Wall Street tracks Europe's climb as Biden edges closer to victory

Biden Trump stocks

Wrap up

US markets are set to close soon, still looking on track for gains in light of an expected Joe Biden (slim) victory.

To lead you into the evening, here are some of our top stories of the day:

 

Have a good evening, and thanks for joining!

A bleak winter

A third of UK hotels and restaurants fear they will collapse over a 'tough winter'. 

A second lockdown risks pushing many such firms over the edge with 32pc in the accommodation and food services industry having no or low confidence in surviving the next three months, according to the Office for National Statistics, my colleague Tom Rees reports.

Fed meeting: little changed

The Federal Reserve two-day meeting was relatively uneventful. It did not announce any new measures, but restated its pledge to use all its tools to help the US economy recover from the coronavirus pandemic.

"The path of the economy will depend significantly on the course of the virus," the policy-setting Federal Open Market Committee said in a statement."The ongoing public health crisis will continue to weigh on economic activity, employment and inflation in the near term, and poses considerable risks to the economic outlook over the medium term."

Economists are increasingly worried that a tentative recovery from pandemic-induced business lockdowns will falter without additional help, as infections in the US spike.

Fed Chair Jerome Powell has urged lawmakers to approve further aid after the $2.2 trillion package passed in March.

The US dollar index was little changed at 92.73 after the Fed meeting statement. 

“It was always unlikely that the Fed would announce any major policy changes in the midst of the election, and that is the case. Rates remain unchanged, as does the bond buying programme and forward guidance," said Neil Birrell, CIO at asset manager Premier Miton.
"The comments centre on the risks to the economy, which are obviously COVID related and are therefore on the downside. Eyes back on the election now and what happens in the next few days and weeks.”

RSA soars on takeover

Shares of one of Britain's oldest insurers, RSA, leapt after it received a £7.1bn takeover offer by Canadian and Scandinavian insurers.

My colleague Michael O'Dwyer reports:

The personal and commercial insurer said it had received a proposal about a potential 685p cash offer and that its board was minded to recommend the proposal, sending its share price rocketing 45.8pc. The FTSE 100 firm said it had been approached by Intact Financial Corporation, a Canadian property and casualty insurer, and Tryg, a Danish insurer. 

US rises in early afternoon

America's main three US indices are extending this week's rallies in early afternoon trading in New York.

All are up around 2pc.

The benchmark S&P500 and the Nasdaq Composite - up 2.1pc to 3,515.61, and 2.3pc to 11,862.24, respectively - are back to levels seen in early October.

BA suspends Gatwick flights

British Airways is suspending all flights from Gatwick airport this month, in light of a second UK lockdown.

The airline plans to reduce operations and place “many more” staff on furlough following a ban on non-essential travel until at least Dec 2.

BA called the restrictions on movement a “blow to our hopes for the winter season”, in a letter to staff seen by Sky News.  

Owner IAG rose 1.1pc in trading on Thursday, before the news broke.

Election pizza galore

Nasdaq-listed pizza giant Papa John International said orders spiked on Tuesday and Wednesday nights as the US election unfolded.

"It was a huge night for us," said CEO Rob Lynch, in an interview with Bloomberg.

Normally, pizza delivery sales return to relatively normal the day after an election, but this year a heightened demand pushed into Wednesday as vote counting trickled in.

 The chain reported third-quarter profits that surpassed analysts' expectations. It had its fifth straight quarter of same-store sales growth as the coronavirus boosts demand for takeout and delivery.

“Let’s just say that as long as the election keeps going, we’re hoping that people keep eating pizza,” said Lynch. “But hopefully that will come to an end sooner as opposed to later.”

Its stock boosted 6pc to $80.75 by around midday in New York.

Confident for Christmas

Brace yourselves.

In an early evening press conference, Boris Johnson said he is "confident" Christmas will be able to happen as normal... if the UK obeys the new lockdown.

Europe round up

Another day, another sea of green for Europe. This week has been a straight rally (albeit more muted today).

  • London's FTSE 100: up 0.4pc to 5,906.18
  • Frankfurt's DAX: up 2pc to 12,568.09
  • Paris' Cac 40: up 1.2pc to 4,983.99

Over to the analysts...

David Madden, Market Analyst at CMC Markets UK:

"It has been another bullish day for European stocks even though the political picture still isn’t very clear in the US. A Biden win seems like the most probably outcome, but despite the absence of clarity, equity traders are happy to snap up stocks".
"Political uncertainty and a rally in equities do not normally go together but some people are taking the view that Mr Biden might not be able to do a whole lot should he trump the Donald in the race to the White House, as the Senate will probably remain under Republican control."

Luca Paolinichief strategist at Pictet Asset Management:

“Political gridlock in the US is not as bad for financial markets as it seems”"The Democrats may have retained control of House of Representatives but look to have failed in their bid to secure a majority in the Senate.
"[This] and the belief that President Donald Trump will struggle to mount a credible legal challenge to the vote, inform our investment thinking.“Biden’s thin winning margin – of around 2 per cent of the popular vote - and the Republicans’ strong showing translate into what we think is a very weak mandate for a leftward shift in economic policy.

Bulls keep rearing 

US-Mexico trade deal

Mexico has agreed to monitor specialised steel exports to the US, as Washington takes action on such imports - used in electrical transformers - from third countries, reported AFP.

High tariffs have been placed on steel and aluminium imports under president Trump, who cited national security concerns, to protect US producers. Trade officials have been trying to prevent lower priced products made in countries like China from entering the US via third countries.

"From the fourth quarter of 2020 onward, Mexico will closely monitor shipments of these products to the United States," the US Trade Representative said in a statement.

Mexico said it would "establish a strict monitoring regime" by the end of 2020, for exports of electrical transformer parts made with a steel-silicon product called grain-oriented electrical steel (GOES), produced outside of North America.

In exchange, Washington's "imports from Mexico will not be subject to any action," the statement said.

Under the US-Mexico-Canada Agreement (USMCA), which came into force in July, goods and services enjoy duty-free treatment. Washington lifted steel and aluminum tariffs on its neighbors in May 2019 in exchange for aggressive monitoring to prevent a surge in imports like GOES.

"The resilience of North America's energy infrastructure is significantly enhanced by having electrical steel production capability within our region," US Trade Representative Robert Lighthizer said in a statement."An influx of low-price steel from third countries imperils this capability."

Paris shuts down (more)

From Friday, Paris will ban delivery and takeaway services - for prepared food and alcohol - between 10pm and 6am. Police said takeaways and deliveries are making people congregate.

Sales and consumption of alcohol in public spaces will also be banned at night.

The rules add to Mr Macron's lockdown last month, forcing non-essential shops to close and making people have signed documents allowing them to be outside.

A week in: France is still posting over 40,000 new virus infections per day and intensive care units are under stress with over 4,000 ICU beds occupied by coronavirus patients.

Eurotunnel freight bounces back

The number of lorries travelling under the English Channel returned to pre-pandemic levels during October. 

More than 140,000 truck shuttles ran through the Eurotunnel, just 7pc lower than last year, flattered by Brexit stockpiling.

Elsewhere in transport, ticketing app Trainline's stock has shot up despite poor results. Shares, however, still remain below IPO levels...

IMF x World Bank meeting postponed

The International Monetary Fund and World Bank have postponed their annual meetings, due to take place next October in Morocco, by a year until 2022 due to the pandemic. Last month’s was held virtually.

Traditionally, they hold annual meetings in Washington in two of every three years, with the third in another location. The last one outside Washington was in Bali, October 2018.

The gatherings draw thousands of delegates, watchers and journalists from over 180 member countries.

Similarly, the World Economic Forum last month said its 2021 annual meeting will be moved to Lucerne-Buergenstock, Switzerland, in May. Organisers had postponed the usual January gathering in the ski resort of Davos.

Handover

It’s time for me to hand over to my colleague Louise Moon, who will steer the blog onwards. Thanks for following along so far today!

Georgia updates loom as Arizona hangs in balance

Latest election updates:

  • Georgia election officials are apparently set to hold a press conference shortly. The state’s latest update said said 50,000 votes were left to count, with Donald Trump holding a rapidly-eroding 18,000 vote lead.
  • In Arizona, officials say they have 450,000 ballots left to count. Joe Biden is holding a narrow lead, but Mr Trump has been catching up slowly today.

Wall Street rises

As expected, US markets have opened strongly, extending yesterday’s gains. 

Credit: Bloomberg TV

 VTB’s Neil MacKinnon said:

The Biden reflation trade is still in play as far as equity investors are concerned (and the Fed will always be there for market support), and sectors such as healthcare have performed well. However, policy gridlock in the new Congress could temper the shape and scale of any new fiscal package. 

Volvo Trucks to start electric truck production to start next year

Volvo wants 35pc of the trucks it sells to be zero-emission vehicles by the end of this decade Credit: Patrik Olsson

Volvo will begin producing heavy-duty electric trucks from next year as it becomes one of the first mainstream manufacturers to successfully tackle environmentally friendly haulage.

My colleague Alan Tovey reports:

The Swedish company said it would begin volume production of the trucks, which have a range of 186 miles, with a view to delivering them in 2022.

The commercial vehicle company – which is a subsidiary of the car manufacturer of the same name – is seeking to cement its place in a market this being eyed by newer upstarts such as Tesla and Nikola.

Tesla boss Elon Musk has been hoping to launch his electric “Semi” truck since its unveiling in 2017, but its entry into service is slipping and not expected until next year.

Checking in with the Leader of the Free World

Donald Trump is not taking things well as his leads in Pennsylvania and Georgia are slowly eroded. 

The President has called for the vote to be stopped repeatedly, even though states are simply working their way through huge amounts of mail-in ballots, and there have been no reports of foul play.

Results are still trickling in, with Georgia likely to go down to the wire. According to CNN, only around 50,000 ballots have yet to be counted – and the Republican candidate’s lead is just 18,000. The state secretary Brad Raffensperger says the count should be completed no later than noon (5pm London time).

Wall Street set to rise at the open

It’s pretty close to the US open. Futures trading is pointing to more chunky gains on Wall Street, with the S&P 500 set to climb 1.7pc on expectations of a Democrat victory.

EasyJet pushes for German bailout

EasyJet, headed up by Johan Lundgren, is one of the biggest airline operators in Germany Credit: REUTERS/Fanny Brodersen

EasyJet has opened talks with the German government over a potential bailout. 

My colleague Oliver Gill reports:

The Luton-headquartered carrier, one of the biggest operators in Germany, is holding “constructive talks” with officials in Berlin, boss Johan Lundgren has revealed. 

Mr Lundgren told German magazine Wirtschaftswoche: "The talks are proceeding constructively.” 

The publication said discussions with German ministers were "apparently about several hundred millions of euros", though Mr Lundgren declined to specify exact figures. 

The discussions follow a plea from Mr Lundgren to the UK Government a month ago to provide financial support. 

US jobless claims edge lower

US initial jobless claims fell slightly last week, with 751,000 Americans filing for unemployment benefits.

That’s not much of a change, with the number have basically plateaued over recent weeks.

Continuing claims fell to 7.3m, from 7.8m. 

Dining out surged ahead of lockdown

Britons rushed to dine out in the final days before the second lockdown with took effect today, according to OpenTable data.

Seated covers were up more than 70pc year-on-year yesterday, having also risen the previous two days.

A trip down memory lane…

Torsten Bell from Resolution Foundation has tweeted out this breakdown of all the different job support proposals we’ve had during the pandemic:

Sunak furlough extension: Business groups react

As ever, we’ve had a slew of reaction from the big business groups and unions to the Chancellor’s latest support announcement. 

Adam Marshall from the British Chambers of Commerce says:

These changes give businesses significant reassurance over an uncertain winter, but many will understandably still wish for the government to give a clearer view of the road ahead.

Government must set out longer-term measures over the next 12 months to give firms greater certainty and confidence to plan proactively, rather than to react to changes in support from week to week.

TUC leader Frances O’Grady says:

Agreeing to extend the job retention scheme at 80% until the spring, as unions have called for, is a positive step.  But there are still gaps in the government’s support package.     

It’s not right to ask millions of low-paid workers on furlough to survive on less than the minimum wage. The Chancellor must fix the scheme so their pay is topped up to 100pc. And he must offer to help to those self-employed workers who are falling between the cracks. 

Jonathan Geldart from the Institute of Directors adds:

The increase in self-employment support is also welcome. However, while the Government has extended some measures, it is still failing to fix major gaps in the support. Many self-employed, including small company directors, continue to be left out in the cold. Grant funding through local authorities could help address this issue, otherwise those missing out will face a harsh Winter.

Dollar hits eight-month low as Biden hopes grow

The dollar has weakened to its lowest level since May 2018 as a victory for Joe Biden begins to look increasingly clear. The margin behind the candidates is absolutely tiny in several states, with the momentum favouring the Democrat as mail-in and absentee ballots roll in.

Follow further updates

As the Commons descends into its usual back-and-forth, you can follow the latest updates on our politics live blog:

Chancellor defends decision

This announcement marks a significant new spending commitment for the Government, although the Bank of England’s bumper QE injection gives the Treasury the green light for more borrowing.

Rishi Sunak has been trying to defend what is, clearly, another huge U-turn. His Winter Economic Plan has fallen apart, and he’s been forced to quickly backpedal to levels of job support last seen in the spring (the Chancellor says employer contributions will be reviewed in January).

Shadow chancellor Anneliese Dodds is dragging Mr Sunak over the coals, saying the Government’s prevarications on both support and lockdown measures – this is the Chancellor’s fourth statement in six months – will have cost jobs and forced some businesses into closure.

Job retention bonus paused

The Chancellor says that because the furlough extension effectively nullifies the need for the job retention bonus (since companies can just keep staff on and have the Government cover 80pc of their wages). A different incentive scheme will follow further down the line.

Self-employed to receive 80pc of average profits for November–Jan

Further support for the self-employed has also been announced: 

Furlough extended to end of March

The Chancellor says the furlough scheme will be extended to the end of March. It will pay 80pc of wages, which will be covered entirely by the Government, Employers will pay only pension contributions and National Insurance. It will apply in all countries and regions of the UK.

Sunak addresses Commons

After a false start, the Chancellor is now beginning his speech: 

Full report: AstraZeneca sales rise on treatment approvals

My colleague Simon Foy has a full report on AstraZeneca’s results this morning. He writes:

Product sales came in at $6.52bn, ahead of its previous estimate of $6.5bn, and the FTSE 100's second most valuable company was boosted by two of its main drugs – cancer treatment Lynparza and diabetes drug Forxiga – receiving approval for wider use in Europe.

Astra has been at the forefront of efforts to develop a Covid-19 vaccine and the company echoed comments from its partners at Oxford University that it plans to publish data from its late-stage vaccine study by the end of the year. 

Sunak statement coming up

Edit: The Chancellor is set to give his statement shortly – the Treasury had shared a live video stream, but has since deleted its tweet.

Car sales worst in nearly 40 years

Sales of new cars fell to a nine-year low in October with the Welsh “fire break” that closed dealers accounting for half of the decline.

My colleague Alan Tovey reports:

Registrations of new cars during the month slipped by 1.6pc to 140,945, taking the year-to-date total to 1.384m - down almost a third.

Poor sales figures drove the Society of Motor Manufacturers and Traders (SMMT) to issue a grim forecast for the full year.

It now expects 2020 to be worst performance by the British car industry in almost 40 years, with sales at a low not seen since 1982.

BBC’s Eardley: Sunak set to extend furlough until March

The BBC political correspondent tweets: 

Lloyd’s of London reveals plans to cut £800m in costs

A woman takes an elevator at the Lloyds of London building in the Square Mile Credit: Dan Kitwood/Getty Images

Lloyd’s of London has announced plans to cut £800m in operating costs for brokers, underwriters and business partners after part of a second-phase restructuring effort.

The insurance market’s ‘Blueprint Two’ plans are part of efforts to build “most advanced insurance marketplace in the world, the group said.

It will aim to achieve:

  • Approved and clear data standards that will support the next generation of placement platforms and solutions at Lloyd’s.
  • A new Lloyd’s marketplace gateway and super-fast processing capability that will allow cover to be evidenced and issued in minutes and simultaneously create technical accounting records.
  • Automated claims recognition, routing and orchestration that will facilitate faster claims payments.

There is no mention of job cuts or further details on how costs will be cut.

Bruce Carnegie-Brown, Lloyd’s chairman, said:

The pandemic has demonstrated that Lloyd’s can adapt in a fast-changing environment and this has only increased our hunger to get on and make further change happen. As a market, we have the appetite and energy to execute on our plans for the future and in doing so, we have the makings of real, transformational change. Blueprint Two is our roadmap to get there and I’m confident that together we can make it happen.

Labour’s Dodds: Businesses need ‘proper’ plan

 The Shadow Chancellor tweets:

As my colleague Harry Yorke reported last night:

Rishi Sunak is expected to confirm that furloughed workers will receive 80 per cent of their wages so long as their businesses are mandated to shut, after Boris Johnson told MPs they would not lose out after the second lockdown ends.

Mr Sunak is also likely to announce that Scotland, Wales and Northern Ireland will have access to the furlough scheme should they follow England in imposing new national restrictions. 

Market moves

European equities have gradually extended their gains this morning, with the FTSE 100 slightly lagging amid pressure from a strong pound.

Greece enters national lockdown

Greece has entered a three-week national lockdown in an attempt to contain the spread of Covid-19 in the country.

Reuters reports:

Prime Minister Kyriakos Mitsotakis said the new restrictions will come into effect on Saturday, November 7.

“I've chosen to take drastic measures sooner rather than later,” Mitsotakis said.

The country has reported fewer cases than most in Europe mainly due to an early nationwide lockdown that it imposed when the pandemic broke out in February. It started unwinding restrictions in May.

EU expects UK economy to stall next year in no-deal scenario

The European Commission has cut its forecast for UK growth in 2021 by nearly half, in its first economic outlook to assume negotiations for a post-Brexit trade deal will not end in success.

Bloomberg reports:

The projections see the economy growing 3.3%, down from 6% projected earlier this year. GDP will plunge by more than 10% this year, one of the worst performances expected in Europe, the commission said.

“The technical assumption of unchanged trading relations that has been used in previous forecast rounds is no longer appropriate,” the European Union’s executive arm said on Thursday. “The possible conclusion of an agreement on a partnership, including a Free Trade Agreement, would improve the outlook compared to the baseline.”

The projections for the UK have deteriorated compared the commission’s summer forecast and are significantly worse than those for the EU and the euro area, where the 2020 recession is projected to be shallower than previously predicted. The bloc’s recovery next year is also expected to be stronger than Britain’s.
Credit: European Commission
  •  You can read the EC’s full forecasts here

Eurozone retail sales fell 2pc in September

Retail sales across the Eurozone fell 2pc in September, slightly more than the 1.5pc drop expected by economists.

The gauge is one of the few to have experienced a truly ‘V-shaped’ recovery, as consumer demand soared post-lockdowns. 

September’s disappointing figures are unlikely to cause too much stir given they are such a lagging indicator– investors are more likely to focus on the very real and present disruption current being experienced.

ONS releases latest Covid-19 economic impact assessment

The Office for National Statistics has released the results from its latest surveys of the economic impact of Covid-19. Here are the key figures and time series:

Jobs cuts continue as construction pick-up slows 

A builder works on scaffolding during July Credit: Anthony Devlin/Bloomberg

Britain’s construction sector experienced the weakest rise in output since the start of summer during October.

IHS Markit’s construction purchasing managers’ index fell to 53.1 from September’s 56.8 reading – still clearing the no-change mark at 50, but indicating a slower pace of expansion.

 IHS Markit, which gathered the data, said:

House building was by far the best-performing area of construction activity in October (index at 62.4) and the speed of recovery eased only slightly since September. Survey respondents often commented on pent up demand and a boost from improving housing market conditions in recent months.
Higher levels of overall construction work also reflected another rise in commercial activity (index at 52.1), although the latest expansion was the weakest for five months. Meanwhile, civil engineering activity (index at 36.4) dropped for the third month running and the rate of decline accelerated to its fastest since May. 
Credit: IHS Markit

 Here are some of the key findings:

  • October data indicated a robust increase in new work received by construction companies
  • Higher levels of new business were mostly attributed to the start of projects that had been delayed earlier in the pandemic
  • The rebound in construction activity after the shutdowns seen during the initial lockdown period continued to put pressure on supply chain capacity
  • Construction firms often noted that demand for building materials had outstripped supply
  • Efforts to reduce overheads and ongoing economic uncertainty contributed to a further decline in staffing numbers across the construction sector

Duncan Brock from the Chartered Institute of Procurement & Supply, which helped gather the data, said:

The largest blot on the landscape was the number of redundancies and job shedding reported by construction firms, though builders remained relatively cheerful about the next 12 months. The strength of the pipeline of new work especially from a robust housing market means the sector is moving in the right direction and hopeful of getting through the winter unscathed.

Here’s a reminder of how the finalised manufacturing, services and composite readings looked:

Corporate round-up

It’s a big day for corporate reporting. Here are some of the day’s top stories (we’ve already mentioned Sainsbury’s):

  • AstraZeneca beat revenue forecasts but fell short on profit as the pandemic introduced inflated costs and led some people to hold off seeking treatment. Sales rose 3pc to $6.6bn during the third quarter, while profit before tax came in at $805m. That produced earnings per share of $0.94, just short of the $1 expected by analysts.
  •  RSA Insurance reported a continued rise in underwriting profits, while revising down its estimate of the total costs related to Covid-19 claims. Chief executive Stephen Hester said: “The outlook for continued underwriting improvements remains positive.”
  •  Asos, the online retailer, announced the appointment of José Antonio Ramos Calamonte as its new chief commercial officer. He is taking up a new position at the group, which it said is designed to ensure it “has the strategic capability required for the next stage of growth”. 
  •  Hikma Pharmaceuticals has raised its estimate for full-year generics revenue to $720m to $740m, from previous guidance for $710m to $730m. Chief executive Siggi Olafsson said the group was “maintaining the positive momentum of the first half”.

US election: How things stand

Here’s our map of the latest results in the US election, with everything coming down to a handful of key states: 

Although Arizona is blue here (having been called by the Associated Press last night), it’s worth repeating that there are whispers of a late Donald Trump comeback in the state. The chances look slim, but a victory for the Republican there could blow the race wide open again. Alaska can be ignored – it’s bound to stay Red.

Money round-up

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

BoE decision reaction: Unlikely to be the last boost

Ruth Gregory from Capital Economics says the Bank of England’s £150bn bond-buying expansion won’t be the last time Threadneedle Street expands its asset purchasing target. She writes:

[The] Bank’s GDP and inflation forecasts still look a bit too optimistic to us. Our view is that inflation will be closer to 1.5pc by the end of 2022. That’s why we believe the Bank will still have to increase its policy support.

Overall, we are sticking with our view that the MPC will shun negative interest rates for the next 6-12 months and instead expand QE by at least a further £100bn in 2021, more than the consensus expects. 

James Smith from ING adds the jury is still out on negative rates, writing:

Whether the policy materialises next year will, in part, depend on whether the economic outlook worsens relative to the Bank’s latest forecasts. In our opinion, this is probably likely. While the Bank’s projection for Q4 GDP (-2pc QoQ) is similar to our own, the forecasts assume that the economy will still recover its pandemic losses by the start of 2022, which we think is a little optimistic.

There is also a latent risk that the unemployment rate rises further than the Bank’s 7.7pc forecasts for the first quarter of next year, although this really depends on how/when government wage support is removed through 2021.

European markets rise

European markets have opened higher, marking a  fifth day of gains after the sharp drops most of last week.

Credit: Bloomberg TV

Sainsbury’s to cut up to 3,500 jobs

People queuing outside a Sainsbury’s earlier this year Credit: REUTERS/Lee Smith

Sainsbury’s said it will axe up to 3,500 jobs as it scraps its meat, fish and deli counters and closes 420 Argos stores as part of wider a restructuring of the business. 

My colleague Simon Foy reports:

The FTSE 100 company said it would not reopen 120 Argos outlets that have been closed since March as part of a strategy to accelerate the integration of its Argos stores into Sainsbury’s.

It plans to shut 420 standalone Argos branches over the next three and a half years, it said. 

Due to reduced customer demand, Sainsbury’s will also close its meat, fish and deli counters to make stores “simpler to run and reduce food waste”. Customer feedback during the pandemic suggested that shoppers are happy to buy these products from the aisle, it added.

It came as the grocer swung to a £137m pre-tax loss after incurring a £438m one-off hit associated with the Argos store closures and “other strategic and market changes”. Total sales for the six months to the September 19 fell 1.1pc to £14.93bn.

Full report: Bank of England injects another £150bn of QE

My colleagues Tim Wallace and Russell Lynch have a full report on this morning’s MPC decision. They write:

The Bank cut back its economic forecasts on the worsening pandemic.

It now thinks GDP will fall by 11pc in 2020, as the economy will shrink again in the final months of the year due to the new lockdown.

The Bank predicts a fall of 2pc in the final quarter, which is a significantly smaller than the falls of up to 12pc predicted by other economists.

But this will not become a full-blown double dip recession as output should start rising again in the opening months of 2021, avoiding the usual definition of a recession as two consecutive quarters of contraction.

MPC: Inflation should meet target in two years’ time

The Monetary Policy Report says inflation should return to the 2pc target within two years. As is conventional, Governor Andrew Bailey has formally written to Chancellor Rishi Sunak this morning, explaining why the target (its key monetary policy goal) has once again been missed.

The MPC said:

CPI inflation is expected to remain at, or just above, 0.5pc during most of the winter, before rising quite sharply towards the target as the effects of lower energy prices and VAT dissipate. In the central projection, conditioned on prevailing asset prices, inflation is projected to be 2pc in two years’ time. 

It added, however:

The outlook for the economy remains unusually uncertain. It depends on the evolution of the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the United Kingdom. It also depends on the responses of households, businesses and financial markets to these developments. 

Brexit note

It’s worth noting that the MPC takes Government policy as a given in its projections, which means they have all been produced with the assumption that the UK will “move immediately to a free trade agreement with the European Union” on January 1st. In reality, that is far from guaranteed, and in any case the PMC expects some disruption:

UK trade and GDP are also likely to be affected during an initial period of adjustment, over the first half of next year, as the United Kingdom leaves the Single Market and Customs Union

Pound rises after BoE decision

The pound has jumped against the dollar following the Bank of England’s announcement, which represents a strong injection of bond buying than economists had anticipated. 

No GDP recovery until early 2022

The MPC says that in its central projection for the UK economy, “GDP does not exceed its level in 2019 Q4 until 2022 Q1”.

The BoE says GDP is expected to drop 2pc in the fourth quarter of this year, a more narrow drop than expected by many economists. It added:

As in the summer, the fall in social spending is expected to be offset slightly by some substitution towards spending on other goods

Estimate round-up

Here’s the BoE’s round-up of its end-of-year forecasts for the UK economy, which include a prediction of negative interest rates beginning next year and ending in 2023, based on market pricing.

Credit: BoE
  • The full Monetary Policy Report can be read here 

Unemployment expected to peak at 7.75pc in second quarter of 2020

The MPC says it is likely slack in the UK labour market has increased more than indicated, adding:

The extended CJRS and new Job Support Scheme would mitigate significantly the impact of weaker economic activity on the labour market.

It projects that the unemployment rate will peak at around 7.75pc during the second quarter of 2020.

MPC: Economy will be shrink further on new lockdowns

The Monetary Policy Committee expects the UK economy to undergo another quarterly contraction for the October to December period, with November widely expected to be weak due to the renewed lockdown restrictions taking effect today.

Although that is a dreaded “double-dip”, the MPC’s expectation that activity will rise in the first three months of 2021 suggests a second technical recession is not looming. The committee said:

The recent rise in the number of Covid cases and associated social distancing measures were likely to weigh on activity in the near term, with GDP expected to fall in 2020 Q4 and to be at a level around 9pc lower in 2021 Q1 than in 2019 Q4. 

Read the announcement in full

  • You can read the Bank of England’s full decision announcement here
  • The MPC’s policy summary and minutes can be read here

Signs of slowdown to cause Q4 contraction, pickup expected in early 2021

Here are some key points from the Bank of England’s announcement:

  • Monetary Policy Committee members voted unanimously to boost its target stock of UK Government bonds by £150bn, taking its total to £895bn.
  • The MPC said: “There are signs that consumer spending has softened across a range of high-frequency indicators, while investment intentions have remained weak.”
  • It said UK GDP is likely to decline in the fourth quarter of 2020
  • It said household spending and GDP are expected to “pick up” in the first quarter of 2021, but said “he level of activity in the first quarter is expected to remain materially lower than in 2019 Q4”.
  • The MPC “stands ready to take whatever additional action is necessary to achieve its remit”

BoE boosts QE by £150bn

The Bank of England has raised its quantitative easing target to £895bn, a rise of £150bn. That beats expectations, and may put some upwards pressure on the pound.

The central bank, as expected, left rates unchanged: 

BoE decision coming up

Less than five minutes until the Bank of England’s latest decision on monetary policy. As a reminder, this decision had been set for noon, but was brought forward to avoid a clash with Rishi Sunak’s looming fiscal stimulus announcement.

The expectations is that Threadneedle Street will boost its bond-buying programme by £100bn to £845bn. The central bank has acted as a willing buyer for Government debt issuances, helping keep borrowing costs affordable as the Treasury spends big to combat coronavirus.

European markets set for moderate gains

There’s still just over an hour to go until the European open, but futures contract trading points toward moderate gains of about 0.2pc each for the continent’s top indices.

Markets rose strongly yesterday as a path to a Joe Biden victory became apparent, raising investors’ hopes of avoiding a protracted contest. It’s still not clear that we have avoided that outcome, however.

Biden on cusp of victory

Thanks James, and good morning everyone.If you’re just waking up in London, there’s been limited change overnight since Michigan was called for Joe Biden on Wednesday evening. The Democrat candidate needs just one more state to become the next President of the United States, with three key possibilities left:

  • Pennsylvania or Georgia: Trump is leading both states currently, but Joe Biden is catching up.
  • Arizona: The traditionally Republican state, which Fox News called for Mr Biden early yesterday, still shows a lead for the Democrat, but Donald Trump has been closing the gap over recent hours.

Outside of the US drama, it’s a pretty busy day for the UK.

As well as a big slate of companies set to report, the Bank of England will make its latest monetary policy decision at 7am. Analysts are expecting Threadneedle Street to announce another £100bn in asset purchases, but to hold rates steady.

Then, later on, we’ll get an announcement from Chancellor Rishi Sunak, who is expected to announce an extension of the furlough scheme beyond December.

Passing the baton

Putting the blog in the very capable hands of Louis Ashworth as London wakes up.

On the political front, there has been very little movement in the last few hours, and with Joe Biden now seen as strongly favoured to take the presidency, don't expect too many wild swings.

Thanks for following along.

US futures up again

Signs of a fourth consecutive gain for US stock markets. Futures trading in Asia shows another bump in the main US indices:

  • Dow: Up 0.56pc
  • S&P 500: Up 0.7pc
  • Nasdaq: Up 1.4pc

Tesla to install giant battery in Australia

Tesla's Megapack technology will be used to install one of the world's biggest lithium-ion batteries in the southeastern Australian city of Geelong in a deal with French energy company Neoen. The 300-megawatt battery is the second major Tesla power project in the country.

Here's Bloomberg with the report:

Installing the new system in Australia’s second-most populous state will help to modernize and stabilize the local grid, which is targeting 50pc of its power to come from renewable sources by 2030, Neoen said Thursday in a media release. The Paris-based company is targeting the battery to be operational by the end of 2021.
Battery storage technology is being deployed on an ever-growing scale to meet demand to back-up the surge in wind and solar power generation. About $951bn will be invested in the technology through 2050, with two-thirds deployed on utility-scale systems, according to BloombergNEF forecasts.
“The big battery will help protect our network in summer, create jobs and drive down energy prices, as well as supporting our recovery from the coronavirus pandemic,” Lily D’Ambrosio, Victoria state’s minister for energy, environment and climate change, said in a separate statement.

Dollar drops against Asian currencies on likelihood of Biden victory

The dollar has hit its weakest level against China's yuan in more than two years, and is down against other Asian currencies, as we inch closer to a result.

That's in part because Biden is likely to be less aggressive on trade tariffs than Donald Trump has been. Currencies of countries that faced stricter tariffs, such as the yuan and Mexican peso, are strengthening in turn.

However, the dollar has been climbing slightly against the pound on the prospect of further stimulus from the Bank of England. We're trading at just under $1.30 to the pound.

All eyes on the UK

For those of you up early or late in the UK, we're expecting a double header of news from the Treasury and Bank of England on Thursday morning as Britain heads into another lockdown.

Chancellor Rishi Sunak is expected to confirm that furloughed workers will get 80pc of their wages if their employers have to shut. The Bank of England, meanwhile, looks poised to pump an extra £100bn into the economy.

Here's the full story from Harry Yorke.

Asian markets trade higher

Here's how things are looking in Asia, where we're following the US markets up in early trading

  • Hang Seng: +1.9pc
  • Nikkei 225: +1pc
  • Shanghai Composite: +0.7pc

Best day after an election on record

Stock markets generally do not soar after a presidential election, but this is just another way in which the 2020 race has been like no other. Today's leap has been the best day following a presidential election on record.

At least, that's the case for the S&P 500 and Nasdaq. The Dow Jones, which closed up 1.3pc, failed to match the jump after the 1900 election, when William McKingley defeated William Jennings Bryan.

Tech companies lead the charge

Here's a closer look at those big technology stocks that have been among the biggest gainers today.

Two potential factors driving this. The first is that big tech has been a proven winner, both before and during the pandemic. With an unclear outcome, investors may see the companies as a safe bet.

The second is that the prospect of political gridlock in Washington will make it more difficult to pass new regulation against tech companies. A Democrat sweep would have been likely to mean new privacy and antitrust legislation, but a Republican controlled Senate means the status quo looks more likely.

No surprise, then, that the biggest winners today have been Amazon, Google and Facebook.

Results so far 

Welcome back

Good evening and welcome back to a second night of as the election results pan out. Joe Biden is edging closer to becoming America's 46th president.

European and US markets soared on Tuesday. Investors looked beyond earlier uncertainty after a “Blue wave” Democratic landslide victory failed to materialise. Traders were ultimately sanguine to any outcome as Joe Biden and Donald Trump battle it out.  

Big tech stocks – from FAANG stocks like Apple and Amazon to ride-hailers Uber and Lyft – helped drive up US markets.

We’re looking out for how Asia reacts as it wakes up to developments, and much more... 

5 things to start your evening 

1) Robocalls told 2.7m voters to ‘stay home’ on election day: Anonymous, cryptic calls telling people to “stay safe and stay home” were made to 2.7m voters in critical swing states on election day.

2) High street meltdown as M&S sinks and John Lewis cuts jobs: M&S plunged to its first pre-tax lost in 94 years and John Lewis axed another 1,500 jobs and experts warn of a near-£7bn plunge in sales.

3) First arrests for alleged fraud over Eat Out and Bounce Back loan schemes: Three men have been arrested over alleged fraud linked to the Government’s scheme intended to help hospitality firms hit by the pandemic.

4) FCA threatens to ditch EU's Mifid rules without full market accessThe watchdog threatened to ditch the EU’s financial rulebook, known as Mifid, if Brussels does not allow UK firms to retain full access to its markets. 

5) 1.5 million Hong Kong investors owed billions from Ant float: A tidal wave of Hong Kong and Shanghai retail investors piled into the record $37bn listing of payments business Ant, and now they're owed.

Coming up today

Corporate: AstraZeneca, Auto Trader, Aveva, Biffa, N Brown, Derwent London, Sainsbury (J), Tate & Lyle, Trainline (Interim results); DWF, Hikma Pharma, Howdens, Inchcape, Lancashire Holdings, RSA Insurance, Superdry, TheWorks.co.uk, TI Fluid Systems (Trading statements)

Economics: MPC decision, car regs, construction PMI (UK); retail sales (eurozone); factory orders (Germany); jobless claims, productivity, FOMC decision (US)