Growth worries hit markets as US jobless claims rise; ECB sets 2% inflation target – as it happened

Last modified: 05: 47 PM GMT+0

And finally, here’s our round-up of today’s markets:

Goodnight. GW

Here’s our news story on the ECB’s new inflation target:

Circle, the company behind digital currency USD Coin, is to float in the US in a $4.5bn (£3.27bn) merger deal with a company chaired by former Barclays chief executive Bob Diamond.

It will merge with Concord Acquisition Corp, which is chaired by Diamond, with the combined business to be taken over by a newly formed Irish holding company that will then list on the New York Stock Exchange.

The deal with Concord – a special purpose acquisition vehicle (Spac), also known as a “blank cheque” shell company that raises money first and seeks businesses to buy later – gives Circle an enterprise value of $4.5bn.

Circle runs USD Coin, a so-called stablecoin pegged to the US dollar used for digital transactions, and has backed $785bn in deals recorded on its blockchain....

More here:

Tax financial transactions to help Covid recovery, G20 told

The world’s leading developed and developing countries have been told a tax on financial transactions could help them raise around $100bn a year to meet the costs of the Covid-19 pandemic, tackle climate change and boost job creation.

Ahead of a meeting of G20 finance ministers in Venice on Friday, a letter from more than 100 economists said the immediate introduction of a financial transactions tax (FTT) would make economies more resilient and generate much-needed public investment.

Nine members of the G20 already impose FTTs – including the UK’s stamp duty on share dealings – but the economists said all countries should make use of them, with the scope expanded and rates of tax increased.

The letter says:

In so doing, additional revenue of the order of $100bn could be generated on an annual basis, at least 50% of which should be devoted to developing countries to support health, education and to strengthen preparedness for future pandemics, with the other 50% spent to assist those most in need at home, particularly in the protection and provision of employment.”

Updated

Earlier today Rishi Sunak gave a broad hint that the government will temporarily break the pension triple lock this year in order to prevent the Treasury being landed with a £3bn uprating bill.

The chancellor said there was a need to be fair to taxpayers as well as pensioners in light of a forecast from the Whitehall spending watchdog – the Office for Budget Responsibility – that a post-lockdown surge in pay growth would result in the state pension going up by 8% next April.

The government pledged at the 2019 election to continue raising the state pension in line with average earnings, the annual inflation rate or 2.5% – whichever is higher.

But in a series of radio and TV interviews, Sunak refused to say whether the guarantee would be honoured this year.

“The triple lock is the government’s policy but I very much recognise people’s concerns,” he told BBC Breakfast.

“I think they are completely legitimate and fair concerns to raise. We want to make sure the decisions we make and the systems we have are fair, both for pensioners and for taxpayers.”

EU fines VW and BMW £750m for colluding with Daimler on fumes

The EU has fined Volkswagen and BMW €875m (£750m) after finding that the German carmakers colluded with another rival, the Mercedes-Benz owner Daimler, to delay emissions-cleaning technology.

The European Commission said that the carmakers had “breached EU antitrust rules by colluding on technical development in the area of nitrogen oxide cleaning”.

Volkswagen, the world’s largest manufacturer of cars, will pay €502m, a reduction of more than half the original fine because it cooperated with the investigation. BMW will pay €372m, far lower than the provision for well over €1bn that it had initially made. Daimler escaped without a fine because it had revealed the cartel to the commission.

Renewed fears over the pandemic hit the markets today, says Danni Hewson, AJ Bell financial analyst:

Global markets have chosen today to price in the dawning realisation that COVID isn’t nearly done damaging lives and economies. Case numbers are rising and it doesn’t matter how loudly politicians shout about “recovery” and relaxation of restrictions there is a very real possibility that living with this disease will require a few more U-turns.

One of the stocks bucking the selloff was British Airways owner IAG (up 0.3% at the close), after the UK government announced it will scrap quarantine rules for fully vaccinated travellers arriving from amber-list countries later this month.

Hewson adds:

Scrapping isolation requirements for fully vaccinated passengers to amber list countries won’t altogether “save summer” for the beleaguered travel industry but it will help. Prices to popular tourist hotspots are already rising as cash strapped businesses attempt to claw back some of their massive losses. But with the added costs of tests to contend with, the hikes will likely push foreign travel out of range for some families this year.

“And inflation isn’t just on the minds of people hoping for a Spanish sojourn or a Greek getaway. Wall Street’s seen some pretty substantial falls. A response to rumblings from the Fed that rising prices might require them to act more quickly than had previously been anticipated. As messages go it’s not subtle but will certainly hammer home the point investors don’t feel the economy is strong enough for support to be withdrawn or even reduced. And a slight uptick in the number of new benefit claimants couldn’t have come at a better time for those seeking to reassure central bankers that the current policy is the right one.

Europe’s stock markets also had a rough day, with the Stoxx 600 falling 1.7% - its biggest one-day drop in two months.

In the City, the FTSE 100 index has posted its biggest one-day fall in almost three weeks.

The blue-chip index has shed 120 points, or 1.7%, to finish at around 7030 points, which is also its lowest close since 18 June - when fears over a rise in US interest rates hit markets.

Growth worries have pushed the yield (or interest rate) on 10-year US government bonds to their lowest since February.

10-year Treasury yields have dipped as low at 1.25%, as the recent rise in yields continues to reverse.

Lower bond yields signal that investors are less concerned about inflation and interest rate rises, and more jittery about the economic outlook....

The slide continues: 10-year Treasury yield falls below 1.3% in trading this morning: pic.twitter.com/6RZUTyr7S4

— James Picerno (@jpicerno) July 8, 2021

Dow futures drop nearly 500 points on concerns about the global economic comeback, bond yields slide

U.S weekly jobless claims unexpectedly rise to 373,000, as job growth slows

10-year Treasury yield falls to 1.25% amid concerns about economic growth, Covid variant$SPY $QQQ pic.twitter.com/YjtoIFGJLA

— Peter (@MyStockNewsfeed) July 8, 2021

Updated

COVID fears in part driving bond market rally

CHART: Covid-sensitive stocks vs US 10 year yield via Standard Chartered #ChartAttack pic.twitter.com/QZXWss1Sjx

— Amber Kanwar (@amberkanwar) July 8, 2021

CNBC is reporting that scientists and other health experts are warning that indoor mask mandates and other public health measures will probably likely make a return in some parts of the United States this fall, as the highly transmissible delta variant continues to spread rapidly across the US (and in other countries, such as the UK).

Here’s a flavour:

“I could foresee that in certain parts of the country, there could be a re-introduction of indoor mask mandates, distancing and occupancy limits” in the coming months, said Lawrence Gostin, director of the World Health Organization’s Collaborating Center on National and Global Health Law.

He said he fears there will be “major outbreaks” in the U.S. this fall, especially in states with low vaccination rates.

“We are heading for a very dangerous fall, with large swaths of the country still unvaccinated, a surging delta variant and people taking off their masks,” he added.

U.S. companies may want to rethink those return-to-work plans this fall, especially in states with low vaccination rates.

U.S. heading for 'dangerous fall' with surge in delta Covid cases and return of indoor mask mandates https://t.co/stpJLGtTeP by @BerkeleyJr

— Dawn Kopecki (@Dawn_Kopecki) July 8, 2021

This chart shows how the number of Americans filing for unemployment insurance remains much lower than earlier in the pandemic - although still above pre-Covid levels:

New #jobless claims rose by 2K to 373K during the week ending 3 July. Continuing claims fell by 256K to 3.339 million and the unemployment rate for the week ending 26 June eased 0.1 percentage points to 2.4%. pic.twitter.com/viqNcuEu7F

— Dr Thomas Kevin Swift (@DrTKSwift) July 8, 2021

Almost all the 30 stocks on the DJIA are lower.

Financial stocks Goldman Sachs (-2.9%) and American Express (-2.67%) are leading the fallers, followed by Apple (-2.2%).

Industrial stocks are also weaker, with construction machinery maker Caterpillar down 2.1% and airline group Boeing losing 2%. Chemicals firm Dow Inc, another stock sensitive to global growth worries, are down 1.9%.

US stock market falls

Wall Street has joined the selloff, with heavy losses at the open as growth worries hit markets.

The Dow Jones industrial average has dropped by around 496 points, or 1.4%, to 34,185 points in early trading.

The broader S&P 500 index is down 1.5%, shedding 65 points to 4,293 points, away from this week’s record highs.

The tech-focused Nasdaq Composite is also sharply lower, down 1.8% or 262 points at 14,402 -- away from its own record highs earlier this week.

Stocks drop https://t.co/Xhun7cgxyE pic.twitter.com/ZP9MGnoU6m

— Bloomberg Markets (@markets) July 8, 2021

U.S. stock indexes early Thursday headed for their worst day in weeks as yields on government debt extended a decline, with investors shying away from bets on a blistering economic recovery and rising inflation.https://t.co/a2ucmlGqIW pic.twitter.com/xhCAfoa4R9

— MarketWatch (@MarketWatch) July 8, 2021

Today’s data shows that the downward trend in jobless claims has flattened, says Greg Daco of Oxford Economics.

🇺🇸Small uptick in initial claims for #unemployment benefits in w-e Jul3

Regular claims
🟡373k (SA): +2k
🟡370k (NSA): +3k

25 states ⬇️ claims
Big ⬆️ in PA, NY, TX, CA, CO
Big ⬇️ in MA, MD, WA, CT & PR

PUA (NSA)
🟢99k: -15k

Total claims: 469k (NSA) but trend has flattened pic.twitter.com/NQe9bHLQNh

— Gregory Daco (@GregDaco) July 8, 2021

Over the next few weeks, we expect to see US continuing claims for #unemeployment benefits fall sharply:

1. Improving labor market recovery
2. Many states are ending emergency unemployment benefits early (PUA + PEUC + federal $300/week top-up) pic.twitter.com/tOo0I4CUVe

— Gregory Daco (@GregDaco) July 8, 2021

The number of Americans receiving unemployment insurance for at least two weeks dipped to its lowest level since March 2020.

The continuing claims total decreased to 3.34 million in the week to June 26, down 145,000. That drop could be caused by people moving into work, or though their benefits expiring.

But, there are still over 14m people on various unemployment support packages, even though some states are ending some stimulus help early, arguing they are deterring people from taking up the record number of vacancies [worries about Covid-19, childcare responsibilities, and a skills/opportunities mismatch are also factors].

insured unempl is regular state UI for the week ending 6/26

claims in "all programs" are for week ending 6/19: 14.2 m, including

5.8 million Pandemic Unemployment Assistance (PUA),
4.9 m PEUC for those exhausting state UI, and
0.1 m EB https://t.co/2jYK1fObR0… 2/6 pic.twitter.com/iuHQtD2cxI

— Chad Stone (@ChadCBPP) July 8, 2021

73% of all claims in week ending 6/19 are in programs (PUA and PEUC) extended thru 9/6 by American Rescue Plan Act, but many states are cutting off these fully federally funded benefits before that https://t.co/vEBp6IJ03m p.3 https://t.co/PlZMgY3TOF
3/6 pic.twitter.com/6ka2MZuFhk

— Chad Stone (@ChadCBPP) July 8, 2021

US jobless claims rise unexpectedly

The number of Americans filing new claims for unemployment benefit has risen unexpectedly - which may fuel concerns that the growth rebound is fading.

There were 373,000 initial claims for jobless support last week, more than expected (but still near a pandemic low) and a rise of 2,000.

The previous week’s total has been revised higher too, from 364,000 to 371,000.

Economists had expected jobless claims to fall to around 350,000 (these figures are seasonally adjusted), as the recovery in the labor market continued and the vaccine rollout helped companies to reopen.

Unemployment Insurance Weekly Claims

Initial claims were 373,000 for the week ending 7/3 (+2,000).

Insured unemployment was 3,339,000 for the week ending 6/26 (-145,000).https://t.co/ys7Eg5LKAW

— US Labor Department (@USDOL) July 8, 2021

Claims are still much lower than earlier in the pandemic (a year ago, 1.4 million Americans filed new unemployment claims). The average weekly jobless claims over the last four weeks hit the lowest since the pandemic began, at 394,500.

Splitting out seasonal adjustments, and jobless claims rose last week by over 3,000 to 369,661. In addition, another 99,001 self-employed workers and freelancers filed new claims for through the Pandemic Unemployment Assistance.

Last week, 373,000 filed initial unemployment claims, an increase of 2,000 from the previous week's revised level.

4-week moving average was 394,500, the lowest level for average since March 2020.

99,001 initial claims for Pandemic Unemployment Assistance (gig/self employed)

— Sarah Ewall-Wice (@EwallWice) July 8, 2021

This small uptick last week may show that the steady fall in claims since the vaccine rollout spurred growth is fading....

Is the slide in jobless claims fading? Unclear, but today's weekly update shows a slight uptick in new claims for last week to 373,000. That's still near a pandemic low, but by the pre-pandemic standard new filings for jobless benefits remain elevated: https://t.co/nHlTGbiNSc pic.twitter.com/5BIKWkGk84

— James Picerno (@jpicerno) July 8, 2021

Updated

Carsten Brzeski of ING says the ECB has turned more structurally dovish today, with its new symmetric 2% inflation target.

The ECB just announced the long-awaited results of its strategy review - one of ECB President Christine Lagarde’s flagship projects when she came into office.

In short, the most significant but not unexpected change is the modification to its numerical inflation target from ‘below, but close to 2%’ to a ‘symmetric 2% target’ over the medium term.

This is the third time the ECB has changed its definition of price stability. Back in 1998, it started with ‘below 2%’, in 2003 it became ‘below, but close to 2%’. This longer-term development clearly marks a gradual trend towards more (even if it is subtle) dovishness.

The ECB has tweaked its inflation target, signalling a more dovish outlook, says @carstenbrzeskihttps://t.co/DI4veMcEoV

— ING Economics (@ING_Economics) July 8, 2021

Brzeski adds that adding the cost of owner-occupied housing into the ECB’s inflation thinking could give it more room to ease policy in the future:

Including real estate prices at a moment of elevated price levels could have built an additional easing bias into monetary policy in the coming years.

Updated

ECB pledges greater role in fighting climate change

The European Central Bank has also pledged to give more weight to the climate crisis when setting monetary policy in the eurozone.

Under a new “new action plan”, the ECB will shift its asset-purchase stimulus programme away from heavy carbon-emitting companies which are not aligned with the EU’s climate goals.

It will also make adjustments to disclosure rules and risk assessment.

The ECB’s Governing Council says:

Addressing climate change is a global challenge and a policy priority for the European Union. While governments and parliaments have the primary responsibility to act on climate change, within its mandate, the ECB recognises the need to further incorporate climate considerations into its policy framework.

Under this new plan, the ECB commits:

  • to further incorporating climate change considerations into its monetary policy framework;
  • to expanding its analytical capacity in macroeconomic modelling, statistics and monetary policy with regard to climate change;
  • to including climate change considerations in monetary policy operations in the areas of disclosure, risk assessment, collateral framework and corporate sector asset purchases;
  • to implementing the action plan in line with progress on the EU policies and initiatives in the field of environmental sustainability disclosure and reporting.

"The ECB will adjust the framework guiding the allocation of corporate bond purchases to incorporate climate change criteria, in line with its mandate."
Devil will be in the detail, but this is a big step forward by the ECB.https://t.co/K1xgmghXRd

— josh ryan-collins (@jryancollins) July 8, 2021

The plan means that the ECB will adjust the framework under which it buys corporate bonds through its stimulus programme to incorporate climate change criteria, and the commitment to net zero:

“These will include the alignment of issuers with, at a minimum, EU legislation implementing the Paris agreement through climate change-related metrics or commitments of the issuers to such goals.”

It will also consider climate risks when reviewing which assets it accepts as collateral from banks:

Collateral framework. The ECB will consider relevant climate change risks when reviewing the valuation and risk control frameworks for assets mobilised as collateral by counterparties for Eurosystem credit operations. This will ensure that they reflect all relevant risks, including those arising from climate change.

It will also start conducting climate stress tests of the Eurosystem balance sheet in 2022 to assess the Eurosystem’s risk exposure to climate change.

The ECB insists that climate issues falls within its remit, as the transition to net zero and the climate crisis will have an impact on inflation, output, employment, interest rates, investment and productivity; financial stability; and the transmission of monetary policy.

It will also affect the value and the risk profile of the assets held on the Eurosystem’s balance sheet, potentially causing climate-related financial risks to pile up, it says, adding:

With this action plan, the ECB will increase its contribution to addressing climate change, in line with its obligations under the EU Treaties.

Economics professor Daniela Gabor argues the ECB should have gone even further:

so @ecb new climate strategy is out, and it's letting down those of us who expected an ambitious approach.
in my view, far less ambitious than Bank of England's. pic.twitter.com/2OpYEBIEqy

— Daniela Gabor (@DanielaGabor) July 8, 2021

1. ECB chose a 'risk framework' that emphasises risks that climate crisis poses to private finance, not the ways in which dirty lending accelerates climate crisis

ECB wastes chance to support Commission in its double materiality efforts.
private finance will be happy

— Daniela Gabor (@DanielaGabor) July 8, 2021

2. ECB conceives transition risks - those risks to private finance from policies to address climate crisis - as entirely fiscal policy related (carbon prices)

but what about transition risks stemming from ECB decisions to decarbonise collateral & corporate bond purchases? pic.twitter.com/VRGsCufi2i

— Daniela Gabor (@DanielaGabor) July 8, 2021

3. Despite calls from @Europarl_EN for @ecb to develop dirty taxonomy because Commission has dropped it under pressure from vested political interests

ECB interested in defining green instruments, but not dirty ones.

subsidise green now, penalise dirty later/never pic.twitter.com/j4n7XyQlTk

— Daniela Gabor (@DanielaGabor) July 8, 2021

Decarbonisation of collateral framework entirely through a risks framework.

here we see how central bank politics and private finance preferences align:

risks framework essentially justifies ECB doing less to accelerate decarbonisation of private finance pic.twitter.com/SbQXJlOENT

— Daniela Gabor (@DanielaGabor) July 8, 2021

the most encouraging is the Corporate Bond purchase program, but remember, this is a crisis intervention, whereas collateral framework is an all weather, and therefore stronger decarbonisation instrument pic.twitter.com/IbhyNSt1O2

— Daniela Gabor (@DanielaGabor) July 8, 2021

On the other hand, historian Adam Tooze argues that the ECB deserves credit for making such a move.

This is devastating in its technical precision from @DanielaGabor and necessary. BUT come on. Let's pinch ourselves. Sure, not Bank of England. But, in 2019 did we think we would get this much from ECB given Weidmann's position at that point? Credit to @Isabel_Schnabel and team! https://t.co/qirJRZGB2F

— Adam Tooze (@adam_tooze) July 8, 2021

Of course @DanielaGabor is right. And devil is in detail. But I remember making a bet with myself back in summer of 2019: "If they open the neutrality question, I will pop a cork". This is an opening! I am popping a cork. https://t.co/zLjUQNIbmI

— Adam Tooze (@adam_tooze) July 8, 2021

ECB sets symmetric 2% inflation target: early reaction

The ECB’s new symmetric 2% inflation target gives the central bank ample room to run accommodative monetary policy for longer without having to fight markets, says Ima Sammani, FX market analyst at Monex Europe:

“The highly anticipated news has helped EURUSD climb higher over the course of today’s session, rebutting the broader G10 market move into haven currencies, as concerns over growth remain prevalent.

By committing to a policy stance that will be growth supportive over the recovery period, the euro is merely reacting to the prospect of downside risks to the growth outlook dissipating somewhat.”

Reuters is rounding up reaction here.

Here’s a flavour:

Christoph Rieger, head of rates & credit research at Commerzbank:

“The inclination to tolerate higher inflation is deeply rooted in the ECB’s thinking. They are stressing the importance of having an inflation buffer.

“There is a justification for them to act forcefully against low-inflation risks that they see arise.

“Tying this with some of the other colour we’ve seen from the ECB of late underlines that it is determined to keep policy loose and allow inflation to establish itself at higher levels.

Colin Asher, senior economist at Mizuho:

“Clearly the ECB is moving in a sensible direction. In the past the ECB has tightened rates prematurely a couple of times and this means the risk of such a mistake in future is small.

But while the ECB is moving in a dovish direction, it is being outpaced by the Fed which has already adopted a formal inflation targeting framework and is actively trying to run the economy hot.”

And Frederik Ducrozet of Pictet Asset Management tweets:

Your usual reminder that a "transitory" period of "moderate" inflation overshoot is not going to change the big picture given past misses.
One needs inflation to *average* 3.3% over the next *6-7 years* to get back to a price level consistent with 2% average inflation since 2012. pic.twitter.com/VtWYOE7ibj

— Frederik Ducrozet (@fwred) July 8, 2021

Bottom line: the ECB's strategy review yields no surprise but a basis for more efficient policy. Any inflation overshoot is only as credible as the instruments to achieve it. The most sensitive questions have been left aside (👋issuer limits) but are likely to come back. https://t.co/tajg0BDFSj

— Frederik Ducrozet (@fwred) July 8, 2021

That's the ECB trying to say GUYS. LOOK. WE REALLY REALLY ARE GOING TO BE CHILLED ABOUT A *MODERATE* OVERSHOOT. BELIEVE US. PLEASE. pic.twitter.com/ACNfcLdMkr

— Soumaya Keynes (@SoumayaKeynes) July 8, 2021

ECB adopts new inflation target

The European Central Bank has lifted its inflation target, giving it more flexibility to stimulate the eurozone economy without breaking its commitment to price stability.

After reviewing its monetary policy strategy, the ECB decided to aim for a 2% inflation target over the medium term (as the Bank of England already does, for example).

Previously, the ECB had aimed to keep inflation below, but close to 2%, so this change would allow it to engage in deeper, or longer stimulus measures if required.

The new target is ‘symmetrical’, meaning that falling below 2% inflation is just as undesirable as rising above it.

Explaining the new policy, the ECB signals that it would accept a period of moderately above-target inflation, to avoid low inflation becoming ‘entrenched’:

When the economy is operating close to the lower bound on nominal interest rates, it requires especially forceful or persistent monetary policy action to avoid negative deviations from the inflation target becoming entrenched.

This may also imply a transitory period in which inflation is moderately above target.

Here's the most important part about inflation overshoot, "a transitory period in which inflation is moderately above target". pic.twitter.com/KyLB00LrYQ

— Frederik Ducrozet (@fwred) July 8, 2021

The ECB has long struggled to raise inflation to target -- although CPI did hit 2% in May, for the first time in two years. The old target had created concerns that the ECB was more concerned about exceeding the target, rather than undershooting it.

The Bank has also acknowledged today that eurozone inflation measures should include a measure of owner-occupied housing costs, to “better represent the inflation relevant for households”.

But, adding that to the Harmonised Index of Consumer Prices (HICP) will take time...

So in the meantime, the Governing Council in its monetary policy assessments will take into account inflation measures that include initial estimates of the cost of owner-occupied housing to supplement its set of broader inflation measures.

The ECB is also rethinking its measure of inflation.

Today they confirmed that they'll still go with the HICP, (what they were using before).

But over time, they want it to include a measure of the price of owner-occupied housinghttps://t.co/dysy3ZVTEZ

— Soumaya Keynes (@SoumayaKeynes) July 8, 2021

Which, according to the @ecb itself, would have added ZERO inflation in the past. It my change in the future, but it may as well be deflationary at some point. https://t.co/Rd7aN64VeR pic.twitter.com/AEUBsC9b8o

— Frederik Ducrozet (@fwred) July 8, 2021

Christine Lagarde, President of the ECB, who launched the review back in January 2020 shortly after joining the bank, says:

While taking the ECB’s primary mandate of price stability as a given, the review has allowed us to challenge our thinking, engage with numerous stakeholders, reflect, discuss and reach common ground on how to adapt our strategy.

The new strategy is a strong foundation that will guide us in the conduct of monetary policy in the years to come.”

🚨 ECB adopts symmetric 2% target but very opaque on overshoot element. Best we get is a line that ECB will allow a "transitory period" of inflation above target. Interesting that ECB highlighting policy rates are key tool (ie, distancing from QE and balance sheet policies) $EUR pic.twitter.com/VCMmZBnEIW

— Viraj Patel (@VPatelFX) July 8, 2021

Updated

Travel news: the UK government announced that holidaymakers from England returning from amber list countries will not have to quarantine if they are fully vaccinated.

Transport secretary Grant Shapps announced the change, which will take effect from 19 July.

Update: Shares in IAG (+1.7%), which owns British Airway, and budget airline easyJet (+1.3%) have risen on the news, bucking the wider selloff in the market.

Shapps says an amber list country could still turn red - warning that travel in 2021 will be nothing like 2019, ie. expect delays, and sudden changes.

— Latika M Bourke (@latikambourke) July 8, 2021

It could open up swathes of European tourist destinations such as Spain, Portugal and Greece to travellers, though countries could impose their own quarantine rules on arrivals from England, my colleague Jessica Elgot reports:

The move is also likely to mean younger travellers may be excluded from many summer breaks. The government currently aims to have offered two vaccinations – with an eight-week gap – to all over-18s by mid-September.

The change will potentially open up travel to 140 amber list countries, including the majority of tourist destinations, though some countries impose strict limits on UK travellers and even those that allow quarantine-free travel may require significant paperwork or negative tests.

Travellers will still have to take pre-departure tests and will be required to take a PCR test on day two of their return. It will mean the requirements for green and amber list countries are the same. The government will count full vaccination as meaning 14 days have passed since the final dose of a vaccine.

Children under 18 arriving from amber list countries will not have to isolate on the return.

"Children under 18 returning from amber list countries would not have to isolate"

Transport Secretary Grant Shapps - setting out changes to travel rules in England - says children between the ages of five and 10 will only have to take a day-two testhttps://t.co/lb3bZByelc pic.twitter.com/Ba9pB9ApNl

— BBC News (UK) (@BBCNews) July 8, 2021

Updated

The UK’s index of medium-sized firms, the FTSE 250, has dropped this morning.

It’s down 1.2% at 22,693 points, away from the record high set earlier this week.

Travel firms are among the larger fallers, such as cruise company Carnival (-3.8%) and ticketing firm Trainline (-3.6%). High-end manufacturer Oxford Instruments, tech investor Allianz Technology Trust (-3.4%) and bank Virgin Money are also lower.

Concerns over economic recovery hitting shares

Wall Street is also heading for a lower open, according to the futures market, as investors continue to ditch shares in favour of bonds:

S&P 500 INDEX FUTURES RETREAT 1.5%
NASDAQ FUTURES DOWN 1.1%, DOW FUTURES DOWN 1.1%#XGlobalMarkets #spx #Index #stocks #Nasdaq #DowJones

— XGLOBAL Markets (@xglobalmarkets) July 8, 2021

US government bond yields are continuing to fall, as bond prices rise -- a sign that investors are less concerned about inflation and more worried about growth.

Treasury 10-year bond yields just hit 1.25%.

Reassuringly expensive. pic.twitter.com/10j7bK53Ly

— Stephen Spratt (@StephenSpratt) July 8, 2021

US 10-Year yields finally broke through a Year strong trendline, opening up to a lot more potential downfall. Remember it is inversely correlated with Gold pic.twitter.com/a0Q5TZY8AJ

— Nassim Baaziz (@NasTrades) July 8, 2021

Sophie Griffiths, market analyst at OANDA, says the mood in the markets is starting to sour:

Concerns over the health of the economic recovery are denting risk sentiment and hitting demand for stocks even as the Federal Reserve moves towards tapering asset purchases.

Inflation concerns and fears that the Federal Reserve could move to start tightening monetary policy have been lingering over the past few weeks, particularly since its hawkish shift at the June meeting.

The minutes from the Fed’s June policy meeting confirmed that the central bank is moving towards tapering its asset purchases, potentially as soon as this year. However, the minutes also revealed that more evidence of a robust economic recovery would be needed to set a more defined timeline for tapering.

Interestingly the minutes come as the bond market continues to show traders are increasingly less concerned with the risk of rising inflation and interest rate rises. This is pretty much the polar opposite of what some Fed policymakers appear to be worried about when they adopted the view of two interest rate rises in 2023. This certainly isn’t the first time the bond market and the Fed have been out of sync this year. Today, bond yields continue to slump lower. The yield on the 10-year treasury has tumbled to 1.26%, a fresh four-month low.

The overriding concern being reflected in the bond market is that peak growth has been reached, and the benefits from fiscal policy are starting to fade. Recent data has been disappointing. The Citigroup Economic Surprise Index is at its lowest level since February.

Banks in Europe are taking the biggest hit on the back of falling government bond yields. Other cyclical stocks such as automotive and miners are also firmly out of favour on global growth concerns.

FTSE 100 selloff deepens amid growth worries

Back in the markets, the selloff is picking up, with the FTSE 100 index now down 130 points or 1.7% at 7020 points, its lowest since 30th June.

Nearly every stock is lower, led by Persimmon (-4%), hotel operator Whitbread (-4%), Barclays bank (-4%), manufacturing company Melrose (-4%), followed by miner Anglo American (3.75%) and catering group Compass (-3.6%).

Concerns over the strength of the economic recovery appear to be rising -- with some recent economic data signaling that growth may have peaked [China’s factory growth slowed last month, as did America’s service sector].

Anxiety over the delta variant may also be hurting hospitality and travel firms, as Covid-19 cases continuing to rise. The global coronavirus death toll passed four million late on Wednesday.

Russ Mould, investment director at AJ Bell, says:

Miners and banks are the principal sectors weighing on the index, suggesting that investors have started to worry again about the strength of the economic recovery.

Miners’ fortunes are heavily tied to commodity prices and the cost of metals and minerals is typically determined by supply and demand for industrial projects around the world.

“Banks are also heavily influenced by economic activity. A strong period of growth means there could be greater opportunities to lend money to businesses and such a backdrop might also point to rising interest rates which increases the chance for the banking sector to make higher profit margins. If the economic outlook is not as strong, then investors start to go off banks for fear that it will be harder for them to push up earnings.

“A pullback in the oil price is also bad for the FTSE 100 given how oil producers Royal Dutch Shell and BP are major constituents of the stock index and a decline in their share prices acts as a drag on the UK market. Both Shell and BP’s shares were weak as Brent Crude prices lost their shine, with the black stuff falling 0.5% to $73.09 per barrel.

“In Asia, Hong Kong’s Hang Seng slumped by nearly 3% as Chinese tech stocks experienced a major sell-off amid fears of further regulatory interference.

Updated

In the housebuilding sector, Persimmon sales rose above pre-pandemic levels in the first half of 2021, as tax cuts and booming British house prices continued to benefit housebuilders.

The UK’s largest housebuilder said this morning that revenues reached £1.84bn in the first six months of 2021, outstripping the £1.75bn recorded in the same period of 2019. Persimmon’s sales had dropped to £1.2bn during the first half of 2020.

The housing industry had feared financial difficulties in 2020 when home sales were temporarily blocked during the UK’s first national lockdowns. However, the government quickly stepped in to prevent house prices falling, announcing an emergency cut in stamp duty...

More here:

The number of international arrivals and departures at UK airports rose last week, but remained sharply below pre-pandemic levels.

The ONS reports that the average number of daily flights increased by 8% last week (to Sunday 4th July) to 2,126 flights, around a third of the level in the equivalent week of 2019.

That follows the introduction of the ‘traffic light’ system in May, under which people were allowed to travel, but must self-isolate when returning from an amber country, or quarantine from a red one.

In the week ending 4 July 2021 there was an average number of 2,126 daily flights, an increase of 8% from the previous week’s daily average.

This is still only around a third of the level in the equivalent week of 2019 https://t.co/49K6FQ0eoJ pic.twitter.com/1HtXYIV5i5

— Office for National Statistics (ONS) (@ONS) July 8, 2021

The ONS explains:

In early 2021, flights remained steady at around 1,000 per day (around 20% of their equivalent 2019 levels). From mid-May 2021 and as the green list of countries was introduced (17 May 2021), flights have gradually increased.

In the week to 30 May 2021, the seven-day average number of daily flights was at its highest since the week ending 20 December 2020, at 1,704. This coincided with the UEFA Champions league final in Portugal on 29 May 2021. In the following week, there was a further high of 1,920 daily flights on average, just ahead of the change in the “traffic-light” status of international travel on 8 June 2021, which saw Portugal removed from the green list.

In the week ending 4 July 2021, the seven-day average number of daily flights was 2,126. This is an increase of 8% on the previous week, which was at 1,970. This is more than twice as high as the corresponding figure for the equivalent week in 2020, but still only around a third of the level seen in the equivalent week of 2019

The share of UK workers on furlough has fallen again, while the number of job adverts continues to rise as the economy reopened.

UK businesses surveyed by the Office for National Statistics reported that 5% of their workforce remained on furlough in the last two weeks of June.

That’s down from 6% in the previous two-week period, and the lowest since the job retention scheme started more than a year ago. Furlough started to wind down this month - with firms now paying 10% of staff wages, and the government’s share dropping from 80% to 70%.

The ONS’s latest weekly check on the economy also found that the total volume of UK online job adverts had increased by 4% in the last week (measured on Friday 2 July 2021), and was 35% higher than in February 2020.

That’s the first “notable increase” in the volume of online job adverts for five weeks, the ONS says:

The largest weekly increase was in “wholesale and retail”, which rose by 19%. This is the second consecutive week that this category has seen a notable increase. Another noteworthy increase was in “domestic help”, which rose by 11% from last week after five weeks of broadly stable levels (since 28 May).

The ONS also reports that consumer spending picked up, although eating out has eased off.

  • In the week to 1 July 2021, the aggregate CHAPS-based indicator of credit and debit card purchases increased by 3 percentage points from the previous week, to 96% of its February 2020 average (Bank of England CHAPS data).
  • In the week to 5 July 2021, the seven-day average estimate of UK seated diners fell by 5 percentage points compared with the previous week, to 119% of its level in the equivalent week of 2019 (OpenTable)

Updated

Deliveroo raises sales forecast after ‘strong growth’ in 2021

The takeaway delivery company Deliveroo has raised its forecasts for sales this year after “strong growth” during the first six months of 2021, a period that included its rocky stock market listing.

Deliveroo said on Thursday it expected the value of transactions through its platform during 2021 to be between 50% and 60% higher than 2020, suggesting that total transactions could be worth well over £6bn for the year.

The company’s fortunes have been transformed since the start of the coronavirus pandemic. In April 2020 Deliveroo warned there had been a “significant decline in revenues” when UK governments imposed national lockdowns. Yet by the end of the year it was preparing to float its shares on the London Stock Exchange as repeated lockdowns boosted demand for home delivery.

Transaction volumes on Deliveroo’s platform increased to £1.7bn in the second quarter of 2021. That was a 76% rise compared with the April to June period in 2020, and an increase of £100m compared with the first three months of 2021.

Here’s Jasper’s full story:

Shares in Deliveroo have risen 3% this morning to 330p - their highest level since their opening day plunge on 31st March. But that still leaves them around 15% below their 390p float price....

Tech selloff sends Hong Kong market to six-month low

Hong Kong’s stock market has fallen to its lowest level since January, driven down by the selloff in technology shares after Beijing’s clampdown.

The Hang Seng index has closed down 2.9%, shedding 807 points to 27,153 points, its lowest since the first week of the year.

An index of tech stocks listed in Hong Kong slumped to their lowest level since last October with technology giant Tencent closing 3.7% lower, and e-commerce players Alibaba losing 4.1%, and JD.com losing 3.6%.

Regulatory worries hit the market, explains Reuters:

China’s market regulator said on Wednesday it had fined a number of internet companies including Didi Chuxing, Tencent and Alibaba for failing to report earlier merger and acquisition deals for approval, according to a statement on the website of the State Administration of Market Regulation (SAMR).

Amid persistent regulatory worries, Linus Yip, chief strategist at First Shanghai Securities said “those leading tech companies are still in the process of seeking a bottom.”

China State Council’s pledge to do more to support the real economy also dampened the mood, as it may signal the recovery is slower than expected.

Oil has fallen to its lowest level in about three weeks, amid growing uncertainty over supplies after the Opec+ group failed to agree a production deal this week.

Brent crude has dropped by 1.5% today to $72.30 per barrel, extending this week’s losses.

Brent had hit a near-three year high of $77.84 on Monday, after Opec and its allies couldn’t back a gradual increase in production, meaning supplies would remain tight.

But it has since weakened, amid speculation that the current production cuts agreement could collapse, leading to a surge of oil onto the market, knocking prices (and easing some inflationary pressures).

#Oil's dropped a lot since the #OPEC+ meeting was cancelled on Monday. Brent's down 6%. Seems like, one way or another, the market thinks more supply's coming. Maybe OPEC+ patches up its differences and boosts in August, or it doesn't and discipline wanes. https://t.co/iFmWBZ1c7C pic.twitter.com/uganpX3spB

— Paul Wallace (@PaulWallace123) July 8, 2021

European markets fall sharply

European markets have fallen sharply into the red this morning.

The FTSE 100 has fallen by around 95 points, or 1.3%, to around 7056 points - a one-week low.

Mining companies, financial stocks, energy firms and consumer goods and service makers are leading the selloff in London.

Anglo American (-3.6%) which produces platinum, copper, nickel, iron ore, coal and diamonds, is the top faller, followed by copper giant Antofagasta (-3.1%).

NatWest bank are down 3%.

Neil Wilson of Markets.com sums up the situation:

Asian shares were broadly weaker overnight, with a steep fall in South Korea registered as daily Covid cases there surged.

Bonds are still bid as weaker hands get washed out with the 10yr Treasury note yielding 1.28%, a new 5-month low in the wake of the Fed meeting minutes - it’s either sending a warning signal or it’s just a flush before the move higher.

US stock markets were mildly higher yesterday, with futures pointing to a drop at the open. Apple shares hit a fresh record, whilst meme stock favourites such as GME, WISH and AMC fell sharply. In London, money transfer app Wise got off to a solid start as shares rallied on the first day of trade. Shares in troubled Chinese ride hailing app Didi fell another 5% as it faces a lawsuit from US shareholders.

Minutes from the FOMC’s meeting in June showed pretty much what we knew; policymakers are moving but with a degree of caution.

“Various participants mentioned that they expected the conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had anticipated” but it is “their intention to provide notice in advance of an announcement to reduce the pace”.

Meanwhile China is back in the game – the State Council issued a statement saying it would seek “to increase financial support to the real economy” by using “monetary policy tools such as RRR cuts”.

Updated

Chinese ride-hailing giant Didi Global is also facing legal action from US shareholders after Beijing’s crackdown sent its shares slumping this week.

Didi is accused of misleading investors who took part in last week’s stock market float, which took place shortly before regulators accused Didi of violating privacy laws, and forced it to stop adding new users.

The BBC explains:

The lawsuits, which were filed in federal court in New York and Los Angeles on Tuesday, say Didi failed to disclose ongoing talks it was having with Chinese authorities about its compliance with cybersecurity laws and regulations.

The complaints named Didi’s chief Executive officer Will Wei Cheng and several other executives and directors. The lead underwriters for the company’s share sale - Goldman Sachs, Morgan Stanley and JPMorgan Chase - were also named as defendants.

The BBC adds:

According to Bloomberg, which cited people familiar with the matter, Chinese regulators asked Didi to delay its share sale due to cybersecurity concerns as long as three months ago.

In Didi’s prospectus, which was made available ahead of the IPO, the firm warned potential investors that their ability to protect their “rights through US courts may be limited, because we are incorporated under Cayman Islands law.”

The document also mentioned some of the regulatory risks to its operations, but gave no indication that the CAC would start investigating the firm and ban it from accepting new users.

China's bond yields slide on RRR rate cut suggestion

Anxiety over China’s recovery is also weighing on the markets today, after the country’s cabinet pledged do to more to support the economy.

A State Council executive meeting chaired by Premier Li Keqiang decided on Wednesday to increase the financial support for the real economy, particularly for micro, small and medium-sized enterprises

The Council, China’s equivalent of a cabinet, also flagged that People’s Bank of China could make more liquidity available to banks to boost lending, through timely cuts in the bank reserve requirement ratio (RRR).

Lowering RRR would allow banks to keep less capital in reserve, and lend more to businesses.

China's cabinet says it will use RRR cuts to support real economy https://t.co/E79jYzUKlr

— Reuters China (@ReutersChina) July 8, 2021

That’s something of a u-turn, as policymakers had been tightening policy as its economy recovered.

China Daily has more details:

Such measures are expected to mitigate the impact of commodity price hikes on the operation of companies, the meeting said, adding that the country will refrain from mass stimulus, maintain the stability of monetary policy and enhance its effectiveness.

The meeting also decided to roll out monetary tools to support carbon emission reduction, and provide incentives for more private funds to finance the cuts.

China’s government bond prices have jumped, pushing down the yield, implying investors are anticipating monetary policy easing, and worrying about softer growth.

China’s State Council held an executive meeting Wednesday to discuss RRR cuts. Any future RRR cuts will be part of a policy package to stabilise growth from the supply side, but will pose downside risks to market interest rates, in our view. #MonetaryPolicy #PBoC #ChinaRRR pic.twitter.com/222pFkgnB4

— ANZ_Research (@ANZ_Research) July 8, 2021

Chinese 10 year rolling over in a big way.

U.S 10 year yields traded as low as 1.2890% today and cut through their 200 day EMA like a hot knife through butter yesterday.

If yields keep falling like this we are in for an interesting time. In theory we should see a bounce. https://t.co/9NWxXz8kOo pic.twitter.com/dS6jKu9BER

— Avid Commentator 🇦🇺 (@AvidCommentator) July 8, 2021

#China 10yr government bond yield dropping fast and likely to break 3% soon. #PBOC increased long rates quickly after Covid, decoupling from US. RRR cuts are also talked about. Economy is starting to weaken. pic.twitter.com/j9tCRrEdpd

— Sean Yokota (@seanyokota) July 8, 2021

Updated

Introduction: China tech crackdown weighs on markets

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

China’s crackdown on technology companies is hitting the markets again today, amid concerns that the rebound in global growth may be fading.

Stock markets across Asia have fallen to a six-week low after Beijing sent shockwaves through global financial circles with plans to tighten restrictions on overseas listings of Chinese companies, as it puts its tech giants under much tighter scrutiny.

China’s CSI 300 index has fallen over 1%, while Hong Kong’s Hang Seng has tumbled 2.75%, helping to pull the MSCI’s index of Asia shares outside Japan down 1% to its lowest since late May.

An index of tech shares in Hong Kong (where several of China’s biggest online giants are listed) fell 3.75%, and has now slumped by almost 12% over the last seven sessions.

Technology giants Tencent (-3.75% today) and Alibaba (-3.8%) have both fallen to their lowest levels of this year today.

Last night, shares in ride-hailing operation Didi slumped another 5% in New York, further below last month’s float price, having crashed 22% on Tuesday after regulators launched a probe into allegations it had illegally collected users’ personal data.

CNBC says the proposal to tighten restrictions on overseas listings could disrupt “a $2 trillion market loved by some of the biggest American investors”, and threaten IPO plans.

China is cracking down on domestic companies that list on U.S. exchanges — here's what you need to know. https://t.co/Rm5mNG0oUG

— CNBC (@CNBC) July 7, 2021

Beijing’s State Council said in a statement on Tuesday that the rules of “the overseas listing system for domestic enterprises” will be updated, while it will also tighten restrictions on cross-border data flows and security.

China’s market regulator also revealed yesterday it has fined a number of internet companies for failing to report earlier merger and acquisition deals for approval -- another ratcheting up of pressure.

Associated Press explains:

Companies including internet giants Alibaba and Tencent were fined Wednesday by anti-monopoly regulators in a new move to tighten control over their fast-developing industries.

In 22 cases, companies were fined 500,000 yuan ($75,000) each for actions including acquiring stakes in other companies that might improperly increase their market power, the State Administration for Market Regulation announced. It said violators include six companies owned by Alibaba Group, five by Tencent Holding and two by retailer Suning.com.

Kyle Rodda of IG says the clampdown is causing nervousness in the markets:

The Hang Seng has copped a fair whack today, as Hong Kong equities remain at the coal front of the Chinese Communist Party’s crackdown on big-tech, the private sector and, really, the region as a whole. That risk will eventually be priced-out of the market, when the CCP thinks it’s made its authority clear enough.

But while that brinkmanship persists, it’ll keep investors on their toes and perhaps away from investing in the region’s tech giants.

Investors are also pondering whether the recovery rebound is fading, after America’s service sector saw growth slow last month.

This has sent yields (or interest rates) on US government debt sliding, indicating traders are less worried about a surge of inflation forcing a tightening of monetary policy.

Treasury yields have dropped to a four-month low as a gauge of U.S. service-sector activity faltered, with short covering exacerbating the move.

The benchmark 10-year yield fell as much as eight basis points on Tuesday to print under 1.35%, the lowest level since Feb. 24. pic.twitter.com/lEY9Oz2iXf

— 有 you (@sakiop225) July 8, 2021

The minutes of the Federal Reserve’s latest meeting, released yesterday, show that officials held a vigorous discussion on whether the economic rebound in the US would soon be strong enough to justify slowing, or tapering, its pandemic-era stimulus measures.

Also coming up today

The European Central Bank is publishing the results of a strategy review today, which could see a change to its price stability target for the first time in almost two decades.

The current goal of inflation “below, but close to, 2%” could be replaced with a more flexible target, with more room to overshoot (although the ECB’s problem has been undershooting inflation).

The ECB is also expected to announce a green shift in its monetary policy, by tilting its asset purchase schemes and collateral rules away from companies with high carbon emissions without a plan to hit net zero by 2050.

Bloomberg explains:

Some officials were in favor of a precise goal of 2% with flexibility around it, while others preferred a policy closer to the Federal Reserve’s average inflation targeting.

A key tussle in the climate-change talks was over whether the ECB should stick to its principle of mirroring the composition of the market when buying bonds -- known as “market neutrality.” That was resolved when Bundesbank President Jens Weidmann signaled last month that he could support tilting purchases toward greener assets if it means protecting the balance sheet from climate and transition risks.

On Thursday at 13:00 CET, we will announce the results of our strategy review.
Watch live on Twitter from 14:30 CET as President @Lagarde and Vice-President de Guindos explain what the outcome is in a press conference. More info https://t.co/BKFbEcx37D pic.twitter.com/Gx4i1q9hlI

— European Central Bank (@ecb) July 7, 2021

The agenda

  • 9.30am BST: Economic activity and social change in the UK, real-time indicators, published by Office for National Statistics:
  • Noon BST: European Central Bank publishes results of its strategy review
  • 1.30pm BST: US weekly jobless figures
  • 4pm BST: EIA weekly oil inventory data

Updated

Contributors

Graeme Wearden

The GuardianTramp

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