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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

US jobless claims hit pandemic low; UK services growth at 24-year high – as it happened

A ‘Now Hiring’ sign in front of an ice-cream shop
An ice-cream shop in Los Angeles, California, last week. Photograph: Frederic J Brown/AFP/Getty

Closing summary

Time to wrap up.

Another flurry of strong economic data has shown that the UK, US and eurozone are recovering rapidly from the economic shock of the pandemic.

In the UK, service sector firms reported their fastest growth since May 1997. With orders surging, some say they’re paying higher wages to attract staff.

The number of people furloughed has fallen by almost 900,000 in April, as companies reopened after the lockdown.

In the US, companies added almost a million new jobs in May according to private payroll operator ADP, showing a surge in hiring. Will tomorrow’s Non-Farm Payroll tell the same tale?

In a positive sign, the number of Americans filing new unemployment claims fell to a fresh pandemic low, below 400,000 for the first time since March 2020.

The news pushed up the US dollar, on speculation that the hot US economy could force central bankers to tighten policy. Wall Street initially fell, but the Dow is now flat again with the broader S&P 500 index off its lows (-0.3%).

The ‘meme stock’ frenzy has continued. Cinema chain AMC are down over 20%, after announcing it will sell more shares - tapping into the strong demand.

But, it also warned that:

… recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals.

GameStop, the original meme stock phenomenon, is down 10%, while electric van-maker Workhorse has jumped 25% as retail investors pile in.

Travel stocks have fallen in London, after Portugal was taken off the UK’s ‘green list’, meaning holidaymakers would need to quarantine on their return.

Oil hit its highest level in two years, with Brent crude rising to $71.99 per barrel – before dipping back, as the stronger dollar hit commodity prices.

And the UK could be close to a trade deal with Norway, according to reports.

Goodnight. GW

Updated

London close: Travel stocks hit by Portugal green list axe

Back in the City, travel stocks have ended the day lower after popular holiday destination Portugal was removed from the UK’s “green list” of destinations.

British Airways parent company IAG led the FTSE fallers, down 5.3%, after the government decided to stop allowing people to arrive from Portugal without having to quarantine.

Rolls-Royce, which makes and services jet engines, fell 2.3%.

Travel firms on the smaller FTSE 250 index also slid, with budget airline easyJet down 5%, ticketing firm Trainline off 5.1% and package holiday firm TUI shedding 4.5%.

Retailer WH Smith (which runs outlets at travel hubs) ended 4.7% lower.

Mining stocks also fell, with the strengthening dollar hitting commodity prices, while National Grid finished 4% lower after going ex-dividend today.

But on the other side of the coin, the weaker pound helped UK multinationals’ share prices.

So the FTSE 100 clawed back some losses, to end 43 points lower at 7064, down 0.6% today. It had hit three-week highs on Wednesday.

The FTSE 250 (smaller companies, more UK-focused) dipped by 0.6%, away from its recent record highs.

Norway and Britain 'agree post-Brexit trade deal' - media

View of Oslo city centre

There are reports in the Norwegian media that Oslo and London are ready to announce a trade deal.

Reuters has the details:

Norway and Britain have reached an agreement on their post-Brexit trade relations, Norwegian state broadcaster NRK and news agency NTB said on Thursday, citing anonymous sources.

The details of the deal, which must be approved by Norway’s parliament, remain unknown but will be presented on Friday, both NRK and NTB reported.

A spokesman for Norway’s Ministry of Trade, Industry and Fisheries said he was not able to confirm the information.

Since Britain’s departure from the European Union last year and a transition period that ended on December 31, Britain and EU outsider Norway have relied on temporary trade arrangements.

You can read NRK’s report online here (a kind reader points out there’s a Google Translate option here, if your Norwegian is a little rusten.)

Cryptocurrency dealers face closure for failing UK money laundering test

Up to 50 companies dealing in cryptocurrencies such as bitcoin may be forced to close after failing to meet the UK’s anti-money laundering rules.

The Financial Conduct Authority, the City regulator, announced on Thursday that an “unprecedented number” of companies had withdrawn applications from a temporary permit scheme that allowed firms to continue trading until the regulator could green-light or formally reject their operations.

A “significantly high number” of those firms had been warned that they were falling short of anti-money laundering standards intended to stop criminals and terrorist groups from disguising the source of their money, usually through a complex web of financial channels.

Firms that pull out of the permit process are required to stop trading immediately, until they can meet the watchdog’s standards and are admitted to the formal list of registered businesses.

Meme stock frenzy continues

It’s another day of wild action in the crazy world of meme stocks.

Cinema company AMC has slumped around 25% so far today, having doubled to a record high on Wednesday. The fall came after AMC said it would sell up to 11.5 million new shares, taking advantage of its recent huge rally.

Video games group GameStop are down almost 10%, having surged to their highest levels since their original dramatic jump-then-crash in January. At $257, they’re still up around 5,600% in the last year (!).

Another Reddid favourite, Workhorse, has surged again today. The electric-powered delivery and utility vehicle manufacturer is up 25%, and has gained over 50% in the last week.

The meme rally is partly being driven by the use of call options – the right (but not the obligation) to buy a stock at a certain price by a particular date.

A call option can be a relatively cheap way of profiting from a rising stock, especially if you set the ‘strike price’ – the level where the option is ‘in the money’ – very high (as an option that is less likely to pay out is cheaper to buy)

These derivatives have been ‘weaponized’ by small traders, says Marios Hadjikyriacos of XM, who are using them to take potentially lucrative positions in stocks which have been shorted by speculators.

Hadjikyriacos explains:

Purchasing a call option on a stock allows traders to command more buying power than simply buying the stock, and forces the primary dealers that sold those options to hedge their price exposure by buying the stock as well.

Combine that with heavy short interest and a stock with relatively small capitalization, and it’s a recipe for some explosive moves.

Updated

Dollar up, tech stocks down....

The US dollar has strengthened, as investors wager that today’s strong economic data increases the possibility of an early ‘tapering’ by the Fed.

This has pulled sterling down by half a cent, to $1.411.

The euro has lost three-quarters of a cent, to to $1.2135.

Tech stocks are also under pressure, another sign that traders are anticipating higher inflation as growth picks up. Intel (-1.8%), Microsoft (-1.35%) and Salesforce.com (-1.3%) are the top fallers on the Dow.

Fiona Cincotta, senior financial markets analyst at City Index, says:

The US economy is roaring back to life amid a successful vaccine programme and the reopening of businesses as pandemic restrictions are lifted. These data points bode well for tomorrow’s non-farm payroll which will be key in deciding the Fed’s next steps

Expectations of an earlier move by the Fed is being reflected in a stronger US Dollar and falling futures, particularly high-growth tech stocks, which are more sensitive to interest rate expectations.

Updated

The Institute for Supply Management has also reported that US services firms grew at a record pace last month (agreeing with Markit’s data).

According to the ISM, economic activity in the services sector grew in May for the 12th month in a row.

Its Service PMI jumped to a new all-time high, up to 64%, up from 62.7% in April (again, anything over 50 shows expansion). The previous record high was 63.7% in March.

All 18 services industries reported growth, as the US economy reopened – but there were also warning of capacity constraints, material shortages, weather-related delays, and problems hiring staff and handling logistics.

The report also includes some interesting quotes from businesses surveyed – many talk about the surge in commodities, and hiring problems.

  • “Transportation, labor, steel and general commodities are all increasing (in price) based upon general inflation and the rising price of oil.” [Mining]

  • “Small businesses in the area are reporting stimulus checks and extension of unemployment are hampering their ability to hire workers. Seasonal labor and H-2B (visa) workers are in very short supply, causing an uptick in cost per hour. Some employers are reporting they are offering cash incentives of (US)$50 if you show up for an interview.” [Professional, Scientific & Technical Services]

  • “We anticipated the reopening reasonably well but were caught off guard with respect to some materials. Steel and copper went higher than anticipated, and shortages are having an impact.” [Finance & Insurance]

  • “Business is very strong, and customer orders continue to increase at a rapid pace. Material shortages, increased prices and qualified personnel shortages are becoming a much larger concern.” [Real Estate, Rental & Leasing]

Updated

US services PMI shows record growth

Growth in America’s services sector has hit a record pace - further highlighting the strength of the recovery.

Data firm Markit says there was an ‘unprecedented expansion in output’ last month, driven by a surge in new business, including the biggest rise in new export orders for nine months.

Firms took on more staff, but also reported problems filling vacancies. Backlogs of unfinished work also built up, as services firms struggled to meet demand.

And, predictably, they were hit by rising prices -- with the rate of input cost inflation accelerated to a series high amid ongoing supplier price hikes.

In response, services firms hiked their own charges at the fastest rate in the survey’s history.

This drove Markit’s US services PMI to 70.4 in May, up from 64.7 in April. That’s the highest reading since the survey began in October 2009, and shows extremely fast expansion.

US services PMI to May 2021

Chris Williamson, chief business economist at IHS Markit, said America’s is accelerating fast … which could lead the Federal Reserve to rein in its stimulus measures …

The US economic recovery shifted up a gear in May, with output of the combined manufacturing and service sectors surging past all prior peaks by an impressive margin.

The strong correlation between the PMI and GDP means the economy looks set to enjoy rapid – potentially double-digit – growth in the second quarter.

Further robust expansions are indicated for the summer months, with an improving order book situation accompanied by elevated levels of business confidence and the further easing of virus restrictions both at home and abroad. But the survey’s price gauges have also climbed to unsurpassed levels, which will add to inflation worries.

These unprecedented output and price growth rates will inevitably lead to speculation about an earlier than previously expected tapering of Fed policy.

With manufacturing also strong last month, Markit says that overall US private sector output expansion was the fastest on record last month (matching the picture in the UK)

US PMI

Updated

Wall Street opens lower after jobs data

Wall St. outside the New York Stock Exchange.
Wall St. outside the New York Stock Exchange. Photograph: Brendan McDermid/Reuters

In New York, stocks have dropped in early trading following the strong labor data.

  • Dow Jones industrial average: down 246 points or 0.7% at 34,354 points
  • S&P 500: down 37 points or 0.9% at 4,170 points
  • Nasdaq: down 172 points or 1.1% at 13,583 points

The jump in private sector hiring, and the fall in jobless claims, suggests a strengthening economy. But that seems to be causing new concerns that central bankers could slow their stimulus programmes faster.

Earlier this week, Federal Reserve Bank of Philadelphia leader Patrick Harker said it’s time to ‘think about thinking about’ reducing the Fed’s bond-buying stimulus programme.

Harker said:

We’re planning to keep the federal-funds rate low for long, but it may be time to at least think about thinking about tapering our $120bn in monthly Treasury bond and mortgage-backed securities purchases.

Updated

Robert Frick, corporate economist at Navy Federal Credit Union, predicts US jobless claims could drop back to pre-pandemic levels later this summer.

But, recovering all the jobs lost will take much longer, he points out:

New claims for state unemployment benefits continued to drop in the most recent week, falling below 400,000 for the first time since the pandemic began. At the current rate, we should be around the typical pre-Covid level for state claims- – about 200,000 –later this summer.

The recent steady drop in claims is another sign that the jobs report tomorrow should be strong after April’s weak one. But unlike with claims, we have at least a year and a half to recover jobs lost from the Covid-19 recession.

The Wall Street Journal points out that the number of worker filings for initial jobless claims have dropped by 35% since late April:

Updated

US jobless claims hit new pandemic low

The number of Americans filing new claims for jobless support has fallen to a fresh pandemic low.

It shows that more firms are holding on to their current staff as well as hiring new employees.

About 385,000 people filed new “initial claims” for unemployment support last week, on a seasonally adjusted basis.

That’s the lowest level for initial claims since 14 March 2020, and 20,000 fewer than the 405,000 in the previous seven days.

If you strip out seasonal adjustments, there were 425,450 new jobless claims – up 6,014 on the last week.

That’s roughly half their level back in January, before Covid-19 vaccinations helped the economy to reopen.

But it’s still means twice as many people are losing their jobs and seeking unemployment insurance than before the pandemic.

Plus, another 76,098 self-employed workers filed for help from the Pandemic Unemployment Assistance (for those who aren’t entitled to regular jobless support).

Here’s some reaction:

Updated

Here’s more reaction to ADP payroll report, showing an acceleration in hiring at US firms last month:

ADP: US private sector payrolls rose 978,000 in May as hiring speeds up

Just in: US companies added nearly one million new employees to their payrolls last month, more than forecast.

Payrolls operator ADP reports that 978,000 new private sector jobs were created in May, beating expectations of around 650,000 new hires.

It’s the strongest reading since last June, when the US economy was reopening after the first wave of Covid-19.

However, April’s was revised down to show 654,000 jobs added in that month, instead of the initially reported 742,000.

May’s data suggests that hiring across the US economy picked up, in the face of raw material shortages and reports that some companies have struggled to hire staff.

Tomorrow’s Non-Farm Payroll will give the official read on the labor market – and the ADP report doesn’t always correlate particularly closely with NFP.

But economists say today’s report is a hopeful sign.

Updated

Full story: UK service sector surges as employers sound alarm

The reopening of the UK economy from lockdown has fuelled the fastest monthly growth since 1997 in activity in the service sector, which spans everything from pubs and hotels to banking and IT, despite evidence of labour shortages and rising costs for businesses.

In its monthly snapshot, IHS Markit and the Chartered Institute of Procurement and Supply (CIPS) reported a surge in business and consumer spending in May as lockdown restrictions were relaxed across all four nations of the UK.

Employers reported the strongest rate of hiring for more than six years amid a spring boom in the economy, which follows the worst recession for more than 300 years in 2020.

However, the monthly survey of businesses in the sector that includes hotels, restaurants, finance and IT showed mounting pressure on staff wage bills, raw materials and transport fuelled the steepest rise in costs since July 2008.

Amid fears over a burst of inflation in several major economies after lockdown, the combination of soaring demand and rising operating expenses pushed up the prices charged by services providers at the fastest rate since the survey began in 1996.

Britain’s surging services sector hasn’t brought much cheer to the markets today.

European indices are all trading lower, with the UK market lagging behind.

The FTSE 100 index is now down 92 points, or 1.3%, at 7014 points (its lowest level in a week).

Travel stocks continue to slide, on concerns that the UK could remove Portugal from its ‘green’ travel list (an update to the list is coming later today).

British Airways parent company IAG are down 5.2%, while budget airline easyJet has dropped by 4.8% on the FTSE 250 index.

The Footsie is also being pulled down because several UK companies, including National Grid (-4.5%) and Kingfisher (-3.6%), have now gone ‘ex-dividend’.

Europe’s Stoxx 600 is down 0.7%, with similar losses in Frankfurt and Paris.

European stock markets at lunchtime today
European stock markets at lunchtime today Photograph: Refinitiv

AJ Bell financial analyst Danni Hewson says:

National Grid shares trading without the rights to the dividend accounted for some of the weakness but nervousness over inflation may be creeping up too ahead of tomorrow’s key US jobs report.

There are still so many factors for investors to weigh, such as whether the economy will overheat or whether new Covid variants could prompt a further economic downturn.

There is also an element of having to second guess how central banks and governments will respond to the rapidly shifting backdrop.

All of this uncertainty is making it tricky for the markets to make concerted progress as we move towards the halfway point of 2021.

Updated

Microsoft Irish subsidiary paid no corporate tax on £220bn profit last year

Tax Watch: An Irish subsidiary of Microsoft made a profit of $315bn (£222bn) last year but paid no corporation tax, as it is “resident” for tax purposes in Bermuda.

The company, Microsoft Round Island One, posted profits last year equal to nearly three-quarters of Ireland’s entire gross domestic product (GDP) – despite having zero employees.

The subsidiary, which collects licence fees for use of copyrighted Microsoft software around the world, recorded an annual profit of $314.7bn in the year to the end of June 2020, according to accounts filed at the Irish Companies Registration Office. Its profits jumped from just under $10bn the previous year and compare with Ireland’s 2020 GDP of €357bn ($437bn).

The revelation of how much money Microsoft has saved by routing via Ireland comes as world leaders hammer out an agreement to tackle multinational tax avoidance before the G7 meeting in Cornwall later this month...

Here’s the full story:

UK furlough total falls

The number of UK workers on furlough has dropped by over 880,000 last month, another sign that the economy is picking up.

There were 3,435,400 people on the Coronavirus Job Retention Scheme (CJRS) at the end of April, down from 4,319,100 at the end of March, HMRC reports.

The largest decline came in the wholesale and retail sector, which had 234,500 fewer jobs on furlough following the reopening of shops in April.

There were also large reductions in the number of people furloughed at accommodation and food services, and arts and entertainment companies, although take-up rates still remain high across these sectors, HMRC adds.

At the end of April, there were still an estimated 602,800 people furloughed in the wholesale and retail sector, 932,600 in accommodation and food services, 246,300 in manufacturing, 166,600 in construction, and 230,200 in arts and entertainment.

The government has welcomed the drop, saying that 11.5 million employees and 1.3 million employers have now been supported by CJRS (which pays 80% of wages to people currently not needed at work due to the pandemic).

Resolution Foundation have calculated that take-up of the Job Retention Scheme has reached two billion days [the total number of employments furloughed each day since the start of March 2020, including weekends].

Dan Tomlinson, senior economist at the Resolution Foundation, says:

Employees have clocked up two billion days’ worth of furlough since the start of the pandemic. This shows just how big an impact the pandemic has had on the economy – and how vital the furlough scheme has been in term of preventing mass unemployment.

The continued fall in furlough rates during April as the economy began to reopen is an encouraging indicator that the labour market – as well as the wider economy – is recovering quickly.

But with around one-in-six young workers still on furlough at the end of April, today’s figures are a stark reminder of the risk of rising unemployment when the furlough scheme ends. The government must do all it can to ensure those workers find work as quickly as possible.

Updated

The number of UK firms open for business is now the highest since the first wave of Covid-19, as lockdown restrictions are lifted.

The Office for National Statistics reports that the percentage of businesses currently trading has increased to 87%, the highest proportion since comparable estimates began in June 2020.

Another 3% of firms plan to restart trading in the next two weeks, it found.

About 6.3% of firms have paused and don’t expect to reopen in a fortnight, while 3.8% of those surveyed have ceased trading.

The biggest change came in the accommodation and food service sector – where the proportion of companies currently operating has jumped to 61% to 83%, following the reopening of hospitality venues for indoor dining last month.

In the transportation and storage industry, the proportion of firms currently trading rose from 67% to 75%.

Updated

British pubs warns of ‘serious’ staff shortages

The Prince of Peckham pub in London as it reopened to indoor customers last month
The Prince of Peckham pub in London as it reopened to indoor customers last month Photograph: Alberto Pezzali/AP

Britain’s pubs have warned they face ‘serious’ staff shortages, having reopened after the lockdown.

The British Beer & Pub Association say some landlords have been forced to greatly cut their service, or shut altogether.

It has written to employment minister, Mims Davies, urging the Government to urgently do what it can to help the sector with such staff shortages.

The BBPA say several factors are to blame. Covid-19 restrictions are more labour-intensive, as you need more staff to run table service, for example. EU nationals not returning to the UK is another factor, they add.

The BBPS also wants the government to expand the Youth Mobility Scheme to cover more nations – currently, this visa scheme is only open to 18- 30-year-olds from Australia, Canada, Hong Kong, Japan, Monaco, New Zealand, Republic of Korea, San Marino and Taiwan.

It is also pushing for a “more flexible approach to immigration” by reviewing the shortage occupation list, to help pubs hire.

Emma McClarkin, chief executive of the British Beer & Pub Association, explains:

Our pubs face a serious staffing shortage that has become acute. In some instances pubs are having to reduce capacity or close entirely because they don’t have the staff to open.

This is a major concern for our sector as it is hindering its recovery after lockdown. At our heart we are a people business and we need good people to provide the best hospitality.

Even before the crisis, pubs in some areas were struggling to find the staff with the skills they need, particularly chefs and kitchen staff. As they reopen and begin their recovery, some have found staff have either moved away or found jobs in other sectors.

Updated

IHS Markit also reports that the wider UK private sector grew at the fastest pace since its survey began in January 1998.

UK composite pMI
UK composite pMI Photograph: IHS Markit

This is based on data from the service sector and manufacturing (which posted record growth in May earlier this week).

Wages on the rise amid scramble for workers

The surge in demand since reopening has left service sector firms scrambling to find staff – and forcing some to lift pay to attract staff.

Today’s services PMI report shows that payroll numbers rose at the fastest pace since March 2015, with survey respondents citing a combination of new hires and the return of employees from furlough.

Many companies reported difficulties with staff availability, especially among consumer service providers, Markit says.

And with labour in short supply, some companies are paying higher salaries – a boost to workers.

The PMI report says:

Tighter labour market conditions and subsequent rises in salary payments added to cost pressures across the service economy in May.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, says a shortfall of talent is driving up pay.

Businesses rushed to increase their operational capacity to meet this demand but were struggling to fill their job vacancies. As staff moved on to other opportunities following the pandemic’s impact on lives and priorities, a potential skills gap in the sector means some firms may struggle to meet their new goals.

This shortfall in talent meant the best candidates were increasingly in demand and demanding higher wages, adding to the highest inflationary rise in business costs since July 2008.

We will see more pressure for salary rises, as basic living becomes more expensive for everyone as the hike in prices charged by service companies was the highest since 1996.”

Updated

UK service sector growth hits 24-year high

A cinema hall, after the reopening of the economy on May 17th

The UK economy is enjoying “eye-popping” growth as services companies see a surge in demand after lockdown restrictions were eased.

Activity at UK service providers jumped in May at the fastest rate in 24 years, according to the latest survey of purchasing managers at UK services firms.

Companies reported resurgent business and consumer spending last month, with new orders rising at the fastest pace since October 2013. This encouraged them to take on more staff, with the strongest rate of employment growth for just over six years.

Backlogs of work also built up due to a jump in forward bookings, stretched capacities and staff shortages.

Covid-19 restrictions were eased in mid-May, meaning that pubs and restaurants could serve indoors. Other other hospitality venues also reopened. This followed the earlier reopening of non-essential shops in April.

But this jump in demand is also pushing costs up. Input price inflation reached its highest since July 2008, and companies raised their own prices at the fastest rate since the survey began in 1996.

This lifted IHS Markit’s Services PMI up to 62.9 in May, from 61.0 in April. Any reading over 50 shows growth, and this level implies the economy is growing extremely fast after contracting in the first quarter of the year.

Its suggests the fastest rate in business activity since May 1997 -- the month in which Tony Blair became prime minister.

UK services PMI
UK services PMI Photograph: IHS Markit

Tim Moore, economics director at IHS Markit, says the successful Covid-19 vaccine rollout is boosting the economy, and implying very strong growth this quarter.

UK service providers reported the strongest rise in activity for nearly a quarter-century during May as the roll back of pandemic restrictions unleashed pent up business and consumer spending. The latest survey results set the scene for an eye-popping rate of UK GDP growth in the second quarter of 2021, led by the reopening of customer-facing parts of the economy after winter lockdowns.

Pressure on business capacity due to a spike in demand and staff hiring difficulties emerged as a major challenge for service sector companies in May. Job creation was the strongest for over six years, but backlogs of work accumulated to the greatest extent since the summer of 2014.

The successful vaccine roll out has generated a strong willingness to spend and fortified business optimism across the service economy. However, inflationary trends intensified in May as suppliers passed on higher transport bills, staff costs and raw material prices. Imbalanced demand and supply appears to have spread beyond the manufacturing sector, which contributed to the steepest rise in prices charged by service providers since the survey began in July 1996.

Updated

Eurozone services sector growth highest since 2018

Services firms across the euro area have posted their strongest growth in almost three years.

With economies reopening from the lockdown, firms reported an increase in output growth, and a rise in volumes of new business for the first time since last July, date firm IHS Markit reports.

Backlogs of work rose, encouraging companies to take on additional staff for the fourth month running – with employment rising at the fastest rate since February 2020

This lifted Markit’s Eurozone services PMI to 55.2 in May, up from 50.5 in April, and the highest level in almost three years.

Ireland and Spain reported the fastest services growth, followed by France, while Germany recorded the slowest expansion.

The wider eurozone private sector grew at its fastest pace since February 2018, Markit adds, due to strong growth in the manufacturing. Ireland posted the strongest PMI since the survey began 21 years ago.

Eurozone composite PMI
Eurozone composite PMI Photograph: IHS Markit

Updated

Foxtons estate agents in Holborn
Foxtons estate agents in Holborn Photograph: Alicia Canter/The Guardian

London estate agent Foxtons is also bouncing back from the pandemic.

Foxtons told the City that trading momentum has remained strong since its last trading update on 14 April, with sales running ahead of pre-Covid levels.

Following a 49% increase in Foxtons Q1 sales revenue versus both 2020 and 2019, the sales commission pipeline has continued to grow and is now 65% ahead of last year and 17% up on 1 January 2021.

As a result of the strong trading momentum, adjusted operating profit for the first half of the year is expected to be significantly ahead of both 2020 and 2019.

Foxtons faced a shareholder backlash in April, with 44% of investors failing to back its remuneration report after it awarded CEO Nic Budden almost £1m in bonuses, despite taking £4.4m of furlough money and £2.5m in business rates relief.

FTSE 100 opens lower

The London stock market has dipped in early trading, dropping from yesterday’s three-week highs.

The blue-chip FTSE 100 index is down 47 points or almost 0.7% at 7060 points.

The FTSE 100, early trading, June 03 2021
The FTSE 100 this morning Photograph: Refinitiv

Retail stocks are lower, with discounter B&M down 1.7% despite reporting that pretax profits doubled last year after it stayed open during the lockdown.

B&M reported that “trading continues to be volatile at a weekly and product category level, in particular since the recent easing of lockdown restrictions.”.

DIY chain Kingfisher are down 2.6%, after going ex-dividend this morning (it’s too late to qualify for the next payout to shareholders).

National Grid also went ex-divi today; they’re down 4.7%.

Travel companies are among the fallers too, with British Airways parent company IAG down 2.5%.

Budget airline easyJet have dropped 2.8% (on the smaller FTSE 250 index), amid reports that Portugal could potentially be removed from the UK’s green list, which allows travellers from those countries into England without having to self-isolate on arrival.

The government is set to announce revisions to the travel traffic-light system on Thursday, but Whitehall sources expect just a “handful of new places” to be given quarantine-free travel – few of which are tourist destinations...

Updated

Growth at China’s service sector companies slowed slightly last month.

The Caixin services PMI, which racks China’s services firms, fell to 55.1 in May, down from 56.3 in April. That still shows rapid growth, with business activity and new orders up sharply – but softening compared to April.

Caixin says the Covid-19 pandemic appears to have hit exports last month.

According to panel members, customer demand continued to recover due to the successful containment of Covid-19 in China, while there were also reports of new product offerings boosting sales.

The resurgence of the virus in other regions across the world weighed on new export business, however, which fell for the third time in four months (albeit only slightly).

Updated

David Beckham buys stake in vehicle electrification firm

David Beckham Lorenz Lunaz Hilton Electric Rolls

The jump in petrol prices won’t alarm those who have made the switch to electric cars.

Converting fossil fuel cars to electric is one option - and former football ace David Beckham has now taken in interest. He’s bought a 10% stake in Lunaz, a Silverstone-based company that electrifies classic cars from Rolls-Royce, Jaguar and Range Rover.

Lunas is also planning to use the same technology on bin lorries, and other commercial vehicles.

My colleague Jasper Jolly went to see them yesterday for a spin, and reports:

Lunaz is part of a small but growing trend of the new battery economy: ripping out polluting engines and installing batteries and electric motors with zero exhaust emissions.

The attraction for Beckham became clear during a Guardian test drive on Wednesday afternoon alongside the famous Silverstone race track in the well-upholstered back of a 1961 Rolls-Royce Phantom. Electric motors may lack the engine roar beloved of petrolheads, but the smooth, quiet ride they offer is well suited to the more rarefied atmosphere of chauffeur-driven luxury. At first glance the plush interior could have been hand-upholstered 50 years ago, but wooden charge and power dials tell a different story.

New cars powered solely by petrol or diesel engines will be banned by 2030 in the UK, but the government is unlikely to order classic cars off the road, whatever their emissions, while London’s ultra-low emissions zone exempts historic vehicles. Yet there is still growing demand for upgrades in the car market. Workshops are springing up around the country that cater to this new class of customer as batteries finally reach the point where they can be slotted in to older models.

The technology is there, but financially, it is likely to be some time before conversions of mass-market cars are within reach. Lunaz charges for classic models start at £245,000 for a Range Rover, putting it within the reach only of the very wealthy. For a historic Rolls-Royce those prices are £350,000 and upwards – very far upwards, judging by the range of bespoke options on offer.

One or two new electric motors take up much less space than an engine, allowing Lunaz to squeeze in custom-made batteries and whatever newer technologies customers need, from air conditioning to electric windows, phone chargers and in-built TVs....

More here:

Analysts: Oil likely to keep rising as demand picks up

Analysts predict that the oil price will continue to rise, as the relaxation of travel restrictions and other curbs are eased.

Norbert Rucker, analyst at Swiss bank Julius Baer, explained:

The strong demand dynamics and likely delays in the Iran nuclear deal negotiations pushed oil prices above the much-watched $70 per barrel level.

We expect oil prices to move well beyond $70 per barrel towards mid-year.

Stephen Brennock of oil broker PVM also believes the market could absorb supply increases:

The market is optimistic that growing summer travel and reopening economies will easily accommodate additional OPEC+ production increases and even a possible Iranian return to the market.

CBA commodities analyst Vivek Dhar said in a note this week that demand from drivers was picking up too.

The US driving season is a period that sees higher‑than‑normal fuel consumption. UK traffic is now sitting above pre‑pandemic levels.

We continue to see the oil demand recovery led by the US, Europe and China.

Updated

Introduction: Oil at two-year high

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

The oil price has hit a new two-year high, with demand increasing as economies emerge from lockdown, and producers keep supplies curbed.

Brent crude has hit its highest level since May 2019 this morning, hitting $71.99 per barrel, having settled at a two-year high overnight. It’s now more than recovered from its slump early in the pandemic:

The brent crude oil price over the last five years
The Brent crude oil price over the last five years Photograph: Refinitiv

US crude is catching up fast too – hitting $69.40 per barrel, its highest since October 2018.

The rally comes after the Opec+ group agreed to maintain its slow easing of production cuts, and as negotiations continue over the Iranian nuclear deal - which could result in oil sanctions being lifted.

Opec+ struck an optimistic tone about improving demand this week, which helped lift oil - even though it stuck to its policy of slowly relaxing production cuts.

Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, predicted a demand recovery in China and the US in the coming months, with vaccine rollouts helping to rebalance the oil market.

And overnight, US crude inventory figures showed a larger-than-expected drop in crude stocks - signaling rising demand, as the peak driving season looms in the US.

With European economies reopening after their pandemic lockdowns (although new Covid-19 variants could yet derail these plans), fuel demand could strengthen. And that would potentially push inflation higher in the coming months too.

Naeem Aslam, analyst at Avatrade, explains:

Basically, traders are feeling a lot more optimistic about the reopening of the global economy and the continuation of the vaccination process. In addition to this, if we look at oil supply, it seems like major oil producers are very much maintaining their discipline.

Traders also understand that the US and Iran’s nuclear deal cannot be reinstated that easily, and it will take a while before the previous conditions are enacted. This means no immediate increase in oil supply, and this is also supporting oil prices.

Also coming up today

The latest services sector PMI reports are expected to show strong growth in the UK, eurozone and the US … and probably intensifying price pressures as well.

The latest US jobless claims data will be closely watched, ahead of tomorrow’s Non-Farm Payroll (NFP) jobs report for May – which may show a rebound in hiring after April’s slowdown.

We also get the monthly assessment of US private sector payrolls, from ADP.

Markets are looking calm, with investors cautious ahead of Friday’s NFP.

But that doesn’t extend to the ‘meme stock’ world. Yesterday, a frenzy of trading in Reddit favourites saw cinema chain AMC Entertainment’s stock double to new record highs.

AMC is expected to benefit as lockdown measures are rolled back, and people return to the cinema. It also launched a new platform for its sizable retail investor base - which includes a free large popcorn when attending a movie at AMC this summer.

But even so, the rally is quite remarkable given the company’s pandemic struggles - sending the firm’s value soaring over $30bn (meaning more pain for the speculative hedge funds betting against it).

As Bloomberg explains:

The moonshot surge in the shares of AMC Entertainment Holdings Inc. has vaulted it into the ranks of some of the world’s most valuable companies.

The company has gone from a small cap to a large cap in the space of a few months. A 95% gain amid a retail-trading frenzy on Wednesday left the movie-theater chain with a market capitalization of $31.3bn. That makes it more valuable than half of the companies in the S&P 500 Index.

AMC is now worth more than Tyson Foods Inc. and Delta Air Lines Inc. despite projections for the company to bring in a fraction of their revenues.

More here: AMC Is Now Worth More Than Half the Companies in the S&P 500

The agenda

  • 9am BST: Eurozone services PMI for May
  • 9.30am BST: UK services PMI for May
  • 1.15pm BST: ADP survey of US private sector payrolls
  • 1.30pm BST: US initial weekly jobless claims
  • 3pm BST: US services PMI for May

Updated

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