- US retail sales return to pre-pandemic trajectory, but growth disappoints
- European stocks drop sharply as quarantine rules hit travel companies
- France placed on UK travel quarantine list as coronavirus cases rise again
- Garry White: Trump’s Chinese tech assault will help fracture the internet
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Retail sales in the US rose by another 1.2pc in July, rising to new record highs as consumers buy more than they did before the pandemic struck, Tim Wallace writes..
The increase is slightly smaller than economists anticipated, with sales of cars dropping a touch, but indicates this part of the world’s largest economy has fully recovered.
“The retail sales figures are encouraging because they suggest the recovery has continued to grind on even in the face of the resurgence in virus cases,” said Michael Pearce at Capital Economics.
“Admittedly, the expiry of additional Federal unemployment benefits at the end of July poses a downside risk to spending in the near term, but with virus infection numbers falling again the high-frequency indicators have continued to edge higher in early August.”
Industrial production also climbed by 3pc on the month, led by reopening car factories ramping up to increase output by more than a quarter.
However, manufacturing is still down by around 8pc compared to 2019 levels.
“The scope for further large gains on factory re-opening appears limited so additional gains will be determined much more by underlying economic fundamentals,” said economist James Knightley at ING.
“Based on the high-frequency consumer sector data there is evidence of a plateauing in the recovery and it will be hard for the manufacturing sector to buck that trend.”
We’re wrapping up the blog early today. It’s dead quiet out there, with European shares set to stumble their way into the weekend.
Here’s a reminder of some of the day’s top stories:
- Chinese data showed the country’s economic comeback may be losing momentum, with retailer sales down 1.1pc year-on-year.
- Second-quarter GDP figures for the EU showed a record 12.1pc fall in output as the pandemic ravaged the bloc.
- European stock markets dropped, with the travel sector under pressure after Britain expanded travel restrictions.
- The European Commissioned announced it has reached a deal with AstraZeneca to buy 300m doses of the pharma giant’s Covid-19 vaccine.
- US retail sales growth missed expectations, with signs a bounceback in demand is losing steam. Industrial production also rose at a slowing pace.
Thanks for following along today. We’ll be back on Monday with the latest news on business, economics and markets. Have a good weekend!
Companies welcome easing restrictions
Bowling alleys and soft play centres breathed a sigh of relief after being told they can reopen from Saturday, but warned of further challenges while restrictions remained in place.
My colleague Hannah Uttley reports:
In a surprise announcement late on Thursday, Boris Johnson said bowling alleys, casinos, beauty salons, skating rinks and soft play centres would be able to welcome back customers from this weekend.
The easing of restrictions will also allow wedding receptions of up to 30 people to take place and live indoor performances at theatres and music venues.
Leisure and hospitality bosses welcomed the announcement after Mr Johnson U-turned on plans to ease lockdown restrictions in July, just 24 hours before they were due to reopen.
Stephen Burns, chief executive of Hollywood Bowl Group, said: “It’s a great relief to finally have clarity on when we can reopen after such unexpected and long delays.”
Auto sales drag
Car and car part sales look to be the weak spot in today’s figures: excluding autos, retail sales were up 1.9pc during the month.
Vehicle and car part sales dropped 1.2pc during the month, with sporting goods and books also falling 5pc, and building materials down 2.9pc.
The biggest bounce was for electronics stores, which saw sales jump 22.9pc in July.
Retail sales miss estimates
US retail sales rose just 1.2pc last month, falling short of the 2.1pc consensus estimate. However, June’s change was revised upwards, to 8.4pc.
Overall, that put seasonally-adjusted sales back on their pre-pandemic trajectory – although a lot of sales look lost for good:
US retail sales: What to expect
Today’s US retail sales figures – set for release at half past – are expected to show a continued recovery, albeit at a rapidly slowing pace.
Economists polled by Bloomberg expect sales to rise 2.1pc month-on-month, compared to June’s 7.5pc and May’s record 17.5pc.
As ever, the more granular data should give a sense of how different shop types have recovered.
Investors will be watching the figures closely to get a sense of how strong the America’s economic rebound is, but it’s not the biggest story in US economics right now. That title goes to the fight in Congress over a relief package – which looks stuck in a stalemate.
NewRiver still awaiting a fifth of rent
Shopping centre owner NewRiver is still owed 19pc of rent due since June 24, as the coronavirus crisis continues to cause strain for landlords.
My colleague Rachel Millard reports:
The FTSE 250 real estate investment trust has collected 60pc of the rent due between June 24 and August 1, but has deferred or re-geared a further 20pc and waived 1pc.
NewRiver’s £1.2bn portfolio comprises 33 shopping centres such as the Montague Centre in Worthing and Hildreds in Skegness, 25 retail parks, and 700 pubs.
It said rent collection “continued to improve”, having collected or agreed alternative payment terms on 84pc of the rent due from March 25 to June 1, an improvement on the 75pc reported on June 18.
Commercial landlords have been hammered by the coronavirus lockdown, with tenants unable to pay rent as they were forced to close.
Wall Street set for mixed open
Still a couple of hours until the US open – and we’ll have those all-important retail sales numbers for investors to absorb before then.
As things stand, it’s set to be a pretty quiet, mixed open – the benchmark S&P 500 is set to drop 0.2pc, while the Nasdaq will continues its inexorable rise, climbing another 0.1pc.
The S&P 500 is just 0.6pc below the all-time high it reached in mid-February. It wouldn’t be a surprise to see a breakthrough on that front if retail sales are strong.
Liberty Steel snaps up French plants
Industrials entrepreneur Sanjeev Gupta is expanding his empire by buying two strategically important steel plants in France.
My colleague Alan Tovey reports:
Mr Gupta’s Liberty Steel conglomerate has been given the go-ahead by Paris to purchase the Hayange plant in north-east France.
Hayange was part of British Steel, which collapsed into insolvency last year and was taken into the control of the UK’s official receiver. It was bankrolled by the taxpayer before the bulk of it was purchased by Chinese company Jingye in the spring.
Liberty was also in the running to buy the main British Steel business before losing out to Jingye.
Seen as a crown jewel of British Steel and one of its most profitable operations, Hayange is a key supplier of rail to the French train network, meaning the government took a keen interest in its ownership.
European Commission signs deal for 300m doses of AstraZeneca Covid-19 vaccine
The European Commission says it has reached a deal with AstraZeneca to buy 300m doses of the company’s under-development Covid-19 vaccine.
The EC says the framework agreement includes the option of buying a further 100m doses, and that it is continuing talks with other companies as well.
Astra’s vaccine, which is being developed in conjunction with Oxford University researchers, is currently undergoing large stage 2/3 trials.
Ursula von der Leyen, president of the EC, said:
The European Commission's intense negotiations continue to achieve results. Today's agreement is the first cornerstone in implementing the European Commission’s Vaccines Strategy. This strategy will enable us to provide future vaccines to Europeans, as well as our partners elsewhere in the world.
European shares extend losses
Stock markets across Europe have extended their losses, and are now pretty deep in the red – with the FTSE 100 down about 2.2pc. Aviation-linked stocks IAG and Rolls-Royce are the worst affected, but other engineering groups and energy heavyweights BP and Shell as also dropping. Across the whole FTSE 100, only Smurfitt Kappa in in the green.
Businesses call for better testing after French quarantine imposition
Businesses facing a “devastating blow” from a new quarantine on passengers returning from France have demanded that the Government improve Covid-19 testing and step in to prop up the travel industry.
My colleague Michael O’Dwyer reports:
Firms fear their business will be wiped out by the Government’s decision to force passengers arriving in the UK from France and the Netherlands to self-isolate for 14 days.
Industry group Airlines UK said the new quarantines were “another devastating blow to the travel industry already reeling from the worst crisis in its history”.
ABTA, the travel industry group, warned of massive job losses if the Government does not take swift action to save the industry, which was already reeling from the lockdown and imposition of a quarantine on passengers from Spain last month.
A spokesman for the industry, which sustains 221,000 jobs, said: “The Government’s measures to restrict travel will result in livelihoods being lost unless it can step in with tailored support for the travel industry.”
EU economy shrank record 12.1pc in second quarter
European Union GDP shrank by 12.1pc between April and June, the worst quarter in the bloc’s history.
The fall – in line with expectations – puts the overall shift roughly in line with that of the Eurozone, and leaves the EU economy 15pc smaller year-on-year.
The number of employed people in the bloc dropped 2.8pc during the second quarter, meaning about half the job added since the debt crisis have been lost.
Generous furlough programs across the 19-nation bloc have so far contained the fallout from a record economic contraction on the labor market, and kept the rise in unemployment modest compared to the U.S. Governments are now facing tough choices on how to wind down those programs, balancing ballooning debt against the consequences of massive job losses for the economy.
The UK maintains its title as the worst-performing economy of the second quarter, with only Spain worse for the first half of the year:
ONS: Nearly 50pc of Brits travelled to work last week
Almost half the UK’s workforce travelled to work last week, as work from home levels continue to fall, according to the Office for National Statistics.
The overall number of those working also increased, with furlough numbers falling to just 3pc.
The ONS found:
- 4 in 10 adults (40pc) said they would feel comfortable or very comfortable eating indoors at a restaurant this week, an increase from 37pc last week, and 34pc the week before.
- Of those adults who had left their homes this week, almost 3 in 10 (28pc) said they had visited a café, pub or restaurant, an increase from 10pc four weeks ago (period covering 8 July to 12 July 2020).
- 4 in 10 adults (40pc) reported that the coronavirus was affecting their well-being this week; of these adults, 18pc reported that they were worried about a possible job loss – an increase from 14pc last week.
- Over 6 in 10 adults (62pc) said they were very unlikely to travel abroad on holiday if they had to self-isolate at home for two weeks upon their return to the UK.
- 1 in 5 adults (20pc) reported that they had cancelled travel plans abroad because of rules that say people need to self-isolate at home for two weeks upon returning to the UK from certain foreign countries.
- When asked to identify which issue they felt was the single most important being faced by Great Britain today, 37pc of adults said the coronavirus pandemic and 23pc said the economy.
Here are some of the day’s top stories from the Telegraph Money team:
- We’re in a recession, so why are home buyers so optimistic and house prices rising?: Analysis by estate agency Hamptons International found that 30pc of properties sold within the past month were subject to a bidding war from three or more buyers – up five percentage points on last year.
Trading app Robinhood cuts off buying data
Robinhood, the retail trading app that has gained massively popularity during lockdown, has stopped sharing data about which stocks investors are buying.
The change – sparked in part by concerns about the harms being done by retail investors piling into stricken companies, or the wrong companies entirely – means tracking website Robintrack will become defunct:
Global stocks near record highs
Despite a downwards move across European equities today, global shares are just a whisker away away from hitting new all-time highs, with the stunning market shock caused by the pandemic almost completely in the past. MSCi’s All-Country World Index is just 1.8pc off its record high, reached in early February.
That summertime Friday feeling
As befits the time once known as “silly season”, regulatory filings are extremely thin this morning. To point, one of the only updates across the FTSE 350 is gold miner Centamin saying it has updated its website, as my colleague Jon Yeomans notes.
Excitingly, the FTSE 25 group says the new site “offers improved functionality, easier navigation and simpler access to Company information”.
Less excitingly, it adds:
The content on the website is consistent with the company’s previous disclosures and does not include any new material information.
Here’s how the old website looked:
And here’s the new one, with BIG ALL-CAPS SANS-SERIF TITLES:
Effects producer DNEG mulls stake sale – Bloomberg
DNEG, a leading British visual effects producer for films, is mulling selling a stake after ditching plans for a full listing, Bloomberg reports, citing sources.
The company is working with JP Morgan on funding options, the people said, asking not to be identified as the matter is private. DNEG plans to reach out to a select group of investors about a potential stake sale, which could value the business at as much as £700m, the people said.
DNEG counts Disney, Amazon, ITV and Sky among its customers. It has produced effects for films including “Sherlock Holmes,” “The Dark Knight” and the upcoming adaptation of Frank Herbert’s 1965 science fiction classic “Dune,” according to its website.
Qatar Airways will resume flights to Gatwick
Qatar Airways has announced plans to resume its flights to Gatwick on August 20th.
The carrier will offer 45 weekly flights to four British airports after returning to Gatwick, in the process “cementing its position as the leading international carrier providing connectivity to the UK”.
Its schedule will consist of:
- Edinburgh (three weekly flights)
- London Gatwick (daily flights)
- London Heathrow (three daily flights)
- Manchester (two daily flights)
Chief executive Akbar Al Baker said:
The UK is a very important strategic market for Qatar Airways, and we are proud of our repatriation efforts to-date including never stopping services between the UK and Doha that have helped bring over 200,000 passengers home.
The resumption of London Gatwick services is a significant indicator of the resilience of the UK travel market, and we look forward to resuming more of our UK destinations to support the recovery of tourism and trade in the region.
European markets have dropped at the open.
As well as this morning’s disappointing data from China, there’s the Government’s latest expansion of quarantine rules for investors to chew upon. That’s dragging down travel stocks across the continent.
As my colleague Amy Jones reported:
The Prime Minister decided to strip France from the “green list” after it reported a sharp rise in coronavirus infections.
About 400,000 Britons have until 4am on Saturday to return to the UK before restrictions are implemented, requiring them to self-isolate for two weeks.
The announcement, which echoes the way quarantine was imposed at six hours' notice on travellers from Spain, will lead to a scramble for flights and trains out of France ahead of the deadline.
EasyJet raises £608m after plane sales and leasebacks
EasyJet has raised a further £608m through the sale or leaseback of 23 of its aircraft, bringing its total raised during the pandemic to £2.4bn.
The proceeds are at the higher end of the expected range for the programme, which was announced in May.
The carrier said the proceeds “will be used to maximise liquidity and further strengthen easyJet's financial position”. The leases have generated obligations of around £122.3m, with easyJet said would translate into a mid-single digit millions annual cost.
EastJet said it “will continue to review its liquidity position on a regular basis and will continue to assess any further funding opportunities”.
Loss of momentum in China’s recovery
July data from China's National Bureau of Statistics on Friday showed weaker-than-expected year-on-year industrial output growth and retail sales extending declines into a seventh straight month.
That was slightly offset by firmer property investment, which showed recent stimulus was supporting construction, Reuters reports.
The newswire says:
Some analysts attributed the loss of momentum in the economy to the torrential rains that have flooded Southern China since June and several fresh Covid-19 outbreaks that led to partial lockdowns.
“Although there could be a modest rebound in some investment activities if the floods subside in coming months, we expect sequential recovery momentum to get weaker in H2,” Nomura analysts said in a note, citing factors such as receding pent-up demand, diminished chances of more policy easing and rising US-China tensions.
Industrial output grew 4.8pc in July from a year earlier, in line with June's growth but less than a forecast 5.1pc rise.
Retail sales dropped 1.1pc on year, missing predictions for a 0.1pc rise and following June’s 1.8pc fall.
Agenda: China’s recovery in question
Good morning. The FTSE is tipped to open lower after Asian markets struggled following the release of disappointing economic data in China.
The mood on the markets was cautious after Chinese retail sales unexpectedly fell in July, suggesting domestic demand is still struggling after the coronavirus outbreak.
Yesterday Wall Street stocks finished mostly lower following better-than-expected labour data offset by disappointment at the lack of progress on Washington stimulus. It was also a poor day for Britain’s top stock indices, with London’s blue-chips feeling the impact of a slew of stocks trading ex-dividend.
5 things to start your day
1) Apple is to launch a dramatic bid to sign up millions of iPhone users for its streaming services as it takes on Amazon Prime and Netflix in a battle to dominate the global entertainment industry. The company is set to announce a new service called Apple One
2) Meet the property investor creating opportunities for BAME students: Ric Lewis, the American-born founder of Tristan Capital, believed to be Britain’s biggest black-owned business, says equality has improved in the UK since he arrived from the US – but it still has a long way to go.
3) City dealmaking collapses to lowest level in over a decade: Boardrooms are snubbing deal talks to focus instead on keeping their businesses afloat during lockdown, dragging the number of takeovers taking place in Europe to its lowest level since 2004, according to data provider Refinitiv.
4) New Look has been forced to overhaul its finances to secure a £40m cash injection from lenders to stay afloat. The ailing fashion retailer will trigger a company voluntary arrangement (CVA), its second in two years, to shake up the way it pays rent. It wants to switch most of its 496 stores to paying rent based on revenues for each site.
5) London City airport puts expansion on hold: The Docklands airport will pause a £480m programme to boost passenger capacity once construction on eight new stands for aircraft and a taxiway parallel to the runway is finished at the end of the year.
What happened overnight
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.14pc, although shares in Japan rose 0.11pc.
South Korean stocks fell 1.28pc after authorities reported the largest number of new coronavirus cases since March.
Chinese shares rose 0.18pc in choppy trade, but a slower-than-expected rise in industrial production and a surprise fall in retail sales weighed on investor sentiment.
China's retail sales - a key indication of consumer sentiment - shrank by 1.1pc on-year in July, falling short of forecasts and suggesting many are still reticent about going out to spend time and money.
The latest data follows a drop of 1.8pc on-year for retail sales in June. While the sale of goods just crept into positive territory, growing 0.2pc, the catering industry was particularly badly hit, with sales down 11pc.
Coming up today
Interim results: Lookers
Economics: Industrial production, retail sales (China); Q2 GDP (eurozone); retail sales, consumer sentiment (US)