Closing summary
Wall Street has been in and out of the red this week, as easing bond yields prompted investors to pile back into technology stocks, away from energy and financial stocks, whose fortunes are more closely linked to the economy.
Today, the Dow Jones is 335 points ahead, a gain of 1%, at 32,758, while the S&P 500 has gained 27 points, or 0.7%, to 3,937 and the Nasdaq is 10 points up at 13,238.
Over here, the FTSE 100 has turned positive, up 0.13%, or 8 points, at 6,707 and Italy’s FTSE MiB is 0.27% ahead. Germany’s Dax is still down 0.55% while France’s CAC is flat.
Oil prices are still up sharply after a large container ship ran aground in the Suez Canal and blocked it. Brent and US crude are both up around 4%, at $61.16 and $60.08 a barrel respectively.
UK inflation slowed in February to 0.4% from 0.7% in January, as the third coronavirus lockdown brought with it a wave of discounting by clothing retailers and secondhand car dealers, according to official figures.
Britain’s economy returned to growth in March, according to surveys, as businesses stepped up preparations for the easing of lockdown, lifting optimism in the services sector to the highest level since 2004. The eurozone’s business sector also returned to growth for the first time in six months, but with fresh lockdowns in place across Europe, economists are not expecting the economy to bounce back until the second half of the year.
Even so, consumer confidence rose to an 11-month high in March, according to the European Commission’s flash indicator.
#Eurozone consumer confidence rose appreciably in March to 11-month high. European Commission "flash" indicator improved to -10.8 in March from -14.8 in February, -15.5 in January & -17.6 in November.
— Howard Archer (@HowardArcherUK) March 24, 2021
Here are today’s main corporate stories:
John Lewis has confirmed plans to permanently close eight more outlets, including department stores in York, Peterborough, Sheffield and Aberdeen, with the potential loss of almost 1,500 jobs.
Ryanair has revealed plans to increase the number of its flights to 80% of pre-pandemic levels by July, as the airline’s chief executive criticised UK government for warning against booking overseas summer holidays this year. Michael O’Leary said he was “very confident” that Britons would be “going to the beaches of Europe” thanks to the UK’s rapid vaccination programme.
The Harry Potter publisher Bloomsbury has issued its second profit upgrade of the year, lauding a lockdown reading boom, but the trend may not endure as coronavirus pandemic restrictions are lifted through the summer.
Almost 60,000 frontline workers at BT will receive a special bonus of £1,500 from the company in recognition of their work during the coronavirus pandemic.
A Goldman Sachs junior banker has spoken out over ‘18-hour shifts and low pay’ at the US investment bank.
One of the UK’s top fund managers, David Cumming of Aviva Investors, has revealed it will not invest in the meal delivery firm Deliveroo when it floats on the stock market in early April, partly because of the way the company treats its workers.
A law firm representing the UK owners of Mercedes-Benz cars has started formal legal action seeking compensation from the German carmaker for allegedly installing illegal emissions cheating devices on its diesel vehicles.
Thank you for reading. We’ll be back tomorrow! - JK
Updated
US Treasury secretary Janet Yellen and Fed chairman Jerome Powell are continuing their testimony before US Congress (from yesterday) -- you can watch live here.
LIVE: Fed Chair Powell and Treasury Sec. Yellen appear before Congress to address the economic response to Covid-19 ▶️ https://t.co/xSXgHQg95g
— Bloomberg (@business) March 24, 2021
Adam Button, chief currency analyst at Forexlive, has been watching.
Powell is doubling down, saying the rise in bond yields reflects an improved outlook. He also repeats that he would be concerned if it were not an orderly process or if conditions tightened enough to threaten the recovery.
Updated
GSK fires former US government vaccine chief over harassment
GSK has fired Moncef Slaoui –- who served as scientific head of the US vaccine programme Operation Warp Speed during the Trump administration -- as chairman of its venture Galvani Bioelectronics. An investigation by a law firm, commissioned by GSK, found that he sexually harassed a GSK employee several years ago.
He is the former head of GSK’s vaccines department, and worked for the drugmaker for 30 years.
GSK said in a statement:
The board of directors of GlaxoSmithKline, the majority shareholder of Galvani Bioelectronics, today announced the termination of Moncef Slaoui as chair of the Galvani board of directors, effective immediately.
The termination follows the receipt of a letter containing allegations of sexual harassment and inappropriate conduct towards an employee of GSK by Dr. Slaoui, which occurred several years ago when he was an employee of GSK. Upon receipt of the letter, the GSK Board immediately initiated an investigation with an experienced law firm to investigate the allegations. The investigation of Dr. Slaoui’s conduct substantiated the allegations and is ongoing.
Dr. Slaoui’s behaviours are wholly unacceptable. They represent an abuse of his leadership position, violate company policies, and are contrary to the strong values that define GSK’s culture.
In the markets, German 10-year government bond yields fell to a five-week low today, as traders worried over tighter lockdown restrictions (extended until 18 April) to contain a fresh wave of Covid-19 infections. This has encouraged a return to safe-haven bonds (and when prices rise, yields fall).
Germany’s 10-year Bund yield (the effective interest rate) fell to -0.360%.
The European Central Bank has also been purchasing more bonds as it ramped up its stimulus efforts to restrain rising bond yields/borrowing costs. It bought €28bn of bonds last week across its stimulus programmes, an increase of almost 50% and the biggest weekly amount since 4 December.
Bond yields had been rising in the eurozone (and the UK and US) largely due to higher growth and inflation expectations for the US, rather than a brighter outlook for the eurozone.
Updated
Flash #PMI data pointed to another substantial increase in business activity across the US in March. Growth was driven largely by services, however, as input shortages and supply delays limited the manufacturing expansion. Read more: https://t.co/T0dWByoQwA pic.twitter.com/4WXiGm3Nym
— IHS Markit PMI™ (@IHSMarkitPMI) March 24, 2021
Service firms recorded the steepest increase in new business for almost three years amid stronger client demand and looser coronavirus restrictions. The combined increase in manufacturing and service sector new orders was the strongest since September 2014.
Chris Williamson, chief business economist at IHS Markit, said
Another impressive expansion of business activity in March ended the economy’s strongest quarter since 2014. The vaccine roll-out, the reopening of the economy and an additional $1.9 trillion of stimulus all helped lift demand to an extent not seen for over six years, buoying growth of orders for both goods and services to multi-year highs.
Producers were increasingly unable to keep pace with demand, however, due mainly to supply chain disruptions and delays. Higher prices have ensued, with rates of both input cost and selling price inflation running far above anything previously seen in the survey’s history.
US business activity expands, powered by services
US business activity continued to expand in March, powered by service sector firms, while input shortages (such as materials, PPE and fuel) and supplier delays held back factory output, according to the flash PMI surveys from IHS Markit.
Adjusted for seasonal factors, the IHS Markit flash US composite PMI output index posted 59.1 in March, down slightly from 59.5 in February, to signal the second-fastest private sector upturn for six years.
- Flash US Composite Output Index at 59.1 (59.5 in February). 2-month low.
- Flash US Services Business Activity Index at 60.0 (59.8 in February). 80-month high.
- Flash US Manufacturing PMI at 59.0 (58.6 in February). 2-month high.
- Flash US Manufacturing Output Index at 54.5 (57.8 in February). 5-month low.
Updated
Wall Street has opened higher ahead of the Markit business surveys, which are due in just over five minutes.
- Dow Jones up 47 points, or 0.15%, to 32,470
- S&P 500 up 9 points, or 0.2%, to 3,913
- Nasdaq up 61 points, or 0.47%, to 13,289
James Knightley, chief international economist at ING, has looked at the US durable goods figures.
Virtually all February data has disappointed as winter storms and cold conditions took their toll on supply chains and kept people inside. Today’s durable goods report was no different, but the data will all bounce strongly for March given massive fiscal stimulus and record low customer inventories.
Bad weather is likely to have been a key factor here with all sectors witnessing declines aside from electrical equipment (+0.2% MoM). If you were experiencing slower production due to storm disruption you obviously need to order less for the next month. ISM orders figures remain very firm so March should rebound strongly on more seasonal weather patterns.
However, there are other issues such as the global semi-conductor shortage, which is impacting vehicle production around the world given they are in anything from brake sensors to satellite navigation to parking assistance systems. If you can’t get enough semi-conductors then you order less of everything else as well, be it steel or tyres – note that vehicle and parts orders fell 8.7% MoM. Assuming this can be resolved soon, orders should also bounce back.
Andrew Hunter, senior US economist at Capital Economics, concurs.
The fall in durable goods orders in February was mainly due to the disruption caused by the severe winter storms, which we already know weighed heavily on manufacturing output last month. The latest surveys point to a rebound in March and suggest that business equipment investment growth is set to remain unusually strong.
Updated
In Germany, chancellor Angela Merkel’s cabinet has approved an extra budget of €60bn, as the government battles a third wave of coronavirus infections caused by more infectious variants. This will lift new borrowing to a record high of more than €240bn this year, according to a government official, Reuters reported.
Excluding transport, durable goods orders fell by 0.9%.
Durable goods orders unexpectedly fell in February, when they were down 1.1 percent on the month following a 3.5 percent increase in January. Econoday's consensus forecast was for a 0.8 percent advance. pic.twitter.com/rCegqQ2Mil
— Econoday, Inc. (@Econoday) March 24, 2021
Orders for US durable goods unexpectedly fell in February, by 1.1% while economists had expected a 0.5% increase.
Chief currency analyst Adam Button at Forexlive says:
This is a soft report and the first big miss in awhile but the market reaction has been minimal. This is the first decline since last April so the market is likely to forgive it, especially if the Markit manufacturing survey at 1345 GMT is strong.
US February prelim durable goods orders -1.1% vs +0.5% expected https://t.co/tGgyCdvudd
— ForexLive (@ForexLive) March 24, 2021
Some thoughts on the John Lewis closures...
Of the eight John Lewis stores that are closing, the biggest (at 102,00 sq ft) and also the most remote is in Aberdeen - 120 miles from the Waitrose in Stirling or 127 miles from John Lewis in Edinburgh. JLP will become non-existent if you live in north-east Scotland.
— john ryan (@newstores) March 24, 2021
The closure of 8 John Lewis stores is quite a blow, especially for Yorkshire.
— Harry Wallop (@hwallop) March 24, 2021
Sheffield's JL has been there since 1940 and employs 299 staff. The large At Home York is also closing & employs 209
There will surely be lots of questions about strategy in the recent past. York was a new-build store opened in 2014. Peterborough completed a £21m refurb only recently. And Sheffield City Council agreed a deal to keep John Lewis there just months ago, paying the company £3m. pic.twitter.com/ji7yd3VRVC
— Graham Soult FIPM (@soult) March 24, 2021
Updated
A law firm representing the UK owners of Mercedes-Benz cars has started formal legal action seeking compensation from the German marque for allegedly installing illegal emissions cheating devices on its diesel cars, writes my colleague Jasper Jolly.
Hagens Berman, a US law firm, filed particulars of the claim at London’s high court on Tuesday alleging that Daimler, Mercedes-Benz’s owner, put “defeat devices” that artificially lowered emissions when the car detected it was being tested.
Updated
John Lewis closes 8 more stores
John Lewis has confirmed plans to close eight more outlets, including department stores in York, Peterborough, Sheffield and Aberdeen, with the potential loss of almost 1,500 jobs, reports our retail correspondent Sarah Butler.
The company, which reported it first ever full-year loss earlier this month, said it would also close four ‘at home’ stores, in Ashford, Basingstoke, Chester and Tunbridge Wells, as well as the four city centre department stores.
The latest closures come after John Lewis closed eight stores in 2020 amid a shift to online shopping, which has been accelerated by the Covid-19 pandemic. Online trading now accounts for three-quarters of the department store’s sales.
Updated
Taiwan has ridden out the coronavirus pandemic mostly unscathed, while Britain has been crippled economically and in human terms – a tale of two island nations, told by Emma Graham-Harrison and Helen Davidson in Taipei.
Taiwan’s leaders, helped perhaps by having an epidemiologist as vice-president, perhaps by its experience of the outbreak of the Sars coronavirus in 2003, recognised the terrible threat posed by Covid-19, even as the earliest data trickled in. They decided the only way to protect their country, its people and economy, was to keep the virus out.
Updated
Almost 60,000 frontline workers at BT will receive a special bonus of £1,500 from the company in recognition of their work during the coronavirus pandemic, writes Joanna Partridge.
The telecoms group said that it would give 59,000 of its staff a £1,000 cash bonus, which they will receive in June.
BT to invest £12bn in faster broadband and reaching remote areasRead more
In addition, the workers, who include engineer and customer service centre staff, will receive a further £500 in shares, which will be awarded after three years as part of the employee share scheme.
Joshua Mahony, senior market analyst at the online trading platform IG, has looked at the market moves.
European markets are on the back foot in early trade despite the helping hand a weaker currency and impressive PMI numbers might provide. Instead, we are seeing a continued focus on the potential impact a third wave could have upon market sentiment, with the reflation trade coming into question as a result.
Declines in Treasury yields over the course of this week signal a shift in tactics, with confidence of a straight-forward recovery certainly on the wane. Instead, we have seen traders head for the havens on the prospect of fresh lockdowns and prolonged restrictions, driving assets such as the dollar, yen, gold, and bonds higher.
Nevertheless, while markets are becoming increasingly hesitant, the ongoing vaccination push and economic recovery do still mean we could see buyers come in when markets provide discounts.
In Germany, chancellor Angela Merkel has made a U-turn on the planned strict five-day Easter shutdown during a hastily-arranged video conference with the heads of Germany’s 16 states, Bloomberg and other news agencies report.
Merkel backs off Easter shutdown as pandemic tension mounts https://t.co/c0S49hdPnW via @ArneDelfs @iaindrogers pic.twitter.com/0RP499MBm6
— Zoe Schneeweiss (@ZSchneeweiss) March 24, 2021
The latest PMI readings bode well for the UK economy, according to analysts.
Dean Turner, economist at UBS Global Wealth Management, says:
The notable take from this morning’s PMI figures is the surge in services, overtaking the manufacturing index for the first time since the start of the pandemic. Nevertheless, the manufacturing sector continues to perform well although export sales are still struggling, probably a reflection of the ongoing Brexit adjustment, alongside the well telegraphed problems with supply chains globally.
It is also clear from the survey that the prospect of easing restrictions buoyed sentiment, as new work increased, and businesses reported rising forward bookings from domestic consumers.
Today’s numbers are consistent with our view that brighter days are ahead for the economy. For investors, we still see further upside in sterling. We also favour UK value stocks, which should benefit from the broadening out of the economic recovery.
Mike Bell, global market strategist at JP Morgan Asset Management, is similarly upbeat:
Today’s bumper survey results indicate that UK growth should boom as the benefits of the successful vaccine rollout start to shine through into rising economic optimism, new orders and hiring. With huge amounts of pent up savings and with everyone desperate to return to normality once restrictions are lifted, business optimism in the service sector increased to the highest level since 2004.
With UK equities still below their pre-Covid levels and reasonably valued, we would expect the strong rebound in economic growth, suggested by today’s numbers, to drive company profits and equities higher over the next year.
Market summary: sterling slips, oil prices soar
In the markets, sterling has fallen to its lowest level against the dollar in almost seven weeks, after the surprise fall in UK inflation to 0.4% in February. The pound is trading at $1.3721, down 0.24%, after dropping to $1.3675 earlier, the lowest since 5 February.
This contrasts with the pound’s rally to above $1.42 in February, fuelled by Britian’s successful vaccination campaign.
Against the euro, sterling is 0.1% lower at 86.28p, after touching its lowest level since 5 March, of 86.45p.
UK two-year government bond yields hit a one-month low and briefly dipped below zero after the inflation figures.
European stock markets have reversed some of their earlier losses. The FTSE 100 index is down 0.2%, some 14 points, at 6,684 while Germany’s Dax has lost 0.5%, France’s CAC slid 0.3% and Italy’s FTSE MiB slipped 0.1%.
Oil prices have risen sharply after a large container ship ran aground in the Suez Canal and blocked it. Both Brent and US crude at more than 3% higher, with Brent rising $1.89 to $62.69 a barrel while US crude hit $59.62.
Bert Colijn, senior eurozone economist at ING, has looked more closely at the flash PMI readings for the eurozone. Like others, he thinks that despite the improvement this month, the economic rebound won’t happen until later this year, given that new coronavirus lockdowns have been declared across Europe.
The PMI jumped to above 50 for the first time since September. This indicates that first-quarter GDP could be better than expected. With lockdowns being extended into the second quarter though, we do expect the rapid economic rebound to take off later.
He is still expecting a contraction in first-quarter GDP, though.
Updated
Chris Williamson, chief business economist at IHS Markit, said:
The UK economy rebounded from two months of decline in March, with business activity growing at its fastest rate since last August as children returned to schools, businesses prepared for the reopening of the economy and the vaccine roll-out boosted confidence.
Companies reported an influx of new orders on a scale exceeded only once in almost four years, and business expectations for growth in the year ahead surged to the highest since comparable data were first available in 2012. Employment consequently rose for the first time since the pandemic struck as firms expanded capacity in response to the new inflows of work and brighter outlook.
The surge in business activity is far stronger than any economists expected, according to Reuters polls, and hints at only a modest contraction of GDP during the first quarter, adding to evidence that the economy has shown far greater resilience in the third lockdown compared to the first. The encouraging readings on future expectations, job creation and new order inflows meanwhile all point to robust economic growth in the second quarter, especially if virus restrictions are lifted further.
Worries persist though, especially in relation to near-record supply chain delays, a continued fall in exports and sharply rising prices, all of which are making life difficult for many companies. Many consumer facing companies meanwhile remain constrained by COVID-19 restrictions, which are likely to curb the overall pace of economic growth for some time to come, especially if we see a third wave of infections.
UK business activity grows at fastest rate since August
Business activity in the UK also returned in growth in March, led by the fastest increase in service activity since August, according to the latest PMI data compiled by IHS Markit and CIPS.
This was fuelled by a rise in new orders for the first time since September 2020, which firms attributed to a rebound in sales ahead of easing lockdown measures, alongside stronger consumer confidence and a surge in demand for residential property services.
- Flash UK Composite Output Index Mar: 56.6, 7-month high (Feb final: 49.6)
- Flash UK Services Business Activity Index Mar: 56.8, 7-month high (Feb final: 49.5)
- Flash UK Manufacturing Output Index Mar: 55.6, 3-month high (Feb final: 50.5)
- Flash UK Manufacturing PMI Mar: 57.9, 40-month high (Feb final: 55.1)
Flash March #PMI shows joint #UK #manufacturing & #services output up sharply to 7-month high after slight February contraction & large January drop despite ongoing #lockdown; joint output index at 56.6 (49.6 in Feb). Services PMI at 56.8 (49.5); manufacturing PMI at 57.9 (55.1
— Howard Archer (@HowardArcherUK) March 24, 2021
Updated
Rory Fennessy, assistant economist at Oxford Economics, notes that the eurozone’s Flash PMIs surprised to the upside in March. The composite PMI rose solidly from 48.8 to 52.5, well above the consensus expectation of 49.1.
There were also PMI gains across sectors, with the manufacturing PMI rising from 57.9 to 62.4, while the services PMI rose from 45.7 to 48.8. In Germany and France, the flash PMIs also recorded broad-based increases.
Today’s such strong readings are surprising given the fact activity still remains markedly subdued in the eurozone in Q1, but it does pose some small upside risks to our forecast.
However, with France and Germany reimposing lockdown measures over the last few days, and other countries extending containment measures across the bloc, economic activity will not recover strongly until the latter half of this year.
Eurozone business activity grows for first time in six months
- Flash Eurozone PMI Composite Output Index at 52.5 (48.8 in February). 8-month high.
- Flash Eurozone Services PMI Activity Index at 48.8 (45.7 in February). 7-month high.
- Flash Eurozone Manufacturing PMI Output Index at 63.0 (57.6 in February). Record high (since June 1997).
- Flash Eurozone Manufacturing PMI at 62.4 (57.9 in February). Record high (since June 1997).
Eurozone business activity returned to growth in March, fuelled by a survey record increase in manufacturing output as global demand continued to revive from the pandemic, the flash estimates from IHS Markit show.
The service sector was again hit by virus-related restrictions, though even here the decline was the weakest since last August. Hiring picked up as firms boosted capacity in line with fuller order books and optimism about the year ahead. Sentiment was tarnished, however, by concerns over rising virus infection rates.
Markit reports #PMI shows #German joint #services & #manufacturing output growth at 37-month high in Feb while #France contracted least for 7 months. Rest of#Eurozone saw a modest return to growth for the
— Howard Archer (@HowardArcherUK) March 24, 2021
first time since last July (composite index at 50.6
vs 48.2 in February) https://t.co/NpamtNkXE4
Updated
One of the UK’s top fund managers has revealed it will not invest in the meal delivery firm Deliveroo when it floats on the stock market in early April, partly because of the way the company treats its workers, writes my colleague Joanna Partridge.
David Cumming, the chief investment officer for equities at Aviva Investors, part of the UK’s largest insurance company, said there was a “combination of investment risk and social issues that affect our judgment whether the shares are a buy or not”.
Updated
The Harry Potter publisher Bloomsbury says profits for 2020 will be much higher than expected because book purchases soared during the pandemic, when people were unable to go out much.
Its chief executive Nigel Newton said:
The popularity of reading during lockdown is a ray of sunshine in an otherwise very dark last year.
The shares jumped 12% on the FTSE small-cap index.
Bloomsbury said it returned £63,000 of furlough funding to the UK government, and repaid temporary salary reductions for staff.
The company said full-year profit would be significantly ahead of market expectations, which were lifted in January. The current analysts’ estimates for profit before tax is £14.8m, below the £15.7m Bloomsbury made in 2019.
Updated
In other news this morning, more than 11,000 shops permanently disappeared from high streets, shopping centres and retail parks in Great Britain last year, with independent retailers and villages faring far better than chain stores and city centres.
Our banking correspondent Kalyeena Makortoff has taken a closer look at the burgeoning rebellion among Goldman Sachs’ junior bankers over ‘18-hour shifts and low pay’.
And, rather disappointingly, the world’s biggest 60 banks have provided $3.8tn of financing for fossil fuel companies since the Paris climate deal in 2015, according to a report by a coalition of NGOs.
Germany enjoyed a strong upturn in business activity in March, according to the PMI surveys from IHS Markit.
- Flash Germany PMI Composite Output Index at 56.8 (Feb: 51.1). 37-month high.
- Flash Germany Services PMI Activity Indexat 50.8 (Feb: 45.7). 7-month high.
- Flash Germany Manufacturing Output Index at 68.5 (Feb: 61.7). Record high (since April 1996).
- Flash Germany Manufacturing PMI at 66.6 (Feb: 60.7). Record high (since April 1996).
Germany’s private sector economy had a strong finish to the opening quarter of the year, with business activity rising steeply on the back of record growth in manufacturing and a mini revival in the service sector as coronavirus lockdown measures were partially eased.
However, the government extended the lockdown to 18 April this week, with an even stricter lockdown over the five days of Easter, when pretty much all shops, including food shops, will have to shut.
Here is our full story on inflation:
Paul Dales, the chief UK economist at the consultancy Capital Economics, said:
The surprise fall in CPI inflation, which displays the disinflationary effect from Covid-19 lockdowns, will delay the rebound to 2.0% and perhaps prompt the markets to reconsider their view that interest rates will rise next year.
He added that although inflation has remained below 1%, meaning the governor of the Bank of England will have to write a letter to the chancellor, Rishi Sunak, explaining why inflation is more than one percentage point below its 2.0% target,
he can say that the fading drag from lockdowns and a rebound in energy inflation will soon lift inflation much closer to 2.0% in April. That said, we doubt inflation will be persistently above 2.0% until 2023, so don’t expect rate hikes for a long time yet.
Returning to UK inflation... Howard Archer, chief economic adviser to the forecasting group EY Item Club, says:
February’s is highly likely to mark inflation’s low point. The EY Item Club expects inflation to move markedly higher over the coming months.
Unfavourable base effects resulting from the fall in oil prices in early 2020 will have an upward impact, magnified by the recent rise in oil prices to one-year highs. Energy prices for millions of consumers will rise in April after the price cap was raised. After a challenging Q1, an expected progressive firming of the economic recovery from early-2021 will also have some upward impact on inflation.
There will also be some upward impact on inflation in October after the temporary VAT level for the hospitality and tourism sectors is raised to 12.5% at the end of September.
The forecaster is predicting that consumer price inflation will approach 2% during the April to June quarter and rise just above 2% in the second half of the year.
The EY ITEM Club suspects that the Bank of England’s ultimate next move will be to tighten policy, initially through edging interest rates up from the current level of 0.10%.
It believes the Bank of England is most likely to hold off from acting throughout 2021 but there is clearly a growing possibility that the Bank could tighten monetary policy in 2022 – although at the moment, early-2023 seems more likely.
The first flash PMI readings for France are out.
- Flash France Composite Output Index at 49.5 in March (47.0 in February), 3-month high
- Flash France Services Activity Index at 47.8 in March (45.6 in February), 3-month high
- Flash France Manufacturing Output Index at 57.6 in March (53.6 in February), 38-month high
- Flash France Manufacturing PMI at 58.8 in March (56.1 in February), 39-month high
The data points to the softest contraction in French business activity for three months in March, according to IHS Markit, which compiles the survey. However, the result extended the current run of decline that began in September, with Covid-19 restrictions continuing to limit economic activity.
March flash #French #PMI shows #services & #manufacturing output fell at reduced rate despite ongoing restrictions composite index up to 3-month high of 49.5 (47.0 in Feb). Services activity contracted less as PMI at 47.8 (45.6); manufacturing growing faster as PMI at 58.8 (56.1)
— Howard Archer (@HowardArcherUK) March 24, 2021
Updated
The latest news on coronavirus vaccines has added to the apprehensive mood in markets. Hong Kong has suspended use of the BioNTech-Pfizer vaccine, after its Chinese distributor informed the city that one batch had defective bottle lids.
Yesterday, a US agency, the independent Data and Safety Monitoring Board, questioned AstraZeneca’s vaccine data from its US trial, saying the company had provided “outdated information” which gave an “incomplete view” of the results (which showed 79% protection against symptomatic disease and 100% protection against severe disease and death).
AstraZeneca said it had published the results up to 17 February. As the trial is continuing, there will be more data available, which could alter the results at least slightly. The drugmaker promised to provide the results within 48 hours.
Updated
European stock markets open lower
European stock markets have fallen again, as traders fret about rising infection rates across Europe, which have prompted new Covid-19 lockdowns in Italy, France, Germany, Poland, to name a few.
- UK’s FTSE 100 down 0.6%, or 40 points, at 6,658
- Germany’s Dax down 0.8%
- France’s CAC down 0.7%
- Italy’s FTSE MiB down 0.7%
- Spain’s Ibex down 0.8%
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, reckons that the sharp fall in inflation due to retailers slashing prices is only temporary.
The sharp fall in CPI inflation in February reflected clothing retailers slashing prices, because the lockdown has left them with excess stock. Prices will snap back, as they have after previous lockdowns (chart). No reason to doubt that CPI inflation will be c.2% by end year pic.twitter.com/oCCqKKt4QB
— Samuel Tombs (@samueltombs) March 24, 2021
#UK consumer price #inflation unexpectedly fell back to a 3-month low of 0.4% in February from 0.7% in January. Consensus had been for a small rise to 0.8%. Inflation primarily brought down in February by prices for clothing, second hand cars and games, toys and hobbies
— Howard Archer (@HowardArcherUK) March 24, 2021
Updated
Clothing and footwear prices fell 1.5% between January and February – the biggest monthly drop since at least 1988, according to Bloomberg.
Jonathan Athow, ONS deputy national statistician for economic statistics, explains:
A fall in clothing prices helped to ease inflation in February, traditionally a month where we would see these prices rise, but the impact of the pandemic has disrupted standard seasonal patterns.
Introduction: UK inflation unexpectedly slows to 0.4%
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
UK inflation slowed to 0.4% in February from 0.7% the month before, according to the Office for National Statistics. City economists had expected a slight uptick to 0.8%.
Prices for clothes, second-hand cars, and games, toys and hobbies fell, which was partly offset by higher transport costs and petrol prices. Clothing and footwear prices fell 5.6% in the year to February, the biggest drop since November 2009.
Normally, clothes prices rise into February following the end of the January sales, but there was increased discounting this year, especially for women’s clothes and shoes, as the UK embarked on its third Covid-19 lockdown. The ONS said price falls were evident at the start of previous lockdowns.
As for toys, traditional toys such as dolls and scooters, along with computer games, became cheaper, while computer gaming consoles went up slightly in price.
Prices for second-hand cars fell compared with a rise a year earlier. The ONS said there had been increased demand for used cars as people sought alternatives to public transport.
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose 0.7% in the 12 months to February 2021. This is down from 0.9% in January 2021 https://t.co/vEYpUbVPQp pic.twitter.com/PBKdX2xvax
— Office for National Statistics (ONS) (@ONS) March 24, 2021
We’ll also be getting the flash estimates for the closely-watched PMI surveys for manufacturing, services and the private sector as a whole for the UK and across Europe this morning.
Fears of a third coronavirus wave in Europe, where new lockdowns have been imposed in Germany, France, Italy and other countries, are weighing on stock markets. European and US stock futures are pointing to a lower open in Europe and on Wall Street later.
In Asia, shares hit a two-week low. MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.85% after falling to the lowest level since 9 March at one stage. Japan’s Nikkei and Hong Kong’s Hang Seng both dropped more than 2%, while China’s CSI 300 lost 1.8%.
Oil prices are up 1% for both Brent crude and US crude, following yesterday’s sell-off. Egypt’s Suez Canal has been blocked by a vast container ship that ran aground after being blown off course by a “gust of wind”, causing a huge traffic jam of vessels at either end of the vital international trade artery.
Here’s some video footage:
The Agenda
- 8.15am GMT: France Markit Manufacturing/Services/Composite PMI Flash (March)
- 8.30am GMT: Germany Manufacturing/Services/Composite PMI Flash (March)
- 9am GMT: Eurozone Manufacturing/Services/Composite PMI Flash (March)
- 9.30am GMT: UK Manufacturing/Services/Composite PMI Flash (March)
- 12.30pm GMT: US Durable goods orders (February) (Forecast: 0.8%)
- 1.45pm GMT: US Markit Manufacturing/Services/Composite PMI Flash (March)
- 2pm GMT: US Fed Chair Jay Powell to testify on economic outlook before Joint Economic Committee in Washington
- 3pm GMT: Eurozone Consumer confidence flash (March)
Updated
