UK factories return to growth as PMIs show global slump easing – as it happened

And finally, after a late flurry, the UK’s FTSE 100 index has ended the day 75 points higher at 6,320 points, a gain of 1.2%.

That’s its highest closing level since 10 June.

Steel maker Evraz was the top riser, up 8%, followed by Standard Life Aberdeen (+6.3%), Just Eat (+4.9%) and silver producer Fresnillo (+4.7%). Optimism over the prospects for economic recovery also lifted asset manager M&G and retailer Kingfisher by over 4% each.

European stocks also had a good day, led by Germany where the DAX gained over 2%.

Traders were cheered by today’s better-than-expected PMI reports, which showed UK factories inching back to growth and a general pickup in France and Australia.

Relief that relations between the US and China appear to be holding up also lifted the markets, as David Madden of CMC Partners explains.

Stocks are in positive territory as traders have welcomed the news that lockdown restrictions in England will be eased from 4 July. The changes will allow pubs, restaurants, cinemas and galleries to re-open. In addition to that, the social distancing rule of staying two metres away from people, will be reduced to one metre. The update didn’t come as a shock as there was speculation about this for a while, but it was welcomed nonetheless.

Stocks were already up on the session in advance of the lockdown announcement. President Trump had to clarify that US-China trade relations were intact after Peter Navarro, one of his trade advisors, said otherwise. The confirmation that trading relations were good acted as a boost to sentiment, and it helped distract traders from the health crisis.

That’s all for today. Thanks for reading and commenting. GW

Confirmation that America’s tech giants are driving the rally:

Tomorrow is Quarter Day in the UK retail sector, when shops are meant to hand over their rent for the next three months.

But in the current pandemic, many may hold onto their cash. That would mean more pain for landlords, such as INTU which is already close to administration.

Ramzi Kattan, a vice president at Moody’s, predicts that landlords could be left rattling empty tins:

“We expect a grim day for most UK commercial real estate landlords on Wednesday when the quarter rent is due, with most likely to collect less than half of due amounts.

Weaker cash flow, struggling tenants and reduced demand for commercial space will weaken credit metrics and contribute to a more challenging operating environment. Retail landlords will be particularly hard hit while logistics landlords will see much higher collection rates likely above 80%.”

My colleague Jason Rodrigues is in London’s West End today, and reports that the streets are the busiest he’s seen in many weeks.

He says:

It seems like a combination of fine weather and price reductions by many retailers have drawn shoppers to Oxford Street in good numbers.

We learned yesterday that retail footfall surged by 45% last week as people returned to the shops, so it does appear that shops are returning to more normal conditions.

Robert Alster, head of investment services at wealth manager Close Brothers Asset Management, says the US economy is still weak, despite the pick-up in June’s PMI:

“The PMI data in the US is showing signs of improvement, but with both services and manufacturing coming in below 50 we must not forget that things are still getting worse – albeit at a slower rate than before. Manufacturing is likely to bounce back fastest – while factories may be operating under capacity due to newly imposed social distancing measures, having staff back in the building at all is a huge step forward.

“The recovery of the service sector relies on consumer confidence improving, and with some US states reporting a resurgence of Coronavirus cases, the resumption of normal behaviour is still a while off. Even with shops and restaurants reopening, consumers are self-regulating to stay safe. Across the world, governments and businesses alike are grappling with the same question; how to get people spending, and fast. With the Presidential election looming on the horizon, this question is more urgent for Trump than most of his global peers”

Alan Tonelson of RealityChek agrees that the economic situation remains poor – even though things may be bottoming out:

And here’s Chad Moutray of the National Association of Manufacturers:

Chris Williamson, chief business economist at IHS Markit, says the jump in America’s PMI index is encouraging – but the recovery will take a long time.,…

“The flash PMI data showed the US economic downturn abating markedly in June. The second quarter started with an alarming rate of collapse but output and jobs are now falling at far more modest rates in both the manufacturing and service sectors.

The improvement will fuel hopes that the economy can return to growth in the third quarter.

“However, although brief, the downturn has been fiercer than anything seen previously, leaving a deep scar which will take a long time to heal. We anticipate that the US economy will contract by just over 8% in 2020. The coming months will therefore see the focus turn to just how much recovery momentum the economy can muster to recoup this lost output.

“Any return to growth will be prone to losing momentum due to persistent weak demand for many goods and services, linked in turn to ongoing social distancing, high unemployment and uncertainty about the outlook, curbing spending by businesses and households. The recovery could also be derailed by new waves of virus infections. Continual vigilance by the Fed, US Treasury and health authorities will therefore be required to keep any recovery on track.

Newsflash: America’s economy continued to shrink this month, but at a much slower rate than in May.

The ‘flash’ US PMI index, just released, has risen to 46.8, from 37.0 in May – close to the 50-point mark showing stagnation.

It suggests a much slower slowdown, particularly in manufacturing as factories reopened their doors.

Data firm Markit says the slump has ‘eased markedly’, as we’ve already seen in the UK, the eurozone and Australia today.

As more firms and states began to reopen following the coronavirus disease 2019 (COVID-19) outbreak, offsetting weak demand faced by many other companies, the overall pace of decline eased among goods producers and service providers.

New business across the private sector declined further in June, albeit at only a marginal pace. Despite many firms noting a rebound in client demand, some stated that renewals and requests for new business were historically muted.

The US stock market has opened higher, with the tech-focused Nasdaq index hitting a fresh all-time high.

The Nasdaq index has gained 81 points, or 0.8%, to 10,137 points, as it continues to surge back from its slump in February and March. Apple is up 1% after it announced its next operating system, Big Sur, and a move from Intel chips to its own semiconductors.

Investors continue to pin their hopes on an economic recovery, despite reports of rising Covid-19 cases in some US states.

Sacha Lord, night time economy adviser for Greater Manchester, has welcomed the relaxation of the 2-metre rule – as it could save thousands of operators across the country from going bust.

Today’s announcement comes just in time, he says:

We are 12 days away from reopening the sector and by the very nature of our industry, we simply wouldn’t have been able to wait any longer to get clarity. I’ve personally spoken to hundreds of operators who are desperate to open their doors and who can now start planning rotas, opening booking systems and restocking fridges.”

“The last three months have been the toughest our sector has ever faced. There will be hard times to come as we adjust to these new ways of operating, but I’m confident with the guidance being published that we will now have the blocks to start rebuilding the sector and helping it back onto its feet.”

However, live music venues and nightclubs can’t open their doors to punters yet, which threatens further damage to a “small but critical industry”, Lord adds.

We have an incredibly important live music scene in the UK, and in Manchester in particular, and the current measures do little to protect this small but critical industry.

We need more information on when these specific venues are likely to be allowed to reopen so preparations can be made, and we must ensure that the financial aid continues past current deadlines to give them the same opportunities to recover as the rest of the sector.”

In contrast, nightclubs in Italy have reopened – with safety restrictions, after politicians warned against widespread partying which could trigger a second wave of infections.

Here’s a handy list of the UK businesses which can now reopen, and which must remain closed:

Oil is also rallying today, on hopes that the world economy could be turning the corner on Covid-19.

US crude has gained 2% to $41.56 per barrel, with the benchmark Brent crude up 1.9% at $43.88.

UK leisure companies such as pub chains and cinema operators are among the top risers on the London stock market today, as the government eases its lockdown rules.

JD Wetherspoon are up 5% today, with Cineworld gaining 6.5%, as Boris Johnson confirms that (as rumoured) the two-metre distancing rule has been lowered to 1-metre-plus. That should allow pubs, restaurants and hair-dressers to resume work.

Here’s the full story.

Over in parliament, Boris Johnson is starting to announce plans to ease the lockdown in England, and allow pubs, restaurants. museums and cinemas to open.

Our Politics Live blog is tracking the action:

Shopping centre operator INTU must be desperately hoping that the economy picks up soon.

INTU, which owns the Trafford Centre and Lakeside in Essex, has been badly hurt by the lockdown, with many tenants missing their rent payments. The company, which was already reeling from problems in the high street, has now lined up KPMG as potential administrators, if it can’t reach a deal with its creditors.

More here: