Stocks gain on US stimulus hopes as 600,000 UK workers lose jobs in Covid-19 crisis – as it happened
Federal Reserve chairman Jerome Powell has given another bearish message to investors, but it does not appear to have done much to prevent a steep rally in stock markets around the world.
The FTSE 100 is up by 3.5%, or 212 points, to reach 6,276 points (although that is a level that was last hit only last week.
The S&P 500, the US benchmark, gained 2.6%, while the Dow Jones industrial average increased by 2.9%.
It came despite Powell’s insistence that risks remain to the recovery, and a warning that it will be a “long road” that will leave the US economy “well short” of where it was in February.
Powell said:
Recently, some indicators have pointed to a stabilisation, and in some areas a modest rebound in economic activity. That said, the levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery.
We are going to leave our live coverage of Powell’s testimony for now.
Here are some of the other important developments from today:
There were reports of a draft $1tn infrastructure spending plan from the Trump administration, targeted mainly at roads and bridges. That added to the sense of optimism among stock market investors, before an absolute blowout retail sales reading.
US retail sales rose by 17.7% in May, more than double the average bounceback expected by economists and a record increase – even if still well below 2019 levels.
Some 612,000 people in the UK have lost jobs since the crisis began, according to preliminary data from the Office for National Statistics. The UK unemployment rate for the three months to April 2020 came unchanged in at 3.9% – but economists said the headline figure and the government’s furlough scheme masked the depth of the economic crisis.
The European commission has opened a formal antitrust investigation to assess whether Apple’s conduct in connection with Apple Pay violates EU competition rules.
UK bakery chain Greggs will reopen 800 shops for takeaway purchases on Thursday, but the bakery chain will push for rent reductions amid expectations of lower sales.
You can keep following our live coverage around the world.
In the UK, Boris Johnson gives statement to MPs on FCO/DfID merger after school vouchers U-turn
In the US, the push for justice and police reform in Black Lives Matter protests continues
In our global coronavirus coverage, New Zealand records first new cases for weeks as Beijing bans high-risk travellers from leaving city
Thank you as ever for following our live coverage of business, economics and financial markets, and please do come back tomorrow for more. JJ
Local government financial pressures can “weigh on the economy”, Powell says. It was a drag on growth after the financial crisis in 2008.
The May jobs report was one of the biggest economic data surprises any economists could remember, Powell says. But “it was definitely, definitely good news.”
About 25m people have been displaced in the workforce, he says.
There is a long road to an employment recovery but it is “starting earlier than we thought”, Powell says.
It is particularly difficult to carry out the survey when it can’t be done in person.
The Fed expects unemployment to decline, Powell says, with a “significant amount” of jobs gains but “well short of where we were before”.
The Fed can do better on racial issues, Powell says.
There is no doubt more than all of us can do, Powell says. The Fed must do more.
A tight jobs market is the best thing the Fed can do to support low-income communities, particularly minority ethnic communities.
“We are highly motivated to get back to that”, he says, referring to the tight labour market of February 2020.
Asked about disparities in income between black workers and white workers, Powell says the economics discipline has a “troubled history” with racism.
There’s a lot of work left to do in the economics profession on these issues, he says.
Powell says he will “take away and think about” the idea of carrying out a study on the effects of monetary policy on racial disparities. He will discuss the idea and respond at a later point.
The Fed’s (quite weak) forecasts rely on the virus remaining under control, Powell says.
The US economy will remain “well short of where we were in February” for some time, Powell says. “There are parts of the economy that will struggle to get back to their old ways of doing things.”
It’s all quite uncertain but we appear to be entering that second phase of the economy reopening and spending increasing.
Smaller businesses are particularly at risk from a longer downturn, Powell says.
“We are committed to using the our full range of tools,” he says.
The Fed is committed to supporting the economy “until we are confident the economy has weathered these events”.
Quantitative easing bond purchases have helped to stabilise markets.
The US continues to face a difficult and challenging time, Powell says.
The most important response has come from health workers, he says.
Beginning in mid-March economic activity fell at un unprecedented rate, and millions of jobs have been lost even though the latest jobs report was more positive, he says.
The downturn could worsen inequalities, Powell says.
Much of the uncertainty over the timing and strength of the disease pertains to the path of the disease, he says.
Federal Reserve chairman Jerome Powell has said that significant uncertainty remains about the timing and strength of the US economic recovery.
A full recovery is unlikely until the public is confident the coronavirus outbreak has been contained, he said in a prepared opening statement ahead of a US Congress hearing. The remarks reiterated his statements last week after revealing a weak US economic forecast.
The Fed is committed to using all the tools to support the economy, Powell said.
He also nodded to the Black Lives Matter protests, saying that there is no place for racism at the central bank and there should be no place for it in society.
Two beds are seen during a tour for the media of ICU positions for coronavirus patients inside a private clinic in Rome. Photograph: Mauro Scrobogna/AP
Here’s more detail on the potential “major breakthrough” in treating Covid-19 that has helped to boost stock markets, from the Guardian’s health editor, Sarah Boseley.
A cheap steroid has become the first life-saving treatment in the Covid-19 pandemic, described by scientists as a major breakthrough and raising hopes for the survival of thousands of the most seriously ill.
Dexamethasone is cheap, available from any pharmacy, and easily obtainable anywhere in the world. Investigators said the drug was responsible for the survival of one in eight of the sickest patients – those who were on ventilators – in the Recovery trial, the biggest randomised, controlled trial of coronavirus treatments in the world.
Peter Horby, a professor of emerging infectious diseases in the Nuffield department of medicine, at the University of Oxford, and one of the chief investigators of the trial, said:
It is the only drug so far shown to reduce mortality and it reduces it significantly. It is a major breakthrough, I think.
