breather, market participants appear to have the appetite to take-on more risk, and juice a little further the stimulus, vaccine and reflation themes.

Asian indices are generally higher, led by strength in Chinese and Hong Kong stocks leading into the Lunar New Year holiday.

But what if inflation picks up too strongly, putting pressure on central bankers to tighten policy? The latest US inflation figures are due later today, and are expected to show a pick-up in consumer prices.

Rodda explains:

In a market basking in the prospect of the reflation trade, there’s the gnawing concern, at least amongst some in the market, that that Goldilocks condition is precariously close to boiling over into outright inflation. Though the risk isn’t seen as being significant in the short-term, with economists predicting a relatively modest 0.2 per cent increase in core CPI for the month, any upside surprise in inflation data will only amplify the calls that the US economy runs the risk of running too hot.

How the Fed might respond to such a set of circumstances will also be crucial, and will be homed in on tonight, as US Federal Reserve Chair Jerome Powell delivers an address to the Economic Club of New York. As per usual, market participants will hanging off every word Chair Powell has to say. The crucial issue, given the preoccupation with inflation risks right now, is whether the Fed will keep the punch bowl nice and full for the markets, even in the face of rising inflation expectations.

The agenda

  • 7.45am GMT: French industrial production for December
  • 8.30am GMT: Sweden’s Riksbank central bank sets interest rates
  • Noon: US weekly mortgage approval figures
  • 1.30pm GMT: US inflation for January
  • 3.30pm GMT: EIA weekly oil inventory figures

Updated

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Tim McGraw started “sobbing” in the street in New York City when he found out he was being inducted into the Country Music Hall of Fame.
BANG Premier
BANG Premier
KATSEYE Manon Raises Concern as Fan Post Claims Her Social Media Activity May 'Hurt the Group'
Concerns grow over KATSEYE's Manon after a fan post claims her social media activity may impact the group's unity amid ongoing speculation.
International Business Times UK
International Business Times UK
Something Very Bad Is Going to Happen: the Duffer brothers’ horror series is absolutely terrifying
The creators of Stranger Things’s new dread-suffused drama sees a happy couple head off for an idyllic wedding – a poorly-lit cabin in the woods. The results are chilling
The Guardian - UK
The Guardian - UK
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