Closing summary
Stock markets around the world are pushing higher, with the UK’s FTSE 100 index up 1.86%, Germany’s Dax 2.4% ahead and France’s CAC rising 1.78%. On Wall Street, the Dow Jones rose 0.46%, the S&P 500 advanced 0.5% and the Nasdaq gained 1.2% to 10,876.
Gold prices set a new record, of $1,984.66 an ounce, before retreating to $1,968 an ounce as the dollar firmed.
Final PMI survey readings showed factories in the US, UK and eurozone bouncing back last month. In the UK, manufacturing output grew at the fastest rate since 2017 last month while in the eurozone, production was the highest since April 2018.
HSBC is to accelerate plans to cut 35,000 jobs globally after the Covid-19 crisis forced the bank to put aside another $3.8bn (£2.9bn) to cover bad debts.
The sports and gym company DW Sports has gone into administration, putting 1,700 jobs at risk.
China has pushed back against the threat of further action by the US against its software companies, after Microsoft revealed it was pursuing an acquisition deal for TikTok. In a further twist, TikTok’s parent company ByteDance intends to relocate to London from Beijing under plans agreed with the UK government, which would anger Donald Trump, the Sun newspaper reported. would anger.
UK investors could be forced to give up to six months’ notice before pulling money from property funds, under plans drawn up by the City watchdog. The proposals are meant to prevent a run on cash reserves at property funds by addressing a “liquidity mismatch” between how quickly investors are able to ask for their money back, and the amount of time it takes for fund managers to sort out the sale of property to pay them back.
That’s all from us for today. Good-bye! We’ll be back tomorrow. - JK
US ISM manufacturing better than expected
The US manufacturing PMI from the Institute for Supply Management is out: it’s come in at 54.2 in July versus June’s 52.6 reading, indicating faster expansion at America’s factories. It’s better than expected and should bring more cheer to stock markets, which are already rallying. The new orders component jumped to 61.5 from 56.4 in June.
Updated
The Nasdaq has just hit a new record high! it rose about 1% to 10,863. It’s been boosted by bumper earnings from the big technology firms in recent days.
Updated
The final reading for the US manufacturing PMI from Markit has come in at 50.9, lower than the 51.3 expected. Any number above 50 indicates expansion.
Data alert: US manufacturing PMI, final reading (July): 50.9 vs 51.3 expected
— David Madden (@dmadden_CMC) August 3, 2020
Markit said:
July PMI data signalled a further upward movement in the headline index, as manufacturers registered the first improvement in operating conditions since February following the outbreak of the coronavirus disease 2019.
Overall growth was marginal but stemmed from the first upturns in output and new orders for five months, as client demand picked up. The contraction in employment softened despite further evidence of spare capacity as new sales rose. Greater optimism in the outlook was also reflected in an improvement in business confidence.
Updated
Wall Street has opened higher.
- Dow Jones up 133 points, or 0.5%, at 26,561
- S&P 500 up nearly 20 points, or 0.6%, at 3,290
- Nasdaq up nearly 100 points, or 0.9%, at 10,843
UK theatre job losses rise to 5,000
Job losses at Britain’s theatres have increased from 3,000 to 5,000 in a month, according to the entertainment union Bectu. In early July, employers had notified the union of close to 3,000 redundancies and layoffs. This has now increased to 5,000.
The job losses include redundancies of permanent staff and layoffs of casual workers and zero hours contract staff.
Over half – about 2,700 – are in London and the West End, with the rest spread around the country, at theatres including Sheffield Theatres Trust, Theatre Royal Norwich, Nuffield Southampton, Theatre Royal Plymouth, Lyceum Edinburgh, Theatre Royal Newcastle, Birmingham Hippodrome, Coventry Belgrade and the Pitlochry Festival Theatre.
To make matters worse, people who remain at theatres face big pay cuts, the union warns.
The theatre industry employs around 290,000 people and 70% of those people are freelance, many of whom have fallen through the gaps of the government income support schemes.
Head of Bectu, Philippa Childs, said:
The clock is still ticking to save the future of the theatre industry and these figures demonstrate the scale of the crisis it is facing. In July we warned that a storm would turn into a tsunami without further assistance. Despite, details of the arts recovery package being announced we are still nowhere closer to the money being distributed.
The tsunami we predicted is about to reach our shores as the timeline for action from the government has been too slow and there has been no flexibility for the industry and its access to the furlough scheme. Major industry businesses are releasing their lowest paid staff from the furlough scheme and that trend is only set to continue up the ladder of the workforce.
On the commodity markets, oil is heading lower amid fears about the economic impact of rising Covid-19 cases around the world, coupled with worries over oversupply, as the oil cartel Opec and its allies (known as Opec+) are getting ready to unwind recent production cuts.
Brent crude, the global benchmark, fell as low as $42.89 a barrel and is now flat at $43.56 a barrel, while US crude dropped to a low of $39.58 a barrel and is now at $40.22.
Opec+ countries have been cutting output since May by 9.7m barrels a day but from this month, the cuts will officially taper to 7.7m barrels a day until December.
Harry Tchilinguirian, head of commodity research at BNP Paribas, said:
Concerns appear to be developing that a rise in Opec+ production will coincide with uneven recovery in oil demand due to localised setbacks following secondary waves of Covid outbreaks.
Updated
'Eat out to help out' starts
The UK government’s Eat Out to Help Out scheme launched today. It offers a 50% discount on food, up to a maximum of £10 per person, at more than 72,000 participating restaurants from Monday to Wednesday, until 31 August.
Business and industry minister Nadhim Zahawi told BBC Breakfast that he thought “it will make a huge difference”.
When asked if you could choose to pay full price, he replied:
It’s worth all of us going out and if the government is supporting the sector, why not?
We should all absolutely make sure that we go out and enjoy that restaurant.”
⬆️ More than 72,000 individual restaurants registered
— Rishi Sunak (@RishiSunak) August 3, 2020
🔍 Over 3.3m searches on the restaurant finder
💷 50% off all day and night, £10 per person
😋 Unlimited Mon-Wed, no vouchers needed.
Eat Out to Help Out starts today: https://t.co/kp4XPsPjmp
The BBC’s Johny Cassidy tweeted:
Lovely breakfast our this morning at The Selsey Arms in West Dean. Making the most of the Eat out scheme. The place was busy which bodes well
— Johny Cassidy (@johnycassidy) August 3, 2020
European shares rise
Shares are powering ahead, with the FTSE 100 index in London gaining 75 points to 5,973, a 1.3% rise, and the Dax in Frankfurt 2.5% ahead. The CAC in Paris added 1.6%, the FTSE MiB rose almost 1% and the Ibex in Madrid was up 0.6%.
In London, the takeaway service Just Eat is the biggest riser, up more than 4%. HSBC remains the second-biggest faller, down 3.9%, after reporting a big drop in profits and larger bad-debt provisions.
The share gains come despite new Covid-19 figures from the WHO. It said the number of deaths across the world had more than tripled to 680,000, from more than 200,000 in April. You can read more on our sister live blog here.
In Scotland, Nicola Sturgeon, the first minister, warned that pubs and restaurants would have to close again if they allow Covid-19 cases to mushroom again by failing to uphold physical distancing rules.
Updated
Another company has fallen victim to the Covid-19 pandemic: The sports and gym firm DW Sports has gone into administration, putting 1,700 jobs at risk, writes my colleague Mark Sweney.
The group, which was founded by former Wigan Athletic owner Dave Whelan, operates 73 gyms and 75 retail stores across the UK. The company, which said its e-commerce website will cease trading immediately, announced plans to shut 25 of its stores last month as the coronavirus lockdown wiped out its income.
DW Sports said the remaining 50 retail outlets will continue to trade and will start closing-down sales from Monday.
FCA: investors to give up to 6 months' notice for property fund withdrawals
Investors could be forced to give up to six months’ notice before being allowed to pull their money out of property funds, under proposals from the City regulator, the Financial Conduct Authority.
At the moment, investors in open-ended property funds can buy and sell units frequently, often daily. But the underlying properties in which these funds invest cannot be bought and sold at the same speed. This creates a liquidity mismatch, the FCA explained.
When too many investors simultaneously pull out their investments, a fund manager is forced to suspend dealings in the fund, as happened with the Woodford and other property funds in the past year. Thousands of investors lost large amounts of money as a result.
Christopher Woolard, the watchdog’s interim chief executive, said:
We think that our proposals will help further our consumer protection objective by reducing the number of fund suspensions, preventing unsuitable purchases of funds, and by increasing product efficiency for fund managers.
‘We want open-ended funds to provide a structure through which investors can safely invest in less liquid assets which offer attractive expected returns and at the same time supports investment that benefits the wider economy.
We hope the proposed new rules will directly address the liquidity mismatch of these funds making them more resilient during periods of stress, and allowing them to operate in a way that all investors are treated equally.
You can read more here.
Updated
Market summary
Time for another look at the markets. Shares are pushing higher across Europe.
- UK’s FTSE 100 up nearly 40 points, or 0.66%, at 5,936
- Germany’s Dax up nearly 2% at 12,555
- France’s CAC up 0.9% at 4,828
- Italy’s FTSE MiB up 0.67% at 19,222
- Spain’s Ibex flat at 6,871
US stock futures are pointing to a muted open for the Dow Jones and the S&P 500 on Wall Street later, as lawmakers have yet to agree a deal on a proposed $1 trillion stimulus package. US stocks ended July on a high note after bumper results from the big tech companies, and the tech-heavy Nasdaq is expected to open nearly 100 points higher.
Spot gold has retreated to $1,967 an ounce, down 0.35%, after hitting a fresh all-time high of $1,984.66 in early Asian trade. Silver prices have dropped 0.6% to $12.22 an ounce.
Copper eased for a fourth session and hit a three-week low as the dollar firmed and expectations for demand receded amid growing Covid-19 infections around the world. The three-month copper price on the London Metal Exchange dropped 0.5% to $6,383.50 a tonne, after falling to the lowest since 10 July, at $6,301.
Sterling has fallen back against the dollar but remains above $1.30. It is down 0.5% at $1.3024 after rising above $1.31 earlier. It’s flat against the euro at €1.1105.
A London-listed firm that offers investors the chance to cash in on the royalties from songs by famous artists has struck a deal to buy the music catalogue of Barry Manilow, whose five-decade career includes global hits such as Mandy and Copacabana (At the Copa), reports our media correspondent Mark Sweney.
Manilow, who released his self-titled debut album in 1973 and first reached the top of the US chart two years later with Mandy, has sold more than 85m albums worldwide.
Hipgnosis, founded by Merck Mercuriadis, the former manager of acts including Elton John, Guns N’ Roses, Iron Maiden and Beyoncé, has acquired 100% of Manilow’s worldwide recording royalties covering more than 900 songs including hits such as I Write the Songs and Could It Be Magic?
Staying with shoppers.... Latest data from retail experts Springboard reveals that footfall at retailers in the UK rose by 2.8% last week from the previous week; a more modest uplift from the week before when shopper numbers climbed 4.4%. In England, footfall rose by just 2.5%, versus gains of more than 4% in each of the other UK nations.
Footfall across UK retail destinations remains more than a third lower than a year ago, at -37.6%. The figures cover high streets, retail parks and shopping centres.
Diane Wehrle, insights director at Springboard, says:
The first week of the mandatory wearing of face coverings in retail stores in England did not deliver the hoped for uplift in footfall, with a rise over the week across the UK that was virtually half of that in the week before.
On high streets, footfall rose by 4.3% from the week before, while shopping centres were up 1.2% and retail parks posted a 1.4% gain. (This includes a 15.7% drop in high street shopper numbers on Monday when rain hit.)
Here is a round-up of today’s main corporate news.
HSBC is to accelerate plans to cut 35,000 jobs globally after the Covid-19 crisis forced the bank to put aside another $3.8bn (£2.9bn) to cover bad debts, which pushed down second-quarter profits by 82% to $1.1bn.
The insurer Hiscox has slid into the red after being forced to pay out for cancelled sports events and holidays due to the Covid-19 pandemic. The firm, which operates in the Lloyd’s insurance market, set aside $232m for claims related to the crisis, up from a previously estimated $175m. It reported a pre-tax loss of $138.9m for the six months to 30 June, compared with a profit of $168m a year earlier.
“It’s been a testing six months,” chief executive Bronek Masojada told Reuters, adding that some claims were related to insurance backing travel company refunds in Britain. “Some of these companies have gone bust and we are picking up the tab.”
Like other insurers, Hiscox is waiting for the Financial Conduct Authority’s test case result in mid-September for further clarity on its business interruption exposure. It maintains that its standard policies do not provide cover for business interruption as a result of lockdown measures taken by the UK government at the height of the Covid-19 pandemic.
Hammerson, one of Britain’s biggest shopping centre owners, has confirmed that it is considering raising money from investors and that it is in advanced talks to sell its 50% interest in the outlet centre operator VIA Outlets to its joint venture partner APG.
The company, which owns the Bullring in Birmingham and Brent Cross in northwest London, is expected to announce a fundraising of at least £500m on Thursday when it unveils first-half results, more than its current market value.
It is desperately trying to shore up its finances faced with a a collapse in rents. Since its flagship malls reopened across Europe, visitor numbers and sales have improved and its rent collection in the UK has increased to more than 30% (but remains low).
The FTSE 100 index in London has just turned positive, and is trading at 5,898.
The highlight in the UK this week is the Bank of England’s monthly policy decision and the latest quarterly growth and inflation forecasts on Thursday. We are not expecting any changes to the interest rate or the asset-buying programme.
At the June meeting, the BOE’s monetary policy committee kept the Bank rate at 0.1% but pumped a further £100bn into the economy by raising its quantitative easing (QE) programme to £745bn. But the committee also slowed the pace of net gilt purchases to around £6bn a week from £13.5bn previously as liquidity problems in financial markets eased.
Philip Shaw, chief economist at Investec, says:
Our expectation is that the votes on both the policy rate and QE will be unanimous in favour of ‘no change’. But we expect the speed of gilt buying to be reined back further. The Bank of England is due to announce the reverse gilt auction sizes beyond 6 August and has hinted that the programme will run more or less to the end of the year. This suggests a weekly gilt purchase rate somewhere close to £4bn per week in order to meet the total £745bn target at that point.
In trying to gauge the policy stance further ahead, we expect the committee to note that the economy has enjoyed further recovery momentum recently ... Welcome though this is, it of course reflects the response to the gradual unwinding of the lockdown.
What is more critical is how the economy looks towards the end of the year as, for example, the CJRS (furlough scheme) expires. Moreover members will also note the signs of higher coronavirus infection rates on Continental Europe, in the US and to an extent the UK.
The MPC’s assessment of the current indicators will probably be one of guarded optimism, but tempered strongly by the risks facing the economy further ahead. We think there is a strong chance that the committee sanctions a further £75bn- £100bn of QE in November.
Pound steady after best month vs dollar in a decade
The pound has risen 0.18% against the dollar to $1.3108.
July was sterling’s best month versus the dollar in more than a decade, although this reflected the greenback’s weakness against a number of major currencies, rather than the pound’s strength, analysts said. The pound rose to $1.3170, its highest level in nearly five months, on Friday.
$1.31
— Andy Bruce (@BruceReuters) August 3, 2020
It is nice. pic.twitter.com/DbVp3u5SaC
Updated
On the stock markets, the FTSE 100 index has slid 0.3% to 5,880, after HSBC reported an 82% plunge in pre-tax profits and a surge in bad-debt provisions. Shares in the Asia-focused bank fell 4.7%.
Italy’s FTSE MiB and Spain’s Ibex are in the red too, down 0.15% at 19,063 and 0.4% lower at 6,847 respectively.
Germany’s Dax has fared better, advancing 1.3% to 12,478, while France’s CAC is 0.27% ahead at 4,796.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, has sent us his thoughts about HSBC:
HSBC follows the recent trend, with massive provisions for future bad loans knocking profits hard in the first half. There’s likely more of that to come, and with low interest rates dragging on revenues full year profits will not be pretty.
However, the bank’s made progress on cost control despite pausing redundancies during the peak of the crisis, and with the transformation plan expected to pick up pace from here that should soften the blow to the income statement. Meanwhile the suspension of the dividend, while a blow to shareholders, has strengthened the balance sheet.
Having been confirmed as HSBC’s permanent CEO in March, Noel Quinn’s update to the bank’s medium term financial targets and dividend policy at the full year will make for interesting reading. Low interest rates are a headwind that’s here to stay, and a shrinking investment bank makes that more of a challenge. We wouldn’t be entirely surprised if that fed through into reduced ambitions on profitability and maybe even a rebased dividend.
Updated
The detail of the UK manufacturing survey reveals:
Signs of economic recovery and expectations of client confidence strengthening led to improved sentiment among manufacturers during July. Confidence rose to its highest since March 2018, with 62% of companies expecting production to be higher one year from now. Only 12% of firms forecast a contraction. Sentiment strengthened across the consumer, intermediate and investment goods industries.
Manufacturing employment fell for the sixth month running in July, albeit to the least marked extent since March. Where job cuts were registered, it was linked to redundancies, natural wastage and aligning capacity with current output needs. Purchasing activity was raised for the first time since last October, but stocks of inputs and finished products both fell further. Supply-chain disruption continued. Average input prices rose for the eighth month running in July, and at the fastest pace in over a year. The pass-through of higher costs resulted in a further rise in output charges.
UK factory output grows at fastest rate since 2017 – PMI
In the UK, factories ramped up production at the fastest rate in nearly three years last month, as manufacturers reopened plants after the Covid-19 lockdown.
The headline manufacturing PMI from IHS Markit and CIPS rose to 53.3 in July in the final reading, compared with the flash estimate of 53.6 and June’s 50.1. It was the highest reading since March 2019.
The output component improved to 59.3, the highest since November 2017.
Updated
Chris Williamson, chief business economist at IHS Markit, which compiled the closely-watched survey, said:
Eurozone factories reported a very positive start to the third quarter, with production growing at the fastest rate for over two years, fuelled by an encouraging surge in demand. Growth of new orders in fact outpaced production, hinting strongly that August should see further output gains. The order book improvement has also helped restore business confidence about the outlook in July to January’s pre-pandemic peak.
The job numbers remain a major concern, however, especially as the labour market is likely to be key to determining the economy’s recovery path. Although the rate of job losses eased to the lowest since March, it remained greater than at any time since 2009, reflecting widespread cost-cutting in many firms where profits have been hit hard by the virus outbreak. Increased unemployment, job insecurity, second waves of virus infections and ongoing social distancing measures will inevitably restrain the recovery.
Spain, the eurozone’s fourth-biggest economy, was the strongest-performing country overall, registering its highest PMI reading for over two years. Slower, but nonetheless solid gains were seen in France and Austria, whilst modest growth was registered in Germany and Italy.
Driving the overall upturn in manufacturing across the eurozone during July were returns to growth in both production and new orders. For output, the marked expansion was the first registered by the survey since the start of 2019 whilst the gain seen for new orders was the first in nearly two years and the strongest since early 2018.
Updated
According to the survey, manufacturing across the eurozone expanded last month for the first time since January 2019. The eurozone economy contracted at a record 12.1% rate in the April to June quarter, official figures showed on Friday.
The Eurozone Manufacturing #PMI highlighted a return to growth in July (51.8, 47.4 in June) as output and demand continued to recover in line with easing COVID-19 restrictions, although job cutting was again registered. Read more: https://t.co/Ebz5iPT20J pic.twitter.com/wswKPxp9Z4
— IHS Markit PMI™ (@IHSMarkitPMI) August 3, 2020
Updated
Eurozone manufacturing bounces back in July
In the eurozone as a whole, the manufacturing sector bounced back last month. The PMI from IHS Markit rose to 51.8 in the final reading, better than the flash estimate of 51.1. In June, manufacturing was still shrinking, with a reading of 47.4, below the 50 mark that divides contraction from expansion.
The output sub-index improved to 55.3, the highest since April 2018.
Updated
And finally, Germany’s manufacturing PMI rose to 52 in July, better than a preliminary reading of 50 and up from 45.2 in June.
Phil Smith, associate economics director at IHS Markit, said:
The recovery of the German manufacturing sector remains on track, with the PMI improving further from April’s low and now finally in growth territory. The headline reading of 51.0 is the highest since December 2018, although it actually understates the strength of the rebounds in the underlying measures of output and new orders, with the PMI dampened by steep falls in both employment and stocks.
The deep cuts to factory job numbers are a sign that activity and demand are still comfortably down on pre-crisis levels, and represent a key headwind to any recovery.
Nevertheless, with new orders up sharply in July the immediate outlook for production looks positive, and the manufacturing sector remains on course to make a strong contribution to an expected technical rebound in the economy in the third quarter.
The July reading is up a tad from 52.3 in June. Production expanded sharply for the second month running in France, but new orders remained stagnant.
🇫🇷 Business conditions across the French manufacturing sector improved again in July, with the headline #PMI ticking up to 52.4 (52.3 in June) amid a strong rise in output. Demand remained subdued though placing some uncertainty on a recovery. Read more: https://t.co/8laeViShID pic.twitter.com/RsY5OsoHO7
— IHS Markit PMI™ (@IHSMarkitPMI) August 3, 2020
Updated
And here’s the final reading for the France manufacturing PMI for July, from IHS Markit. It has also improved more than expected, to 52.4 versus forecasts of a 52 reading, which was the flash estimate.
Updated
🇮🇹 Italy Manufacturing PMI climbs above 50.0 into growth territory in July (51.9; 47.5 in June) to signal an improving landscape for the goods producing sector, as production expands at a quicker pace. Read more: https://t.co/OhvxNsCTBy pic.twitter.com/85VnAwzURV
— IHS Markit PMI™ (@IHSMarkitPMI) August 3, 2020
Lewis Cooper, economist at IHS Markit which compiles the survey, said:
Factories and production lines continue to operate below capacity and limit working hours, however, with manufacturing employment declining for the fourteenth month in a row as a result. Foreign demand also remained a source of weakness, with new export orders falling further.
Overall, July data appear to suggest the sector is on its way to recovery, with output expectations also remaining positive.
But, after such an extreme blow, there is masses of ground to make up. It is essential that demand conditions continue to improve, and any reintroduction of lockdown measures due to a “second wave” of the pandemic has the potential to derail the recovery.
Italy’s manufacturing sector also returned to growth last month. The PMI from Markit has come in at 51.9 for July, up from 47.5 in June and compared with a forecast reading of 51.2. It’s the highest reading since June 2018 – good news for the eurozone’s third-largest economy.
Updated
🇪🇸 Spanish manufacturers saw marked gains in output and new work during July, returning to growth territory for the first time since February. Manufacturing #PMI at 53.5 up from 49.0 in June. Read more: https://t.co/YiauJcV1Wg pic.twitter.com/cYvunWKDvN
— IHS Markit PMI™ (@IHSMarkitPMI) August 3, 2020
IHS Markit, which compiles the survey, said:
Spain’s manufacturing sector returned to growth during July as businesses continued to reopen following lockdown and firms benefited from an associated upswing in demand. Orders, purchasing and production were all reported to be up, with demand higher in both domestic and international markets.
However, less positive was further job losses as firms continue to operate well below capacity. Confidence about the future also remained subdued.
Updated
The Spain manufacturing PMI is out: it is better than expected at 53.5 in July, up from 49 in June. Economists had expected a reading of 52. The 50 mark divides contraction from expansion.
Spain 🇪🇸
— Your Trading advisor (@YTradingAdvisor) August 3, 2020
Manufacturing PMI (Jul) ||
53.5 (Actual)
52.0 (Forecast)
49.0 (Previous)
European shares have edged cautiously higher at the open, after recording losses last week. HSBC is the biggest faller on the FTSE 100 index in London, down 4.1% to 328p.
- UK’s FTSE 100 up 0.1%
- Germany’s Dax up 0.6%
- France’s CAC up 0.3%
- Spain’s Ibex down 0.1%
Updated
The embattled tour operator Tui – Europe’s biggest holiday firm – has agreed a sale and leaseback deal for five new Boeing 737 Max-8 aircraft with Singapore-based BOC Aviation, raising $226m to shore up its finances.
Last week Tui announced it would shut 166 stores in the UK and Ireland, about a third of its branches. It plans 8,000 job cuts overall after the Covid-19 pandemic wiped out air travel for several months.
Last week’s decision by the UK government to reimpose a 14-day quarantine on travellers arriving from Spain dealt another heavy blow to the travel company, forcing its UK arm to cancel thousands of holidays.
Updated
Let’s take another look at HSBC, Europe’s biggest bank, which reported an 82% plunge in second-quarter profits to just $1bn this morning. It warned that its bad debt charges could total $8bn to $13bn this year, compared with its previous estimate of $7bn to $11bn.
Chief financial officer Ewen Stevenson told Reuters:
What we have seen this quarter is quite a sharp shift in economic outlook for the global economy, the famous ‘V’ has got a lot sharper and as a result we have materially increased our provisions.
HSBC’s UK business has been badly hit, and set aside $1.5bn to cover bad debts. The bank’s Hong Kong-listed shares dropped as much as 4.7%.
Its headcount has been slashed by about 4,000 this year, after the bank restarted a redundancy programme that had been put on ice after the coronavirus outbreak.
Noel Quinn, the chief executive, said only a fifth of the 9,000 staff who normally work at the London Canary Wharf headquarters will be able to return to the office for safety reasons.
Updated
London risks losing its aura as a ‘fun’ place to work, a think tank has warned. The capital could also lose £178m each month in spending on lunch, after-work drinks, coffee/tea, snacks, stationery and other office equipment if companies don’t bring back office workers from WFH.
Major cities such as London face more economic pain as some companies resist the government’s efforts to encourage workers back to their desks this week, and its discounted meal deal begins, my colleagues Graeme Wearden and Miles Brignall write.
Pablo Shah, a senior economist at the Centre for Economics and Business Research (CEBR), fears that the capital could have lost its aura as a “fun” place to work, particularly in the digital and creative industries.
“We had a management meeting in the office last Tuesday and were able to see what London looks like as the lockdown eases. To be frank, it looked like a ghost town,” Shah said. “London last week did not look very attractive to the talent it needs.”
Introduction: Gold hits new record high
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, and business.
Tensions between the US and China are rising again after the US Secretary of State, Mike Pompeo, said Donald Trump will take action in coming days to tackle national security risks posed by TikTok and other Chinese software companies, as Microsoft revealed it was trying to buy TikTok’s parent company ByteDance.
Pompeo told Fox News show Sunday Morning Futures:
These Chinese software companies doing business in the United States, whether it’s TikTok or WeChat – there are countless more … are feeding data directly to the Chinese Communist party, their national security apparatus.
Could be their facial recognition patterns. It could be information about their residence, their phone numbers, their friends, who they’re connected to. Those are the issues that President Trump has made clear we’re going to take care of.
The Sun newspaper reported today that ByteDance is preparing to move its headquarters from Beijing to London under a deal approved by the UK government, a move that would clearly upset Trump, who has considered banning TikTok in the US.
Chinese state media said banning Tik Tok would be “a barbaric act of a rogue government”, and rejected the US’s claims about national security fears. A Global Times editorial, published on Sunday, said a Microsoft acquisition was “the hunting and looting of TikTok by the US government in conjunction with US high-tech companies”.
HSBC has warned it could ramp up cost cutting plans amid the Covid-19 crisis, after a $3.8bn bad debt charge sent profits plunging 82% in the second quarter, our banking correspondent Kalyeena Makortoff reports. The London-based bank makes 90% of its profits in Asia, and has also been impacted by the US-China trade war and other tensions.
HSBC’s chief executive Noel Quinn said:
Our first-half performance was impacted by the Covid-19 pandemic, falling interest rates, increased geopolitical risk and heightened levels of market volatility.
European stock markets finished in the red last week on Covid-19 fears, and after preliminary estimates for second-quarter GDP showed the eurozone, Germany and the US posting record economic declines between April and June. On Wall Street, tech stocks lifted the S&P 500 more than 0.7%, while the tech-focused Nasdaq rallied more than 1.7%, with Apple and Facebook hitting all-time highs.
Gold has hit a new record high: it touched $1,984.66 an ounce in early Asian trade, and is now flat at $1,975.8 an ounce. The WHO said on Friday that in the past 24 hours there were nearly 300,000 new coronavirus cases reported – the largest daily increase on record.
Lawmakers in the US have yet to reach an agreement on a proposed $1 trillion stimulus package. Republicans and Democrats reportedly made some progress over the weekend.
The latest Caixin survey of Chinese manufacturing was better than expected at 52.8 for July, while economists were expecting 51.3. The previous reading was 51.2. Any higher reading above 50 indicates faster expansion; any reading below 50 points to contraction.
In Asia, stock markets were mixed. Japan’s Nikkei rallied 2.3% while the Shanghai composite index rose 1.3% and Hong Kong’s Hang Seng lost 0.85%. European shares are being called higher, ahead of PMI manufacturing reports across the region.
The Agenda
- 8:15am BST: Spain Markit manufacturing PMI for July (forecast: 52)
- 8:45am BST: Italy Markit Manufacturing PMI (forecast: 51.2)
- 8:50am BST: France Markit Manufacturing PMI final(forecast: 52)
- 8:55am BST: Germany Markit Manufacturing PMI final (forecast: 50)
- 9am BST: Eurozone Markit Manufacturing PMI final (forecast: 51.1)
- 9:30am BST: UK Markit/CIPS Manufacturing PMI final (forecast: 53.6)
- 2:45am BST: US Markit Manufacturing PMI final (forecast: 51.3)
- 3pm BST: US ISM Manufacturing PMI (forecast: 53.6)
Updated
