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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

UK grocery sales hit record; Brexit and Covid-19 weigh on markets – as it happened

Christmas decorations in Regent Street this week
Christmas decorations in Regent Street this week Photograph: Nick Harvey/REX/Shutterstock

Honda hit by supply problems

One more thing.... car maker Honda has warned that it may be forced to temporarily halt production at its British factory, where it builds the Civic car, due to transport-related delays that could leave it short of parts.

Reuters has more details:

“Whilst a number of measures are being taken to mitigate any disruption, there could be a temporary pause to production to enable any supply issue to be resolved,” the company said in a statement.

Spokesmen for the company did not immediately say whether the issue was related to Brexit.

Talks between Britain and the European Union to strike a free trade deal by the end of the year have been unsuccessful so far with companies warning about the risk of severe disruption if there is no agreement.

Transport between Britain and mainland Europe is likely to face some disruption even if there is an agreement before the transitional arrangements expire at the end of the year.

Honda’s southern English Swindon factory built just under 110,000 cars last year but is due to close permanently next year.

Summary

Right, time for a recap.

Britain’s supermarkets have enjoyed their busiest month ever, as the English lockdown prevented people eating and drinking out last month. Sales of Christmas food and drink also surged, as families got into the festive spirit (and spirits) early.

There’s also been a surge in people getting their Christmas shopping ready early, amid worries that supplies could run short. Impressive organisation skills, but that’s a blow to hopes of a bumper December on the high street.

Economic confidence has jumped in Germany, on hopes of early vaccine rollouts.

But US small firms are less confident, due to the surge in Covid-19 cases and deaths across America.

Eurozone growth in the third quarter of 2020 has been revised down slightly, with new figures showing that Greece has suffered badly this year.

The pound has had a choppy day, amid anxiety that the UK and EU won’t agree a free trade deal in time.

Sterling is currently down over half a cent at $1.3311, amid some relief that the two sides have agreed to implement the Withdrawal Agreement, and the Northern Ireland protocol.

Chemicals giant Ineos is to build its new 4x4 offroader in France, dashing hopes of a jobs boost in Wales.

Industry regulator Ofgem has given the go-ahead for energy networks to plough at least £40bn into the green revolution.

Tesla is to raise up to $5bn selling new shares, as the electric carmaker takes advantage of an almost 900% surge in its share price over the last 12 months.

In the City, the FTSE 100 is up just 6 points in late trading, after a generally quiet days trading across the markets.

While multinationals are benefitting from the weaker pound, companies vulnerable to the pandemic are down today, including InterContinental Hotels (-3.6%), Rolls-Royce (-2.9%) and IAG (-2.6%).

Edward Moya of OANDA sums up the day:

Risk appetite is waning as the coronavirus continues to deliver staggering numbers across the US and as Senate Majority Leader McConnell continues to show no signs of warming up to a bipartisan $908 billion stimulus package.

US stocks are softer, but optimism is sky-high that Pfizer’s vaccine will get the greenlight later this week, after the FDA staff report confirmed the vaccine is highly effective with no safety issues. The report also showed that the vaccine starts to work 14 days after the first dose.

The UK also launched their vaccination campaign, marking a key turning point with the fight against COVID-19. Wall Street will now focus primarily on vaccine execution and how soon countries will reach herd immunity.

Updated

Ineos to build Grenadier 4x4 in Hambach, not Wales

Ineos, the UK chemicals giant, has decided to build its new 4x4 off-road vehicle in France, dashing lingering hopes that it might be made in Wales.

The company has bought a factory from Mercedes-Benz in Hambach (east of Metz, close to the border with Germany).

It hopes to start building its rival to the Land Rover Discovery late next year, and begin shipping to customers in early 2022.

Ineos, owned by Sir Jim Ratcliffe (now of Monaco), had originally pledged to make the Grenadier in Bridgend, Wales, creating 500 jobs.

In September 2019, Ratcliffe said “The decision to build in the UK is a significant expression of confidence in British manufacturing.”

But those plans were put on hold in July, and now Ineos insists that Hambach is the ideal facility for production of the Grenadier, safeguarding jobs there instead.

Ineos says:

One of Europe’s most modern automotive manufacturing sites, it is home to a highly experienced and capable workforce, has an excellent track record amongst Mercedes plants for the quality of its output, and recently benefited from a major investment to enable the production of larger vehicles.

Updated

Wall Street has opened, without much fanfare.

The main indices are slightly lower in early trading, amid worries over the escalating Covid-19 pandemic (with Dr Anthony Fauci warning yesterday that the situation could worsen further in January)

  • Dow: down 30 points or 0.1% at 30,039
  • S&P 500: down 7 points or 0.2% at 3,685
  • Nasdaq: down 36 points or 0.3% at 12,482 −36.98 (0.30%)

Full story: Record UK grocery sales after Covid lockdowns fuel early festive revelry

November was the biggest month ever for UK grocery sales with shoppers spending almost £11bn as the return of lockdown in England drove supermarket purchases of food and alcohol.

Sales of turkey and alcohol were up by just over a third and festive light sales soared 238% in November, according to analysts at Kantar, as shoppers brought forward preparations for Christmas and began treating themselves at home while pubs and restaurants were closed.

While mince pie sales slipped 8%, as social distancing rules meant there was less celebrating with friends and colleagues, cream liqueur sales doubled as festive drinking kicked off at home....

More here:

The eurozone’s recovery from this spring’s slump was a little less vigorous than first thought.

Eurostat has revised down its growth estimate for July-September across the euro area to +12.5%, down from +12.6% last month (and an initial estimate of 12.7%).

That’s still the fastest recovery on record, after the worst downturn (an 11.7% slump in Q2).

Eurostat also reports that Greece has suffered particularly badly over the last six months:

France (+18.7%), Spain (+16.7%) and Italy (+15.9%) recorded the sharpest increases of GDP compared to the previous quarter. These countries were also among the highest decreases in the second quarter.

Greece (+2.3%), Estonia and Finland (both +3.3%) and Lithuania (+3.8%) had the lowest increases of GDP. Except for Greece, which registered a decrease of 14.1%, these other countries also had less pronounced declines during the second quarter.

The report also shows that household spending, investment and rising exports all lifted the eurozone economy over the summer.

Our Politics Liveblog has full details on the UK-EU agreement on the Northern Ireland protocol, which has lifted the pound back to $1.337 -- flat on the day.

Sterling is now recovering its earlier losses, after the UK and EU announced they have reached an “agreement in principle on all issues” relating to the implementation of the Brexit withdrawal agreement.

This isn’t a breakthrough on the free trade deal - but it is at least an encouraging signal of cooperation.

European Commission Vice-President Maros Sefcovic and senior UK cabinet minister Michael Gove have both tweeted the news, which includes the Protocol on Ireland and Northern Ireland.

The deal - which is separate to trade talks - will ensure that the Withdrawal Agreement is fully operational at the start of next year.

Here’s the BBC’s Laura Kuenssberg with more details, including that the UK will now pull the contentious clauses in its Internal Market bill that breached the Brexit Withdrawal Agreement (to Brussels’ ire).

Here’s another chart showing the fall in US small business confidence:

Over in America, small firms are getting more anxious about the economic situation.

The US small business confidence index has dropped to 101.4 for November, down from 104 points in October.

The survey, produced by the National Federation of Independent Business, suggests that the escalating pandemic and the latest Covid-19 restrictions imposed in many states are hitting the economy.

There’s not much sign of Christmas cheer in the markets today, as investors fret about Brexit and the pandemic.

After an underwhelming morning, the main European indices are all the red, pulling the Stoxx 600 down by 0.6%.

In London, the FTSE 100 is now down 33 points or 0.5% at 6521.

Jet-engine maker Rolls-Royce (-3.5%) and airline group IAG (-2.4%) have joined the fallers, suggesting the recent surge in vaccine optimism is taking a breather.

Intercontinental Hotels (-3.5%) and catering firm Compass (-3%) are also lower, along with banks like HSBC (-3.7%) and Standard Chartered (-3%).

European stock markets, December 8th 2020
European stock markets, December 8th 2020 Photograph: Refinitiv

Mihir Kapadia, the CEO of Sun Global Investments, says:

“Despite the positive news that Britain has started to rollout a vaccine, global markets have continued their underwhelming performance this week as economic factors and rising infections still weight heavily on sentiment.

Europe is also shrugging off vaccine news as Brexit returns to the agenda. Investors are concerned that the UK and EU are unlikely to reach a compromise with the final time limit almost reached .

Currently, it appears that markets are now likely to drift lower as investors close their books and protects their profits and think about 2021 with relative optimism about the prospects.”

The pound is still being bogged down by Brexit worries, down nearly 0.5% today against the US dollar at $1.331 and the euro at €1.099.

That’s still high than yesterday morning’s tumble, when there were reports that Britain was about to walk away from the trade deal talks.

But traders are still edgy, with Boris Johnson warning this morning that securing a deal at an imminent Brexit summit in Brussels will be “very difficult”.

Asked if he would try to do a deal right up until the wire, Johnson told reporters:

“Yeah, of course. We’re always hopeful but you know there may come a moment when we have to acknowledge that it’s time to draw stumps and that’s just the way it is.”

Over in parliament, MPs on the Business, Energy and Industrial Strategy Committee have been hearing about the problems facing British businesses when the Brexit transition ends:

In the energy sector, industry regulator Ofgem has given the go-ahead for energy networks to plough at least £40bn into the green revolution.

It will also allow them to make higher returns on their investments, after companies threatened an unprecedented rebellion against its plans to save homes £20 a year on their bills.

My colleague Jillian Ambrose explains:

Ofgem’s plans, set out on Tuesday, will halve the savings energy bill payers can expect over the next five years to £10 a year after softening the crackdown on company profits it proposed over the summer.

The regulator has given the green light for investments in electricity grid upgrades, which are paid for through energy bills, to climb by a fifth compared with its earlier proposals, which sought to limit spending to £25bn.

Ofgem will also allow the companies to make returns of 4.3% on their energy network investments, up from its early plan to cut them to a record low of 3.9% but still well below the returns of 7-8% allowed over recent year.

Shares in energy providers have moved higher this morning, with SSE rallying 2.4% and National Grid up 1.4%.

Beautifully wrapped vintage christmas present

Speaking of Christmas... a third of people have already completed their festive shopping, according to a new survey from the Chartered Institute of Marketing (CIM).

That’s sharply higher than last year, when around 19% of super-organised people had wrapped up their Christmas shopping during November.

The CIM reports that people appear to have felt pressure to get their shopping done earlier than usual, due to the risk that the lockdown would make popular gifts harder to come by.

Nearly half of the 2,000 people surveyed said they’d done most of their shopping online. That may worry high street shops, who are desperately hoping for a bumper December after many were shut down last month.

Mark Dodds, chair of CIM’s food, drink and agriculture group said:

“This is serious news for many retailers. The high street was struggling before the pandemic, with many retailers reliant on the critical Christmas period for their sales. If seven million fewer people are going to be hitting the shops this December, then it could be devastating for shops that depend on Christmas footfall.

“It’s a particular concern for smaller and specialist retailers, who even with a good online offering, will have been drowned out during the lockdown by the marketing spend of the bigger brands.”

Over in Germany, investor morale has picked up as people anticipate Covid-19 vaccines will be approved and start to be rolled out soon.

Economic research institute ZEW reports that its gauge of economic sentiment for Germany jumped sharply this month, from 39 points to 55 pints.

But the assessment of the economic situation in Germany worsened again, sinking to -66.5 points, 2.2 points lower than in November.

That follows the introduction of Germany’s ‘lockdown-light’, which is now expected to run until at least January.

The European Medicines Agency (EMA) has said it will decide whether to approve the Pfizer/BioNTech vaccine by the end of this month, which would trigger the start of a co-ordinated rollout in the EU.

ZEW President Professor Achim Wambach said vaccine optimism was lifting confidence in an economic recovery.

“The announcement of imminent vaccine approvals makes financial market experts more confident about the future.

The ZEW Indicator of Economic Sentiment increased significantly in December despite the still high numbers of new coronavirus infections. This is most likely due to the announced forthcoming COVID-19 vaccine approvals.”

Updated

Neil Wilson of Markets.com says the grocers are clearly benefiting from the Covid-19 restrictions:

With little to do, restaurants shut, and Christmas parties cancelled, grocery sales are resilient – Kantar reports 11.3% year-on-year growth in the 12 weeks to Nov 29th, and 13.9% growth last month alone.

November turned out to be the biggest month ever for the UK supermarkets. In the 12 weeks to the end of last month, Tesco sales rose 10.4%, Sainsbury’s +10.8%, WM Morrison +13.7% and Asda +7.7%, with the sector seeing inflation of 1.4% over the month.

People have ‘gone early and gone hard’ on Christmas shopping at the supermarkets this year, says consumer journalist Harry Wallop:

Record grocery sales in November as Christmas starts early

Morrison’s new Christmas range of glitter-free own-brand decorations, cards, wrapping paper and horticulture.
Morrison’s new Christmas range of glitter-free own-brand decorations, cards, wrapping paper and horticulture. Photograph: Dave Thompson/PA

The latest Covid-19 restrictions and lockdown has proved extremely lucrative for the UK’s supermarkets.

Data firm Kantar has reported that November was the biggest month ever for the UK grocery market, with £10.9bn spent in store and online.

With pubs and restaurants closed in England for much of the month, and curbs in other areas too, households hit the supermarkets instead for their food and drink.

Kantar reports:

Take-home grocery sales rose by 11.3% during the 12 weeks to 29 November 2020, the fastest rate of growth since August.

Take-home sales during the past four weeks increased by 13.9%, as eating and drinking out of home was restricted by the English national lockdown.

Many people are getting into the Christmas spirit early -- literally, in certain cases. Alcohol spending was 33% higher than in November 2019, with two-fifths of that growth came from spirits. Cream liqueurs sales more than doubled compared with 2019, the survey found.

Kantar also found that sales of festive lights are up 238% (in the month to 15 November), as families try add some sparkle after a grim year.

Sales of turkeys have grown by 36% year-on-year. More than £11 million was spent on Christmas puddings in November too.

However, mince pie sales are down by 8%. Kantar says this is due to “fewer opportunities to share a treat with friends and colleagues.” (can confirm).

Fraser McKevitt, head of retail and consumer insight at Kantar, reckons December will be even busier, setting a new record.

“The three days before non-essential retail and hospitality closed on 5 November were especially busy, with grocery sales that week up by 17%. November as a whole saw shopper frequency hit its highest level since the beginning of the pandemic, suggesting more confidence among people going into stores.

Those factors contributed to November being the single largest month ever for the supermarkets, with £10.9bn spent over four weeks. December’s numbers are likely to surpass that again, and we expect spend to be close to £12 billion in the month ahead, around £1.5bn more than last year.”

Incidentally, this surge in spending underlines why the supermarket chains were forced to u-turn last week and repay their business rates relief. An emergency tax break is hard to justify when you’re pulling in record sales, and other businesses are facing closure.

Updated

The US Capitol Building in Washington, D.C.
The US Capitol Building in Washington, D.C. Photograph: Bryan Dozier/REX/Shutterstock

As well as Brexit and Covid-19, investors are watching for signs of progress towards a new US stimulus package.

Lawmakers are expected to approve a one-week stopgap funding bill later this week, which would give more time to agree a wider stimulus programme and an overarching spending bill to avoid a government shutdown.

My colleague Lauren Gambino reports from Washington:

Congress is poised to pass a stopgap funding measure that will avert a government shutdown and provide lawmakers more time to negotiate an emergency coronavirus stimulus legislation amid deepening economic pain.

Negotiations over a $1.4tn catch-all spending package are playing out alongside bipartisan efforts to pass long-delayed Covid-19 economic relief.

Congressional leaders hope to attach the stimulus bill to the must-pass spending bill, though several key sticking points remain.

On Monday, the Democratic House majority leader, Steny Hoyer, said that the House would vote on Wednesday on a one-week spending bill, known as a continuing resolution (CR), to avoid a government shutdown while lawmakers race to reach an agreement. Government funding for federal agencies is due to expire on Friday....

The Phillips 66 oil refinery in New Jersey, United States.
The Phillips 66 oil refinery in New Jersey, United States. Photograph: Anadolu Agency/Anadolu Agency via Getty Images

Oil is under a little pressure this morning too, with Brent crude dropping 0.5% to $48.55 per barrel.

The oil price hit nine-month highs last week, with Brent approaching $50 per barrel, after Opec+ agreed to only increase production modestly next month.

Stephen Innes of Axi says Covid-19 fears are pulling oil down again:

Traders have turned to focus on the pace of the vaccine rollouts virus, and the virus’s merciless spread over the short term, while the increased probability of stretched or fresh lockdowns cloud the near term horizon.

Britain’s FTSE 100 index has dipped at the start of trading, down 16 points or 0.25% at 6539.

Intercontinental Hotels is the top faller, down 2.4%, followed by banks HSBC (-2.3%) and Standard Chartered (-1%).

Mining companies are also dipping into the red, which also suggests a little anxiety about economic prospects.

European stock markets are also underwhelming - with France’s CAC down 0.2% and Germany’s DAX slightly lower.

Introduction: Brexit and Covid-19 cast clouds over markets

A police officer with Larry the cat in Downing Street last weekend, as Brexit talks head to a climax
A police officer with Larry the cat in Downing Street last weekend, as Brexit talks head to a climax Photograph: Yui Mok/PA

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

The markets are looking edgy this morning, as Brexit talks head down to the wire and the Covid-19 pandemic continues to rage.

After a volatile Monday, the pound is dipping against the US dollar and the euro in early trading as investors brace for showdown talks between Boris Johnson and European commission president Ursula von der Leyen later this week.

Yesterday, sterling was on track for its worst day in three months -- slumping by two cents against the dollar -- before rebounding after Johnson and von der Leyen agreed to hold personal talks in Brussels.

But fears of a no-deal Brexit are still lingering, foglike, in the City. The two sides seem to still be deadlocked over three key issues -- the ‘level playing field’, governance of the deal, and fishing rights.

So the pound is taking the brunt of the uncertainty, dipping by half a cent this morning to $1.333 [having hit a 30-month high over $1.35 last week]

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

Jim Reid of Deutsche Bank says a “high-stakes game” is continuing, with sterling the asset class most affected by the Brexit headlines:

Though an in-person meeting was taken by some as a positive sign, along with the fact the two sides are still talking, a UK government source said to journalists that “”Whilst we do not consider this process to be closed, things are looking very tricky and there’s every chance we are not going to get there.”

Kyle Rodda, market analyst at IG, adds:

Of course, the Brexit soap opera remains a key talking point, though still, little reliable or substantial information about the negotiations has been released.

UK Prime Minister Boris is on his way to Brussels for talks with his counterpart Ursula Von Der Leyen, with the market likely to remain jumpy going into tonight’s trade as market participants await a definitive answer on the trade pact.

The latest Covid-19 news is also weighing on the markets, with Hong Kong tightening its social distancing rules and banning evening dining at restaurants.

The sharp surge in Covid-19 cases and deaths in America is also worrying investors, with most of California now under a strict new lockdown.

New infections are running at around 200,000 every single day, and US diseases expert Dr Anthony Fauci has warned there could be another surge in Covid cases after Christmas.

The news that the Trump administration passed up a chance last summer to buy millions of additional doses of Pfizer’s coronavirus vaccine could also weigh on Wall Street’s spirits, as it may mean longer delays to get America vaccinated.

The agenda

  • 10am GMT: ZEW index of German and eurozone economic confidence
  • 11am GMT: NFIB survey of US business optimism

Updated

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