UK household finances weakest since November 2011
British household finances have reached their weakest point since November 2011, according to an index broadly followed by economists.
IHS Markit’s UK household finance index, which measures households’ overall perceptions of financial wellbeing, plummeted to a reading of 34.9 in April, with the biggest monthly drop since the survey was started in 2009, as the financial crisis raged.
At this point economic indicators are expressing the extent of rather than the fact of recession, but it is still a stark picture. And the signs for the future are not positive either. From IHS Markit’s release:
With a large degree of uncertainty surrounding the time frame to which the emergency public health measures will be maintained, financial wellbeing expectations also fell sharply. Overall, the respective index signalled the strongest level of pessimism for almost eight-and-a-half years.
There were almost 70,000 applications for the state wage support in the first half hour of the portal being open, according to the head of HM Revenue and Customs.
This is from the Financial Times (£) write-up of HMRC Jim Harra’s appearance on BBC radio earlier:
Harra said that the website was working, with about 67,000 claims from employers before 8.30am. He said: “We have scaled our IT system to cope with the maximum number of claims. There are over 2m PAYE schemes and our system is big enough to handle a claim from every one of those.”
This morning is an important day for the UK government’s efforts to cushion the blow of the lockdown recession: the launch of the furlough scheme that will allow companies to claim back 80% of the wages of employees not working.
Under the scheme, the government will cover 80% of workers’ wages, up to £2,500 a month, if they are not working but kept on their employers’ payroll, reports the Guardian’s Julia Kollewe. Workers across the economy have been furloughed because of the Covid-19 lockdown.
The system can process up to 450,000 applications an hour. Employers should receive the money within six working days of making an application, the Treasury said.
HM Revenue & Customs has deployed 9,500 staff to deal with queries, including 5,000 on web chat, but there are fears that the website could crash and that telephone lines could also be overwhelmed.
You can read the full report here:
Italian bond yields rise as investors eye eurozone risks
There are some worrying moves on bond markets, with Italian government debt pricing in more risk ahead of an EU summit this week where coronabonds will be on the agenda.
The yield on the 10-year Italian bond rose by almost 10 basis points (0.1 percentage points) to 1.898% on Monday morning; yields rise when prices fall due to lower demand. On the other hand, German 10-year Bund yields were little changed at -0.482%.
An increasing spread between the two bond yields is one of the most important indicators of how investors view the risks to the Italian economy. If there is no solidarity across the eurozone that could spell trouble.
Selling pressure on Italian government bonds has returned in the past week, undoing some of the benefits of the European Central Bank’s massive bond-buying scheme, after eurozone politicians failed to agree to common debt issuance as a means of addressing the crisis.
Italian Prime Minister Guiseppe Conte used an interview with Germany’s Sueddeutsche Zeitung on Monday to repeat calls for the EU to issue common eurozone bonds to demonstrate the bloc’s solidarity in the face of a pandemic that is likely to trigger the worst recession in years.
Analysts at Deutsche Bank led by Jim Reid said:
Thursday is the key day this week with the EU leaders summit a potentially big event for the future of Europe as they discuss how close the region can get to joint issuance in the near future.
Expect creative ambiguity to rule as it normally does on the continent. Nevertheless you would expect more explicit details to be outlined as to how Europe will help Italy. Will this be enough to keep Italian spreads (and domestic politics) in check though?
at 9.20am BST
The selloff in US crude oil futures was a brutal 21% in early Monday trade, and there is little sign of any imminent recovery, with West Texas Intermediate May prices still bumping along below $15 per barrel.
“Don’t panic,” suggest analysts led by Mark Haefele, chief investment officer in UBS’s wealth management arm. They forecast prices of WTI and Brent crude of $20 per barrel at the end of June, and over $40 per barrel at the end of the year.
The volatile trade comes amid fears US storage facilities could soon max out, leaving markets watching both domestic production and inbound crude tankers due for US ports. If the current pace of the inventory build continues, we could see US tanks
hit max capacity roughly by the end of June.
But the sharp swing in the front month contract also reflects thinned trade, with most of the market already shifting to the June contract before the Tuesday rollover.
But oil prices could be the last of the major asset classes to recover from the coronavirus crisis, cautioned Stephen Innes, global markets strategist at foreign exchange trader Axicorp.
Regardless of what OPEC does, there will be structural demand loss for oil due to less travel. At a minimum, oil prices will be the last asset class to recover from lockdown. End transport demand will only occur in the final stages of reopening when border crossing is allowed, and travel restrictions get lifted. People will then flock again to planes, trains, and automobile
One possible explanation for the bumpy ride on the FTSE 100 this morning (it is now mildly negative): the prospect of the UK easing restrictions appears to be fairly distant.
Culture secretary Oliver Dowden is doing the media rounds this morning. He confirmed that the government is reluctant to lift the lockdown for fear of sparking a second wave of infections, telling BBC Breakfast:
The worst thing we could possibly do would be to prematurely ease the restrictions, and then find a second peak and have to go right back to square one again, potentially with even more draconian measures.
You can follow more on the UK coronavirus live blog:
The positive start to the week on European stock markets was very short-lived indeed: the major indices are now negative today.
The FTSE 100 is down by 0.3%, and the Stoxx 600 is down by 0.2%.
The other big mover on the FTSE 350 is Aston Martin Lagonda, as the struggling carmaker got away a rights issue. Shares are up by 12% at 65p (although still barely a third of where they were at the start of the year).
Billionaire investor Lawrence Stroll, who led the bailout, also takes over as executive chairman of Aston Martin’s board today. He is also joined on the share register by Mercedes-Benz F1 boss Toto Wolff.
The rights issue and the investment that I, and my co-investors in the consortium, have made has underpinned the financial security of, and our confidence in, the business. We can now focus on the engineering and marketing programmes that will enable Aston Martin to become one of the preeminent luxury car brands in the world.
In this first year we will reset the business. Our most pressing objective is to plan to restart our manufacturing operations, particularly to start production of the brand’s first SUV, DBX, and to bring the organisation back to full operating life. We will do this in a way that ensures we will protect our people, wherever they work – their safety is our overwhelming concern.
Interesting timing on this announcement from spreadbetting company Plus 500: its chief executive has just resigned. Shares are down 7%, making it the biggest faller on the FTSE 350.
Spreadbetting companies have seen a remarkable boom during quarantine measures, as historic market volatility coupled with the fact of millions of people being locked inside have contributed to an enormous surge in revenues.
Asaf Elimelech, Plus 500’s chief executive, “tendered his resignation from the board and the company with immediate effect”, the company said in a statement to the stock market. However, he has a year’s notice period so will work alongside his successor to hand over.
The FTSE 100 has gained 0.4% in the first exchanges in a relatively gentle start for these volatile times. FTSE 100 investors endured a rocky ride last week, with the index falling back before recovering some of its losses on Friday.
In Germany the benchmark Dax gained 0.7%, while France’s Cac 40 gained 0.7% and Spain’s Ibex rose by 0.6%.
US oil price hits lowest since March 1999
Good morning, and welcome to our live coverage of business, economics and financial markets.
The US oil price benchmark has hit its lowest level since March 1999, with investors seeing little in the way of demand growth while coronavirus lockdowns continue in the world’s largest economies.
West Texas Intermediate (WTI) futures prices for May delivery fell as low as $14.47 per barrel in early trading, below the levels seen even during the Iraq war. The price fall also partly reflects the way the futures market functions, with the expiration on Tuesday of the contract for May delivery meaning some traders’ demand moves to the next month.
Nevertheless, the price action reflects the deep uncertainty around the outlook for a demand bounceback. Brent crude futures prices, the global benchmark based on North Sea oil prices, fell by 2.2% to $27.47 per barrel, hitting their lowest point since major production cuts were mooted.
The number of active oil rigs in the US was 438, a 35% fall from only a month ago, according to data from Baker Hughes published on Friday. That was the steepest fall since February 2015 as oil producers desperately try to cut costs.
Even historic production cuts from Opec+ – the cartel of oil producers including Saudi Arabia, plus Russia – have failed to prop up prices. Oil tankers generally used for transport have instead been drafted in for storage by traders hoping for higher prices.
Jeffrey Halley, senior market analyst at trading platform Oanda, said:
With above-ground storage bulging at the seams, WTI’s only hope, it appears, is for production cut action from the impending decisions of state authorities in Texas and Oklahoma, and lots of producers going out of business.
In other developments this morning, China continued its incremental economics stimulus efforts with an interest rate cut. From the Reuters report:
China cut its benchmark lending rate as expected on Monday to reduce borrowing costs for companies and prop up the coronavirus-hit economy, after it contracted for the first time in decades.
The one-year loan prime rate (LPR) was lowered by 20 basis points (bps) to 3.85% from 4.05% previously, while the five-year LPR was cut by 10 bps to 4.65% from 4.75%.
at 8.00am BST