Wall Street has opened higher and European shares are still pushing higher.
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Covid vaccine booster jabs could rival $6bn flu market
Drug companies Pfizer, BioNTech and Moderna are set to make billions of dollars from Covid-19 booster jabs in years to come, according to analysts, who estimate that sales could rival the $6bn market for annual flu vaccines.
This comes as as the UK government is expected to announce details of its autumn booster programme in the coming days.
The booster rollout is set to begin in September, health secretary Sajid Javid said this week, although the government is still waiting for final advice from the Joint Committee on Vaccination and Immunisation. Javid said that elderly people who got their first jabs early on, from December 2020, will be first in line for booster shots. More than 75% of UK adults are now double vaccinated.
In recent days, a growing list of governments, including Germany, Chile and Israel, have decided to offer booster doses to older and vulnerable people with weak immune systems as the highly contagious Delta variant spreads.
However, health experts are warning that many more people around the world will die of Covid if western countries prioritise booster shots for their own populations instead of sharing them with the rest of the world.
This year, Pfizer, BioNTech and Moderna expect to make $72bn in revenues between them from their Covid vaccines.
European shares headed for longest winning streak since 1990
As reported earlier the European Stoxx 600 index rose 0.2% this morning to hit a new all-time high — the 10th consecutive session that it has set a record. This means that the index is headed for its longest streak of record high sessions since at least 1990, the Financial Times reports.
Spanish and French inflation diverges, eurozone trade surplus shrinks
Let’s have a quick look at data from Spain, France and the eurozone this morning.
Inflation in Spain rose to an annual rate of 2.9% in July, its highest level in almost five years, due to a 20.7% spike in energy prices (which may have peaked), while inflation in France eased to 1.2% from 1.5%.
Rory Fennessy at Oxford Economics says:
- Final July inflation readings confirmed a pickup in Spanish inflation, but price growth fell back in France. Spain’s reading offers reassurance that underlying price growth is recovering, but we think it will still remain low. France’s low inflation reading is complicated by the postponement of the summer sales season, but we still see inflation averaging comfortably below target over 2021.
- The eurozone’s trade surplus narrowed to €12.4bn in June from May’s €13.8bn reading, but it remains broadly in line with levels seen over the past ten years.
- At a time when concerns around inflation are tilted to the upside across the world, France’s drop back in inflation to 1.2% y/y in July from 1.5% previously could raise eyebrows. But this was mainly due to the postponed summer sales (similar in Italy) exerting negative pressure on manufactured goods inflation, which declined by 1.1% after rising by 0.7% in June.
Turning to the eurozone’s trade data for June, he says:
Today we also received the eurozone’s trade data for June, which saw the trade surplus narrow slightly to €12.4bn in June from May’s €13.8bn reading. This was caused by a slight drop in exports of 0.7% m/m, while imports were stable over the month. However, the trade surplus remains broadly in line with levels observed over the last ten years.
The slight fall back in exports can be put down to global supply-chain disruption, which we know has affected the performance of European industry over Q2, particularly Germany. Furthermore, while export volumes are hovering close to their February 2020 level, imports have well exceeded theirs as resilient consumption for goods among the bloc’s consumers supports import demand.
On Wall Street, stock futures (for the Dow Jones and the S&P 500) have hit record highs after Disney reported a post-pandemic rebound as its theme parks reopened. The world’s biggest entertainment company beat analysts’ forecasts in the quarter to 3 July.
This suggests that Wall Street will get off to a flying start when trading starts this afternoon. Over here, the UK’s FTSE 100 is 0.36% ahead, Germany’s Dax has gained 0.37% and France’s CAC is up 0.3%.
IoD: 44% of firms face staff shortages
A new survey from the Institute of Directors, out today, shows that 44% of businesses are currently experiencing staff shortages – which risks undermining the economic recovery and stoking emerging inflationary pressures.
Of those affected, 65% attribute worker shortages to the UK’s long-term skills gap, whilst four in 10 are struggling with a lack of workers from the EU. Some 21% state that shortages are due to staff having to isolate. A similar proportion report that furloughed or inactive staff are reluctant to return to the workforce at the current time.
Directors are reporting that the hardest roles to recruit are in the ‘professionals’ and ‘associate professionals’ categories – although ‘skilled tradespeople’ are also much in demand. The sector worst hit by staff shortages is hospitality.
In response to these shortages, 81% of directors would support relaxing immigration requirements as a way of easing the pressures on the labour market.
Labour shortages are also impacting on the salary costs facing business. Three quarters of directors say they are concerned by this. Half of those affected are observing increases in wage costs in excess of 5%.
Joe Fitzsimons, senior policy advisor at the IoD, says:
Employers are keen to re-build following an incredibly turbulent 18 months for business. But the issue of labour shortages is proving disruptive across a huge range of sectors and at all levels. Ensuring that workers are available with the right skillset to perform effectively is a crucial pre-requisite for recovery.
Sterling on track for second week of decline against dollar
While stocks are enjoying a good week, sterling dipped to two-week lows against the dollar today, putting it on course for a second week of decline. But it’s still the third-best-performing G-10 currency, behind the Canadian dollar and the US dollar, according to Refinitiv.
Yesterday’s GDP figures were in line with expectations, and showed the UK economy returned to growth in the second quarter of the year. The economy expanded by 4.8%, as the lockdown measures introduced to fight the Covid-19 pandemic were relaxed.
The pound slipped 0.15% against the dollar at one stage this morning to $1.3790. Against the euro, it fell 0.2% to a week’s low of 85.12p.
Michael Brown, senior market analyst at Caxton FX, says:
This morning’s decline... appears to be a continuation of the modest dollar bull trend that appears to have embedded itself as a result of the market pricing a sooner than expected taper [of the bond-buying programme] from the Fed.
UK divorce and pre-nup enquiries surge
Divorce enquiries have surged in the UK as couples return to pre-lockdown life, says the law firm Stewarts – but enquiries for pre-nuptial agreements have also doubled.
It reported a 136% increase in June in individuals seeking divorce advice compared to January of this year. This suggests that the lifting of lockdown restrictions has proved a turning point, after people were cooped up together for long periods.
It also marks a shift from the typical ‘divorce calendar’ where the peak times are after Christmas and the school summer holidays, when couples have spent prolonged periods of time together.
Sarah Havers, senior associate in the divorce and family department at Stewarts, says:
One emerging, and perhaps unsurprising, impact of Covid-19, is the rise in marriage separation and divorce. Even the strongest of marriages have been severely tested by the overall stresses of the pandemic - financial, emotional and physical. What’s interesting is that now restrictions are lifting, many couples can no longer sustain who they were in lockdown. Having been forced to take a long, hard look at their partners, the much-heralded promise of ‘freedom day’ has taken on a whole new meaning.
At the same time, new enquiries for pre-nuptial agreements doubled in June compared to February 2021. With the pandemic causing many weddings to be delayed, couples have had more time to think about what they really want and the importance of safeguarding their assets.
Now that restrictions are easing and the big weddings are being planned for late summer/September, we’re seeing a boom in prenuptial agreements as part of financial planning for a future together. In a world of uncertainty, a ‘pandemic pre-nup’ gives both parties certainty and control over a fair financial agreement should the relationship sadly fall apart.
Moderna: Vaccine maintains antibodies against variants for 6 months
Moderna has announced results from a new study on the durability of its Covid-19 vaccine against variants (Alpha, Beta, Gamma, Delta, Epsilon and Iota). The study, published in Science, found that the majority of people maintained antibodies against variants for six months after the second dose.
The oldest people tended to have lower antibody levels, but differences were small, Moderna said.
Stéphane Bancel, the Massachusetts-based company’s chief executive, said:
We are pleased with these new data showing that people vaccinated with two doses of the Moderna Covid-19 vaccine maintained antibodies through six months, including against variants of concern such as the Delta variant. Along with our partners, we are committed to generating data on the Moderna COVID-19 vaccine and sharing this as available.
These data support the durable efficacy of 93% seen with the Moderna Covid-19 vaccine through six months. We expect that these data and the growing body of real-world evidence will help inform health regulators’ approaches to how and when to administer additional boosting doses.
FTSE 100 on track for longest winning streak since November
Britain’s blue-chip index of leading shares, the FTSE 100, is also set for its fourth weekly gain – its longest winning streak since last November. Industrial, mining and retail stocks are boosting the index.
The FTSE-250 hit another record high, rising 0.2% to 23,814. Engineering firm Babcock jumped 6.8% to the top of the index after it agreed to sell its consultancy division Frazer-Nash for £293m to shore up its finances and pay down debt. Babcock’s biggest customer is the UK’s Ministry of Defence.
Danni Hewson, financial analyst at the stockbroker AJ Bell, says:
The FTSE 100 looks like rounding off a decent week in fine fashion on Friday as investors shrugged off a Delta variant linked sell-off in Asia.
However, the closure of Chinese ports in an effort to control the spread of the more infectious Covid strain could add to global supply chain disruptions and become something the market cares about in fairly short order.
For now UK stocks are taking their cue from the US, where the S&P 500 closed at a record high for a third consecutive day. Entertainment giant Disney demonstrated the increasing power of its huge library of content as it unveiled a better-than-expected quarterly performance.
Its ownership of franchises like Star Wars, Marvel and Pixar – alongside the traditional House of Mouse stuff – is helping it hoover up subscribers and, as coronavirus restrictions are lifted, people are coming back to its theme parks too. This is important as the experience of interacting with Disney creations helps reinforce their appeal to prospective viewers.”
Returning to travel tests... the UK’s competition watchdog said yesterday that it is ready to help the government take rapid action against Covid testing companies if it finds they are breaching consumer law, amid rising concerns about rip-off pricing and unreturned or delayed results.
In a statement published on Thursday afternoon, the Competition and Markets Authority (CMA) set out the details of its previously announced investigation into the market, and said it was also looking at whether the Department of Health and Social Care (DHSC) could take any action to improve matters in the short term.
Today, Gatwick airport is calling for simpler testing rules, including the removal of testing requirements for people returning from green list destinations, and for double-vaccinated travellers returning from amber countries. Non-vaccinated people should be able to take a cheaper lateral flow test, rather than an expensive PCR test, the airport said.
European stock markets set for fourth week of gains
European stock markets are pushing cautiously higher and are on track for their fourth successive week of gains amid optimism over recent strong company results and a steady economic recovery from the Covid-19 crisis.
The pan-European Stoxx 600 index has hit a new record high, up 0.1% at 475.5. Retailers and travel & leisure stocks are the top risers, with Adidas gaining 2%.
The company announced last night that it was selling Reebok to the US brand management company Authentic Brands Group for up to €2.1bn (£1.8bn), as the German sportswear firm concentrates on its core marque after pressure from investors.
Shares in the pet supplies chain Zooplus surged more than 40% after the retailer accepted a takeover offer worth €3bn from the US private equity house Hellman & Friedman.
- UK’s FTSE 100 up 25 points, or 0.36%, at 7,217
- Germany’s Dax up 25 points, or 0.16%, at 15,963
- France’s CAC up 9 points, or 0.1%, at 6,891
- Italy’s FTSE MiB up 43 points, or 0.16%, at 26,599
Here is our full story on Disney:
Disney enjoys post-Covid recovery
The reopening of theme parks and 12 million new subscribers to Disney+ fuelled a post-pandemic recovery at the world’s biggest entertainment company, which beat Wall Street expectations in the quarter to 3 July, reports our media business correspondent Mark Sweney.
Disney+ reached a global user base of 116 million in the quarter, ahead of analyst estimates of 115 million, dispelling fears that growth was slowing after the company missed targets in the second quarter.
The reopening of theme parks in the US, France and China helped Disney’s parks and consumer products division return to profit for the first time since the coronavirus pandemic hit. The division made $356m in operating income during the quarter on $4.3bn in revenue.
Disney’s share price jumped more than 5% in after-hours trading as investors and analysts reacted to the post-pandemic recovery of the world’s biggest entertainment company.
European stock markets have opened flat to slightly higher, as expected.
- UK’s FTSE 100 index up 22 points, or 0.3%, at 7,216
- Germany’s Dax up 0.1%
- France’s CAC up 0.1%
- Italy’s FTSE MiB up 0.1%
- Spain’s Ibex flat
Introduction: Gatwick warns of slow UK travel, European shares enjoy good week
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Gatwick Airport has warned that UK travel will continue to lag substantially behind Europe and the US if the government doesn’t simplify travel rules (in particular testing). Passenger numbers were “very low” at 569,000 in the first six months of the year and Gatwick made a loss of £245m.
Like others in the travel industry, Gatwick is calling for no test requirements for travellers from “green list” countries, and for double-vaccinated travellers returning from amber countries; and a single lateral flow test for non-vaccinated people coming back from an amber destination.
Chief executive Stewart Wingate says:
In the UK we are all emerging to enjoy more freedoms due to our world class vaccination programme, however we are in danger of squandering the advantage that vaccination programme has afforded us for international travel. Our government needs to act now and remove unnecessary and costly PCR testing requirements for passengers, particularly for those double vaccinated.
The UK aviation recovery is far behind countries in Europe such as France and Germany whose travel bookings are on average over 50% of pre-pandemic levels whereas in the UK it is sitting at approximately 16%.
Analysis by the Guardian suggests passengers to the UK have spent at least £500m on PCR Covid-19 tests from private companies since mid-May – only for the NHS to be saddled with extra costs when firms fail to deliver them.
Companies offering Covid tests to travellers may be skewing the market by not charging VAT sales tax, the Guardian has found, adding to pressure on the government to intervene and regulate pricing.
It’s been a good week for stocks, with Germany’s Dax, the European Stoxx 600 and the UK’s FTSE-250 all reaching new record highs yesterday, while the FTSE 100 was a bit of a party pooper, closing down 0.37% at 7,193. European markets are set for another week of gains.
On Wall Street, the Dow Jones and S&P 500 also posted fresh all-time highs despite a sharp rise in producer price inflation in July, which hit a record high of 7.8%. Markets were more encouraged by a fall in jobless claims last week.
Michael Hewson, chief market analyst at CMC Markets UK, says:
The sharp rise in July PPI [producer prices index] appears to have caught the market slightly unawares after Wednesday’s data showed July CPI [consumer prices index] levelling out. This sharp divergence between PPI and CPI has served to muddy the waters ever so slightly when it comes to the transitory narrative, given that if not passed through, could see profit margins start to come under pressure.
For now, markets appear to be working on the baseline assumption that a taper [of the Fed’s bond-buying programme] is coming, and getting comfortable with that idea, and as long as the discussion doesn’t move onto the more sensitive topic of rate rises, then the current trend of higher highs looks set to continue.
Asian markets have lagged this week over concerns around rising Covid-19 infections and slow vaccination rates across the region. Japan’s Nikkei slipped 0.1% and Hong Kong’s Hang Seng lost 1.1% while other markets were in positive territory, including Australia, up 0.5%.
Oil prices are sliding for a second day after the International Energy Agency warned that demand for crude and its products had slowed sharply as rising Covid cases have forced governments in the Asia-Pacific region to reintroduce restrictions. Brent crude is 0.8% lower at $70.74 a barrel while US crude has lost nearly 1% to $68.44 a barrel.
In late breaking news last night, Amazon made the surprise decision to move production of its $1bn-plus Lord of the Rings series from New Zealand to the UK, rejecting tens of millions of dollars in incentives to shoot the TV show in the same location as the blockbuster films.
- 10am BST: Eurozone trade for June
- 3pm BST: US Michigan consumer confidence for July (forecast: 81.2)