The FTSE 100 has regained a bit of ground this morning: it is now down by about 0.1% at 6,933 points.
Across Europe things have brightened somewhat. The Dax in Germany is in positive territory, despite meagre industrial production data and signs of further movement restrictions ahead. France’s Cac 40 is also ticking along smoothly.
Shares in Jet2 have taken a bit of a tumble this morning. They are now down by 4.4% today, undoing some of the recent gains as investors have looked forward to travel restarting.
As Jet2’s chief executive noted today, there is a lot of uncertainty over what exactly will be allowed and when. Airlines prospects are essentially in the hands of ministers.
Even if flying is allowed, airlines are grumbling that the requirement to be properly tested (with more reliable polymerase chain reaction [PCR] tests) will make it too expensive for families to travel.
James Martin, the British Chambers of Commerce director of policy, gave the government’s plan a very qualified thumbs-up:
This framework provides some welcome clarity however much uncertainty remains around what countries will be on the green list come May 17th. The PCR tests required under the guidelines will also prove costly for many travellers, harming those businesses and supply chains who rely on international travel to trade. The government must redouble their efforts to provide further clarity on the green list as quickly as possible and ensure PCR test are affordable and accessible to all”.
On the broadcast rounds this morning Grant Shapps, the transport minister, said he would work with private companies to cut the costs of tests.
The tests are “too expensive”, Shapps said. However, action to cut the cost before 17 May would have to be brought in very quickly indeed.
Facebook has removed 16,000 groups that traded misleading or fake product reviews after the UK’s competition regulator intervened.
The Competition and Markets Authority (CMA) said it was the second time it had taken action against the US tech company, after it and eBay, the auction website, agreed in January 2020 to take action against fake reviews.
Andrea Coscelli, chief Executive of the CMA, said:
Never before has online shopping been so important. The pandemic has meant that more and more people are buying online, and millions of us read reviews to enable us to make informed choices when we shop around. That’s why fake and misleading reviews are so damaging – if people lose trust in online reviews, they are less able to shop around with confidence, and will miss out on the best deals. It also means that businesses playing by the rules miss out.
Facebook has a duty to do all it can to stop the trading of such content on its platforms. After we intervened again, the company made significant changes – but it is disappointing it has taken them over a year to fix these issues.
More info on the statement by Jet2’s chief executive, Steve Heapy, via Sky News.
He said the Leeds-headquartered airline, which focuses on serving British holidaymakers with flights to the likes of Alicante, Mallorca and Tenerife, had suspended flights up to 23 June “because of the continued uncertainty that the framework provides”.
He was referring to the UK government’s plans to reopen travel, with confirmation of destinations not expected until early May before a restart on 17 May at the earliest.
Jet2 will automatically cancel and refund affected passengers.
After several weeks exploring how to restart international travel, with substantial assistance and input from the industry, the framework lacks any rigorous detail about how to get international travel going again. In fact, the framework is virtually the same as six months ago.
Following the publication of the framework today, we still do not know when we can start to fly, where we can fly to and the availability and cost of testing. Rather than answering questions, the framework leaves everyone asking more.
Jet2 to suspend all flights and holidays up to 23 June
Jet2 will suspend all of its flights and holidays up to and including 23 June due to uncertainty over the the UK government’s travel proposals, its chief executive has said, according to Reuters.
Jet2 chief executive Steve Heapy said in a statement on Friday:
We are trying to run a business so that we can take customers away, but we need the government to provide us with clarity to achieve this.
The UK government has said it will give more clarity at the start of May over whether holidays to certain destinations will be allowed.
You can read about the government’s “traffic light” plans here:
Mike Ashley’s Frasers expects another £100m hit from pandemic
Frasers Group, which includes Sports Direct, House of Fraser and Flannels, has doubled the hit it expects to take from the coronavirus pandemic to £200m in the expectation that a third wave will lead to more restrictions on retailers.
The retail chain, controlled by the Sports Direct founder, Mike Ashley, had estimated in February that the impact of the Covid-19 crisis would lead to a £100m non-cash writedown in the value of its properties and other assets.
“Further restrictions are in our view almost certain,” it said on Friday.
You can read the full story here:
Approaching mid-morning in London the FTSE 100 has lost more momentum: it is now down by 0.3%.
The biggest faller is Glencore, the mining company, down by 2.4%.
Germany’s Dax has dropped 0.2%, after falling industrial production took economists by surprise. However, France’s Cac 40 has edged up by 0.1%.
It remains to be seen if the March price jump was just a result of a rush to get in before the stamp duty cut deadline, but signs that the boom might be fading have disappeared.
Jonathan Hopper, chief executive of Garrington Property Finders, said that “many estate agents are now talking of a boom rather than a bounceback”.
He said the chancellor’s extension of the stamp duty holiday has given a boost to people who were already planning to buy – but adds that in some parts of the country the rapid pace of price growth has already wiped out the advantage of the tax cut. That is a well known phenomenon for stamp duty cuts.
On 19 April the market will receive yet another helping hand in the form of a new mortgage guarantee scheme.
Record prices do raise the question of whether the government really needs to be intervening so actively to sustain prices – even before the consideration of house purchases being out of reach for many.
Guy Harrington, chief executive of residential lender Glenhawk, said:
The continuation of government support measures has only added unnecessary fuel to the fire in stimulating house price growth, regardless of the deep and lengthy recessionary environment that still looms large.
Given that it is unlikely the government will do a U-turn on any of its support policies, the housing market will continue its untenable boom until autumn. How long this will endure once the job support scheme, stamp duty holiday and other stimulus measures end is anyone’s guess.”
There are a lot of things lining up to suggest that house prices will be sustained at or near record highs for a while yet.
Yet it is astonishing that a year after an enormous global economic shock, the average price of the most expensive asset most people buy has risen by 6.5%.
Is it really true that the housing market can emerge essentially unscathed from a recession of this magnitude? Russell Galley from Halifax appears to think not, in the longer term at least:
Overall we expect elevated levels of activity to be maintained in the coming months, with consumer confidence spurred on by the successful vaccine rollout, and buyer demand still fuelled by a desire for larger properties and more outdoor space, as work-life priorities have shifted during the pandemic. A shortage of homes for sale will also support prices in the short term, as lower availability always favours sellers.
However, with the economy yet to feel the full effect of its biggest recession in more than 300 years, we remain cautious about the longer-term outlook. Given current levels of uncertainty and the potential for higher unemployment, we still expect house price growth to slow somewhat by the end of this year.
UK house prices at new record to mark year since first lockdown
The UK average house price hit a new record high in March – a year on from the start of pandemic lockdowns.
The average price hit £254,606, according to Halifax, which tracks the prices of house on which it offers mortgages.
House prices gained 1.1% in March compared to February. March was initially set to be the final month of a stamp duty holiday, before it was extended by chancellor Rishi Sunak.
It means that prices are 6.5% higher than they were in March 2020 – when the extent of the pandemic’s effect on the UK economy was only starting to become clear.
March was the first house price rise since November, said Russell Galley, Halifax’s managing director. He said:
Following a relatively subdued start to the year, the housing market enjoyed something of a resurgence during March.
Casting our minds back 12 months, few could have predicted quite how well the housing market would ride out the impact of the pandemic so far, let alone post growth of more than £1,000 per month on average.
The continuation of government support measures has been key in boosting confidence in the housing market. The extended stamp duty holiday has put another spring in the step of home movers, whilst for those saving hard to buy their first home, the new mortgage guarantee scheme provides an alternative route onto the property ladder.
It looks like economic data out of Germany this morning may be contributing to the glummer mood that appears to have taken hold of European equity markets: industrial production unexpectedly fell in February.
Production fell by 1.6% in February, against economists’ expectations of a gain of about that amount. German production is down by about 6.4% over the year, according to Germany’s federal statistics office.
Carsten Brzeski, global head of macro at ING, an investment bank, said:
February industrial data makes it hard to see how the economy could still escape a contraction in the first quarter.
It would need an explosion of manufacturing and construction activity in March to prevent the German economy from falling into contraction in the first quarter of the year.
The drop in industrial production is somewhat surprising, given strong orders and confidence indicators. Besides some possible and temporary supply chain disruptions, the only other explanation for the disappointing performance can be the harsh winter weather in February.
Sanjeev Gupta criticises bank ‘endangering thousands of jobs’
The Liberty Steel owner Sanjeev Gupta has criticised creditors pushing to wind up his business, saying they are risking “tens of thousands” of jobs with “dangerous and cavalier behaviour”.
Gupta’s GFG Alliance, the parent company of Liberty Steel, is being pursued in court in the UK and Australia by Credit Suisse. Credit Suisse is trying to recoup money from the collapsed Greensill Capital, the financial firm that extended as much as $5bn (£3.6bn) in loans to GFG.
Although Credit Suisse was not named in the article, Gupta said he was prepared to defend claims against his businesses in court if necessary.
I am concerned that short-term, aggressive tactics by some of Greensill’s creditors are threatening tens of thousands of long-term jobs here in the UK and elsewhere.
These creditors are at risk of destroying their own chance of recouping value by taking these knee-jerk actions. They undermine profitable businesses and ultimately put at risk thousands of skilled, industrial jobs in communities with limited alternative employment opportunities.
GFG’s collection of steel, aluminium and energy businesses employ 35,000 people worldwide, with 5,000 in the UK – about 3,000 of which are in Liberty Steel.
Gupta said the business’s greatest challenges were in the UK because of its reliance on the aerospace and automotive markets, where demand has fallen during the pandemic.
He also pledged to overhaul the way his businesses are financed. Gupta has been scrambling to find new lenders since Greensill collapsed, but has so far not secured any backing.
Credit Suisse declined to comment.
The FTSE 100 has dipped at the opening bell. It’s down by about 0.1% in the opening few minutes – futures trades in the hour before the open had pointed to gains.
The broad Stoxx 600 index has gained 0.1% across Europe’s biggest companies, while the even more exclusive Stoxx 50 is flat.
France’s Cac 40 is up by 0.1%, while Germany’s Dax has dipped by 0.1%.
Introduction: Stock markets in Goldilocks mood
Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.
Stock markets around the world have continued their push into uncharted territory in the wake of the coronavirus pandemic shock. The MSCI World index, the US benchmark S&P 500 and the large-cap European index, the Stoxx 600, all hit record highs on Thursday.
European stock markets are (for the most part) expected to follow up this morning, albeit with gentle gains.
The Federal Reserve’s loose stance on monetary policy, the pace of vaccine rollouts and hopes for a spending blowout from consumers with big savings are all helping. Concerns about variants of the coronavirus do not appear to be getting much of a look-in.
Deutsche Bank analysts led by Henry Allen and Jim Reid said:
It was yet another buoyant day for financial markets yesterday as remarks from Fed Chair Powell helped to sustain the ongoing strength in risk assets, whilst also putting downward pressure on Treasury yields. Although Powell’s comments stuck to his dovish messaging of late, they offered fresh reassurance to investors who’d begun to price in earlier rate increases on the back of some very strong economic data in recent weeks, not least with last week’s jobs report.
There’s more feeling of what JP Morgan boss Jamie Dimon described as a Goldilocks economy (comments that just beg for bear metaphors to counteract them). Ian Williams, an analyst at Peel Hunt, a stockbroker, said:
Equity markets remain in a sweet spot: greater confidence in post-pandemic growth prospects supports risk appetite; while central banks remain dovish, and bond yields have yet to reach a level that provides relative valuation competition.
Looking ahead for today, in the UK the travel industry is eagerly awaiting the government’s new plan to allow holidays abroad this summer. Airlines have been hammering home their desire to get Britons flying again soon, and their complaint that mandatory testing for travellers will price families out.
- 8:30am BST: UK Halifax house price index (March; previous: 5.2% growth)
- 9am BST: Expected release of UK travel plans
- 12pm BST: Bank of England quarterly bulletin