Markets tread water as European leaders hold high-stakes rescue talks

EU Council
German Chancellor Angela Merkel greets the Finish Prime Minister Sanna Mirella Marin and the President of the European Council Charles Michel Credit: Thierry Monasse/Getty Images

Wrap-up

Time to wrap up. The FTSE 100 rose moderately today during a flat session for European and US equities, which were stuck in a holding pattern as EU leaders undertake crucial talks over bloc-wide rescue plans.

It was a typically quiet Friday on the corporate front, and with little substantial economic news, there wasn’t much to drive investor sentiment in any direction. Here are some of the day’s top stories:

  • Angela Merkel sound caution as crunch talks began over the EU’s proposed €750bn bailout plan. A decision isn’t expected today, with the potential for talks to drag out exacerbated by divisions between different parts of the bloc.
  • The Government announced further plans to lift its lockdown measure. The new change include encouraging companies to send workers back into offices, where possible. 
  • British Airways announced the retirement of its ageing fleet of Boeing 747 jetsThe flag carrier said Covid-19 had accelrated the decision.
  • Losses widened at Iceland. The frozen food retailer made a loss of £71m despite attracting more shoppers to its stores than ever before. 

Thanks for following along today, and please join us again on Monday!

Private equity giant KKR in talks over Elsan acquisition

KKR, the American private equity group, is in talks over a potential €3.5bn takeover of French clinic chain Elsan, Bloomberg reports.

The news service says:

The private equity firm is discussing a potential deal with Elsan’s owner, CVC Capital Partners, as it seeks to preempt a planned bidding process for the company, the people said. A deal could value Elsan at about €3.5bn, according to the people, who asked not to be identified because the information is private.

Other suitors have also been studying potential bids for Elsan and there’s no certainty KKR will be able to reach a deal, the people said. CVC plans to launch a broader sale process if it can’t agree on terms of a transaction with KKR, the people said.

Hollywood Bowl plans to reopen all sites from August 1st

I mentioned earlier in the day (see 12:35pm post) that Hollywood Bowl was a big immediate beneficiary of the Government’s latest update on its plans to loosen restrictions.

As might be expected, the company has now announced it will reopen all its site from the start of next month.

In a statement, it said:

The group has a robust reopening strategy and a strong balance sheet which means that the business is well placed to reopen 54 of its centres on 1 August 2020. The remaining six centres in Scotland and Wales are ready to reopen once the restrictions in the devolved administrations are lifted. Customers will be able to pre-book lanes in advance of the opening date from today.

The Group has comprehensive COVID-secure operating bowling protocols in place, in addition to adopting the operating measures published by UK Hospitality and endorsed by the Government for bar, diner and amusement areas. These include enhanced cleaning and social distancing measures, with customer guidance throughout the centres.

The Group will begin the process of un-furloughing its team members and will provide training on the new COVID-secure operating procedures.

Its shares are up about 6.5pc currently.

Consumer confidence slowly rebuilds

A growing number of people now say they would feel comfortable sitting inside a restaurant for a meal, offering cautious hope that the economy can start to get back on track after the coronavirus recession.

My colleague Tim Wallace reports:

Almost three in 10 last week said they would have a traditional meal out, up from two in 10 the week before, an Office for National Statistics survey found. That figure rises to 45pc when asked if they would eat at a table outside.

This has started to show up in spending.

Between 8 and 12 July, one in four of us visited a cafe, restaurant or pub, although most bought food or drink to take away rather than eating in.

Restaurateurs will hope that this growing confidence is further bolstered by the "eat out to help out" scheme announced by Chancellor Rishi Sunak, which gives diners up to £10 off their meals on Mondays, Tuesdays and Wednesdays in August.

Market moves

With just over an hour to the close, European shares are still trading pretty flat – with only the FTSE 100 notching up decent gains.

Losses widen at Iceland despite frozen food frenzy

Iceland Foods has seen losses widen to £71m despite the supermarket chain attracting more shoppers to its stores than ever before. 

My colleague Laura Onita reports:

Losses at the retailer, which has increased its share of the grocery market to 2.5pc during lockdown according to Kantar figures, were up from £53.8m for the year to the end of March. 

Its performance was dragged down by a string of one-off costs including environmental and restructuring costs as well as a £2m dent related to coronavirus in the final weeks of the period because it had to cover sick pay and buy personal protective equipment for staff. 

Iceland got a boost as shoppers stocked up their freezers when the nation went into lockdown. Revenues rose £200m to £3.2bn, while underlying profits were down to £133m from £144m.

Its liquidity and cash position both “remain strong”, it said, after posting net debt of £687m.

The privately owned company said its supply chain rose to the challenge posed by stockpiling to keep food on the shelves. 

Wall Street lifts at the open

US stocks open in the green, rebounding from losses late on Thursday after Netflix surprised investors with a disappointing subscriber outlook.

British man arrested over Ryanair ‘bomb threat’

PA has more details on the situation at Oslo airport (see 11:53am update):

A 51-year-old British man has been arrested over an alleged bomb threat on board a Ryanair flight from London to Oslo, police said.

The budget airline said the security alert was sparked when a note was found by crew on the flight from Stansted to Gardermoen on Friday.

Oslo police said the plane landed safely before passengers were evacuated and the aircraft is being searched by officers, including those from the bomb squad. A statement said:

“The police are in control of the incident and have arrested a 51-year-old man, suspected of being behind the threats. The man is a British citizen.”

US housing starts begin rebound

There were 1.19m US housing starts in June on an annualised basis – a 17.3pc month-on-month increase, and a strong step back towards pre-virus level.  The rise was in line with economists’ expectations.

Daniel Kretinsky continues to build up Royal Mail stake

The billionaire investor known as the “Czech sphinx”, Daniel Kretinsky, has increased his shareholding in Royal Mail further to 12.1pc.

His stake controlled by his vehicle Vesa Equity is now worth £222m.

As my colleagues Oliver Gill and Chris Williams reported last month:

In a rare public statement to The Telegraph, Mr Kretinsky said he would “not exclude the possibility of either strengthening our presence or reducing current shareholder ­position”. The energy tycoon also praised Royal Mail’s “tradition, history and ­importance of the public service it ­provides”.

The appearance of his fund, Vesa ­Equity Investment, on the Royal Mail share register last month sparked ­speculation over his plans. Little more than a fortnight later, Rico Back, the Royal Mail chief executive, stepped down, with the FTSE 250 company plunged into crisis as a result of the coronavirus pandemic.

BlackRock profits rise as investors buy into bond funds

BlackRock ended the second quarter with $7.3 trillion under management Credit: REUTERS/Lucas Jackson/File Photo

Asset-management titan BlackRock posted a 21pc rise in quarterly profits as investors piled back into bond-heavy funds to weather the coronavirus market crash.

Its second-quarter profit rose to $1.2bn, while revenues climbed to $3.6bn. It ended the quarter with $7.3 trillion in assets under management, up from $6.5 trillion in March, with a net $100bn on new money coming in.

Larry Fink, its chief executive, said:

Clients are turning to BlackRock more than ever before as they face increasing uncertainty about the future, and we are bringing together the entirety of our differentiated platform to help them. Clients are relying on BlackRock for our unique insights, guidance and comprehensive investment solutions. This is leading to deeper partnerships, and we’re seeing clients entrust BlackRock with a greater share of their assets. 

The announcement follows a strong string of results from Wall Street banks, which have been buoyed by high trading demand in recent months.

Presented without comment

Scenes from today’s European Council meeting:

Reuters reports:

 The 27 leaders, all masked up, greeted each other with elbow bumps rather than their customary cheek kisses and handshakes, and there were birthday gifts for German Chancellor Angela Merkel and Portuguese Prime Minister Antonio Costa...

The 27 EU heads gathered in a room in the Brussels EU headquarters equipped with hand sanitisers and disinfected headsets. Unusually, as a health precaution, there were no journalists in the building.

Officials said the summit could drag into Sunday if an agreement remains elusive. Luxembourg Prime Minister Xavier Bettel told Reuters he had brought an extra set of clothes just in case.

Hollywood Bowl rises after PM’s announcement

Shares in Hollywood Bowl popped higher after Boris Johnson named bowling alleys as among the leisure facilities that can reopen from August 1st.

Firstgroup is also rising after guidance that all people can resume use of public transport:

Business groups react to new Covid-19 steps

We’ve got some initial reaction to Boris Johnson’s announcement on workplace guidance from business groups (see 11:44am and 11:22am posts).

Edwin Morgan, director of policy at the Institute of Directors, said:

Many businesses will welcome the announcement today that guidance on going to work is changing, and it’s sensible that they have been given advance notice so that they can consult with staff and prepare workplaces.

While we have heard from businesses who are keen to return to offices, there is also a significant amount of caution out there. Directors need to balance the risks, and won’t want to increase the possibility of closures down the line by rushing back. On top of this, not everything is in a company’s control. Childcare is an issue for many employees, and even if the guidance is changed, some staff who use public transport will still be concerned. Businesses will have to deal sensitively with these issues.

There’s no doubt that businesses reliant on commuter custom are facing immense difficulties, and more support may be needed. At the same time, it’s not clear that the desire to return quickly to the previous ‘normal’ is there. As many as two thirds of our members say they intend to keep increased flexible working in place after lockdown ends. As the Prime Minister emphasised, employers will have to consider their own circumstances, and some of the behaviour changes from coronavirus may be long-lasting.

The BCC’s director general Adam Marshall added:

Companies, in discussion with their employees, will decide how and when to return to offices safely. To take those decisions, businesses need crystal-clear official guidance.

Firms will be weighing up how they want to work in future. Many have seen benefits to productivity and work-life balance over recent months, and will want to keep elements of their new normal. For many employees, returning to the workplace is contingent on schools reopening, the availability of wraparound care and the capacity of public transport.

Businesses should be able to offset the investments they make to ensure their premises are Covid-secure against their tax bill, which would help many to return to workplaces over the coming months.

Rileys sports bars enter administration

Rileys sports bars have become the latest corporate casualty of the coronavirus pandemic. 

My colleague Rachel Millard reports:

FRP has been appointed as administrators and is looking for a buyer for the chain. 

The site had 21 sites with 208 staff but 44 redundancies have already been made and sites closed in Grays, Sheffield, Wolverhampton and Worcester. 

It is hoped a buyer will keep the remaining 17 sites open. 

Rileys has been a popular venue to play pool, darts and ping-pong and watch live sports, but like most hospitality businesses it has suffered during the coronavirus lockdown. 

Ryanair flight grounded at Oslo airport due to bomb threat – local media

Norwegian newspaper VG reports a Ryanair flight has been grounded at Oslo airport following a bomb threat. Citing police, it says the plane landed safely after receiving the threat while in mid-air.

More details on the Government’s Covid-19 plans

The Government has published the full details of its plans to reopen the UK economy.

Here’s the key section:

From 1 August, if prevalence remains around or below current levels, we will take the following steps:

  • Give employers more discretion on how they ensure employees can work safely. Working from home is one way to do this, but workplaces can also be made safe by following COVID-19 Secure guidelines.
  • Reopen most remaining leisure settings, namely bowling, skating rinks and casinos, accompanied by COVID-19 Secure guidelines. This will not include particularly high-risk activities and settings such as nightclubs, which will be kept under review.
  • Enable the restart of indoor performances to a live audience, in line with COVID-19 Secure guidelines, subject to the success of pilots that are taking place as soon as possible.
  • Enable all close contact services to resume, including any treatments on the face such as eyebrow threading or make-up application, working closely with the sector and public health experts to ensure this can be done as safely as possible and in line with COVID-19 Secure guidelines.
  • Carry out pilots in venues with a range of sizes of crowds, particularly where congregating from different places, including sports stadia and business events. The pilots, some of which will begin in late July, will be carefully monitored and evaluated to inform future decisions on any further relaxation of the rules. If plans progress in line with expectations, pilots will expand to build up to and prepare for a full, socially distanced return in the autumn.
  • Enable wedding receptions; sit-down meals for no more than 30 people, subject to COVID-19 Secure guidelines. Over time, we will assess whether gatherings of this type for other purposes can be made possible and when larger wedding receptions can take place.

How European stocks have outperformed

Emmanuel Macron has described today’s crunch European Council meeting, which is expected to mark the beginning of several days of talks, as a “moment of truth” for the bloc.

Investors might be inclined to agree – European equities have outperformed since the details of the rescue fund were first announced, and markets have likely priced in a heavy burst of stimulus.

Johnson outlines plans for return to work

Boris Johnson is currently setting out plans for the coming months, outlining ambitions for further reopenings and pledging more money for the NHS ahead of what might be a particularly tough winter.

He has said from today anybody can use public transport; from 25 July gyms, pools and other facilities will reopen; and from 1 August, the advice on going to work will be updated. 

On our politics live blog, my colleague Cat Neilan reports:

From the start of August other services including "close contact" work like beauticians will be able to reopen - but not nightclubs, the PM said. 

Wedding receptions for up to 30 people can also take place, as long as they are in “a Covid-secure way”. 

Boris Johnson says from October, “audiences in stadia”, conferences and other events will be able to restart, subject to successful pilots he says.

Eurozone construction jumps

Construction output in the eurozone jumped strongly during May, rising a record-breaking 27.9pc compared to April. That still left levels down 11.9pc compared to the same period last year.

Rio Tinto expects copper production to fall

Mining group Rio Tinto has warned a copper supply crunch could intensify, with disruptions caused by Covid-19 taking 3pc to 4pc off production levels.

The FTSE 100 group said it is seeing signs of recovery across its markets, with conditions stabilising in China as Europe and the US begin to recover.

Its overall production rose 1pc during the second quarter compared to a year before, despite “significant global challenges”

“If I look at the Chinese situation, the recovery is well underway,” with a V-shaped rebound taking place, said Rio’s chief executive officer Jean-Sebastien Jacques.

“I’m not quite sure on what letter of the alphabet I should pick for the other countries,” he told Bloomberg. “We are starting to see some signs of recovery in construction and automotive in the US and in Europe, but it is slow.”

Rio Tinto said it had introduced new controls after destroying an ancient Aboriginal site in May to make way for an expanded iron ore mine.

“We will learn from it in order to make sure it doesn’t happen again,” said Mr Jacques. “Today, there are still a lot of questions, and we don’t have all the answers.”

Eurozone inflation at 0.3pc

No major surprises from Eurostat’s final reading for eurozone inflation during June – it came in at 0.3pc both month-on-month and year-on-year, in line with flash estimates. That’s well below the European Central Bank’s target – but central bankers have widely accepted inflation rates are going to be pretty skewed for a while.

Money round-up

Virgin Atlantic will resume passenger flights next week

The announcement comes after Sir Richard Branson's airline secured a £1bn rescue package Credit: BEN STANSALL/AFP via Getty Images

Virgin Atlantic will resume passenger flights to several destinations next week but warned it anticipated a sluggish recovery in demand for air travel.

My colleague Simon Foy reports:

The carrier said its planes will return to the skies with flights from Heathrow to Hong Kong, New York and Los Angeles. 

However, Corneel Koster, the firm's operating chief, said with widespread border restrictions and the UK's quarantine requirements for arrivals from most long-haul destinations, “it’s basically essential travel only”. 

Entry to the US is still restricted to US citizens and permanent residents, while there are some exemptions for certain close family members and diplomats. 

Mr Koster told Bloomberg TV: “Bookings initially are looking limited and load factors will be relatively low. We do believe there is pent-up demand out there, but we don’t know when our major market to and from the US will open. And corporate demand will take time to recover.”

ECB: Forecasters expect bigger GDP hit, lower inflation

The European Central Bank has released the results of its latest survey of professional forecasters. Respondents have lower expectations for inflation in the coming years, and also predicted a larger hit to GDP than previously anticipated.

Here are the highlights:

  • HICP inflation expectations revised down for 2021 and 2022, and also for longer term
  • Real GDP growth expectations revised towards sharper downturn in 2020 and slightly steeper recovery in subsequent years
  • Expectations for peak in unemployment rate pushed back to 2021, but expectations of unemployment rate in the longer term remain unchanged
Credit: ECB

Merkel cautious as summit begins

With the European Council meeting kicking off, the tone from Herman leader Angela Merkel – a chief architect of the initial €750bn proposal – has been cautious. Ms Merkel said she can’t say whether leaders will be able to find a compromise, warning that the situation across the bloc is completely different to February. She said talks would be tough, but that Germany and France would work together to support Charles Michel, the council’s president.

Quiet ending

It’s looking like a pretty quiet session to close out a week of decent gains across European stock markets. The biggest catalyst for gains this week has been vaccine hopes – although as a Times report from this morning highlights, optimism on that front may be a little premature:

Setting the stage for today’s meeting

Don’t expect any immediate answer from the summit of EU leaders beginning today. Dutch prime minister Mark Rutte – leader of one of Europe’s ‘frugal four’ – says there’s only a 50pc chance of a deal this weekend.

Bloomberg reports:

EU leaders at the summit kicking off Friday will meet in person for the first time since February to try settle their differences over the €750bn fund. While European stocks have outperformed US and global shares since the plan was announced mid-May, negotiators of the deal have been playing down chances of an agreement ahead of the talks.

Deutsche Bank’s analysts, led by Jim Reid, add:

As a reminder from yesterday, our view here at DB is that although an agreement is still possible this weekend, it would now be a positive surprise, and there’s no indication so far of the differences of opinion between the member states having been bridged yet. The meeting gets started at 10:00 Brussels time, though is scheduled to continue into Saturday, so its likely the final news of what’s happened will only be known over the weekend.

Ninety One assets under management rise

In an extremely brief trading update, asset manager Ninety One said:

Ninety One today confirms its assets under management at 30 June 2020 of £118.0 billion (31 March 2020: £103.4 billion).

Market moves

It’s been a pretty mixed open for European stocks.

Credit: Bloomberg TV

HomeServe expects ‘solid’ full-year performance

Home repairs business HomeServe said it expects “to deliver a solid performance” in its 2021 financial year, with demand recovering strongly and its membership business unaffected.

The FTSE 100 group said customer satisfaction is at record highs, with its acquisitions pipeline full of “attractive targets” for expansion.

In its membership businesses, “policy renewal and mid-term cancellation rates have continued in line with historic trends in this traditionally quieter period, with no impact from the Covid-19 pandemic”.

It added consumer demand for home improvements has “recovered strongly across all businesses”, with record traffic levels for subsidiaries eLocal and Checkatrade.

Royal Bank of Canada’s Andrew Brooke said Homeserve is one of “our favourite defensive growth names”.

British Airways to retire Boeing 747 fleet

A British Airways 747 landing at San Diego International Airport, USA Credit: KC Alfred/ZUMA Wire/REX

British Airways will retire its fleet of Boeing 747 jets with immediate effect.

PA reports:

The airline has used the craft since July 1989 and is currently the world's biggest operator of the 747-400 model. It was planning to retire the fleet of 31 craft in 2024 but its end has been hastened by coronavirus.

The airline said:

It is with great sadness that we can confirm we are proposing to retire our entire 747 fleet with immediate effect.

It is unlikely our magnificent 'queen of the skies' will ever operate commercial services for British Airways again due to the downturn in travel caused by the Covid-19 global pandemic.

While the aircraft will always have a special place in our heart, as we head into the future we will be operating more flights on modern, fuel-efficient aircraft such as our new A350s and 787s, to help us achieve net-zero carbon emissions by 2050.

Agenda: Europe to open higher

Good morning. European equities are set to open slightly higher ahead of the EU rescue fund meeting this weekend.

Leaders from the bloc will meet in person this morning for the first time since the crisis began and will attempt to thrash out a deal for a €750bn (£680bn) recovery fund.

5 things to start your day 

1) EU throws out US data sharing deal over surveillance fears: The ruling, by the EU Court of Justice, saw the "EU-US privacy shield" invalidated due to concerns over the privacy of Europeans, with the court suggesting US surveillance laws were too far-reaching.

2) Sunak urged to pump £500m into ‘green aviation fuel’: Sir Graham Brady, the chairman of the Conservative Party’s backbench 1922 Committee, wants "supercharging investment in aviation decarbonisation".

3) MPs to examine tax system as increases loom: The Treasury Committee, the most powerful group of backbench MPs, has began an inquiry into tax after the pandemic amid warnings the Government will have to rein in borrowing.

4) The UK will borrow an extra £110bn from debt markets to pay for the Covid-19 crisis, taking the total to a mammoth £385bn in just eight months of the financial year. The Debt Management Office announced plans to sell the gilts between September and November, days after the Chancellor unveiled an extra £30bn in support for the economy.

5) Netflix shares plunge as it says pandemic video boom won't last: The US video company revealed that more than 10m households had signed up to its monthly service in the three months to the end of June, sending total subscriber numbers above 192m.

What happened overnight 

Asian markets edged up on Friday morning following an across-the-board sell-off on Thursday. Hong Kong added 1pc percent and Shanghai climbed a similar amount a day after collapsing 4.5pc, while Sydney added 0.1pc and Seoul and Taipei climbed 0.7pc. Singapore and Wellington also edged up but there were losses in Manila and Jakarta. Tokyo went into the break barely moved.

Coming up today

Interim results: Ninety One, Rio Tinto

Full-year: Homeserve, Walker Crips

Economics: GfK consumer confidence, Andrew Bailey hosts first virtual Citizens’ Panel Open Forum (UK); inflation final reading (eurozone)