- European stocks rise after sharp losses last week
- Retail, pub and leisure stocks drop, dragging on FTSE 250
- Ryanair flies to €200m loss
- Associated British Foods warns of £375m hit from Primark closures
- Ocado upgrades guidance
- UK manufacturers cut jobs as activity continues to rise
- German factories led eurozone recovery ahead of latest lockdowns
- Ambrose Evans-Pritchard: Hint of menace from China’s new routemap
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Time to wrap up. These were some of the day’s top stories:
- Second lockdown to wipe 10pc off GDP in November: The second national lockdown will blow a £45bn hole in the country’s battered finances with the UK facing another huge contraction that sets back the recovery.
- Factory activity loses steam ahead of second lockdown: Factories’ recovery lost more momentum last month, especially among consumer goods makers, according to a closely watched survey.
- Primark and Ladbrokes warn of steep costs from second lockdown: Britain's blue-chip companies are already counting the cost of the UK’s second lockdown, with the owners of Primark and Ladbrokes predicting a significant profit hit from a loss of sales.
- City exodus resumes as Goldman and Deutsche tell staff to stay home: Goldman Sachs and Deutsche Bank have kicked off the latest exodus from the City by telling staff not to come in once the new national lockdown rules come into force on Thursday.
- British Airways and Ryanair will not refund Britons despite travel ban: British Airways, Ryanair and Wizz Air will not refund hundreds of thousands of Britons who have been barred from flying during the second lockdown.
Thanks for following along today. We’ll be back tomorrow for the last session of trading before the US election results.
Gym bosses plead for rethink on closures
Britain’s biggest fitness operators are urging the Government to rethink a decision to close gyms under the country's second lockdown, arguing that they are an “essential” service.
My colleague Hannah Uttley reports:
The chief executives of fitness chains Pure Gym, The Gym Group and David Lloyd have written to the Prime Minister warning that the “regressive” decision will damage the health and wellbeing of “millions” of people unless it is reversed.
Gyms, along with swimming pools and leisure centres, will be required to close from Thursday under national lockdown rules intended to limit the rise in coronavirus cases across the country.
However, outdoor exercise will be allowed in public places such as parks, while the Government is currently reviewing whether outdoor sports such as golf and tennis will be permitted.
Ocado eyes move to stock clothes
Ocado is eyeing a move into clothing and homeware after it cemented its position as a pandemic winner with a profit upgrade and further acquisitions.
My colleague Laura Onita reports:
In recent years, the firm has been selling its robotic warehouses to major grocers overseas to help them beef up their online offering.
It now plans to replicate the move with clothes and general merchandise after it bought two tech firms in the US to improve the speed and the scope of robot-picking.
Tim Steiner, chief executive, said although its team would stay focused on grocery, the boom in online shopping gave it impetus to provide a similar service for non-food items.
US manufacturing expands at fastest pace since late 2018
US manufacturing expanded at the fastest pace since late 2018 last month, with higher employment and strong order growth driving the gains.
The Institute of Supply Management’s manufacturing purchasing managers’ index rose to 59.3 from September 55.4 – easily clearing the growth threshold of 50.
Timothy Flore, chair of the ISM’s Business Survey Committee, said:
Manufacturing performed well for the third straight month, with demand, consumption and inputs registering growth indicative of a normal expansion cycle. While certain industry sectors are experiencing difficulties that will continue in the near term, the overall manufacturing community continues to exceed expectations.
Car dealers protest against new lockdowns
Car manufacturers and dealers are on a collision course with the Government, appealing to be allowed to keep selling vehicles through the new lockdown and avoid damaging job losses across the industry.
My colleague Alan Tovey reports:
Under the controls coming in from Thursday, dealerships will have to shut despite saying they can operate safely compared with most other retailers.
They argue their larger premises allow social distancing, while generally lower customer numbers and visits, which are often by appointment, mean infection risks are minimal.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said: “As England heads back into lockdown, we need to keep business operating. Auto manufacturing must have its showrooms open; it’s proven safe and secure, a very different environment from other retail premises.”
Convicted Libor trader Tom Hayes will be released in January – Bloomberg
Tom Hayes, the former trader convicted of Libor rigging, will be released in January after more than five years in jail, Bloomberg reports.
Hayes was the highest-profile conviction in the Libor-fixing scandal. He was found guilty by a London jury in 2015, and is being released after serving about half of his 11-year sentence. UK law requires most convicted criminals to serve only about half of their sentence.
The 41-year-old will be released Jan. 29, his father, Nick Hayes, said by phone. His release means he will be subject to a number of conditions, including a restriction on travel, for the remainder of his sentence.
UK banks called to urgent talks of bounce-back loans scheme – Guardian
The Treasury has called the UK’s top banks to an urgent meeting to review plans for provision of emergency loans ahead of the new lockdown in England, the Guardian reports.
The Guardian understands big lenders – including HSBC, Barclays, NatWest and Lloyds – were contacted on short notice on Monday morning, hours before Boris Johnson was due to address parliament about fresh Covid restrictions.
“We need to convene an urgent meeting at noon to discuss the favoured bounce-back loans,” the email read, according to a banking source. It was the first direct communication with banks regarding the loans programme since Saturday’s national lockdown announcement.
The bounce-back loan scheme, which is 100% government-backed, offers firms cheap funding worth up to £50,000. It has so far distributed £40.2bn to 1.3m UK businesses.
Wall Street set from strong gains
With US clocks going back over the weekend, we’ve returned to the Wall Street open happening at 2:30pm London time.
So, with just over an hour to go, America’s top indices look set for strong gains at the outset, with the benchmark S&P 500 set to rebound about 1.2pc after Friday’s chunky losses.
CBI’s Fairbairn hits out over Covid-19 and Brexit
The Confederation of British Industry’s outgoing boss has attacked the Government’s handling of coronavirus announcements at the business lobby group’s annual conference.
My colleague Alan Tovey reports:
Dame Carolyn Fairbairn , CBI director-general, warned that companies cannot operate on “speculation, leaks and surmise”, as she warned the second lockdown will be “truly devastating for business”.
She also warned of the double whammy business faces from new controls and the prospect of a no-deal Brexit, appealing for the Government to hammer out a trade agreement. as time runs out on achieve a Brexit deal.
“It would be unconscionable to unleash a no-deal Brexit on the countries of Europe, the UK and the European Union, as we are facing this vicious second wave,” Ms Fairnairn said.
“I’ve always felt and argued that a good deal was an economic necessity. I now think it’s a moral necessity as well.”
City forecasters warn second lockdown will take 10pc off GDP this month
The second national lockdown will blow a £45bn hole in the country’s battered finances with the UK facing another huge contraction that sets back the recovery.
My colleague Tom Rees reports:
City forecasters said the economy is at risk of its first double dip recession since the 1970s as they warned the new Covid-19 measures will wipe 10pc off GDP in November.
The cost of the Chancellor putting the economy back on life support and the hit to output will send public borrowing surging above £400bn this year, JPMorgan predicted. Its economists said the additional £45bn hammer-blow to the country’s coffers will push the deficit to almost 20pc of GDP, a record high during peacetime.
A second lockdown to curb rising virus infections all but confirms that the UK will suffer a dreaded W-shaped recovery where the recovery goes into reverse, experts warned.
Rates growth bumps Hiscox’s bottom line
A strong rise in rates boosted insurer Hiscox’s performance during the third quarter, with the group keeping its guidance steady.
The FTSE 250 said its priving momentum had “accelerated further” during the period, with aggregate rates up 18pc so far this year.
It set aside $75m for catastrophic claims in the third quarter, but made no change to its estimates for claims related to Covid-19.
Chief executive Bronek Masojada said:
Our year-to-date performance demonstrates the resilience of the Group, as we delivered good growth in every target area, including in all of our retail businesses.
Full report: UK manufacturing rebound loses steam
My colleague Lizzy Burden has a full report on this morning’s UK manufacturing PMI data. She writes:
European clients stockpiling ahead of a potential no-deal Brexit at the end of the year, and increased demand from China and the US as their economies recovered, boosted exports.
However, consumer goods firms experienced falls in both output and new business for the first time since they started recovering from the Covid-19 shock earlier this year because they are more sensitive to short-term changes in the economy.
Goldman: Eurozone economy will shrink 2.3pc in fourth quarter
Economists at Goldman Sachs have cut their forecasts for eurozone growth in the wake of the new restrictions.
Broadly speaking, the fourth quarter (October–December) had been expected to show moderate continued growth after the third-quarter surge.
But now, Goldman sees the bloc’s GDP falling 2.3pc, versus a previous estimate for 2.2pc growth.
Although our analysis suggests that the new lockdowns will lead to a sharp contraction in economic activity, we expect a smaller hit across Europe than earlier in the year.
First, the new restrictions are lighter than the blanket shutdowns—with schools and factories open—and imply an incremental tightening in restrictions of around one third of that observed during the first wave (given pre-existing containment measures).
Second, mobility appears to have become less sensitive to new containment measures, pointing to a smaller growth drag for a given containment measure.
‘Airbnb for the elite’ taps Government support
A holiday rental company offering a luxury alternative to Airbnb that only curates the most elite home stays has secured taxpayer backing through the Government’s start-up rescue fund.
My colleague Matthew Field reports:
The Plum Guide, which originally stood for “people like you and me”, offers properties across the UK, New York, Rome and Paris.
Founded in 2015 by entrepreneur Doron Messayed, The Plum Guide has received backing by Talis Capital, Latitude, Hearst Ventures and Octopus Ventures.
According to its accounts, The Plum Guide raised £13m over the summer from its existing investors and the Government’s Future Fund, a scheme set up to bail out loss-making start-ups.
Goldman and Deutsche tell staff to work from home – Bloomberg
Goldman Sachs and Deutsche Bank have both told staff that only essential workers should come into their UK offices following the new lockdown announcement, Bloomberg reports.
The news service says:
“We will substantially reduce the numbers of colleagues working from the office,” said Tiina Lee, Deutsche Bank’s UK chief executive officer, in a memo Sunday. “We must ensure only those that cannot carry out their role from home are in the office.”
Goldman also told the vast majority of its more than 5,000 London employees to work from home from Nov. 5, with only ‘in-office essential’ workers permitted to come to its Plumtree Court building, according to an internal memo Sunday by Richard Gnodde, the bank’s international head.
UK manufacturing PMI reaction: Shielded from the double-dip
Responding to this morning’s manufacturing PMI reading, Samuel Tombs from Pantheon Macroeconomics says the sector is “insulated from the economy’s impending double-dip”. He adds:
Looking ahead, the industrial sector should not be disrupted significantly by the four-week lockdown that begins on Thursday, as manufacturing employees are permitted to attend their usual place of work, and schools will remain open, enabling parents to continue working.
Demand for British goods from businesses in the rest of the EU also likely will pick up in the last two months of this year, given the risk that the Common External Tariff might apply to UK.exports to the EU from January 1, if no trade deal is agreed. More generally, demand for consumer goods will remain high at least until a Covid-19 vaccine is widely available, prompting households to rotate back towards services spending again.
KPMG’s Simon Jonsson adds:
The PMI statistic is marginally worse than last month, but still positive. It predates the UK Government announcement on Saturday. During early Autumn, there were some weak signs of increasing confidence, but there is a question mark over the sustainability of this trend. The announcement on Saturday means a lot of manufacturing businesses need to consider what demand will be for their products over the next few months.
Toilet roll-maker Accrol insists supply is high
VERY LOCKDOWN STORY ALERT: Toilet roll maker Accrol has insisted that there is plenty of supply as the boss of the British Retail Consortium pleaded with shoppers not to panic buy.
My colleague Simon Foy reports:
Accrol said it was prepared for a second national lockdown and heightened restrictions and was ready to “satisfy additional demand, should it materialise”.During the spring lockdown, the company operated at full capacity to meet the heightened consumer demand for its toilet roll and other tissue products. “[Accrol] remained fully operational across its three sites, successfully protecting the health and safety of its employees throughout and subsequently through the period of regional restrictions,” the company added.The update came as Helen Dickinson, the chief executive of the BRC, urged consumers not to panic buy before Thursday's lockdown.
After a poor start, European equities are now chalking up strong rises, clawing back some of the ground lost during last week’s tough trading.
- Read more (from Friday): £72bn wiped off FTSE this week in worst month since March
The FTSE 100 is also being buoyed by a weaker pound.
The pan-European benchmark Stoxx 600 suffered a data problem earlier, hence the flat patch in the graph above.
Here are some of the day’s top stories from the Telegraph Money team:
- Young people denied financial Covid support because they live with parents: Those on low incomes and have to self-isolate can access £500 but councils are turning down youngsters who live at home.
- Tenants face higher rents as landlords caught in cladding crisis: Landlords fear they will have to raise rents to cover expensive repair works.
- Who will win the US election – and what does it mean for investors?: The winner will have a huge influence over how stocks perform in the next four years.
UK manufacturing growth beats estimates
The UK’s manufacturing recovery continued at a faster pace than first thought during October, with a final PMI reading of 53.7 versus the ‘flash’ estimate of 53.3.
IHS Markit, which gathered the data, said:
The recovery in the UK manufacturing sector continued at the start of the final quarter, as output and new orders rose again supported by improved demand from both domestic and overseas sources. That said, the upturn showed further signs of losing impetus, as the initial boost to growth from the economy reopening faded and job losses accelerated.
The data was gathered by the 12th and 27th October, before the new restrictions announced on Saturday.
Here are some of the key findings:
- The intermediate and investment goods industries both saw marked expansions of production and new order volumes in October. In contrast, the consumer goods sector slipped back into contraction, with output and new business falling for the first time since the onset of their respective recoveries.
- Manufacturing employment declined for the ninth successive month in October. Furthermore, the rate of job losses accelerated and was marked
- Signs of surplus capacity across manufacturing as a whole remained
- Manufacturers maintained a positive outlook in October
IHS Markit’s Rob Dobson said:
October saw the UK manufacturing recovery continue, albeit with the upturn losing momentum amid ongoing lockdown measures and signs that growth could weaken further in coming months after Brexit-related stockpiling.
The main drag was a fall back into contraction for the consumer goods industry, blamed in part on lockdowns and falling demand as virus worries intensified among households.
Manufacturing PMIs rise across Europe
Final manufacturing PMIs across the eurozone have beaten the ‘flash’ estimates, with narrow beats across the bloc’s top economies.
The final reading for the eurozone came in at 54.8, versus an earlier estimate of 54.4. That solidly passes the growth threshold of 50.
IHS Markit, which gathered the data, said:
Growth was seen across all three market groups during October, albeit to varying degrees. The fastest expansion was seen in investment goods, where growth improved to its highest level for over two years. A solid gain was seen in intermediate goods, but growth weakened to a marginal pace amongst consumer goods producers.
France came in at 51.3, versus an estimate of 51:
Germany’s reading was 58.2, versus an estimate of 58:
Italy scored 53.8, versus an estimated 53.7:
Those figures appear to confirm what the ‘flash’ PMIs told us: manufacturing is experiencing an increasing rebound in activity – which appears to be being by a decline in services-sector activity (figures on which will be confirmed in finalised readings towards the end of the week). They’re also something of a blast from the past: activity is expected to slow through November due to renewed lockdowns.
Serco drops after losing Atomic Weapons contract
Outsourcer Serco is leading fallers on the FTSE 250 today, after saying its contract with the Atomic Weapons Establishment will lapse as the group returns to the director control of the Ministry of Defence.
The group said:
Serco is proud to have been involved with AWE for the last 20 years, and will work with the other shareholders and the Ministry of Defence to ensure a smooth transition to the new arrangements.
We expect that AWE will make a contribution to both Serco’s group underlying trading profit and profit after tax of around £17m in 2020. Whilst our budgeting process is yet to be completed and the pandemic makes forecasting extremely difficult, assuming a smooth transition of AWE at the end of June 2021, we would expect both group underlying trading profit and profit after tax in 2021 to remain broadly in line with current consensus and at similar levels to our expectations for 2020, representing growth of around 35pc over 2019.
Liberum’s Joe Brent said the loss was “not a surprise”, adding:
The contact was initially to March 2022 but could be reviewed by the government at any point. It is not a total surprise that the contract is being terminated early as the contract was known to be problematic, with negative reports from the NAO earlier this year. "It is disappointing to see that in their early days the Department made the same mistakes, also experienced by others, as were made more than 30 years ago," the NAO said.
He warned, however, that it is still “material” for Serco, given AWE represented 28pc of the group’s free cash flow in 2019.
Spanish manufacturing PMI rises
Spain’s final manufacturing purchasing managers’ index came in at a reading of 52.5, ahead of the ‘flash’ estimate of 51.
That’s moderately ahead of the growth threshold of 50.
IHS Markit, which gathered the data, said:
Growth of the Spanish manufacturing economy gathered Source: IHS Markit. momentum during October, supported by a faster gain in output and a return to growth of new orders.
Purchasing activity also rose slightly, although lengthening lead times for the delivery of inputs led to the continued utilisation of existing inventories.
Employment was up, but only slightly as capacity remained in the main sufficiently high to keep on top of workloads. Confidence about the future picked up to its highest level in eight months.
GVC Holdings warns of £37m hit from closures
Ladbrokes-owner GVC Holdings has warned it could take a hit of up to £43m to its underlying profit (EBITDA) if its whole retail estate were forced to close.
The FTSE 100 group’s currently estimated hit, based on looming closures in England, and existing measures in Wales, Italy and Belgium, is £37m.
Citi’s Monique Pollard noted the figures do not not include the offsetting effect of a stronger online effect.
FCA lays out further proposals to support borrowers hit by Covid-19
Following the announcement of new restrictions, the Financial Conduct Authority has outlined further proposals to support consumer credit borrowers who are impacted by coronavirus.
Here are the key proposals:
- To support those financially affected by coronavirus, we will propose that consumer credit customers who have not yet had a payment deferral under our July guidance can request one. This could last for up to 6 months unless it is obviously not in the customer’s interests.
- Under our proposals borrowers who are currently benefitting from a first payment deferral under our July guidance would be able to apply for a second deferral.
- For high-cost short-term credit (such as payday loans), consumers would be able to apply for a payment deferral of one month if they haven’t already had one.
The regulator added:
We will work with trade bodies and lenders on how to implement these proposals as quickly as possible, and will make another announcement shortly.
In the meantime, consumer credit customers should not contact their lender just yet. Lenders will provide information soon on what this means for their customers and how to apply for this support if our proposals are confirmed.
Ocado upgrades guidance
Ocado had raised its guidance for full-year underlying profit (EBITDA) from £40m to £60m amid continued high demand.
The logistics and delivery group said trading across its recently-launched joint venture with Marks & Spencer had “remained strong through the fourth quarter”, adding:
Ocado continues to see high demand as consumers migrate to online grocery in record numbers. Sales are in line with the trends reported in the third quarter although growth rates reflect the seasonality of the quarter.
That may bode well ahead of M&S’s interim results, set for release on Tuesday.
ABF expects £375m loss of sales from lockdowns
Associated British Foods, owner of Primark, has warned it expects to lose £375m in sales as a result of lockdowns across large parts of Europe.
The FTSE 100 group – which is set to release full-year results tomorrow – said England’s newly-announced lockdown, if it forces non-essential retail stores to close, will mean 57pc of its total retail selling space will be shut as of Thursday. Around two-thirds of that total is in England.
Trading hours are also restricted in a number of other markets. Uncertainty about further temporary store closures in the short-term remains.
We are implementing the operational plans developed to manage the consequences of these closures and appropriate action will be taken to reduce operating costs. All orders placed with our suppliers will be honoured.
Ryanair drop to €200bn loss as passenger numbers collapse
Ryanair warned it is preparing for a “hugely challenging” winter as it swung to a €197m (£178m) pre-tax loss in the first half of the year.
My colleague Simon Foy reports:
Europe’s largest airline expects to post "record higher losses" in the second half as the reimposition of lockdown restrictions across the continent hammer winter demand.
The carrier slumped €197m into the red for the six months to September, compared to €1.15bn profit for the same period last year, after passenger numbers declined by 80pc to 17 million. Revenue tumbled by 78pc to €1.18bn.
The company expects to carry around 38m passengers in the current financial year, but added that this guidance “could be further revised downwards if EU governments continue to mismanage air travel and impose more uncoordinated travel restrictions or lockdowns this winter”.
After failing to enjoy much of a recovery during the summer because of travel restrictions, the industry faces months of pain as its moves into the loss-making winter season with Covid once again surging across Europe.
- Read more: Ryanair flies to €200m loss
Agenda: FTSE set to slide
Good morning. The FTSE 100 is set to slide ahead of the second national lockdown on Thursday.
Business chiefs have warned that just extending the furlough scheme for a month will not be enough to save many companies.
The CBI's annual conference is also set to start today but with a notable absentee: Boris Johnson.
5 things to start your day
1) Extra month of furlough ‘not enough’, business chiefs warn: Michael Gove admitted the furlough scheme could be prolonged, fuelling fears that retailers will miss out on vital pre-Christmas trading.
2) Testing delay ‘risks massive air jobs loss’, Heathrow boss warns: The Heathrow airport boss also warned that London risked being overtaken by Amsterdam and Frankfurt unless a testing regime was put in place.
3) TfL strikes £1.8bn bailout deal with Government: The agreement gives TfL enough funding to continue to operate until the end of March 2021.
4) Huawei's UK profits drop ahead of launch of 5G in the UK: Profits at Huawei’s UK business fell to £37.5m in 2019, down from £47.8m the previous year, ahead of a ban that will stop UK telecoms companies from using its 5G equipment.
5) Sunak urged to extend loan schemes to see off cash crunch: Currently there is set to be a month long gap between the end of the current scheme and any successor scheme implemented by the Treasury.
What happened overnight
Asian shares were mostly higher on Monday buoyed by further signs of recovery in China's manufacturing sector.
Japan's benchmark Nikkei 225 added 1.4pc to 23,303.42 in morning trading, while South Korea's Kospi gained nearly 0.9pc to 2,287.17. Australia's S&P/ASX 200 added 0.4pc to 5,952.40. Hong Kong's Hang Seng edged up 0.7pc to 24,277.75, while the Shanghai Composite inched down less than 0.1pc to 3,221.78.
Coming up today
Trading statement: Hiscox
Economics: Manufacturing PMI final reading (UK, Japan, China, Germany, France, Italy, Spain, eurozone, US)