Good morning, and welcome to our live coverage of business, economics and financial markets.
Headline news this morning: HSBC will push ahead with 35,000 job cuts, Reuters reports, after getting hold of a memo. The bank is resuming a massive redundancy programme it had put on ice after the Covid-19 outbreak.
The bank will also maintain a freeze on nearly all recruitment from outside, chief executive Noel Quinn said in the memo, which was sent to 235,000 staff worldwide. (Reuters said a spokeswoman confirmed the contents of the memo.)
We could not pause the job losses indefinitely – it was always a question of ‘not if, but when’.
UK consumer price inflation eased for the fourth month in a row in May and came in at an annual rate of 0.5%, as expected, according to the Office for National Statistics. That’s the lowest inflation rate since June 2016 and compares with April’s reading of 0.8%.
Inflation has fallen as the coronavirus pandemic forced the government to impose a nationwide lockdown in late March and caused oil prices to tumble. Economists said this will no doubt add to the debate over whether the Bank of England might at some point be persuaded to take Bank rate below zero.
Stock markets are expected to open flat after yesterday’s rally. In Asia, Japan’s Nikkei dropped 0.56%, Hong Kong’s Hang Seng rose 0.2% while the Shanghai market has lost 0.18%. Beijing shut all schools again and cancelled flights after a spike in new Covid-19 cases, fuelling fears of a second wave.
The UK’s FTSE 100 finished 2.9% higher at 6,242 points yesterday, and on Wall Street the S&P 500 gained 1.89% while the Dow Jones industrial average climbed 2.04%.
Stocks were boosted by reports of a draft $1tn infrastructure spending plan from the Trump administration, targeted mainly at roads and bridges, and news of a 17.7% surge in US retail sales in May after the Covid-19 lockdown was eased.
The stock market rally came despite another cautious message from Federal Reserve chairman Jerome Powell, who warned of a “long road” to recovery that will leave the US economy “well short of” where it was in February for some time.
Stocks came off their highs when Powell, in his semi-annual testimony to the Senate, also said that the Fed’s corporate bond-buying programme could be tapered if the market function improves. On Monday, it was announced the Fed would start to buy individual corporate bonds.
James Knightley, chief international economist at ING, says:
Recent data flow has offered hope of a more vigorous economic rebound than we initially thought possible. The Fed remains wary though, with a renewed wave of infections arguing for caution. As such, Powell again emphasised policy will remain ultra-loose with the potential that they could have to do more to ensure the recovery continues.
He again tries to provide a reality check to the optimism in risk markets, such as equities, which are seemingly seeing only good things ahead. He warned of the risk of insolvencies, particularly in the small business sector and suggested that “until the public is confident that the disease is contained, a full recovery is unlikely”. Given a vaccine appears some way off and fears over a pick-up in Covid-19 cases in several states, he is clearly sitting on the more cautious side of the fence.
- 10am BST: Eurozone inflation for May (final reading)
- 1:30pm BST: US Housing starts and building permits
- 5pm BST: US Fed chair Jerome Powell testifies to House Financial Services Committee