FTSE 100 LIVE: Inflation falls to 0.5% in second full month of coronavirus lockdowns

Inflation was 0.8 percent in April — May’s figures represent a four-year low. The ONS said it struggled to compile inflationary figures for May as many areas of the economy were shut down due to COVID. 

Fuel prices suffered their biggest fall on record in May, tumbling by 16.7%,  while energy costs dropped 7% and clothing and footwear fell 3.1% as retailers resorted to heavy discounts amid the lockdown.

Other economic hopes lie in the Bank of England raising its asset purchase programme by at least £100bn this week to help financial markets stabilise during the period of huge government borrowing due to the pandemic.

The bank’s Monetary Policy Committee is expected to keep the benchmark rate unchanged at 0.1 percent, however economists predict it will extend its quantitative easing programme. The extra stimulus through an extension of QE is expected ahead of results of the BoE’s review of the possible introduction of negative interest rates later this year.

It comes as the UK central bank cut interest rates from 0.75 per cent to 0.1 percent earlier this year due to the pandemic, and also announced a £200bn new programme of QE.

This has meant the Treasury wasa able to issue big quantities of government debt.

Since March, the BoE has bought £148billion of existing gilts, or government bonds, currently at a rate of almost £14bn a week and also bought £152bn of newly issued gilts.

This has helped ensure the private sector did not have to increase its holdings of gilts substantially.

The cost of government borrowing has fallen, with debt sold at an interest rate of 0.2 per cent for the 10-year bond on Tuesday. 

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5pm update: The FTSE-100 index closes up 10.46 at 6253.25.

4pm update: The FTSE-100 index at 3.45pm was up 15.51 at 6258.30.

3.30pm update: Sweden to lift travel curbs to 10 European countries from June 30

Sweden will from June 30 lift its advice against non-essential travel to Greece, Croatia, Spain, Italy, Portugal, Slovenia, France, Iceland, Belgium, Switzerland and Luxembourg.

Foreign Minister Ann Linde told a news conference: “For other countries, the advice (against non-essential travel) still applies. Countries outside the EU and Schengen will be extended to August 31.” .

3pm update: The FTSE-100 index at 2:45pm was up 29.62 at 6272.41.

2.30pm update: US stocks open higher

US stocks rose after the opening bell as data suggested that the economy is on the up. 

Yesterday, data was released showing a record monthly gain in retail sales for May. 

There is also hope of new stimulus from the Fed. 

2pm update: Sterling holds steady

The pound at 2pm was 1.2553 dollars compared to 1.2584 dollars at the previous close.

The euro at 2pm was 0.8953 pounds compared to 0.8947 pounds at the previous close.

1pm update: Cuts at De La Rue

Bank note manufacturer De La Rue has announced plans to cut jobs, as it heads towards a restructuring focused on making plastic notes.

It plans on a funding round of £100million to fund this, while 260 jobs are on the line. 

12.10pm update: US stocks back up, FTSE continues rally

The FTSE-100 index at 11:45am was up 37.08 at 6279.87.

The Dow and S&P rebounded, both looking at gains of around 0.6 percent when the market opens later on. 

11.30am update: HSBC resumes job cuts

HSBC CEO Noel Quinn told staff in a memo seen by the Financial Times that the bank would “lift the pause on job losses”.

Before coronavirus struck 35,000 jobs were on the block at the bank globally. 

The restructuring comes following a fall in profits and darkening economic forecasts. 

11am update: US futures drop

US stocks ended their rally, as futures contracts for the S&P and Dow Jones Industrial Average started to drop. 

Fears of the coronavirus second wave disrupting business have taken the wind out of major indices sails, as caution returns to stock futures. 

10.50am update: Commerzbank slapped with huge fine

The UK’s financial regulator has fined Commerzbank £37.8million for failing to install adequate anti-money laundering systems and controls between October 2012 and September 2017.

FCA executive director of enforcement and market oversight, Mark Steward, said: “Commerzbank London’s failings over several years created a significant risk that financial and other crime might be undetected. Firms should recognise that AML controls are vitally important to the integrity of the UK financial system.”

Commerzbank London agreed to resolve the matter at an early stage of the investigation and therefore qualified for a 30 percent discount. Without the discount, the financial penalty would have been £54million. 

10am update: FTSE’s fruitful Tuesday

Yesterday, the FTSE 100 was led by 5% plus gains from names including Barclays, Just Eat and plumbing products distributor Ferguson.

Overall, only three firms out of the 100 in the index had a negative Tuesday, with two of those down less than 1%.

Despite the progress, the FTSE 100 remains down 17.2% year-to-date, still lagging well behind its US counterparts. In the FTSE 250, which closed out the day 2.2% higher, property developer Hammerson topped the table, with its share price closing 10% up.

9.45am update: Deflation fears flare

Ulas Akincilar, head of trading at the online trading platform, INFINOX, said: “For all the bullish talk about the reopening of England’s high street shops, consumer demand is reeling.

“Prices are falling in most of the goods and services tracked by the ONS as the economy skids towards deflation.

“Fragile demand and falling prices do not make a happy mix. Consumers hold off on making purchases when they think prices might get cheaper in coming months. And the soaring numbers of unemployed or furloughed people mean Britons have even less reason to start spending again.

“With economic output already flailing, a sustained collapse in consumer spending would compound the pain – and may even plunge the UK into the insidious danger of deflation.

“So far the Bank of England’s barrage of monetary support has focused on propping up the economy and staving off an immediate collapse. But the rapid fall in inflation means that the money taps now have a second purpose – to save the UK from slipping into a long and dangerous spiral of deflation.”

Melissa Davies, chief economist at Redburn also said: “Across the advanced economies, inflation is close to or approaching zero already and there is every likelihood indicators will turn negative outright. With the risk of a persistent deflationary shock still far from vanquished by central banks and governments, expect more stimulus.

“The Bank of England needs to increase its QE asset purchase programme on Thursday to avoid running out of capacity while a move towards negative rates at some point in 2020 seems likely to help manage government borrowing costs. 

“Once the true unemployment figure is revealed, pressure on government to boost unemployment benefits and stimulate consumption is only likely to grow.”

9.30am update: Pound down

Sterling took a slight knock against the dollar as FX traders weigh the risks of a no-deal Brexit. 

The pound has risen more than 4% against the greenback in the last three months, but is still far off levels seen before the new coronavirus sent global markets tumbling in March, according to reports from Reuters. 

9.00am update: Gold futures dip

Gold futures dipped 0.3 percent as investors gained confidence. 

Gold prices usually fall when markets rise, as investors move to riskier assets. Other haven assets to watch are the Japanese yen and government Treasurys. 

8.30am update: EU new car sales

Figures released this morning show that EU new car sales suffered another big drop in May, falling by 52 percent.

This is a less steep decline than the 73 percent drop seen in April, but still spells gloom for year-end figures.

Sales declined by 45.5 percent for the first five months of the year.

8.00am update: European stock markets on the up

Stock markets are at it again. 

London’s FTSE, Germany’s DAX and France’s CAC all rose in early trade, as optimism continues off the back of the UK’s COVID treatment breakthrough yesterday afternoon. 

The drug, dexamethasone, is cheap, readily available, and seems to drastically improve COVD patients chance of living. 

Markets are rising in spite of gloomy data, including inflation figures this morning and the revelation yesterday that 600,000 more people in the UK are out of work. 

7.30am update: Experts comment on inflation

Andrea Olivari, co-founder at digital lender Selina Finance said: “The figures are unsurprising given the devastating effect the pandemic has had on the economy, but further lockdown relaxations and economic stimulus could start reversing this trend.

“There is hope that consumer demand could slowly return, especially as a result of this week’s reopening of the retail sector; however, the extent of this will likely be undermined by the restrictions still in place, as social distancing makes it very difficult for many businesses to operate effectively.”

This is Lucy Harley-McKeown taking over from Rachel Russell.

5.52am update: FTSE bosses recieve full pay again after pandemic wage cuts

Top bosses at UK companies including Foxtons, Persimmon, Severn Trent, Burberry and Bakkavor, are will start getting full pay again following the pandemic.

Housebuilder Persimmon is among the companies which has returned senior executives to full pay only a month after they volunteered to take a 20 percent cut.

Burberry and food manufacturer Bakkavor, also cut payouts to investors as a result of coronavirus.

Other companies, such as advertising group WPP, which is making job cuts, and Dunelm, which used the government’s furlough scheme, are still reviewing whether to reinstate full salaries.

Sarah Wilson, head of Minerva, the investor advisory group, told the FT: “Shareholders will take a harsh view on companies that are indulging in virtue signalling. 

“Companies need to stand by their principles, and they will be judged particularly when things are tough for their staff and customers.”

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