UK retailers pessimistic as economy reopens; Covid-19 worries markets – as it happened

And finally, the London stock market has ended the day with small gains – after a choppy days trading.

The FTSE 100 has closed 23 points higher at 6147 points, a gain of 0.4%. That’s a small rebound after yesterday’s 3% slide.

Despite this morning’s gloomy CBI survey, retail chain JD Sports was the top riser on the FTSE 100, up 3.8%.

Investment group Standard Life Aberdeen (+3.7%) and private equity group 3i (+3.6%) also rallied, following the jump in financial stocks after regulators relaxed regulations on US banks.

Top fallers included Rightmove, catering company Compass and hotel group Whitbread – all vulnerable to any second wave of Covid in the UK.

The worse-than-expected US jobless data didn’t cause much alarm in the City, with traders mainly focused on the latest Covid-10 developments. Larry Kudlow’s insistence that America won’t have another lockdown may have calmed nerves, however that pledge could be tested if Covid-19 cases keep rising.

Thee latest warning from the iMF about stock market bubbles should also encourage investors to wonder if the recent rally has gone too far….

On that cheery note, goodnight! GW

Shares in US banks have jumped, after banking regulators unveiled a pair of rules that will make life easier for large banks with complex trading and investment portfolios.

Reuters has the details:

One rule wraps up a long-running effort by Republicans to overhaul the so-called “Volcker Rule,” clearing the way for banks to make larger investments in riskier funds like venture capital funds.

The second relieves banks from having to set aside cash to safeguard derivatives trades between affiliates within the same firm. The move hands a win to big global banks that had lobbied for the relief, as industry estimates it could free up as much as $40 billion in previously reserved cash.

Goldman Sachs has now jumped to the top of the Dow leaderboard, up 2.6%, followed by JP Morgan (up 2.1%). This has lifted the Dow into positive territory, after its earlier slide.

Readers may remember, though, that the Volcker Rule was introduced after the last crisis, to prevent Wall Street banks making risky, speculative bets with their customers money…..

One of Donald Trump’s top advisors has insisted that the US economy won’t lock down again, even if Covid-19 cases keep rising.

Larry Kudlow, director of the United States National Economic Council, told Fox Business that there may be individual “spikes and hot spots” in certain places, but not another national shutdown.

The International Monetary Fund has warned that the recent stock market rally may have run too far – and is vulnerable to a correction.

In its latest global financial stability report, the IMF said the surge in stocks since late March suggested an optimism that was not matched by the economic data.

“Markets appear to be expecting a quick ‘V-shaped’ rebound in activity.

“This has created a divergence between the pricing of risk in financial markets and economic prospects.”

The IMF is also concerned that the rally appears to be fuelled by central bank stimulus schemes – raising the risk of a crash if the punchbowl is taken away.

After 20 minutes, the Dow Jones industrial average is now down 199 points, or 0.8%, at 25,245.

That’s its lowest level since Monday 15 June, leaving the index flat for the month and 11% down this year.

Industrial stocks, basic materials makers and consumer goods firms are leading the sell-off. Boeing is down 2.5%, on fears that a surge in Covid-19 cases will cause further damage to the travel sector.

Walt Disney, which has postponed the reopening of its California theme parks due to the pandemic, has lost 2.2%.

Ding ding! US stock traders have returned to the fray after yesterday’s rout, with anxiety over the coronavirus pandemic still swirling.

The Dow has dipped at the start of trading, losing 95 points or 0.4% to 25,350 (on top of the 710 point tumble on Wednesday).

The S&P 500 is down 0.3%, and the Nasdaq is flat, as investors stay cautious following the biggest spike in US Covid-19 cases since April.

The virus dominates several newspapers today, which could focus minds on the health and economic crisis:

This is the 14th week in a row in which new US jobless claims exceed one million – a previously unprecedented level (and indeed scarcely believable before the lockdown).

Glassdoor senior economist Daniel Zhao says the US jobs market remains fragile.

The labor market continues its lethargic recovery as we see another week of only modest declines in the tens of millions of Americans continuing to claim UI benefits amid an ongoing pandemic. While recent economic indicators like the May jobs report stoked optimism for a swift recovery earlier this month, the slow improvement in continuing claims puts a damper on those high hopes.

Looking ahead to the June jobs report next week, we’re likely to see more signs of a labor market only modestly improving, balancing precariously between a speedy V-shaped and a much slower recovery.”

Zhao also points out that PUA claims – paid to gig economy workers who are sidelined – are also rising.

Some snap reaction to the latest US jobless figures:

Slightly more encouragingly, the number of Americans who have been claiming unemployment benefit for at least a fortnight has dropped.

This ‘continued claims’ total has dropped from 20.289m to 19.522m – still alarmingly high.

Newsflash: Nearly 1.5 million Americans filed new claims for unemployment benefit last week.

That’s worse than expected — economists had expected 1.3m fresh job losses. It’s barely lower than the previous week, when 1.54m initial jobless claims were filed.

This suggests America’s economy is struggling to emerge from its slump, and that some companies are still laying staff off.

It also means that at least a million Americans have lost their jobs every week since mid-March, when the initial jobless claims smashed the previous record of under 700k.

US department store Macy’s has just announced it is cutting 3,900 corporate jobs.

The move will save around $364m, Macy’s says, as it tries to cut costs to ride out the coronavirus pandemic.

Another blow to America’s labor market, just minutes before we get the latest weekly jobless data….

UK retailers are right to be concerned about their sales prospects, says Howard Archer of the EY Item Club.

He suspects demand for big-ticket items will remain weak, especially among workers who are currently furloughed….

While there may well be a significant initial element of ‘pent-up’ demand for some retailers following their re-opening, further out the upside for may well be capped by cautious consumers.

Consumer spending has clearly taken a substantial downturn as a result of COVID-19and is likely to remain under pressure for the near term, at least. Many people have lost their jobs, despite the supportive government measures. while others may be worried about job security once the furlough scheme ends in October.