US stocks near record highs as Trump extends economic aid

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With European markets set to close slightly higher, it’s time for me to wrap up for the day.

We’ve had a pretty slow start to the week – but things are likely to pick up with tomorrow’s employment data, and Wednesday’s GDP reading. So, in the calm before the storm, here were some of the highlights:

  • European shares wavered amid escalating tensions between the US and China, with Wall Street dipping after opening near record highs. China announced it would introduce sanctions against 11 Americans in response to a similar step from Washington over the weekend.
  • Cineworld and Clarkson shares popped higher on the FTSE 250, with the former rising after a US judge struck down a rule banning movie studios from owning cinemas. Clarkson posted solid results and restored its dividend.
  • Shares in Next Digital, the media group owned be pro-democracy campaigner Jimmy Lai, popped higher after he was arrested as part of a continued crackdown upon dissenting voices in Hong Kong.
  • McDonald’s launched legal action against Steve Easterbrook, its former executive, saying he should not have been given severance pay because he “concealed evidence and lied about his wrongdoing”.

Thanks for following along today. I’ll be back bright and early tomorrow for the latest data on Britain’s looming jobs crisis.

‘Red wall’ high streets to take biggest retail hit

Fears are growing that the high streets in areas on the Government’s list for “levelling up” will be the hardest hit by the impact of Covid-19 on retail and the decline of offices.

My colleague Lizzy Burden reports:

Data from the Office for National Statistics (ONS) show the regions with high streets that have the highest proportion of retail addresses per office are Yorkshire and the Humber, the East Midlands and the North East, ranging from 3.9 to 4.9. London, however, had the lowest number of retail addresses per office at 1.6.

“The number of people with office jobs in city centres is a key component of bringing people in to be customers for retailers,” said Paul Swinney at the Centre for Cities think tank. “The weakest areas have much more retail space than office space – that does not seem to be sustainable.”

Smaller construction firms cut fewer roles

An employee at a building site in March Credit: Chris Ratcliffe/Bloomberg

New data from workplace auditor Hudson Contract has shown that smaller construction firms have dealt with the return to the worksite better than large construction companies.

My colleague Ben Gartside reports:

According to their analysis, large firms have cut 30pc of subcontractors since the week before lockdown, while SMEs have only dropped by 21pc.

Ian Anfield, managing director of Hudson Contract, said: “Our figures show how SMEs are leading the recovery in the construction industry.

“Smaller companies are proving more resilient, agile and adaptive to the new circumstances and are investing in skilled subcontractors to retain productive labour and finish jobs."

Mr Anfield added: “By contrast, large construction firms tend to work on more complex projects which have been hit harder by the downturn.

Meanwhile, the average number of contractors used by smaller firms dipped by two thirds, while the average weekly earnings of subcontractors jumped 4.8pc from last month, to £889. Despite the uptick, the numbers are down 3pc in comparison to last year, when the average subcontractor earned £920 a week. 

How US shares have shifted

With the S&P 500 within inches of a new record high, here’s a reminder of how quickly US stocks shook off the impact of Covid-19:

McDonald's sues former boss over alleged relationship with staff

McDonald’s has filed suit against its ousted boss Steve Easterbrook, alleging that he concealed evidence and lied about details of three “physical sexual relationships” with staff and his termination shouldn’t have included severance pay.

Bloomberg has the details:

Easterbrook – who was fired as chief executive officer in November “without cause” – had originally admitted to having a consensual relationship with an employee. But information the company received from an anonymous tip in July led the company to further investigate. It concluded he had been involved in sexual relationships with three additional company employees before his exit, according to a company filing Monday.

The evidence also shows Easterbrook approved a special discretionary grant of restricted stock units worth hundreds of thousands of dollars to one of the employees after their first sexual encounter -- and just days before their second, the company said.

As a result, the fast-food chain filed a complaint in the Delaware Chancery Court to recover any compensation and severance benefits that he received when he left his post. The company has also taken steps to prevent Easterbrook from exercising any stock options or selling any shares.

Chris Kempczinski, who took over as CEO when Easterbrook was pushed out, alerted company employees about the action Monday.

“We recently became aware, through an employee report, of new information regarding the conduct of our former CEO, Steve Easterbrook,” he wrote in the internal memo, reviewed by Bloomberg News. “While the board made the right decision to swiftly remove him from the company last November, this new information makes it clear that he lied and destroyed evidence regarding inappropriate personal behavior and should not have retained the contractual compensation he did upon his exit.”

Wall Street opens in the green

US stocked have opened near all-time highs as President Donald Trump took executive action over the weekend to extend economic aid. 

Royal London swings to a loss

Insurer Royal London paid out £8.5m to the families of 1,200 life insurance customers who died as a result of Covid-19. 

My colleague Michael O’Dwyer reports:

Royal London swung to a £181m pre-tax loss in the first half of the year compared to a profit of £393m in the same period last year as the pandemic pummelled asset values and reduced bond yields. 

Insurers hold large amounts of capital on their balance sheets to make sure they can pay out on claims and invest this money in financial assets like shares and bonds and in real assets such as property to make a return. 

Royal London has £139bn of assets under management and is the largest of the remaining UK mutual insurers, owned by its 8 million policyholders. 

The insurer has pencilled in a further £10m in claims related to Covid-19 but warned there is still uncertainty on the pandemic’s ultimate eventual effect on future mortality rates. 

Watchdog raises concerns over Facebook’s Giphy takeover

Facebook boss Mark Zuckerberg Credit: Drew Angerer/Getty Images

The Competition & Markets Authority has told Facebook to take further steps to run Giphy – the animated image website the tech giant bought earlier this year – as a separate entity.

The watchdog, which is conducting an ongoing merger investigation, said it “considers there to be a general lack of independence of the Giphy business from Facebook” as a result of some contractual provisions.

It called for Facebook to appoint a ‘hold separate manager’, who would report back directly to the CMA.

Revolt fears lead to curb on boss pay rises

Fear of investor revolts held back bosses' pay at the 30 biggest London-listed companies last year, with chief executives receiving almost a tenth less.

My colleague Simon Foy reports:

On a median basis, chief executive pay across the FTSE 30 fell by more than 7pc to £5.9m in 2019, according to Deloitte’s annual executive remuneration report.

However, across the wider FTSE 100, top executives’ pay packets remained relatively stable at £3.7m compared to £3.5m in 2018.

The report found that investors' concerns pressured firms to keep payouts lower, with only eight FTSE 100 companies receiving a vote of less than 90pc for their pay report, down from 23 firms the previous year.

Finance chiefs at blue-chip firms also took a cut, with average pay down 12pc to £1.9m in 2019.

New twist in NMC scandal fallout

NMC Health collapsed after an accounts scandal Credit: Christopher Pike/Bloomberg

Collapsed hospital firm NMC Health is being investigated over claims of fake invoices and forged documents relating to hundreds of millions of dollars worth of sales. 

My colleague Michael O’Dwyer reports:

The former FTSE 100 hospital company – which plunged into administration in April after billions of dollars of undisclosed borrowing was uncovered – is facing new allegations that sham invoices for medicine sales were behind a major round of borrowing, the Financial Times reported.

The alleged scheme involved the funnelling of loans worth billions of UAE dirhams to NMC via Neopharma, a pharmaceutical company owned by NMC’s founder BR Shetty. One dirham is worth 21p.

AbuDhabi-based NMC allegedly created fake orders for medicines from Neopharma and its partner firm Nexgen so that it could borrow money from banks.

The combined value of thousands of apparently fake transactions was six times Neopharma’s actual sales, according to documents seen by the FT. 

Cineworld jumps as judge scraps ban of studios owning movie theatres

Cinema chain Cineworld is the biggest riser on the FTSE 250 today, after a US Federal Judge struck down a long-standing rule that said movie studios are not allowed to own cinemas.

The lifting of the restrictions, which hark back to 1948, mean that a major studio might swoop on some of Cineworld’s locations.

But analysts have poured cold water on the likelihood of a surge in sales – particularly as the pandemic drive streaming demand while people avoid going out to the movies.

Morgan Stanley’s Ed Young said the Cineworld price move looked overdone as the industry movie focuses on direct-to-consumer offerings.

Markets moves

It’s been a shaky morning so far for European equities, which have flipped between gains and losses amid escalating US–China tensions .

Capita to hire 900 new workers after TfL contract extension

Outsourcing giant Capita is set to hire 900 new workers to police London's congestion charge and low emissions zones following a five year extension to its contract with Transport for London.

My colleague Ben Gartside reports:

Capita's chief executive Jon Lewis welcomed the extension, saying that the new contracts “will see us build on our existing partnership, which has already seen us launch ULEZ on time and on budget, and will draw on our track record of transformation and digitally enabled services, as well as adding value for our shareholders.”

The congestion charge and low emission zones – designed to reduce pollution in the capital – are set to be expanded to include north and south circular roads. If drivers do not meet the emission standards, a fee of £12.50 is incurred for entering central London. This fee is in addition to the £15 congestion charge collected for entering central London between 7am and 10pm.

The new policy has been a success for TfL, as there has been a 44pc drop in roadside levels of the nitrogen dioxide since the policy was implemented, as well as four out of five vehicles entering central London meeting the emissions standards of ULEZ.

Capita had announced earlier in the year that they were cutting 200 workers because of financial difficulties brought about by the Coronavirus pandemic.

Bank of France warns recovery is slowing

French president Emmanuel Macron Credit: FRANCK FIFE/AFP via Getty Images

France’s central bank has warned the pace of the country’s recovery has slowed, suggesting it may take a long time for output to return to pre-virus levels.

The Bank of France’s monthly report suggests activity was about 7pc lower in July, compared to 9pc in June. It warned August indicators suggest at best a slight improvement this month.

The French economy contracted by a record 13.8pc in the second quarter.

Bloomberg has more details on the BoF’s report:

The report confirms what the Bank of France has described as a recovery in the shape of a bird wing, with a sudden jump after the lifting of lockdown measures in May, followed by a steady return toward normal.

For August, business leaders in services and most industrial sectors expect stability, the Bank of France said. In construction, activity is expected to improve slightly to almost reach normal levels.

Morses Club expect lending to return to pre-virus levels

Doorstep lender Morses Club said it expects debt collection to return to pre-pandemic levels by the end of the month as subprime lenders seek to return to normality following the coronavirus shutdown. 

My colleague Michael O’Dwyer reports:

The Aim-listed lender’s home collected credit division recouped cash at 98pc of its normal levels in July. 

The business continued to recover towards 2019 levels with lending in July rebounding to 80.9pc of the levels seen a year earlier, compared to just 28pc in April. 

Lending by high interest providers was all but called to a halt in recent months as customers faced financial uncertainty and lenders struggled to get money owed to them repaid. 

Morses Club, which said its cash position had improved since June, announced plans to keep employees and agents working from home until the end of the year and said it would restructure its property portfolio as a result. 

Money round-up

Here are some of the day’s top stories from the Telegraph Money team:

Jimmy Lai’s Next Digital sees shares soar after arrest

Shares in the media group owned by Jimmy Lai soared on Monday after online posts encouraged investors to support the publisher arrested under the city's controversial new national security legislation.

My colleague Simon Foy reports:

Next Digital stock skyrocketed by 260pc after dismayed activists used Hong Kong's LIHKG forum to call on investors to support the company.

Mr Lai was arrested on Monday along with other executives of the company in the highest-profile detentions since the draconian legislation was imposed by Beijing in June.

Hong Kong police said the men had been arrested on suspicion of "colluding with foreign powers" and raided the publisher's headquarters.

China to sanction 11 Americans

China will launch sanctions against 11 Americans on Friday in retaliation against measures imposed by the Trump administration over the situation in Hong Kong.

Bloomberg reports:

Those sanctioned include Senators Marco Rubio and Ted Cruz, Human Rights Watch executive director Kenneth Roth and Michael Abramowitz, the president of Freedom House, [Foreign Ministry spokesperson Zhao Lijia] told a briefing in Beijing.

Last Friday, the US said it would put sanctions of 11 Chinese officials and their allies, with the list including Hong Kong chief executive Carrie Lam.

Clarkson jumps after ramping up dividend

Clarkson provides shipping services Credit: Qilai Shen/Bloomberg

Shares in shipping services provider Clarkson have jumped higher this morning after the group renewed its dividend following a strong first-half performance.

In what it called a “robust” showing, the FTSE 250 company raised its first-half profit before tax to £20.9m, from £19.2m last year.

It hailed “particularly strong trading” in its broking division that offset pressures elsewhere.

Chief executive Andi Case said:

The company has produced strong cash flow, boosted by the excellent performances of our Broking and Research divisions, allowing the Board to pay the equivalent of the 2019 final dividend as well as an interim dividend for 2020. We have delivered 17 consecutive years of dividend growth.

It announced plans to pay an extra dividend equivalent to its deferred 2019 payout.

Liberum’s Gerald Khoo said a second virus wave could still put pressure on the group, but added:

Clarkson remains well-positioned to make the most out of whatever market conditions prevail, while continuing to build its digital offering

Chinese inflation pushes higher

Chinese consumer inflation edged up last month, partly driven by rising food prices from flood-related disruptions and as the country recovers from the pandemic.

My colleague Lizzy Burden reports:

Data from the National Bureau of Statistics showed that the consumer price index hit 2.7pc in July, its fastest pace in three months.

Pork prices climbed 85.7pc compared to last year. China’s pig herds have been ravaged by African swine fever, and Covid-19 later hit supply chains.

Capital Economics noted that “floods that have swept across China since late June appear to have disrupted supply chains and production in the Yangtze River Delta, where around half of China’s agricultural production takes place”.

Meanwhile, the Chinese producer price index fell 2.4pc from last year, a smaller drop than the 2.5pc economists had expected, due to a recovery in industrial demand and as commodity prices rebound.

Capital Economics said further fiscal stimulus was expected to continue to shore up producer prices in the coming months.

Transport stocks rise after buss bailout

Transport companies have risen today after the Government announced a further £256m bailout for England’s bus and light rail systems to help them keep operating through the pandemic.

The package, which doesn’t cover London, will include a further £27.3m weekly for buses until funding is “no longer needed”, the DfT said.

Transport companies have taken a heavy hit as the pandemic keep people from going out.

FirstGroup and Go-Ahead are among those to have welcomed the announcement. 

Go-Ahead chief executive David Brown said:

As communities return to work, services reopen and people begin travelling again, we are seeing customers returning to public transport.  However, passenger numbers are still below 50pc of pre-Covid levels across our networks.  While social distancing is in place and sections of society remain closed, we welcome the Government's continued support to keeping these critical services running. 

Markets rise

European markets have edged slightly higher at the open. 

Credit: Bloomberg TV

Superdry secures new £70m loan

Superdry boss Julian Dunkenton Credit: SuperGroup/PA 

Retailer Superdry has struck a new £70m loan deal with lenders to help it weather the fallout from Covid-19.

The retailer said the new financing facility, agreed with HSBC and BNP Paribas, will give it the “necessary flexibility and liquidity” going forward.

It came as the group offer an update on quarterly sales over the 13 weeks to July 25th, in which it record a 58.1pc decline in sales compared to 2019.

Superdry said the performance had been better than it initially expected, but warned “disruption from Covid-19 continues to materially impact our performance year on year”.

Online sales jumped 93.2pc during the quarter but has since normalised, the group said.

Julian Dunkerton, its chief executive, said:

The actions we have taken to date have greatly strengthened our cash position, which together with our new ABL Facility, give us the flexibility to execute our current plans and to secure our recovery.

 Jefferies’ Andrew Wade said the new loan extends the group’s liquidity for a further year. He added:

In our view, the focus is now shifting back from survival and liquidity to the execution of the brand reset and transformation plans.

Poll: One in three companies will cut jobs due to Covid-19

One in three companies expect to make redundancies by the end of September in a blow to Britain's hopes of economic recovery from the coronavirus crisis, a new survey has found.

My colleagues reports:

The 33pc figure – revealed in a survey by human resources body the Chartered Institute of Personnel and Development (CIPD) and recruiter Adecco – represents a rise from 22pc of companies shown in the groups' spring quarterly report.

The latest survey suggests the jobs market will continue to shrink through the summer quarter, with the number of employers expecting to hire workers falling further below the number planning for redundancies.

The report said its disparity marker between the two categories of employers fell four points from the spring quarter to minus 8, the lowest it has been since the survey's methodology was adopted in 2013.

Agenda: Stocks set to rise 

Good morning. The FTSE 100 is set to start the week in the green despite US-China tensions continuing to flare.

US President Donald Trump signed two executive orders banning WeChat, owned by Chinese tech giant Tencent, and TikTok in 45 days' time while announcing sanctions on 11 Chinese and Hong Kong officials

Mr Trump also signed four orders to keep certain unemployment benefits, a temporary payroll tax deferral, eviction protection and student-loan relief.

However, the main focus this week will be on whether Congress can agree a fresh stimulus package after talks between Democrats and Republicans hit an impasse last week. 

5 things to start your day

1) Landlords tell ministers: let’s go halves on rent bills. Landlords, shops and restaurants have joined forces to ask the Government to step in and pay commercial rents to help them survive the coronavirus pandemic.

2) Truss wrong to warn phased border checks would fall foul of WTO, says former chief. In a leaked letter, Liz Truss had warned Britain would face a legal challenge over a phased approach to checks on goods arriving from the EU.

3) BA cuts £1-a-week allowance for first aiders. The withdrawal of the payment means many staff are now reluctant to take on the responsibility of acting as first responders.

4) MPs fire salvo in £1bn Navy contract row. Hopes that British shipyards will build new support ships for the Royal Navy are being undermined by the Ministry of Defence’s refusal to release a “lessons learned” report on a contract to build similar vessels abroad, it is claimed.

5) Business lending to hit 13-year high as further redundancies loom. Banks will lend more to British businesses this year than at any point since the financial crash, as the UK seeks to stave off waves of redundancies. 

What happened overnight 

Shares were mostly higher in Asia on Monday after President Donald Trump issued executive orders to provide tax relief and stopgap unemployment benefits for Americans hit by the fallout from the coronavirus pandemic.

Shares rose on Monday in Sydney, Shanghai and Seoul, while markets were closed in Tokyo and Singapore for a public holiday.

"It has been an unusually risk-friendly start to the Monday proceedings, but there is still a lot of wood to be chopped on the US stimulus deal, while Aug. 15 trade talks loom ominously," Stephen Innes of AxiCorp said in a commentary.

Stock prices fell in Hong Kong after the authorities arrested pro-democracy media tycoon Jimmy Lai on suspicion of collusion with foreign powers.

The Hang Seng index dropped less than 0.1pc to 24,526.63.

Elsewhere in Asia, South Korea's Kospi jumped 1.6pc to 2,388.12 and the S&P/ASX 200 in Australia surged 1.7pc to 6,105.20. The Shanghai Composite index advanced 1pc to 3,385.80.

Shares also rose in Taiwan, India and Thailand.

Coming up today

Interim results: ContourGlobal, Clarkson

Economics: Inflation (China); job openings (US)