Closing summary

  • British pharma giant AstraZeneca announced it would now be able to supply more than two billion doses of its potential coronavirus vaccine, thanks to a string of manufacturing deals
  • The Bank of England published a list of the large companies who have borrowed government-backed loans through its Covid corporate finance facility (CCFF) so far. It included a raft of household names including Tottenham Hotspur, easyJet, Nissan, Marks & Spencer, Greggs and Burberry
  • Meanwhile, the UK construction industry experienced its third worst month for production on record. The construction PMI rose from its record low of 8.2 in April to 28.9 in May, according to data firm IHS Markit

That’s all from us today. We’ll be back from 8am tomorrow. Thank you for reading and stay safe -KM

A final question from Bloomberg, on whether AstraZeneca is looking at further partnerships to help manufacture even more than 2 billion doses.

AstraZeneca’s boss says they will continue looking at this over the next two months, but says it would make sense for society to bet on two to three different other solutions ‘not just our vaccine.’

He expects other vaccines to also pop up, since they’re not sure which one will work. He mentions another potential Covid-19 vaccine being developed by rival Pfizer, for example.

He’ll certainly look at additional capacity, but at 2 billion doses, Soriot says he thinks they’re already making a big impact.

This is what a healthy, successful pharma industry can deliver, Soriot says. It means companies are able to step up and come to help.

We’re funding this manufacturing at considerable risk, given that trials are still ongoing, Hatchett says.

He stresses there is a possibility that the vaccine may not work.

If that ends up being the case, manufacturing capacity would still be available and potentially could be redeployed for use by other vaccine manufacturers that use similar production processes.

Pascal Soriot, chief executive of AstraZeneca, says he expects to know whether the vaccine works by August.

He says there are two timelines, one linked to manufacturing and one around trials.

‘If everything goes according to our intentions, we should know by August indeed,’ he said.

After that, vaccines could start being distributed as early as September, starting in countries including in the UK and US.

We are anticipating some bottlenecks, Hatchett admits.

Vials, for example, are in short supply.

‘The more lead time we can have to address this incredibly complex logistical challenge’ to distribute a vaccine when we have one, the easier it will be, Hatchett says.

AstraZeneca’s boss hedges his excitement over the vaccine.

‘We will give it our best shot and we hope it will work’ he said.


AstraZeneca’s chief executive says part of the 1 billion doses to be produced by the Serum Institute will be used in India.

The remainder will be put forward for international allocation in a fair manner.

Hatchett says health care workers will likely be among the first to receive potential doses of the vaccine.

Vulnerable people are also likely to be the first vaccinated, particularly those who are at most at risk of severe impacts from the disease. That includes the elderly and people with medical conditions, including hypertension or diabetes.

An allocation scheme is currently being developed, with the help of the WHO, he adds.

We’ve now moved onto the Q&A portion of the press conference with AstraZeneca.

Richard Hatchett, chief executive of the Coalition for Epidemic Preparedness Innovations (CEPI) is speaking now.

He says the aim is to make sure the firms can get as much vaccine, as possible as quickly as possible, to people who need it globally.

The vaccine, he adds, will be the best way to exit the pandemic.

He also thanks AstraZeneca for taking steps to assure equitable access to the vaccine.

Pascal Soriot, chief executive of AstraZeneca, is holding a press conference on the deal.

He says the company is moving as fast as it can on developing the potential vaccine

Soriot thanks everyone at CEPI and Gavi and the Serum Inistutue of India for their work.

“Our goal is not to leave anyone behind,” he adds.

AstraZeneca deal could boost supplies of Covid-19 supplies to more than 2bn

Britain’s AstraZeneca said on Thursday it would now be able to supply more than two billion doses of its potential coronavirus vaccine, thanks to a string of manufacturing deals including one with CEPI, Reuters reports.

The company said it reached an agreement worth $750 million with the Coalition for Epidemic Preparedness Innovations (CEPI) and Gavi to produce 300 million doses of the shot, AZD1222, and another with the Serum Institute of India to supply one billion doses for low and middle-income countries.

European stock markets have ended the day in the red, according to provisional data at the close:

  • Britain’s FTSE 100 dropped 0.66%
  • Germany’s DAX fell 0.5%
  • Spain’s IBEX slid 0.5%
  • France’s CAC 40 fell 0.3%


Campaign group Positive Money has accused the Bank of England and Treasury of “propping up climate criminals and bad bosses with public money,” through the CCFF.

The group takes issue with the £1.8bn provided to airlines “with no conditions attached.” They point out that EasyJet recently is planning to cut 30% of its workforce and that BA is pressing ahead with up to 12,000 job cuts, despite receiving state support.

Positive Monday also singled out funding of high-carbon companies, including Baker Hughes (£600m) and Schlumberger (£150m).

“Other companies with poor social records include G4S, which has accessed £150m through the CCFF, despite its numerous failings on human rights and delivering on public contracts,” the campaigners added.

Positive Money’s executive director Fran Boait said:

We really need to ask ourselves whether we should be propping up climate criminals and bad bosses with public money. The government must consider whether conditions which would stop firms laying off workers, avoiding tax, and fuelling the climate crisis, should be applied to these bailouts.

We can’t repeat the mistakes of 2008, where the banks got bailed out with no strings attached and the public got sold out. We need to use every opportunity to ensure the recovery from this crisis builds a fairer and greener society.

More on Tottenham tapping state-backed loans, from the Guardian’s David Hytner.

Tottenham have borrowed £175m from the Bank of England to help them through the next year or so, as they respond to the financial destruction of the Covid-19 crisis.

The club fear that they may lose more than £200m of revenue in the period from the start of lockdown to June 2021, including broadcast rebates, and they have sought help from the government’s Covid Corporate Financing Facility, which has provided them with the unsecured loan.

It is repayable in full next April at a rate of 0.5%, which is low in commercial terms, although Spurs could redraw it for another year.

Spurs have been badly hit by the pandemic because they had banked on revenue streams from fans attending various events at their stadium – and not only football matches.

They have had to cancel a rugby union game between Saracens and Harlequins, Anthony Joshua’s world title fight against Kubrat Pulev, two NFL fixtures and England versus Australia in the rugby league Ashes. Concerts from Guns N’Roses and Lady Gaga and the Capital Radio Summertime Ball have also gone.

The club’s chairman Daniel Levy said:

We have always run this club on a self-sustaining commercial basis. I said as early as 18 March that, in all my 20 years at the club, there have been many hurdles along the way but none of this magnitude – the Covid-19 pandemic has shown itself to be the most serious of them all.

Tottenham Hotspur among the big borrowers of state-backed loans

Tottenham Hotspur’s Harry Kane during the Premier League match at Tottenham Hotspur Stadium, London.
Tottenham Hotspur’s Harry Kane during the Premier League match at Tottenham Hotspur Stadium, London. Photograph: John Walton/PA

The Bank of England has just published its list of the large companies who have borrowed money under its Covid corporate finance facility (CCFF). There are a lot of household names included, with football club Tottenham Hotspur among the more eye-catching.

Some 53 companies have borrowed under the scheme. They will have to repay the loans, but at more favourable terms than would have been available at market rates.

Here are some of the biggest names in different industries:


EasyJet (£600m), a Ryanair subsidiary (£600m), British Airways (£300m), Wizz Air (£300m)

Other transport

FirstGroup (£300m), National Express (£300m), Stagecoach Group (£300m), Carnival (£25m)

Automotive and aerospace

JCB (£600m), Nissan (£600m), Toyota (£365m), Rolls-Royce (£300m), car dealer Inchcape (£100m), Honda (£75m), aerospace manufacturer Meggitt (£60m), truckmaker Paccar (£170m)


Westfield (£600m), John Lewis (£300m), Marks & Spencer (260m), Greggs (£150m), Asos (£100m)

Other household names

Chanel (£600m), Burberry (£300m), Intercontinental Hotels Group (£600m), Tottenham Hotspur (£175m), the National Trust (£30m)

Some staff at Glasgow’s Grand Central hotel will be made redundant.
Some staff at Glasgow’s Grand Central hotel will be made redundant. Photograph: Murdo MacLeod/The Guardian

Intercontinental Hotels Group (IHG) has confirmed it has begun consultations over redundancies at the 19 hotels in England, Scotland and Wales which it directly manages or leases.

IHG is expected to make at least 20 people redundant at each property, which is why it has begun the consultation process, although it does not intend to keep any of the hotels permanently closed.

Five of the hotels affected by the planned redundancies are in Scotland and include Kimpton Blythswood Square and Grand Central in Glasgow, as well as Kimpton Charlotte Square, InterContinental The George and Crowne Plaza in Edinburgh. IHG operates around 350 locations in the UK, the vast majority of which are franchises.

Bryan Simpson, an organiser for trade union Unite called the proposal “premature, ill conceived, and unjustified”.

A spokesperson for IHG said:

This is a very difficult time for our industry, and we have done everything to protect and retain jobs for as long as possible. Most of our hotels in the UK are currently closed and while we are looking forward to welcoming guests back when we can reopen, it will take time for travel and tourism to return to pre-coronavirus levels.


The US jobless numbers have weighted down Wall Street, with markets slumping at the open.

The S&P 500 lost 0.46%, the Dow Jones industrial average lost 0.33%, and the Nasdaq lost 0.33%.

You may have missed it during the flurry of news from the ECB, but there was more poor data from the US.

Another 1.9m Americans claimed jobless benefits during the week of 30 May, taking the total number to an astonishing 42.6m.

More than 42 million Americans have filed jobless claims since mid-March.

— CNBC (@CNBC) June 4, 2020

Paul Ashworth, chief US economist at Capital Economics, a consultancy, said:

Initial jobless claims fell to 1,877,000 in the week ending May 30th, from 2,126,000, but the pace of decline has begun to stall a little, with claims still at an otherwise unprecedented level.

Ashworth expects the US unemployment rate to rise above 20% in data to be published tomorrow. That’s a truly enormous number of people without work - and all in an election year as well.

The European commission’s proposal for a pandemic recovery fund should not be seen in isolation, Lagarde says.

She does not doubt the determination of European leaders at large to respond to the pandemic, she says.

And with a slightly barbed question Lagarde says she will “occasionally take the liberty to read things” from her notes.

And with that the press conference is over.

Inflation was “clearly in the birth certificate” of PEPP, Lagarde says - after a question on whether it was added as a post-hoc justification of the policy.

The purchases were front-loaded as part of its short-term response to the crisis, Lagarde highlights.

Lagarde admitting that PEPP has been front-loaded maybe also a sign that we shouldn't extrapolate in a linear fashion to when it will "run out".

— Claus Vistesen (@ClausVistesen) June 4, 2020

Asset purchases are needed in all eurozone jurisdictions to support monetary policy, Lagarde says in answer to a question on why German debt was relatively highly represented in recent purchases.

On deflation, Lagarde says the ECB has discussed “disinflation” (which is not quite the same thing), and that is why they have used the most “efficient, effective and flexible” of the tools at her disposal.

Lagarde is very firm in expressing confidence that the asset purchase programme is legal, after another question about the German constitutional court ruling.

Asked again about #Karlsruhe ruling, @Lagarde carefully repeats main points:
1) ECB subject to European Court of Justice jurisdiction
2) ruling directed at German govt & parliament and not the ECB itself
3) confident of a resolution that doesn't compromise bank's independence

— Christiaan Hetzner (@christiaanhtznr) June 4, 2020

There is broad agreement that the stimulus is perfectly adequate, Lagarde says.


— *Walter Bloomberg (@DeItaOne) June 4, 2020

Sounds like the ECB will do more not less easing going forward - overall monetary easing not done yet $EUR

— Viraj Patel (@VPatelFX) June 4, 2020

This is absolutely key from @lagarde: ECB staff projection for 2022 headline inflation were revised lower, from 1.5% to 1.3%, despite massive stimulus in the pipeline.

This is the lowest medium-term inflation projection ever (same as in Dec-14 before QE).

— Frederik Ducrozet (@fwred) June 4, 2020

Lagarde says the pandemic stimulus has demonstrated that it is a very successful programme.

It has prevented a “downward spiral” in growth and inflation, Lagarde says.

Asked whether the ECB has considered junk bonds (those that are not rated as investment-grade), Christine Lagarde said the central bank will continue to observe the situation, but that the monetary policymakers had not discussed it further than that.

On the German constitutional court’s ruling against its asset purchases, Lagarde said: “We have indeed taken note of the judgement... and we are confident that a good solution will be found.”

She expects “a good solution that will not compromise the ECB’s independence”, European law, or the primacy of the European Court of Justice, which has ratified the programme.

Lagarde says the ECB “strong welcomes” the European commission’s proposals for a fiscal stimulus through a recovery fund.

And now we are into the Q&A.

Inflation will decline over the coming months, remaining subdued through to the end of the year, Lagarde says.

Lower demand will suppress inflation, and it will only be partially counterbalanced by higher prices from supply constraints, she says.

ECB forecasts suggest the annual rate of inflation will be 0.3% in 2020, 0.8% in 2021 and 1.3% in 2022.

That would leave it far below the ECB’s 2% inflation target throughout the whole forecast period - suggesting that stimulus will be deemed appropriate for a while yet.

Back on Christine Lagarde, the ECB will do “everything necessary” to support the eurozone economy, she says.

There has been some bottoming out of the downturn in May, but growth will start to rebound in the third quarter as lockdown restrictions ease, she says.

However, the pace of recovery is very uncertain, she says.

New ECB forecasts suggest that annual GDP growth will fall by 8.7% in 2020 and rebound by 2021 to 5.2%, followed by 3.3% in 2022.

Risks around that forecasts are biased to the “downside”, she says.

1.88m Americans claimed jobless benefits

Breaking off briefly from the ECB, another 1.88m Americans made jobless claims during the week of 30 May.

That was above the 1.8m expected by economists on average.

US stock market futures have been dented by the data.

Christine Lagarde: Eurozone undergoing unprecedented slump

European Central Bank president Christine Lagarde says the eurozone is experiencing an unprecedented slump.

The pandemic has created an unprecented contraction, Lagarde says.

There has been a significant fall in spending from consumers and businesses.

There are some signs of the slump “bottoming out” but they are “tepid” compared to the pace of the slump.

There will be a “gradual reopening”, she says.

You can watch Christine Lagarde speak here:

Christine Lagarde leading the ECB’s press conference on Thursday.

More investors react:

Neil Williams, senior economic adviser to the international business of Federated Hermes, said:

The ECB is turning up its monetary hose. Extending and ramping-up its asset purchases by €600bn means it can continue running QE in 2021 at over €100bn per month. This is way up on the €20bn run-rate pre-virus, and even the €80bn during its own, 2015 euro-crisis. Hopefully, with flexibility pledged on issuers’ buying limits, there won’t be too much push-back from the Governing Council and Germany’s Constitutional Court.

After lagging the US and UK, the fiscal box is now opening. Further budget amendments in Germany, France, and Italy suggest they’ll have to ‘stomach’ 2020 deficits closer to the European Commission’s projected 7.0%, 9.9%, and 11.1% of GDP. Most telling of all are efforts to push through the €750bn ‘Recovery Fund’, targeting grants and loans toward most affected euro members.

While controversial to those wary of debt-sharing, in practice, highly indebted members like Italy and Greece, vulnerable to rising debt-service costs, have especial interest in resisting a volte face that destabilises the euro.

Marchel Alexandrovich, senior European financial economist at Jefferies, said:

This response shows the scale of the challenge facing the ECB to get the economy through this recession and to get inflation back up to 2%.
There were no adjustments to the composition of its Corporate Bond Purchase Programme, or changes to the tiering multiple applied to bank deposits. But in the Q&A, expect Lagarde to be extremely dovish, to focus on the downside risks to the outlook and to stress that all options in terms of future policy moves remain very much open.

Hinesh Patel, portfolio manager at Quilter Investors, said:

While it is no surprise to see interest rates left untouched, we were expecting less of an increase in the pandemic bond buying programme given economies across Europe are beginning to reopen and the worst of the crisis appears to be in the rear-view mirror. Needless to say this should be another positive for risk assets, at a time when equities in particular have already rallied strongly from their lows in March.

Investors will be watching Europe with interest going forward as valuations remain on the cheaper side compared to other regions and remains under-owned by international investors. If Christine Lagarde continues to placate big businesses’ borrowing costs like this, we should see a positive return environment for investors as the economy gets going again.

What a (actually relatively small) difference €600bn makes: the before and after pictures show European stock markets pushing into the green.

European stocks rebounded after the ECB’s stimulus announcement.
European stocks rebounded after the ECB’s stimulus announcement. Photograph: Refinitiv

However, the euro is giving up some of its snap gains - although it is still up by 0.1% for the day against the US dollar.

We will see how it fares during Christine Lagarde’s press conference, in a few minutes.

Former ECB vice-president Vitor Constâncio appears to approve of the central bank’s move, describing it as “ahead of the curve”.

The ECB, “ahead of the curve”, just increased QE emergency purchases, PEPP, by €600 bn to €1350 and prolonged it to at least Until June 2021 with reinvestment in full at least to the end of 2022. The other purchase programs continue. The euro is going up, periphery yields down.

— Vitor Constâncio (@VMRConstancio) June 4, 2020

Some early reactions from economists to the larger-than-expected stimulus.

Carsten Brzeski, chief economist at ING Germany, said:

An increase of the PEPP programme by 600bn euro and the reinvestment of the PEPP proceeds underlines the ECB’s determination to do ‘whatever it takes’. Today’s decision should dent any future speculation about whether or not the ECB is willing to play its role as the lender of last resort for the Eurozone.

Similar sentiments from Mohamed El-Erian, the influential chief economic adviser at Allianz, the insurer:

3 quick FYIs on ...

Policy: The @ECB confirmed that #CentralBanks remain in a "whatever it takes mode" through the expansion of its PPP

Data: US #Jobless claims out in less than 30 minutes (expectations below); and #Markets: No meaningful pullback from the recent strong rally

— Mohamed A. El-Erian (@elerianm) June 4, 2020

Viraj Patel, a global macro strategist at Arkera, said:

Feels like ECB knew where the consensus was (€500bn) & wanted to do a bit more to signal the extent of their easing bias. Interested now on the pace of purchases and how comfortable the ECB is with a stronger $EUR (whether there's a limit). Tone of presser will be less upbeat

— Viraj Patel (@VPatelFX) June 4, 2020

Here is the move from the euro after the announcement, as traders appeared to welcome the support for the eurozone economy (even if looser monetary policy should theoretically dent the currency:

Just in: The ECB increases asset purchases by €600 billion and extends emergency program until June 2021

— Bloomberg Markets (@markets) June 4, 2020

And here is the move in Italian bond yields. Clearly investors believe the ECB is saying that it won’t let Italian borrowing costs to spiral out of control.

Italian bonds love ECB’s bond buying boost: #Italy’s 10y yields in free fall after ECB has increased the PEPP envelope by €600bn, until at least June 2021 and for reinvestments until at least end-2022.

— Holger Zschaepitz (@Schuldensuehner) June 4, 2020

The positive surprise from the ECB has boosted assets across Europe.

European stock markets have turned positive after the ECB surprised investors. The Euro Stoxx 600 index, which tracks big companies across the region, has gained 0.1%. Bank shares have been boosted as well.

The euro has also reversed its earlier losses against the US dollar: one euro now buys $1.1260, a gain of half a cent from earlier.

European government bond yields have also fallen, with Germany’s 10-year Bund yield down by 0.02 percentage points to 0.36%. Yields move inversely to prices, so the rise indicated increased demand for the debt.

Italian government bond yields also fell strongly, down 0.15 percentage points to 1.4%, the lowest since 30 March.

There are six points in the European Central Bank’s announcement. Here is a summary:

  1. Another €600bn (£536bn) in bond purchases, taking the pandemic emergency purchase programme up to €1.35tn.
  2. Purchases will take place until at least the end of June 2021, or until the “coronavirus crisis phase” is over.
  3. The stock of assets bought will not shrink until at least the end of 2022.
  4. Purchases will continue at a monthly pace of €20bn, plus another €120bn spread out until the end of the year.
  5. The balance sheet of assets bought will not shrink until the ECB starts to raise interest rates - suggesting the stimulus measures will be in place until there truly is a proper recovery.
  6. Key interest rates remained unchanged. The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively.

The expansion of bond purchases means the total pandemic emergency purchase programme (PEPP) will be worth €1.35tn - a massive stimulus.

The ECB’s governing council, which controls monetary policy, said:

In response to the pandemic-related downward revision to inflation over the projection horizon, the PEPP expansion will further ease the general monetary policy stance, supporting funding conditions in the real economy, especially for businesses and households. The purchases will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions. This allows the governing council to effectively stave off risks to the smooth transmission of monetary policy.

Interest rates remained unchanged, as expected by analysts.

The full ECB announcement can be read here.

European Central Bank expands quantitative easing programme

The European Central Bank has unveiled a new €600bn bond buying programme, in a larger expansion of stimulus measures than many investors had expected.

Purchases will continue until the end of June 2021, the ECB said in a statement.

Analysts had expected €500bn in quantitative easing stimulus.

More details to follow.

A quick note before the ECB announcement: the UK’s Office for Budget Responsibility has revised down the cost of the job retention scheme:

We have now included the latest changes to the furlough scheme and self-employed income support scheme in our policy database. These and other changes raise our estimate of the total cost of the Chancellor’s coronavirus policy interventions slightly to £132.5 billion in 2020-21.

— Office for Budget Responsibility (@OBR_UK) June 4, 2020

CJRS cost revised down 30% as usage suggests employers have concentrated furloughing among part-time and lower-paid jobs. Average pre-virus weekly pay looks to have been around £320 – much closer to median part-time than full-time earnings. Read more:

— Office for Budget Responsibility (@OBR_UK) June 4, 2020

A quick look at US stock market futures suggests that the negativity is going to spread across the Atlantic.

The S&P 500 and the Dow Jones industrial average both suggest stocks will fall by 0.4%, although the Nasdaq is set for a more comfortable time, declining by only 0.2%.

The FTSE 100 has been the strongest performer of large European indices so far on Thursday morning, down by 0.3%.

Stock markets in France, Germany and Italy are down by between 0.8% and 1% as we await the European Central Bank’s latest monetary policy decision at 12:45pm BST.

All major European stock market indices fell on Thursday morning.
All major European stock market indices fell on Thursday morning. Photograph: Refinitiv

The euro has fallen by 0.3% against the US dollar at $1.1205, while it is flat against the pound.

ECB guide: More bond purchases expected

Christine Lagarde, president of the European Central Bank (ECB), will announce the latest monetary policy update on Thursday afternoon.
Christine Lagarde, president of the European Central Bank (ECB), will announce the latest monetary policy update on Thursday afternoon. Photograph: Daniel Roland/AFP via Getty Images

The European Central Bank is widely expected to extend its huge quantitative easing programme as it tries to stimulate the economy.

The initial interest rate announcement is due at 12:45pm BST, with ECB president Christine Lagarde to address the press conference in Frankfurt at 1:30pm BST.

Here are some of the things to look out for:

Bond purchase increases

Quantitative easing was the centrepiece of the ECB’s initial response to the pandemic, with €750bn in bond buying announced on 18 March. The question today is whether it will be expanded or whether the central bank will hold fire until July.

Many analysts expect the ECB to up buying by €500bn, as purchases at their current rate are expected to run out by October.

Derek Halpenny, head of research at MUFG, an investment bank, said:

We think today is the day in which the ECB needs to reinforce the perception of European authorities finally getting to grips with the scale of the Covid-19 hit with further QE action.

A failure to act today would imply consideration is being given to only running the program until September which would result in considerable anxiety amongst investorsthat would result in an immediatetightening of financial market conditions.

Seema Shah, chief strategist at Principal Global Investors, said:

Despite the ECB only having spent a third of the €750bn [Pandemic Emergency Purchase Programme], anything less than a €500bn expansion will be a disappointment and could undo the recent weeks of market strength. Although equity markets seem to believe a V-shaped economic recovery is underway, the reality is that the euro area economy continues to struggle under the weight of the coronavirus crisis and the ECB cannot afford to delay additional stimulus.

Focus is also on whether the bank will expand purchases to include “fallen angels” - companies that have lost their investment-grade ratings during the coronavirus crisis.

That would give the ECB more room for manoeuvre and help parts of the economy that might need it more.

Thoughts on the eurozone’s fiscal stimulus

The EU is wending its way towards a recovery fund to pull together governments across the bloc into a massive fiscal stimulus. But with sensitivities around the politics of risk sharing (opposed by some northern European countries), Lagarde has a delicate balance to strike.

Commerzbank told clients that the desire to keep pressure up on governments could lead to the ECB delaying its QE announcement:

It will be a very close call with the hawks potentially swaying a consensus-minded President Lagarde to defer the announcement, also to keep pressure on the politicians to deliver on the EU Commission’s €750bn Next Generation EU Fund.

Paul Donovan, an analyst at investment bank UBS, said:

ECB President Lagarde will be happy that someone is doing fiscal stimulus (as the pandemic is a problem for fiscal policy, not central bank policy). Today’s meeting should continue to emphasise the need for quantitative policy to support financial markets and ensure sufficient liquidity in the economy.

Updated economic forecasts

Everyone and their dog knows that the eurozone economy is in recession, but the question is how deep is it.

Lagarde has already dismissed the “mild” scenario of a 5% fall in output this year. That leaves a decline of between 8% and 12% in GDP - twice as deep as after the 2008 financial crisis.

If inflation forecasts are also weak that would support the case for more stimulus from the ECB.

The German court ruling

Looming over the ECB’s bond purchases is the German constitutional court ruling that it may have exceeded its mandate by directly financing government spending. The Karlsruhe court said the ECB must carry out a “proportionality assessment” within three months in its 5 May ruling.

Lagarde has insisted the ruling will leave the bank “undeterred” in battling the crisis. Acting now could make it less likely that any support is withdrawn at a later date.

Principal’s Shah said:

Close attention will also be paid to any hints that that last month’s German Constitutional Court ruling will tie the ECB’s hands in future, with the euro’s longest winning streak in six years at risk. A defiant tone, dispelling those concerns, would serve Lagarde – and the euro – well.

There is some interesting detail on the Bank of England’s response to the pandemic on financial markets in a speech just published by Andrew Hauser, the executive director for markets at Threadneedle Street.

While a lot ofthe speech is backward-looking at the big moments of the crisis, Hauser said that “further financial instability cannot be ruled out” as the pandemic’s effects continue to be felt on markets. He said:

Financial markets could come under strain again, if there is another leg to the global infection cycle, or if economic data come out persistently worse than expected. And even if – as hoped – we escape that, the sheer scale of our interventions means we must, in time, ask ourselves hard questions about the financial markets we rely upon, and their potential to amplify the sort of ‘dash for cash’ we saw in March and April.

Hauser said the sudden pre-lockdown ‘dash for cash’ was the “biggest test of core market functioning and resilience since the Great Financial Crisis (GFC) of 2008-9.”

He tells of his experience watching a “doom loop” on Treasuries markets as investors scrambled for cash, emergency talks with the Federal Reserve about the enormous dollar swap lines designed to make sure there was enough cash in the financial system, and the near breakdown of the UK gilt market.

The speech also contained a handy guide to what the BoE has done during the crisis, and how it compares throughout more than 300 years of history:

The Bank of England’s actions during the financial crisis (left) and the size of its balance sheet as a proportion of GDP since 1970 (right).
The Bank of England’s actions during the financial crisis (left) and the size of its balance sheet as a proportion of GDP since 1700 (right). Photograph: Bank of England

There was also a rapid drop in new orders received by UK construction companies, which was almost exclusively attributed to the coronavirus disease 2019 (COVID-19) pandemic.

Residential builders did slightly better during May than civil engineers or office builders, but the reading for that segment was still only 30.9.

IHS Markit said:

Around 64% of the survey panel reported a drop in construction activity during May, while only 21% signalled an expansion. Where growth was reported, this was mostly attributed to a limited return to work on site following shutdowns in April.

In bad news for the economy as the government signals the end of the furlough scheme (paying workers’ salaries), there were “widespread reports that redundancies would have been far more severe without the use of the government’s jobs retention scheme”.

Tim Moore, economics director at IHS Markit, said:

A gradual restart of work on site helped to alleviate the downturn in total UK construction output during May, but the latest survey highlighted that ongoing business closures and disruptions across the supply chain held back the extent of recovery.

It seems likely that construction activity will rebound in the near-term, as adaptations to social distancing measures become more widespread and the staggered return to work takes effect. However, latest PMI data pointed to another steep reduction in new orders received by UK construction companies, with the pace of decline exceeding the equivalent measures seen in the manufacturing and service sectors.

Construction industry sees third-worst month in history

The crisis hitting the UK construction industry eased slightly in May, but the sector still saw its third-worst month recorded by a closely followed survey.

The construction purchasing managers’ index (PMI) rose from its record low of 8.2 in April to 28.9 in May, according to data firm IHS Markit.

Any figure below 50.0 indicates an overall decline in output, so 28.9 is still a severe recession for the sector.

The pandemic prompted the closure of sites across the country in late March. Although many returned to work through April and May, the disruption and the expectation of a worsening economy have struck the sector down.

🇬🇧 Weakness in the UK Construction sector persisted in May, with #PMI Total Activity Index at 28.9 (up from 8.2 in April) amid steep falls in activity across all broad areas of construction. Read more:

— IHS Markit PMI™ (@IHSMarkitPMI) June 4, 2020

A woman working behind the bar in a pub pouring a pint of beer.
A woman working behind the bar in a pub pouring a pint of beer. Photograph: Alamy

Young’s pub chain intends to open all of its 276 sites by the 3 August, and is hopeful the business can “bounce back” once its pubs are allowed to reopen, but expects trading to be “materially below average” for the rest of the year.

The company reported a £13m shortfall in revenue and £7.7m impact on profits due to declining trade and the 10 days of closure due to the lockdown which were covered by this trading year, which ran for 52 weeks until 30 March.

The company’s chief executive Patrick Dardis welcomed the government’s business rates holiday, which he says will save Young’s £14.5m.

A man walks by Tesla Model 3 sedans and a Tesla Model X SUV in Shanghai.
A man walks by Tesla Model 3 sedans and a Tesla Model X SUV in Shanghai. Photograph: Sun Yilei/Reuters

Another interesting detail from the SMMT data: Tesla’s Model 3 was the most popular car during May.

That is mainly because Tesla does not rely on car showrooms to anywhere near the extent of traditional car manufacturers. However, it also illustrates the progress being made by battery electric cars, which have continued to grow strongly even during the pandemic.

Battery electric car sales are up by 131% for the first five months of the year, while pure internal combustion engine (ICE) sales are sharly down. Mild hybrids though are also on the increase - they combine a small battery with an ICE, so are still relatively polluting.

Battery electric sales are up strongly.
Battery electric sales are up strongly. Photograph: Society of Motor Manufacturers and Traders

However, battery sales still only account for 1 in every 25 car purchases in the UK.

UK car sales halve in first five months of 2020

The UK car market has halved compared to last year as the coronavirus crisis hits, with just over half a million registrations in the first five months compared with more than one million at this point last year.

UK new car registrations fell -89.0% in May to their lowest level for the month since 1952, according to figures published today by the Society of Motor Manufacturers and Traders (SMMT).

It was the weakest May for UK car sales since 1952.
It was the weakest May for UK car sales since 1952. Photograph: Society of Motor Manufacturers and Traders

Some 20,247 cars were registered in the month, as “click and collect” services, allowed from mid-month, saw some movement in the market, the trade body said.

That was an improvement from the 4,321 sold in April, but still 163,477 fewer than in the same month last year.

Battery electric vehicles were the only segment in which sales improved - albeit from a low base - with 429 more units registered year-on-year as pre-orders of the latest premium models were delivered to customers.

Mike Hawes, SMMT chief executive, said:

After a second month of shutdown and the inevitable yet devastating impact on the market, this week’s re-opening of dealerships is a pivotal moment for the entire industry and the thousands of people whose jobs depend on it. Customers keen to trade up into the latest, cutting-edge new cars are now able to return to showrooms and early reports suggest there is good business given the circumstances, although it is far too early to tell how demand will pan out over the coming weeks and months.

Restarting this market is a crucial first step in driving the recovery of Britain’s critical car manufacturers and supply chain, and to supporting the wider economy. Ensuring people have the confidence to invest in the latest vehicles will not only help them get on the move safely, but these new models will also help address some of the environmental challenges the UK faces in the long term.

Just when you thought you were out, Brexit drags you back in - that seems to be the view of foreign exchange analysts on the future prospects for sterling, which is under pressure this morning.

The pound had hit a one-month high of $1.2615 against the US dollar on Wednesday, but fell by 0.5% on Thursday morning back to $1.2517.

Even as economists weigh economic prospects, there is very little time left for the UK to agree a wide-ranging free-trade agreement with the EU, extend the transition deal before the June deadline, or come up with a compromise of some sort. That is weighing on the pound.

This is from the report by the perfectly named Jonathan Cable, from Reuters:

Sterling will lose recent gains against the dollar and weaken further if Britain does not ask for an extension to its Brexit transition period by a June 30 deadline to allow more time for talks on a trade deal with the EU, a Reuters poll found. [...]

“The fading prospect of an extension to the post-Brexit transition period, and the risk of supply chain disruption at the start of 2021, casts a cloud over (Britain’s) GBP outlook,” said James Smith at ING.

“Brexit is back in the spotlight. There’s little to suggest we should expect any real progress, and that’s one reason why we’ve seen some risk premium creep back into the pound.”

The pound is expected to have weakened to $1.23 by end-June, according to the wider poll of over 50 foreign strategists taken this week.

A couple walk past cars on the forecourt of Vauxhall Lookers in Speke, Liverpool, as showrooms open for the first time since lockdown.
A couple walk past cars on the forecourt of Vauxhall Lookers in Speke, Liverpool, as showrooms open for the first time since lockdown. Photograph: Peter Byrne/PA

Car dealer Lookers, which today announced plans for 1,500 job cuts, was in trouble well before the pandemic struck, with a fraud investigation and plans to close dealerships. The Covid-19 crisis has hurt it further.

It will close 12 dealerships as it returns to selling and servicing vehicles after the coronavirus shutdown, writes the Guardian’s Joanna Partridge.

The group, which operates 164 car dealerships, says the latest redundancies are needed to protect the long-term future of the business and it hopes to save £50m a year from the job cuts.

It will begin consultations on the redundancies shortly, which will reduce its workforce by almost 20%.

You can read the full report here:

The FTSE 100 is on track for its first decline this week. It had been buoyed earlier in the week by optimism that the world economy will recover from the pandemic faster than previously thought.

However, the early selling pressure has eased somewhat, with stocks down by 0.2% on the blue-chip index.

The FTSE 100 may have been helped by the weak pound, which is down by 0.4% this morning against the US dollar, trading at $1.2522. Weaker sterling flatters the earnings of FTSE 100 companies who make the majority of their revenues in other currencies.

European stock markets fall at opening bell as optimism peters out

The FTSE 100 has lost 0.45% in early trade, mirroring downward moves on stock markets across Europe.

Germany’s Dax lost 0.7% at the open, France’s Cac 40 lost 0.6% and Spain’s Ibex lost 0.9%.

Car sales weak as Aston Martin and Lookers cut jobs

Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.

Every aspect of the car industry has been hit hard by the pandemic, with showrooms lying idle for weeks (until Monday in England) and factories shutting their gates because of health fears and parts shortages. The latest updates show that the pain is only starting to be felt in the UK.

UK car sales in May were about 90% below their level at the same point in 2019, according to new preliminary data from the Society of Motor Manufacturers and Traders (SMMT).

Preliminary figures (ahead of the final release at 9am) showed that around 20,000 new cars were registered last month, up from just 4,321 in April but just a fraction of the 183,724 sold in May 2019.

The weak sales show why the industry is pulling back, with two major rounds of job cuts announced this morning.

Aston Martin has said 500 workers will lose their jobs, the embattled sportscar manufacturer said, as it seeks to cut costs under new chief executive Tobias Moers.

The cuts reflect “lower than originally planned production volumes and improved productivity across the business”, the company said. The redundancies will cost £12m but will be part of £28m in savings.

Lookers, the car dealer struggling with a fraud investigation and the terrible operating environment, will cut 1,500 jobs.

The company’s board “regrettably considers this action as being necessary in the current environment to sustain and protect the Lookers business over the long term”, it said.

Lookers hopes to save £50m through the job cuts. The one-off cash restructuring cost will be about £9m.

Looking ahead, the main economic event of the day will be the European Central Bank’s latest monetary policy decision - expect much more on that here throughout the day.

The agenda

  • 9am BST: UK new car sales (May)
  • 9:30am BST: UK construction purchasing managers’ index (PMI) (May)
  • 10am BST: Eurozone retail sales (April)
  • 12:45am BST: European Central Bank (ECB) interest rate decision
  • 1:30pm BST: ECB press conference led by Christine Lagarde
  • 1:30pm BST: US balance of trade (April)
  • 1:30pm BST: US jobless claims (week to 30 May)


Kalyeena Makortoff and Jasper Jolly

The GuardianTramp

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