Rolling coverage of the latest economic and financial news, as shares fall sharply on Wall Street and bond prices rise
- Latest: Nasdaq and S&P 500 down sharply after dovish Powell
- Yields jump after Powell speaks
- US jobless claims rose last week
- UK car sales slump again in lockdown
- Introduction: Bond yield worries are back
- Deliveroo picks London for IPO
We are now closing the live blog for the day
Time for a quick recap.
Stocks have fallen sharply on Wall Street, led by tech shares, as investors continue to fret about rising government bond yields and the prospect of higher inflation.
An update on how stocks are doing this afternoon:
We want labor markets consistent with our assessment of maximum employment. That means all of the things.”
With such a dovish tone, Powell failed to alleviate fears that the central bank is reacting too slowly to the recent rise in inflation expectations and long-term Treasury yields.
The Fed chair suggested that although central bank officials were closely watching the market movements, it would take much more to perturb them.
#Stocks slide on rising Treasury note yields following latest comments from #fed chair Jerome Powell on financial market conditions #Dow -400 #Nasdaq -295 #sp500 -54 Yield on 10yr note 1.54% @KNX1070 @MottekOnMoney
Some of the most popular tech growth stocks are among the big fallers today.
Tesla, for example, is down 5.7% at $615, with ecommerce site Etsy has lost 6%.
Wall Street really isn’t happy.
The S&P 500 index is now down 1.4% or 53 points at 3,766, …. and the Nasdaq’s now over 2% today, and down 10% from its recent peak.
US Indices are struggling again today. The Nasdaq is now down 10% from the record highs of mid February, entering correction territory. The $VIX has risen to its highest level since last week’s bond market event.
RUT -2.68%$DIA $QQQ $SPY $IWM pic.twitter.com/VKbWrCcymL
*NASDAQ 100 FALLS 10% FROM LAST MONTH’S PEAK, NEARING CORRECTION pic.twitter.com/Mctd1Y58SR
Ya gotta love the market. Fed Chair Powell says #inflation will pick up as the economy picks up, so that send treasury yields spiking with the 10-yr back over 1.5%, sending stocks diving. I know future earnings are dinged by higher rates but talk about being trigger happy
1.53% 10-year now, highest this week. Stocks “buckling” coincident with this yield rise.
The most dovish Powell talks, the more the 10-year sells off.
This is exactly what you expect for a market is worried about inflation and a central bank that is not. pic.twitter.com/17oestUOYU
Deal of the day: Square, the mobile payments firm run by Jack Dorsey, Twitter co-founder, has acquired a majority stake in Jay-Z’s Tidal audio and video music streaming service in a $297m deal.
Under the terms of the deal, Tidal’s superstar co-owners, who include Beyoncé, Madonna and Rihanna, will retain their stakes and become the second-largest shareholders. Jay-Z will join Square’s board of directors.
“It comes down to a simple idea: finding new ways for artists to support their work. New ideas are found at intersections, and we believe there is a compelling one between music and the economy
I’m grateful for Jay’s vision, wisdom, and leadership. I knew TIDAL was something special as soon as I experienced it, and I’m inspired to work with him. He’ll now help lead our entire company, including Seller and the Cash App, as soon as the deal closes. https://t.co/YRfYjcWJQx pic.twitter.com/xBtq2xfwue
Tech stocks are taking another lurch lower, with the Nasdaq now down 236 points or around 1.8% at 12,761 points.
That’s despite Fed chair Powell sounding relaxed about inflation risks, and insisting that ‘persistent tightening’ in financial markets would be a concern.
Federal Reserve Chairman Jerome Powell warned Thursday that the central bank would not sit back and let the financial market conditions tighten.
“I would be concerned by disorderly conditions in markets or persistent tightening in financial conditions that threatens the achievement of our goals,” Powell said during a Wall Street Journal webinar.
Fed Chairman Powell sends the stock market a warning and a selloff ensues https://t.co/REJz76IXEj
So Powell goes all dovish and yields rise.
What happens if the Us 10-Year yield rises to 2%?
A test to the entire rhetoric of “take higher risk because central banks will solve it all” pic.twitter.com/gFBtjeIK3k
US government bond yields have moved higher, as Federal Reserve chair Jerome Powell discussed the economic outlook on a Wall Street Journal jobs summit.
Powell sounded pretty relaxed about the inflationary risks, saying that it was unlikely that deeply ingrained expectations of low inflation would change.
Fed Chair Powell, asked about bond market ruckus last week, says the central bank doesn’t want to see disorderly markets or “a persistent tightening in financial conditions” but otherwise isn’t concerned.
Fed chair Powell’s remarks that recent bond moves caught his attention, but that current Fed policy is appropriate suggests that Fed won’t take action (e.g., buy 10-yr treasuries) to bring long rates down. That’s what’s causing $tsla and other growth stocks to sell off again. pic.twitter.com/t50kLhUTkA
Opec’s decision not to increase oil supplies is quite surprise, says Fawad Razaqzada analyst at Think Markets.
So, let’s be honest – no one saw that coming. OPEC and its allies have reportedly agreed to keep output steady through April rather increase it by 500K barrels per day as was widely expected. Brent oil jumped nearly 6% and was holding near its highs as the final statements were being prepared ahead of a press conference.
Saudi Arabia, pulling the strings again, convinced fellow OPEC oil producers to “keep our powder dry” amid persistent uncertainty during this pandemic. Saudi’s oil minister Prince Abdulaziz bin Salman, acknowledged that the market had improved since January, but wanted to “urge caution and vigilance,” adding that “…before we take our next step forward, let us be certain that the glimmer we see ahead is not the headlight of an oncoming express train.”
With Brent crude pushing for $70/b on #OPEC rollover possibility a reminder of this #Infographic from @SPGlobalPlatts documenting Trump’s twitter diplomacy the last time oil was at these levels. #OOTT https://t.co/W91SMfkPX2 pic.twitter.com/it0HQE4QRN
The jump in the oil price has, predictably, drive up shares in BP and Royal Dutch Shell, by around 2.6% each.
And that’s lifted the FTSE 100 index off its earlier lows. It just closed 24 points lower at 6650, down 0.37%.
The oil price has jumped by 5%, amid reports that the Opec+ group could continue to restrict crude output.
Brent crude has surged by over $3 per barrel, to above $67, following a report that Saudi Arabia has offered to extend its voluntary output cuts by another month, into April.
Saudi Arabia is considering extending its voluntary oil cuts of 1 million barrels per day by one month into April, an OPEC+ source told Reuters on Thursday.
The source was speaking as OPEC+ ministers met to discuss output policy.
Markets didn’t see that coming. #Oil pops. Brent’s up 5.2% today after #OPEC+ decides not to increase production next month. #SaudiArabia will even extend its unilateral cuts of 1 million barrels a day, which were meant to finish at the end of this month. @BloombergNRG pic.twitter.com/lvQnuVptEZ
OPEC+ IS CLOSE TO KEEPING OUTPUT UNCHANGED IN APRIL – DELEGATES
The US factory data certainly looks decent:
The rebound in US factory orders continued in January: the 2.6% monthly gain lifted total orders further above the pre-pandemic level to the highest amount since Sep 2018: pic.twitter.com/EQI34ucJWx
Orders at US factories jumped at the start of 2021 – an encouraging signal for the economic recovery this year
Factory orders rose 2.6% in January, up from 1.6% in December, which is stronger than expected.
Factory Orders strong pic.twitter.com/NcS0jcQx9z
United States #Factory #Orders rose by 2.6% from 1.6% earlier in January 2021, the largest increase since last July and above market expectations of a 2.1% advance. #DGCX #FOREX #FUTURES pic.twitter.com/UpgbWkFgrG
That resilience didn’t last long…..
The Nasdaq’s now in the red, down 119 points or 0.9% to 12,877.90.
Nasdaq about 20 points away from going red for the year.@CNBC
Wall Street has opened a little higher after Wednesday’s fall, with tech stocks showing some resilience:
Despite the selloff in the high-growth tech stocks, market sentiment has held up pretty well.
We’re back in ‘neutral’ (52.0) territory from ‘greed’ (63.0) one week ago.
MSNBC points out that this is the 50th week in a row that total initial claims have been higher than the worst week of the Great Recession.
Vaccination programmes should help the economy recover, but in the meantime millions of households are struggling:
For now, the pain of joblessness drags on. One year after the pandemic began, some 10 million Americans remain without work and a further 7 million have abandoned their search for work.
This suggests it will take some time to re-employ all of these millions of Americans either unemployed or underemployed or have exited the workforce,” said Mark Hamrick, senior economic analyst at Bankrate.
JUST IN: Around 745,000 people filed for unemployment benefits for the first time last week; the 50th week in a row that initial claims have been higher than the worst week of the Great Recession. https://t.co/Z894Pf9LE8
Heidi Shierholz of the thinktank Economic Policy tweets:
Another 1.2 million people applied for UI last week, the last week of February. This included 745,000 who applied for regular state UI and 437,000 who applied for Pandemic Unemployment Assistance (PUA). 1/ https://t.co/tg071kRKs8
The 1.2 million who applied for UI last week was roughly the same as the prior week (an increase of 18,000). The four-week moving average of total initial claims was unchanged. 2/
Last week was the 50th straight week total initial claims were greater than the worst week of the Great Recession (GR). (If you restrict to regular state claims—b/c we didn’t have PUA in the GR—initial claims last week would have been the 6th worst week of the Great Recession.)3/
This chart shows continuing claims in all programs over time (the latest data for this are for Feb 13). Continuing claims are nearly 16 million above where they were a year ago. 4/ pic.twitter.com/pS0YXHGWRA
Oxford Economics’ Greg Daco flags up that the jump in jobless claims is partly due to a backlog in Texas due to last month’s winter storms (there was a big drop in claims a week ago….).
There were 54,170 new jobless claims in Texas, up from 36,401.
Initial #unemployment benefit claims revised ⬆️& rise slightly in w-e Feb27
745k (SA): +9k
748k (NSA): +32k
TX w/ more than 1/2 of total rise: winter storm backlog
Still very high 1.2 million *new* weekly jobless benefits claimants pic.twitter.com/VriyTGrUIr
More Americans filed new claims for unemployment benefit last week, as the Covid-19 pandemic continued to hit workers.
There were 748,078 new ‘initial claims’ for unemployment support last week, an increase of 31,519 (or 4.4 percent) from the previous week, the Labor Department reports.
Unemployment Insurance Weekly Claims
Initial claims were 745,000 for the week ending 2/27 (+9,000).
Insured unemployment was 4,295,000 for the week ending 2/20 (-124,000).https://t.co/ys7Eg5LKAW
LAYOFF WATCH: Initial jobless claims climb 9,000 to 745,000 at the end of February. An additional 436,696 new claims filed through emergency federal program. Claims still disappointingly high, but data has also been erratic lately. Treat cautiously.
UI claims rose modestly to 1.18 million last week (748K UI initial claims NSA + 437K PUA claims).
Here’s another reason why the rise in US government bond yields is hitting share prices…
European planemaker Airbus has welcomed the United States’ four-month suspension of its retaliatory tariffs against the UK over the aircraft subsidy dispute:
“We continue to support all such actions to create a level-playing field — and continue to support a negotiated settlement of this long-standing dispute in order to avoid the continuation of lose-lose tariffs.”
The boss of Diageo Ivan Menezes, the FTSE100 owner of 30 scotch whiskys including Johnnie Walker, Bell’s and Talisker, says ‘today is a very good day for Scotch and Scotland… will safeguard thousands of jobs’. pic.twitter.com/LhU8kBnjIR
Here’s our technology editor Alex Hern on the CMA’s investigation into Apple:
The iOS App Store is the only way to install apps onto iPhones, iPads and Apple Watches, meaning the terms Apple sets for developers have huge sway. Developers must pay 30% of their revenue to Apple if they sell digital goods through the App Store, for instance, and are largely banned from launching services which require a subscription to work, unless that subscription is made available through Apple’s payment processing service, which charges 15% or more to use.
The company argues that these practices are necessary to guarantee the apps that iPhone owners download are secure and safe.
London and Washington have agreed a temporary ceasefire in the trade spat over aircraft subsidies – in a boost to the Scotch whisky business.
The US is suspending retaliatory tariffs on UK products caught up in the longstanding dispute between America and Europe over government aid to Boeing and Airbus, for four months.
“I am delighted to say that our American allies – under their new President and his hard-working staff at the U.S. Trade Representative – have embraced our move to seek a fair settlement,”
The United States and Britain on Thursday agreed a four-month suspension of U.S. retaliatory tariffs imposed on goods such as Scotch whisky over a long-running aircraft subsidy row, saying they would use the time to resolve the dispute.
The U.S. administration under former president Donald Trump had imposed tariffs on an array of EU food, wine and spirits, including on Scotch whisky, which the industry says are putting its future at risk [nL8N2JP2T2]
UK WELCOMES SUSPENSION OF U.S. RETALIATORY TARIFFS, SAYS IT WILL PROTECT JOBS IN BRIATIN || UK AND US AGREE FOUR MONTH SUSPENSION OF TARIFFS RELATING TO BOEING AIRBUS DISPUTE – JOINT STATEMENT
UK SAYS SUSPENSION OF U.S. RETALIATORY TARIFFS WILL BENEFIT SCOTCH WHISKY INDUSTRY
Big breakthrough in US-UK trade dispute over Airbus/Boeing subsidies, which has led to a 25% retaliatory tariff on Scotch single malt and cashmere sweaters, as well as pork and cheese. Biden administration is suspending tariffs for 4 months, while seeking settlement…
NB: U.S. retaliatory tariffs on EU goods still remain in place.
Back in the markets, government bond prices have calmed a little today after Wednesday’s wobble.
The yield, or interest rate, on UK 10-year gilts has dipped back to 0.74%, while the US 10-year Treasury yield is stable around 1.46%.
“Investors can take some comfort from the fact European markets aren’t as weak as their counterparts in Asia and the US overnight.
“However, the mood was clearly cautious, with the increase in corporation tax announced by Rishi Sunak in his Budget likely contributing to the downbeat mood, albeit not coming into force for two years.
Britain’s competition regulator has launched an investigation into Apple, over whether the technology giant is breaking UK competition law.
Millions of us use apps every day to check the weather, play a game or order a takeaway. So, complaints that Apple is using its market position to set terms which are unfair or may restrict competition and choice – potentially causing customers to lose out when buying and using apps – warrant careful scrutiny.
Our ongoing examination into digital markets has already uncovered some worrying trends. We know that businesses, as well as consumers, may suffer real harm if anti-competitive practices by big tech go unchecked. That’s why we’re pressing on with setting up the new Digital Markets Unit and launching new investigations wherever we have grounds to do so.
We’re investigating complaints about Apple’s terms and conditions for third party developers on its App Store.
This is just the initial stage of our investigation and we have yet to reach any conclusions.
Our investigation will consider Apple’s market position, and whether it’s imposing unfair and anti-competitive terms on developers.
Find out more: https://t.co/fpUu3xVG2l
The IFS’s Paul Johnson also flags up the ‘fiscal drag’ impact of freezing personal tax allowances:
In 1990 1 in 15 taxpayers paid higher rate of income tax. By 2025 it will be 1 in 6. This is a very big change in the structure of income tax. The basic rate may have fallen but a lot of people are paying higher rates of income tax
Freezing things for a long time makes a big difference. Since 2010 there has been a doubling of the number of people, to almost 500,000, paying the additional 45% rate of income tax. That’s because it has kicked in at £150k for that whole period.
One of the UK’s leading thinktanks has criticised Rishi Sunak’s plans for an abrupt end to the £20 a week increase in universal credit, calling the decision not to phase out the uplift “remarkable.”
In its post-budget analysis, the Institute for Fiscal Studies contrasted the way in which the furlough, stamp duty holiday, the cut in VAT and business rates support were being phased out, with the cliff edge for universal credit (UC) in September.
“It is, by the way, remarkable that while the chancellor felt the need for a gradual phase out of furlough, business rates support, stamp duty reductions and VAT reductions he is still set on a cliff edge reduction in UC such that incomes of some of the poorest families will fall by over £80 between one month and the next. Whatever the case for cutting generosity into the longer term, if you’re going to do so the case for doing it gradually rather than all at once looks unanswerable.”
Analysis of Rishi Sunak’s budget is pouring in this morning, with warnings that household incomes face a painful squeeze.
My colleague Jasper Jolly explains:
The real earnings of UK workers will fall this year and remain stagnant after that even as the economy recovers from the coronavirus pandemic, according to analysis of the budget that suggests the government will oversee one of the worst periods for UK living standards on record.
Incomes will lag behind inflation during 2021-22 – meaning living standards will drop – and will only rise by an average of 0.3% annually over the course of the next four years, according to the Resolution Foundation, an independent thinktank.
The construction PMI report highlights that getting hold of supplies is a real challenge for businesses right now.
Global supply chains are still bruised by the pandemic, at a time when vaccine optimism is creating more demand for raw materials.
Strong demand for products added pressure to already impaired supply chains as sellers battled with raw material shortages, and the costs of business rose at the fastest rate since August 2008.
Though delivery times were still deteriorating as port disruptions made their mark, it was to a lesser degree compared to January suggesting the worst of the squeeze due to Brexit may have eased. Supply chain managers found themselves spinning a number of plates with creative ways to get stock including sourcing more local supply for some.
Stretched supply chains and sharply rising transport costs were the main areas of concern for construction companies in February. Reports of delivery delays remain more widespread than at any time in the 20 years prior to the pandemic, reflecting a mixture of strong global demand for raw materials and shortages of international shipping availability.
Subsequently, an imbalance of demand and supply contributed to the fastest increase in purchasing costs across the construction sector since August 2008.”
The UK construction sector has rebounded, with builders reporting a pick-up in commercial work last month — and rising cost pressures.
Data firm IHS Markit reports that construction companies experienced a solid return to growth in February, after a brief contraction in January.
Improving order books and early signs that the vaccine rollout will release pent up demand also led to the strongest degree of construction sector optimism for over five years.
UK construction activity rebounded in February, with the headline #PMI up to 53.3 (Jan: 49.2) supported by a rise in commercial work. However, cost burdens rose at the fastest rate in over 12 years. Read more: https://t.co/fyJ18xnXdy pic.twitter.com/xL7XbgRawP
Residential work remained the strongest area of growth in February, although the speed of recovery eased slightly since January. There were some reports citing temporary delays on site arising from adverse weather and supply chain issues (especially for timber).
After some grim months (including February), industry experts are hopeful the UK car sector may finally pick up soon:
Karen Johnson, Head of Retail & Wholesale at Barclays Corporate Banking, said:
“February is never the busiest month of the year for new car registrations, with buyers often holding out to ensure they can get their hands on the very latest number plates in March. Lockdown has only further exacerbated this trend in 2021, and so new registrations have clearly fallen versus last year.
“It’s not all doom and gloom for UK car dealerships though. The end of lockdown is in sight, and the planned reopening of non-essential retail will be a huge relief to many in the motor industry. The new registration plate launching in March will also further spur consumer purchases in the coming months, and as consumer confidence grows many will hope to see new car sales grow accordingly.”
“After two months of nationwide lockdown, sales of new cars have slowed significantly, but last week’s confirmation that the restrictions will soon be eased hints at the open road ahead.
“Crucially the Government’s roadmap out of lockdown has given dealers something to plan for. While their reopening dates are not set in stone, dealerships at least have the certainty they need to fine tune their sales strategies ahead of the market unlocking.
The SMMT has also cut its forecast for UK car sales this year, following February’s 35% tumble.
It now expects 1.83 million registrations in 2021 as “showroom closures continue to stall order books”.
While online orders and click and collect can provide a lifeline, showroom closures mean dealerships will find it significantly more challenging to fill order banks following £23 billion worth of fewer registrations since March 2020
The London stock market is in the red this morning, as those worries about rising government bond yields hit stocks.
The FTSE 100 index is down 50 points or 0.75% at 6625 points, wiping out most of the budget day rally (travel, hotel and pub chains and banks jumped as the furlough scheme, and the lower VAT rate for hospitality, were extended).
After steadying since the start of the week, it appears that we have returned to watching the bond yields climb as the US 10-year Treasury yields rose to 1.48% levels into the Wednesday US session.
In turn, this had invited the jitters back to the foreground as the likes of the Dow and the S&P 500 indices closed lower after commencing the session wobbling between gains and losses.
Deliveroo’s float should attract lots of interest, says Michael Hewson of CMC Markets:
In a welcome boost to the London IPO market, Deliveroo announced this morning that it plans to launch its upcoming IPO here. In the middle of last month, it was speculated that this could come as soon as next week.
With its finances only recently bolstered by $180m of new funding from its stakeholders of Fidelity and Durable Capital Partners in January, the company could fetch a valuation of up to £8bn. Deliveroo also has operations across 200 cities in Asia, as well as in Europe, and is likely to see plenty of interest given that the IPO of DoorDash in the US did fairly well with Deliveroo’s backers also having stakes in the DoorDash business, so they know the sector well.
Deliveroo has chosen London for its highly anticipated initial public offering after Rishi Sunak, the UK chancellor, endorsed an overhaul of listing rules to allow founders to retain more control after going public.
The multibillion-pound IPO is expected to be among London’s largest this year, handing the City a much-needed win over New York and Amsterdam at a time of feverish activity in new tech listings.
Until today, it was unclear whether the most hotly anticipated tech float of a UK company would be in the UK or on Wall Street.
Deliveroo’s float will follow those of tech companies Moonpig, The Hut Group and, in the pipeline, Trustpilot and Auction Technology Group.
Boom! London wins the Deliveroo $8bn float https://t.co/sH0x7aBclS
The [dual-class] share structure, which typically gives founders a greater say in shareholder votes, will provide Chief Executive Officer Will Shu with “stability” to execute long-term plans, the food-delivery company said in a statement on Thursday.
Deliveroo, which was founded in 2013 and provides online ordering and delivery services to restaurants and grocery stores, was valued at more than $7 billion in its latest funding round in January. The company and others like it have seen an explosion in orders in the last year as Covid-19 restrictions kept customers out of stores and restaurants.
Chancellor Rishi Sunak has welcomed Deliveroo’s decision to pick London, saying:
“The UK is one of the best places in the world to start, grow and list a business – and we’re determined to build on this reputation now we’ve left the EU.
“That’s why we are looking at reforms to encourage even more high growth, dynamic businesses to list in the UK.
Food delivery services Deliveroo has announced it has chosen London for its hotly anticipated stock market debut, in a boost to the City.
“After eight years of operations and rapid expansion around the globe, choosing London underlines Deliveroo’s commitment to making the United Kingdom its long-term home.”
Deliveroo said in a statement on Thursday morning that its dual-class structure would be “closely in line” with the Hill review’s recommendations and be limited to three years. However, the changes are unlikely to come into force before it has completed its IPO, with initial paperwork expected to be filed as soon as next week.
Companies with dual-class structures can already trade on the LSE’s standard listing. Once the new rules are in place, Deliveroo would be able to move up to a premium listing. A person close to the company said that the Hill review was also likely to attract more tech companies to London, making it more attractive as a listing venue overall.
Metal prices are also dropping today:
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Another bout of bond yield jitters are weighing on the markets today, just a day after chancellor Rishi Sunak’s budget highlighted that UK government borrowing is at a post-war high, with debt to its highest level in sixty years.
Global risk appetite was subdued, with equity markets moving lower, especially in the US. As we’ve been saying for a while now I suspect this huge liquidity and recovery story is going to repeatedly lock horns against the risk of higher inflation and higher yields in 2021. This year won’t be for the faint hearted.
By the close, US Treasuries had witnessed another big selloff, with 10yr yields up +8.9bps to 1.481%, marking the 3rd biggest daily increase we’ve seen so far this year, with the moves higher driven by increases in both real rates (+6.6bps) and inflation expectations (+2.5bps).
Bonds have become the main event for the stock market, and today was no exception. Stocks were were down substantially for a second straight day. The Nasdaq Composite fell 2.7%, giving the tech-heavy index a two-day decline of 4.3%. The S&P 500 was off 1.3%. #barronsonline
Headline debt peaks at 109.7% in 2023-24 but historically low interest rates make it relatively cheap to finance.