Closing summary
Stock markets are mixed, as traders are torn between news of more Covid-19 restrictions across Europe, and hopes of a US fiscal stimulus package being agreed soon and that Pfizer’s coronavirus vaccine may be available before the end of the year.
- US’s Dow Jones up 81 points, or 0.29%, at 28,688
- UK’s FTSE 100 down 40.2 points, or 0.68%, at 5,879.36
- Germany’s Dax down 0.17% at 12,887
- France’s CAC up 0.21% at 4,946
- Italy’s FTSE MiB down 0.29% at 19,333
- Spain’s Ibex down 0.1% at 6,842
Sterling has risen 0.67% to $1.30 and by 0.53% to €1.1780, after comments from the UK and the EU suggesting that a trade deal is still possible before the end of the year (even though talks are still deadlocked).
China’s economy bounced back in the third quarter, the first major economy to do so, although the annual growth rate, of 4.9%, was slightly lower than economists had expected. Investors were cheered by news that retail sales jumped 3.3% in September, which lifted European luxury stocks in early trading.
With this, we are saying good-bye for today. We’ll be back tomorrow. Take care! - JK
Wall Street has opened higher on hopes of a stimulus deal in the US: the Dow Jones rose 92 points, or 0.32%, to 28,698 at the opening bell, while the S&P 500 is up nearly 13 points, or 0.37%, at 3,496, and the Nasdaq is almost 63 points ahead at 11,734, a 0.54% gain.
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Over in Washington, the IMF has a panel on cross-border payments and digital currencies where Fed chair Jay Powell has been speaking.
He said “yes there are potential benefits” to digital currencies (like bitcoin), but stressed that the regulatory challenges need to be assessed first, such as the risk of cyber attacks and the impact on monetary and financial stability.
He also said that it’s more “important to get it right than to be first” and stressed that the US dollar remains the world’s reserve currency.
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Sterling rises; UK and EU say deal still possible
Sterling has risen 0.67% to $1.30 against the dollar and is up 0.55% against the euro at €1.1782, after the UK and the EU said the door was still open to to a deal. But talks are currently deadlocked, with just over two months to go before the transition phase comes to an end.
According to Reuters, European Commission vice president Marcos Sefcovic reiterated that the EU still wanted a trade deal with Britain but not “at any cost” after Johnson said on Friday there was no point in continuing talks, prompting EU chief negotiator Michel Barnier to cancel his planned trip to London. Instead he will now speak by telephone with his British counterpart David Frost.
Sefcovic told reporters after meeting Michael Gove in London:
It has to be a fair agreement for both sides – we are not going to sign an agreement at any cost. The European Union is ready to work until the last minute for a good agreement for both parties.
Earlier, UK housing secretary Robert Jenrick called on the EU to “go that extra mile, to come closer to us on the points that remain for discussion”. Speaking on Sky, he said:
We hope that they could come forward now with some relatively small but important changes which respect us as an independent sovereign nation.
Meanwhile, Boris Johnson’s spokesman stressed that Britain won’t return to the negotiating table with the European Union next year – and any agreement needs to be concluded by the end of the year.
We have been repeatedly clear that any agreement needs to be in place before the end of the transition period, and we will not be back to negotiate further next year.
We must provide certainty to our citizens and businesses, and endless prolonged negotiations won’t achieve this.
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Lunchtime round-up
Time for a lunchtime round-up. The FTSE 100 index in London is trading 0.23% lower at 5,906 and Germany’s Dax has just turned negative as well, giving up earlier gains. Other European indices are still up. France’s CAC is up 0.31%, Italy’s FTSE MiB has edged up 0.06% and Spain’s Ibex has risen 0.15%.
Shares were boosted by hopes of that a US stimulus package can be agreed soon, after weekend comments from US House speaker Nancy Pelosi that she was “optimistic,” and expectations that a coronavirus vaccine may be available before the end of the year, after Pfizer said on Friday that it may apply for emergency use by late November.
But as more Covid-19 restrictions were announced across Europe, from Austria and Belgium to Wales which unveiled a two-week “firebreak” starting on Friday (with people urged to stay at home), the stock market rally is fizzling out.
Euronext has fixed a technical glitch that led to the suspension of trading in Amsterdam, Brussels, Lisbon and Paris for more than three hours.
Oil prices have fallen slightly, while gold, a safe-haven investment, and other precious metals have rallied.
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Conversely, crude oil is down, as concerns over surging coronavirus cases around the world have dampened expectations for a recovery in demand. Also, Libya plans to ramp up output in an effort to revive its energy industry after months of blockade.
Brent crude fell 0.68% to $42.64 a barrel while US light crude lost 0.66% to $40.61 a barrel.
Commerzbank analyst Eugen Weinberg was quoted by Reuters as saying:
Even if the recent record-high new cases of Covid-19 worldwide have not yet caused demand forecasts to be revised further downwards, there is no sign as yet of the hoped-for recovery.
Stephen Brennock of oil broker PVM said:
This latest swathe of stringent restrictions will inevitably impede economic growth and undermine the fuel demand recovery.
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Gold prices are rising amid mounting fears of a bad second Covid-19 wave. Other precious metals have rallied too.
Spot gold has gained 0.74% to $1,913 an ounce. Silver is 2.48% ahead, platinum has risen 1.83% and palladium is up 0.78%.
Gold, seen as a safe haven investment in times of turmoil – it serves as a hedge against inflation and currency declines – has risen about 25% this year as the coronavirus pandemic unfolded.
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The FTSE 100 index in London has turned negative, trading down some 12 points, or 0.2%, at 5,907.73.
Other European indices are still positive: the Dax in Frankfurt is 0.14% ahead at 12,927, the FTSE MiB in Milan has gained 0.23% to 19,434 and the Ibex in Madrid is up 0.43% at 6,879.
UK household finances remained under severe strain during October, according to the latest survey from IHS Markit.
Its household finance index remained at 40.8, far below the 50 mark that divides contraction from expansion. Households have been using up more savings to fund some purchases, Markit said. It uses survey data collected by Ipsos Mori. It is the first consumer survey published each month.
Expectations for job security remained gloomy, but were the least pessimistic for seven months. Over a quarter of households expect the Bank of England to cut interest rates at some point.
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Euronext, the pan-European exchange operator, has halted trading in all its products due to to a technical issue, affecting equities trading in Amsterdam, Brussels, Lisbon and Paris.
The outage has hit trading in equities, derivatives and commodity futures across Europe.
The French CAC 40 index – operated by Euronext – was up 0.8% at 4,976.15 points before trading was halted. Other European indices have drifted lower in the last hour.
UK shopper numbers down as new restrictions hit
Shoppers numbers across the UK fell 3.1% last week from the week before, as the new Covid-19 restrictions took their toll. The latest numbers from retail consultants Springboard show larger cities continue to be hit hardest, with footfall in regional cities down 5.7% compared with declines of 2.1% in market towns and 1.2% in coastal towns.
The 10pm curfew meant that high street footfall post 6pm fell 4.5% – nearly double the drop seen during the day, between 9am and 6pm, of 2.4%.
Diane Wehrle, insights director at Springboard, said:
The additional Covid tiered restrictions had an immediate impact on footfall in retail destinations last week with an across the board week on week decline; the fourth consecutive drop and also greater than that in previous weeks.
US stock futures are pointing to a higher open on Wall Street later, with the Dow Jones seen opening 0.8% higher, the Nasdaq up 1.2% and the S&P 500 0.9% ahead.
European stocks lose ground
The FTSE 100 index has given up nearly all of its earlier gains and is just about positive, up 2.5 points at 5,922.04. European indices have also lost ground after stronger early gains. Germany’s Dax is 0.29% ahead, Spain’s Ibex has risen 0.23%, Italy’s FTSE MiB is up 0.35%, and France’s CAC is trading 0.82% higher.
The number of global coronavirus cases is close to 40 million, according to a tally by Johns Hopkins University.
New restrictions to help stop the rapid spread of coronavirus have been announced by European governments in recent days. This morning, Austria limited gatherings to a maximum of six people indoors and 12 people outdoors.
You can read the latest on Covid-19 on our main live blog here:
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Cryptocurrency traders wait for Powell speech
In Washington, the International Monetary Fund’s annual meeting is still in full swing, a a week after it started. Several big names in the central banking world are due to speak later today. They include Fed chair Jay Powell, several ECB officials and ECB president Christine Lagarde, as well as the Bank of England’s deputy governor Jon Cunliffe, who will make two appearances this afternoon.
Their comments will be scrutinised for any hints as to whether interest rates will go negative. Britain’s banks are not ready for negative rates, the chairman of NatWest, Howard Davies, said last Thursday, pointing to technical and contractual issues. Here is a handy explainer what negative interest rates would mean for consumers.
Powell’s speech at a panel on cross-border payments and digital currencies could be interesting in other ways.
Bitcoin and other cryptocurrency traders are hoping for some signals from Powell at the panel, which also includes the general manager of the Bank for International Settlements, Agustín Carstens. The price of bitcoin has risen to $11,400 after endorsement from Twitter founder Jack Dorsey’s payments company Square, which bought $50m of bitcoin earlier this month.
In February, comments from Powell on the potential power of digital currencies during testimony in front of Congress sent the bitcoin price higher.
Powell said Facebook’s libra, a digital currency project that was deemed too risky by most major central banks last year, was a “wake-up call” that a digital currency could come “fairly quickly” and in a way that is “quite widespread and systemically important”.
Mati Greenspan, the founder of market analysis firm Quantum Economics, was quoted by Forbes as saying:
This IMF webcast is highly anticipated in the crypto community and the chairman’s attendance speaks volumes to its importance in traditional finance. Central bank digital currencies have increasingly been on the minds and lips of those who govern our money for obvious reasons.
The panel will be livestreamed by the IMF.
Chinese industrial production rose 6.9% year-on-year in September. In Japan, exports fell 4.9% in September from a year earlier, worse than the 2.4% drop analysts had expected. But this was much better than the double-digit declines registered in each of the last six months, noted Neil Wilson, chief markets analyst at Markets.com.
Pfizer’s announcement on Friday that it hopes to apply for emergency approval for its Covid-19 vaccine by late November has also lifted spirits, after a bad week for shares last week when Covid-19 fears hit markets.
There are hopes that a US fiscal stimulus package can be agreed soon. House Democrat leader Nancy Pelosi said over the weekend that she was “optimistic” about getting a stimulus deal before the presidential election on 3 November.
She acknowledged that would require agreement within the next 48 hours. And Treasury Secretary Steven Mnuchin, her negotiating partner, is in the Middle East until Tuesday.
The White House proposed a $1.8 trillion stimulus last week to help Americans struggling because of the coronavirus pandemic. Pelosi said the offer fell short in a number of areas, including tax credits for poor people, aid to state and local governments, worker protections and rent help. She has stuck to her demand for a $2.2 trillion aid and stimulus package.
But markets have undoubtedly been cheered by signs of progress in the talks, after Pelosi and Mnuchin had a lengthy discussion on Saturday night.
Ben Emons, Medley Global Advisors managing director, said on Bloomberg TV:
It seems that the market is optimistic that indeed stimulus will follow whether that is tax cuts under a Trump presidency or spending under a Biden presidency.
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Retail sales in China rose 3.3% in September from a year earlier, a big jump from 0.5% in August.
Vasu Menon, executive director of investment strategy at OCBC Bank, described this as a “big surprise”. Markets were somewhat disappointed by China’s 4.9% GDP growth figure for the third quarter, but analysts thought that pessimism was overdone. Menon told CNBC’s Street Signs Asia:
The headline numbers seem like they’ve missed the mark but when you drill down to the details, especially domestic consumption, I think that offers some room for optimism.
Bear in mind that 4.9% growth is still a decent number — especially given the current environment — and is a pick up from the previous quarter which was 3.2%.
European shares have opened higher despite new Covid-19 restrictions across Europe, lifted by strong corporate results from the likes of the Dutch health technology firm Philips and the Swiss wealth manager Julius Baer.
- UK’s FTSE 100 index up 0.64%
- Germany’s Dax up 0.86%
- France’s CAC 40 up 1.06%
- Italy’s FTSE MiB up 0.8%
- Spain’s Ibex up 0.82%
Luxury stocks LVMH, Hermes and Pernod Ricard are also rising after better-than-expected retail sales numbers from China for September.
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Introduction: China first big economy to rebound from pandemic
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
China has become the first major economy to recover from the Covid-19 pandemic. It grew 4.9% between July and September from a year earlier, up from a 3.2% annual rate in the previous quarter, according to government data.
The growth rate was slightly lower than the 5% or more forecast by analysts, but represents a major reversal from the first quarter of this year when the economy shrank by 6.8% – China’s first contraction since 1992 when officials began keeping quarterly GDP data.
China’s central bank governor Yi Gang said on Sunday that officials predict growth of about 2% for 2020. China is expected to be the only G20 economy to grow this year. The world economy as a whole is expected to shrink by 4.4%, according to predictions from the International Monetary Fund, which would be the steepest downturn since the Great Depression.
The Chinese economy remains resilient with great potential. Continued recovery is anticipated, which will benefit the global recovery.
Here is our full story.
While the growth rate disappointed the market, “it was in fact quite good,” says says Iris Pang, chief economist, Greater China, for ING. The most encouraging factor is consumption, she says.
Retail sales jumped to 3.3% YoY in September from 0.5% YoY in August. This big jump shows that consumption has further stabilised, and there was also evidence of more spending from the business side.
Cross-provincial travel has helped the economy a lot as Mainland China “spenders” have stayed in the home country to spend on tourism services and luxury items in the duty-free shops. These activities have created jobs for low-skilled labour market participants and have helped to further stabilise consumption.
Chinese stock markets rose initially but later fell back. The CSI 300 index dropped 0.87%. Other stock markets in Asia rose, however, with Hong Kong’s Hang Seng gaining 0.5% and Japan’s Nikkei up 1.1%. Confidence was boosted by hopes of a US fiscal package and expectations of a coronavirus vaccine by the end of the year.
It’s a big day for central bank speeches, with US Federal Reserve chair Jerome Powell, European Central Bank president Christine Lagarde and Bank of England deputy governor Jon Cunliffe due to to speak this afternoon. Markets will be looking for further clues as to UK central banks’ leanings when it comes to negative rates.
The pound is lingering above a 10-day low as Brexit talks enter a crunch week. Boris Johnson said on Friday that it was time to prepare for a no-deal outcome when the transitional phase ends on 31 December, alarming markets. The EU’s chief negotiator, Michel Barnier, had been due to travel to London for talks with his UK counterpart David Frost, but they will now speak by telephone.
The Agenda
- 1pm BST: Fed chair Jerome Powell speech
- 1:45pm BST: ECB president Christine Lagarde speech
- 3:05pm BST: Bank of England deputy governor Jon Cunliffe speech
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