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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Markets fall back as Covid-19 fears mount and US jobless claims rise – as it happened

The Bank of England and the City of London financial district.
The Bank of England and the City of London financial district. Photograph: John Sibley/Reuters

Closing summary

Time for a recap

Concerns over rising Covid-19 cases, particularly in the US, have weighed on markets.

While investors hope that vaccines will help the global economy recover next year, policymakers are warning that the new wave of infections is damaging growth right now.

  • The crisis is hurting many British businesses. One in seven UK firms has little confidence it will be trading in three months, with a third of hospitality firms fearing collapse.

The Next Generation EU package must become operational without delay.

The package’s additional resources can facilitate expansionary fiscal policies, most notably in those euro area countries with limited fiscal space.

Goodnight. GW

Updated

Today has been a difficult one for some UK gamers, and retailers who have been overwhelmed by demand for PlayStation’s latest console.

Sarah Butler has the story....

Web pages dedicated to the launch of the PlayStation 5 at John Lewis, Tesco and Game had all crashed on Thursday morning. Currys had introduced a queuing system that had tens of thousands of customers on hold on Thursday morning.

With much of their stock already sold via orders placed before the launch, Game, Currys, John Lewis and Argos all said they had sold out of the £449 console by 10.10am on Thursday.

However, thousands of consoles were available on auction site eBay for more than double the list price, with some sellers asking for more than £1,000.

Europe closes lower

European stock markets have closed, with small losses across the main exchanges.

The FTSE 100 index of blue-chip shares ended 50 points lower, down 0.8% at 6334.

Chemicals firm Johnson Matthey was the top faller, down 5.5%. It reported an 88% drop in profits this morning, after weak demand for its automotive catalysts amid the pandemic.

Melrose (-4.6%) and Rolls-Royce (-3.9%) were close behind (both have aerospace operations), with property firm British Land down 3.7%.

BP lost 3.2%, with the oil price slipping a little today.

Supermarkets, technology focused companies and pharmaceutical firms had a better day, though.

Fiona Cincotta of Gain Capital says fears over the near-term economic growth outlook overshadowed more upbeat vaccine news.

This time it was the turn of AstraZeneca to inform as to how its covid -19 vaccine is performing in recent trials. The vaccine was found to provoke a robust immune response, particularly in older adults in Phase 2 trials.

Whilst this is great news, after the big hitting data from Pfizer and Moderna this week, AstraZeneca’s was insufficient to overshadow fears of rising covid cases, tighter lockdowns and the impact on the economy.

The Europe-wide Stoxx 600 closed down 0.73%, with Germany’s DAX down 0.87% and France’s CAC off 0.75%, as markets handed back some of their stellar November gains.

Jobs at risk as Peacocks and Jaeger call in administrators

Britain’s retail crisis has deepened this evening, with the news that the fashion chains Peacocks and Jaeger have fallen into administration.

The move puts more than 4,700 jobs at risk, after the troubled businesses were unable to find a buyer during rescue talks over the last couple of weeks.

My colleague Sarah Butler explains:

Fashion chains Peacocks and Jaeger have called in administrators putting nearly 4,800 jobs at risk.

The businesses are part of entrepreneur Philip Day’s retail Edinburgh Woollen Mill Group empire which issued a warning last month that it was on the brink of collapse.

Peacocks, a Cardiff-based fast fashion chain, employs 4,369 staff across its 423 stores and up-market brand Jaeger, which employs 347 across 76 outlets, have been put into administration as talks on a rescue package have not been successful ahead of a legal deadline tomorrow.

No redundancies or store permanent closures have been made and administrators said the businesses would continue to trade while they looked at options for their future.

Tony Wright, Joint Administrator and Partner at FRP, says:

“Jaeger and Peacocks are attractive brands that have suffered the well-known challenges that many retailers face at present. We are in advanced discussions with a number of parties and working hard to secure a future for both businesses.”

US home sales keep rising despite Covid-19

The US housing market continues to shrug off the pandemic.

Sales of existing homes (ie, not new builds) increased for a fifth straight month in October, rising 4.3% month-on-month, as record low interest rates continue to support demand.

On an annual basis, sales surged 26.6% to an annualized rate of 6.85 million sales - the highest in almost 15 years.

Prices have surged too - the median existing house price is up 15.5% from a year ago to a record $313,000 in October.

Pressure to move to larger properties, following the lockdowns and move to home working, is a factor, points out Reuters:

Existing home sales, which account for the bulk of U.S. home sales, jumped 26.6% on a year-on-year basis in October. Sales increased in all four regions last month and continued to be concentrated in the upper price end of the market.

The housing market is being driven by record low mortgage rates. The COVID-19 pandemic, which has seen at least 21% of the labor force working from home, has led to a migration from city centers to suburbs and other low-density areas as Americans seek out spacious accommodation for home offices and schools.

Back in Europe, the markets remain subdued with just over an hour’s trading to go:

  • FTSE 100: down 59 points or 0.9% at 6325
  • German DAX: down 68 points or 0.5% at 13,133
  • French CAC: down 23 points or 0.4% at 5,488

Mark Warner, Democratic Senator from Virginia, sums up the need to extend America’s pandemic support packages before they expire next month:

Richard Flynn, UK managing director at Charles Schwab, says the jobs recovery in the US seems to be stalling, as the pandemic intensifies:

“This week’s significant increase in US jobless claims indicates the U.S. labour market’s slow, but steady, recovery may have stalled due to a second wave of COVID-19.

While temporary layoffs have been falling, permanent job losses have been rising recently, and there is yet to be sign of a definitive reversal of this trend.

Wall Street has opened a little lower, with today’s rise in unemployment claims fuelling concerns over the labor market.

Worries over the escalating Covid-19 crisis are also weighing on traders’ minds, with the US death toll now over 250,000.

The Dow Jones industrial average, which fell 1.1% yesterday, has dipped by another 0.4% or 120 points to 29,317, having closed at record highs earlier this week.

The broader S&P 500 has slipped by 0.4% to 3,554 points, while the tech-focused Nasdaq is down 0.1% at 11,787.

Fears grow over expiring US unemployment packages

The number of unemployed Americans applying for help through the Pandemic Emergency Unemployment Compensation (PEUC) scheme has also risen, to nearly 4.4m.

PEUC gives another 13 weeks of jobless support once the standard state assistance has been exhausted.

It’s part of the CARES Act programme, and is due to run out at the end of December unless Congress agrees a new stimulus package (as is the PUA programme for freelance and self-employed workers)

AnnElizabeth Konkel of jobs site Indeed.com explains why this is a concern:

CBS News reported this week that some families would be pushed into poverty if the PEUC and PUA schemes are allowed to expire.

About 12 million jobless workers around the U.S. will lose their unemployment benefits the day after Christmas, according to a new analysis.

The benefits cutoff could push many households into poverty while creating headwinds for the economic recovery, experts say.

Greg Daco of Oxford Economics is also concerned:

Economist: jobless claims at 'unhealthy levels'

Daniel Zhao, senior economist at Glassdoor Senior Economist, says the number of Americans filing new jobless support claims are unhealthily high, having jumped to 742,000 last week.

He also warns of benefit ‘exhaustion’, as the programmes approved earlier this year to support the economy run out.

“Initial unemployment insurance (UI) claims rose, maintaining unhealthy levels at a time when COVID-19 cases are reaching alarming rates around the country.

Continuing claims dropped below their pre-pandemic record set during the Great Recession, but it’s mostly driven by benefit exhaustion for 9 million claimants.

Zhao warns that millions more Americans will lose support, unless Congress acts quickly and approves a new stimulus bill:

The U.S. faces a potentially long winter as millions of Americans have had their unemployment benefits expire and 12 million more face a looming benefits cliff in December.

Congressional failure to act would be an extraordinary blow to unemployed Americans and would affect over half of the 20 million current UI claimants. The summer’s steady recovery is now well in the distance as health experts raise the alarm about a tough pandemic winter.

Spiking cases and expired benefits are ingredients for a vicious cycle where Americans are pushed back into the workforce when the virus is already widespread. The combined health and economic crises could echo some of the harsh impacts felt in the spring rather than the steady recovery seen over the summer.”

Here’s Bloomberg’s take on the rise in US jobless claims:

Applications for U.S. state unemployment benefits rose for the first time in five weeks, suggesting the labor-market recovery is slowing amid a surging pandemic and fresh business restrictions.

Initial jobless claims in regular state programs totaled 742,000 in the week ended Nov. 14, up 31,000 from the prior week, Labor Department data showed Thursday.

On an unadjusted basis, the figure increased by about 18,000. The week included Veterans Day, and claims data tend to be more volatile around holidays.

US initial jobless claims rise to 742,000

The number of Americans filing new claims for unemployment benefit has jumped, in a sign that the US economy is struggling.

Some 742,000 new claims for jobless support were filed last week, up from 711,000 in the previous seven days.

That’s higher than expected (economists forecast a fall to 707,000), at a time when Covid-19 cases are rising alarmingly in the US.

In addition, another 320,000 people filed unemployment claims through the Pandemic Unemployment Assistance (aimed at freelancers, gig economy workers, and others who don’t quality for initial claims).

The number of ‘continued claims’ (people receiving unemployment help for at least two weeks) has fallen, to 6.372m from 6.801m -- but that may show that claimants have exhausted their entitlement, rather than finding new jobs.

Updated

The head of the IMF, managing director Kristalina Georgieva, has written a blog post ahead of the G20 meeting -- hailing the recent progress on vaccines, but warning of more economic pain ahead as Covid-19 cases surge in many countries.

She writes:

As G20 leaders meet virtually this week, the global economy faces a critical juncture. Countries have started to climb back from the depths of the COVID-19 crisis. But the resurgence in infections in many economies shows just how difficult and uncertain this ascent will be.

The good news is the significant progress on vaccine development. While there are many caveats, this raises hopes of vanquishing the virus that has taken more than a million lives and caused tens of millions of job losses.

The not-so-good news is the severity of the pandemic and its negative economic impact. Last month, the IMF projected a historic global GDP contraction of 4.4 percent in 2020. And we expect a partial and uneven recovery next year, with growth at 5.2 percent.

Updated

IMF: Global recovery may be losing momentum

The International Monetary Fund has warned the recovery from the economic slump earlier this year may be “losing momentum”.

In a new surveillance note, or report, ahead of the G20 Leaders’ Summit this weekend, the IMF also warns that the Covid-19 crisis will leave behind “a dire legacy of higher inequality and weaker potential output”.

The Fund says:

While global economic activity has picked up since June, there are signs that the recovery may be losing momentum, and the crisis is likely to leave deep, unequal scars.

The virus has killed more than a million people and left tens of millions unemployed, especially among low-skilled workers, women, and youth. With infection rates still high in many parts of the world, social distancing continues to hold back momentum in the service sector. Global GDP is now projected to contract 4.4 percent in 2020 and stage an uneven and partial recovery next year.

Moreover, persistent under-employment and school closures are likely to harm human capital; and excess bankruptcies may erode know-how and productivity. The surge in debt will add to challenges down the road. Alongside, uncertainty and risks are exceptionally high.

IMF growth forecasts

The IMF adds that policies should be focused on ending the crisis quickly and supporting a strong recovery.

That includes collaborating to develop and produce vaccines, additional government spending in some countries, and helping people who lose their jobs in the crisis to gain new skills.

The Fund says:

• End the health crisis. The fastest end to the global crisis lies in multilateral collaboration on the development, production, and distribution of therapies and vaccines, which would lower supply risks and costs for all. Until effective vaccines are widely available, continued social distancing, contact tracing, and use of masks are essential to control the spread of the virus and will allow economic normalization to take place earlier.

• Bridge the economy through the crisis and minimize scarring. Extensive policy support has averted much worse outcomes and will need to be maintained until the crisis is behind us. In some economies, additional fiscal support beyond what has already been announced is warranted. Where fiscal space is insufficient, reallocations within the budget envelope may be necessary. As the impact of the crisis is better understood, focus will gradually need to shift toward (i) retraining and reskilling the jobless to facilitate employment in expanding sectors and (ii) supporting viable or strategic firms to minimize unnecessary bankruptcies. Monetary and financial sector policies should remain accommodative while maintaining stability.

• Bolster medium-term growth and build resilience. With large-scale public and private investment needs to rebuild from this crisis, now is an opportune time to address long-standing challenges. Enhancing access to opportunities, including through digitalization, can broaden inclusion and help lift the global growth potential. Mitigation of climate change, which requires zero net carbon emissions by 2050, can be done in a way that bolsters recovery and creates jobs.

Updated

Ouch. Sales at US department chain Macy’s have fallen by a fifth in the last quarter, as the pandemic continues to hurt retailers badly.

The company, which runs the Macy’s, Bloomingdale’s and Bluemercury chains, has reported net sales of $3.99bn in the three months to 31 October, down from $5.17bn a year ago.

Although digital sales grew 27% year-on-year, that didn’t make up for the exodus of customers away from Main Street and the mall since the spring.

Jeff Gennette, chairman and CEO, says this festive season will be ‘different’:

“Customers have shifted their spending to casual apparel and categories they can enjoy as they stay at home. Several of these categories, including home furnishings, jewelry and fragrance, have generated double-digit sales growth compared to last year.”

“Looking to Holiday 2020, we know this year is different. We are committed to bringing the joy of the season to America as we do every year. From next week’s Thanksgiving Day Parade to reimagined family gatherings, we will help our customers and their families celebrate in style.

The famous Macy’s parade has been reshaped due to Covid. Instead of a 2.5-mile parade with massive crowds, next Thursday’s action will mainly take place in and around Herald Square (where Broadway, Sixth Avenue, and 34th Street meet), and you’ll have to watch it on TV.

There’ll still be big acts, but most performances are being prerecorded, including from the cast of Hamilton, Mean Girls, Ain’t Too Proud — The Life and Times of The Temptations and Jagged Little Pill.

As the New York Post points out:

This will be one of the first times during the coronavirus pandemic that Broadway performers will put on a show, after the iconic section of Manhattan was left darkened and desolate due to forced closures.

Other performers on Thanksgiving Day will include the Big Apple Circus, the NYPD Police Band, and the West Point Marching Band with musical appearances from Patti LaBelle, Dolly Parton, Jordin Sparks, Santa Clause and dozens more.

Updated

And here’s Reuters take:

The resurgence of the coronavirus pandemic prompted a sharper fall in new orders for British factories this month, a survey showed on Thursday.

The Confederation of British Industry’s monthly manufacturing order book balance fell to -40 from October’s seven-month high of -34, despite the strongest reading for output since September 2019.

UK factories see bigger drop in orders during November, CBI says

The CBI’s industrial trends report also shows that order books at UK factories have been weaker than normal all year:

CBI industrial trends
CBI industrial trends Photograph: CBI

Here’s CBI deputy chief economist Anna Leach on the drop in factory order books in November*

Output volumes have declined at their slowest pace in over a year in our November survey. But order books have softened again as global demand has been hit by intensified lockdowns, and manufacturers have trimmed their expectations,”

“Key to stabilising trading conditions for manufacturing firms will be getting the pandemic under control through further investment in mass testing, ensuring a seamless test and trace system, and an efficient vaccine roll out.”

* - to clarify, not October as the earlier post initially said...

Updated

Tom Crotty, Group Director at chemicals firm INEOS, says the drop in UK factory orders shows that manufacturers face a very challenging time:

“These results show what we already know – that manufacturers up and down the country are continuing to face very difficult circumstances as we move into the winter.

“Looking ahead, manufacturers have a crucial role to play in working with the government to build its green industrial revolution, improve productivity and level-up regions. Government support for the sector has therefore been – and will continue to be – vital in keeping firms going through the crisis.”

Updated

UK manufacturers hit by falling orders

Just in: UK manufacturers have been hit by a new slump in orders, as the pandemic hits demand for goods.

The CBI’s latest health check on British industry found that the “pipeline for activity” – including output expectations and order books – has weakened this month “amidst a second wave of COVID-19 both domestically and abroad”.

New orders fell at a faster pace in November, and are sharply below average, according to the CBI’s Industrial Trends Survey, which surveyed 277 manufacturers.

CBI industrial trends
Demand for new goods from UK manufacturers has dropped Photograph: CBI

Worryingly, firms also predicted that output will decline at a slightly faster pace over the next three months. That’s a gloomier view than a month ago, with manufacturers also predicting output prices to fall over the next three months.

Here are the details:

  • Total order books (-40%) deteriorated slightly from October (-34%), and remained far below their long-run average (-14%)
  • Export order books (-51%) worsened marginally from October (-46%) and remain far below their long-run average (-18%)
  • Output volumes in the three months to November (-6 from -8 in October) fell at their slowest pace since September 2019. Output dropped in 9 out of 17 sub-sectors, with the headline decline primarily led by the aerospace manufacturing sub-sector.
  • Manufacturers anticipate output to decline at a slightly quicker pace in the next three months (-10), marking a worsening in expectations compared to last month’s survey (+15).

[Explanation: the percentages are ‘net balances’ -- the difference between the percentage of companies reporting an increase and those reporting a decrease]

Updated

One in seven UK companies fear collapse

The pandemic has left one in seven UK companies fearing that they will not last until next spring, new research shows, with hospitality firms particularly worried.

The Office for National Statistics has reported that 14% of UK businesses said they had low or no confidence that their business would survive the next three months.

That figure jumps to one-in-three firms in the food or accommodation sector, such as pubs, restaurants and hotels.

That’s an alarming signal of the economic damage being caused by the second wave of Covid-19 cases.

The ONS explains:

Across all industries, of businesses that have not permanently ceased trading, 40% had moderate confidence that their business would survive the next three months, and 14% had low or no confidence of the same. Conversely, 40% said that they had high confidence.

The accommodation and food service activities industry had the highest percentage of businesses that had no or low confidence that their business would survive the next three months, at 34%. This was followed by the administrative and support service activities industry, at 18%.

The ONS also reports that nearly one in ten workers are still furloughed, with more than quarter working from home:

  • 9% of the workforce were on partial or full furlough leave
  • 28% of the workforce were working remotely instead of at their normal place of work
  • 60% of the workforce were working at their normal place of work

Mid-morning update: Markets still down

European stock markets are still skulking in the red.

The FTSE 100 remains down around 1%, or 63 points, at 6321. Aerospace engineering firm Melrose (-5%) and jet engine maker Rolls-Royce (-3%), have joined the top fallers, which usually indicates anxiety over the pandemic, alongside the oil companies and property firms.

Chemicals firm Johnson Matthey are also down around 5%, after posting an 88% fall in pre-tax profits (partly due to weak demand for automotive catalysts during the pandemic).

The top fallers on the FTSE 100
The top fallers on the FTSE 100 Photograph: Refinitiv

France’s CAC index is down 0.85%, with Germany’s DAX off 1%, as the risk-off mood continues.

AJ Bell investment director Russ Mould explains that concerns over the pandemic, especially in the US, are rising -- with Brexit also nagging at the markets:

“The report on the AstraZeneca and University of Oxford vaccine was less likely to move the dial as, unlike the other major vaccine updates so far, there was no detail on its efficacy.

“And while the prospects for the second half of 2021 are looking more encouraging thanks to advances made by science, the here and now is increasingly difficult with New York announcing more severe restrictions amid a surge in Covid-19 cases across America.

“With Donald Trump continuing to stubbornly resist calls to concede to the projected winner of the Presidential election Joe Biden, it appears little is being done at a federal level to address the second wave of the pandemic in the US.

“Brexit uncertainty continues to buzz in the background like a low-level headache and oil prices are giving back some of their recent gains ahead of a crunch meeting of OPEC at the end of this month. We could be in for a challenging few weeks.”

Eurozone construction output drops

The eurozone’s construction sector has gone into reverse again, as the second wave of Covid-19 cases hit Europe’s economy.

Construction output across the eurozone shrank by 2.9% in September, compared with August, new figures from Eurostat show.

This left construction production 2.5% lower than a year ago in the eurozone, and 2.7% lower in the wider EU.

Eurostat reports that France and Italy suffered the sharpest monthly fall, as both countries were hit by rising infections:

In the euro area in September 2020, compared with August 2020, building construction decreased by 3.2% and civil engineering by 0.4%. In the EU, building construction decreased by 2.7% and civil engineering by 0.8%.

Among Member States for which data are available, the largest decreases in production in construction were recorded in France (-8.4%), Italy (-8.1%) and Slovakia (-3.0%). The highest increases were observed in Slovenia (+2.6%), Romania (+1.7%), Bulgaria and Germany (both +1.5%).

We do have some encouraging vaccine news this morning, but it doesn’t seem to be lifting the markets.

The latest trial results from the Oxford/AstraZeneca candidate show it produces a strong immune response in older adults, and was better tolerated than by younger triallists.

The findings could lift hopes that the vaccine could protect age groups most at risk from the virus.

But this isn’t the eagerly awaited efficacy results from the final phase of trials, which are expected in the coming weeks, as the BBC’s Fergus Walsh points out:

PA has more details:

The ChAdOx1 nCov-2019 vaccine has been shown to trigger a robust immune response in healthy adults aged 56-69 and over 70.

Phase 2 data published in the Lancet suggests one of the groups most vulnerable to serious illness and death from Covid-19 could build immunity, researchers say.

According to the researchers, the trial demonstrated similar immune responses across all three age groups – 18-55, 56-69, and 70 and over.

The study of 560 healthy adults, including 240 over the age of 70, found that the vaccine is better tolerated in older people than in younger adults.

Champagne Glass and Champagne Bottle with sparkling yellow and orange lights in the background.

Naked Wines have certainly contributed to the boom in parcel deliveries this year.

Sales at the online wine retailer jumped by 80% in the six months to the end of September, as the lockdown drove more people to order alcohol online.

Naked’s base of active customers has jumped by 37% in the last 12 months -- up around 204,000 to 757,000 (these Angels pay £20 into their account each month, to spend on wine from independent producers).

Faced with this welcome surge in demand, Naked has doubled its warehouse capacity.

The company has now raised its sales forecasts, with CEO Nick Devlin saying the online wine market has accelerated this year:

Ultimately the most significant impact of COVID-19 on Naked Wines is not found in these interim results, but in the way it has accelerated the growth of the online wine category and increased consumer willingness to trial a new and better way to buy wine.

Parcel revenues outstrip letters at Royal Mail

Royal Mail

The pandemic has pushed Britain’s Royal Mail to a significant milestone -- it is now making more revenue from parcels than letters.

With millions of workers confined to barracks again, demand for home shopping has rocketed this year. This means parcel deliveries now make up 60% of Royal Mail’s revenues, up from 47% before the pandemic, according to its first-half results (the six months to 27th September).

Royal Mail’s revenue rose nearly 5%, with parcels up 33.2% and letters down 20.5% -- another example of the pandemic accelerating existing trends.

Costs have also risen, with Royal Mail pointing to:

“increased parcel volumes and manual sortation of much of this additional volume through our network, costs related to COVID-19 such as protective equipment, overtime and agency staff, as well as social distancing measures, along with management restructuring costs.”

This ate into profits, and pushed the company into an operating loss, as my colleague Joanna Partridge explains:

Royal Mail swung to a £20m operating loss in the first half, compared with a £61m profit in the same period the previous year, blaming increased costs. At the pre-tax level, the company made a profit of £18m, a fall of almost 90% on the previous year’s £146m.

The shift towards handling fewer letters and more parcels pushed up the company’s costs by £95m, as parcels require more manual sorting by workers. The company also faced an extra £85m in costs related to doing business during the pandemic, including the purchase of protective equipment, social distancing requirements and more worker absences.

Royal Mail said it spent £147m on voluntary redundancy charges following its announcement in June that it was cutting 2,000 jobs – a fifth of its management roles – in a cost-cutting plan accelerated by the coronavirus crisis.

Shares in the company have jumped nearly 9% this morning, as it has also raised its forecasts - and predicted that Royal Mail would be better than break even at adjusted operating profit level if its revenues hit the high-end of expectations.

It’s currently recruiting around 33,000 additional flexible workers to cover the peak Christmas season.

But, the company also warns of considerable uncertainty, especially in the new year:

As parcel volumes at both Royal Mail and GLS have continued to be robust year to date, revenue performance in the scenario has improved.

It remains difficult to give precise guidance but parcel growth is expected to remain robust in Q3, with more uncertainty over trends in Q4 due to the development of the COVID-19 pandemic, further recessionary impacts and trends in international volumes

Updated

The meerkats are in the doghouse this morning.

Britain’s competition watchdog has hit price comparison site Comparethemarket.com with a £17.9m fine, after ruling that clauses in its contracts with home insurers broke competition law.

The Competition and Markets Authority said the website [well-known for its entertaining adverts with meerkats Aleksandr and Sergei] had prohibited home insurers on its platform from offering better prices on rival sites.

That prevented Compare the Market from being undercut, leading to higher insurance premiums for customers, said the CMA.

Michael Grenfell, the CMA’s Executive Director for Enforcement, has warned other digital markets not to illegitimately restrict competition:

Today’s action should come as a warning – when we find evidence that the law has been broken, we will not hesitate to step in and protect consumers.

Lagarde: euro area severely affected by Covid-19 fallout

The president of the European Central Bank has warned EU lawmakers that the second wave of Covid-19 cases is causing significant damage to the eurozone economy.

Testifying to the European Parliament’s committee on economic and monetary affairs, Christine Lagarde said the surge in infections, and new restrictions, were a serious challenge to the euro area and the global economy.

Overall, the euro area economy is expected to be severely affected by the fallout from the rapid increase in infections and the reinstatement of containment measures, posing a clear downside risk to the near-term economic outlook.

Faced with this economic hit, she also urged European politicians to end the damaging row over their new €1.8tn (£1.6tn) budget which blew up this week when Hungary and Poland vetoed it.

Fiscal policy (government spending) has a crucial role to play in bolstering demand in the short and medium term, reinforcing confidence and enhancing the growth potential of our economies, Lagarde insists:

Public investment and reforms, especially if geared towards medium and longer-term challenges such as environmental sustainability and digitalisation, can build a bridge towards a successful and inclusive recovery....

For these two reasons, the Next Generation EU package must become operational without delay.

The package’s additional resources can facilitate expansionary fiscal policies, most notably in those euro area countries with limited fiscal space.

Lagarde also points out that the pandemic was causing particular damage to the services sector, as it is “especially vulnerable” to the voluntary and mandatory social distancing measures introduced. Countries most dependent on tourism and travel have been worst hit.

Lagarde warns that consumers will remain very cautious, and that companies will be reluctant about committing to fresh investment until there is more certainty over vaccine rollouts.

So far, government support measures, particularly short-time work schemes, have protected households against job losses and a drop in incomes. But this has not prevented unemployment from spiking in some countries.

In addition, consumers are expected to remain very cautious in the current highly uncertain environment as the ramifications of the pandemic are threatening people’s employment and income prospects.

All Europe’s stock markets have dropped in early trading - by around 0.75%, following the sell-off on Wall Street last night.

Clearly that’s not a major move, but it does illustrate that fear has the upper hand over hope this morning.

Energy stocks are the worst-performing sector on the Stoxx 600, followed by banks, property companies and miners -- a sign that investors are jittery about growth prospects.

European stock markets, early trading, 19 November 2020
European stock markets in early trading Photograph: Refinitiv

Strategist: Brace for post-Thanksgiving surge

The decision to shut New York’s schools and move to remote learning again has given markets a jolt, says Stephen Innes, chief global markets strategist at axi.

Lockdown fears were ignited once again with New York City’s seven-day rolling average of the test positivity rate reaching the 3% safety threshold that triggers a school system shutdown.

Here’s Mayor Bill de Blasio’s announcement:

Hopes of a vaccine have obviously support market in the last couple of weeks... but Innes fears the crisis will keep escalating, especially after American families have met up for Thanksgiving:

Investors are becoming more fearful of the economic damage already done and what will be exerted while waiting for the vaccine rollout.....

While the vaccine does offer bright green lights at the end of the tunnel, the tunnel just got more cavernous and lengthier.

Still, if you are not concerned about the post-Thanksgiving Holiday virus surge, you should be; I’m not a medical professional, but statistically, this US 3rd wave might get much worse.

Updated

FTSE 100 opens lower

Covid-19 anxiety has pushed the UK FTSE 100 index down at the start of trading.

The blue-chip index has dipped by 47 points, or 0.75%, to 6337 points.

Companies most sensitive to the pandemic are among the fallers, with oil giants BP (-2.4%) and Royal Dutch Shell (-2.2%). Property developers Land Security and British Land are down 2.3%.

Banks are also dipping, with Barclays and NatWest both off around 2%, while miners are also dropping.

The FTSE 100 hits its highest level since June on Monday, after Minerva reported its vaccine was almost 95% effective, but has dipped back since.

The FTSE 100
The FTSE 100 over the last quarter Photograph: Refinitiv

Introduction: Risk off as Covid-19 deaths mount

The foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea.
The foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea. Photograph: Ahn Young-joon/AP

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

There a risk-off feel in the markets today, as the escalating Covid-19 pandemic overrides optimism that successful vaccine rollouts will help the world economy recover in 2021.

Wall Street suffered a late slide last night, with the Dow Jones industrial average dropping over 1% -- down 344 points to 29,438.

And European stocks have just opened lower too, with investors fretting about just how tough the next few months will be. The Stoxx 600, which tracks shares across Europe, is down 0.8% at the start of trading, in what could be a nervy session.

The pandemic continues to escalate in the US; overnight, Johns Hopkins University has reported that more than 250,000 Americans have now died from Covid-19, another grim milestone in the crisis.

Total US infections now exceeding 11 million, with more than 76,000 people hospitalised with Covid across the country.

And in New York, schools are to temporarily halt after infection rates reached their highest level since the spring.

This has reminded the markets that we face months of rising deaths and economic disruption, which will see more businesses collapse and people lose their jobs.

Jim Reid of Deutsche Bank explains:

Whether it be outlooks or markets it’s all about vaccines and the virus at the moment. Risk assets actually slipped late in the US session, and closed at the lows (S&P 500 -1.16%), largely due to NYC school closures coming into force again today after the city’s positivity rate of first time Covid-19 tests rose over 3%.

In terms of the sectoral moves, every industry group in the US ended lower except for Autos (+1.14%), while the losses were led by Energy (-2.88%) and Utilities (-1.94%).

But the global situation is worsening too - Japan has recorded a record number of new daily coronavirus infections, including a new peak in Tokyo, while India is approaching 9m cases.

European stock markets are expected to drop back this morning, having hit multi-month highs back on Monday

The agenda

  • 8am GMT: ECB president Christine Lagarde testifies to the EU Committee on Economic and Monetary Affairs
  • 11am GMT: CBI industrial trends survey of UK manufacturing in October
  • 1.30pm GMT: US weekly unemployment statistics
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