LIVE – Updated at 14:45
Rolling coverage of the latest economic and financial news, as transatlantic leisure flights resume….and UK households grow more anxious.
Dow Jones hits record high
In New York, the Dow Jones industrial average has hit a fresh record high at the start of trading.
The Dow jumped by 188 points, or 0.5%, to 36,516 points at the open.
The rally is led by construction equipment maker Caterpillar (+3.8%), financial services groups American Express (+2%) and Visa (+1.5%), chemicals firm Dow Inc (+2%) and chipmaker Intel (+1.6%).
Materials, energy, financial stocks and industrials are the best-performing sectors across the market.
Investors are in upbeat mood after the US economy added more jobs than expected in last Friday’s non-farm payroll report, and the House of Representatives finally passed a $1tn bill to rebuild the nation’s infrastructure.
ECB chief economist argues against tightening policy now
Tightening monetary policy now to fight the surge in inflation across the eurozone would be counterproductive, European Central Bank chief economist Philip Lane has warned today.
Lane pushed back against pressure to take action, after consumer prices inflation hit 4.1% last month – more than double the ECB’s target.
In a speech to the ECB Conference on Money Markets, Lane said three temporary factors were pushing up inflation today but are projected to fade over the course of next year.
First, the pandemic initially exerted powerful downward pressure on inflation, hitting activity and leading to temporary tax cuts (such as VAT in Germany) which are now being reversed
Second, the unexpectedly-strong European and global recovery from the pandemic shock has caused bottlenecks, and mismatches between supply and demand of commodities and manufactured goods
Third, energy prices have been the largest single contributor to the currently-high inflation rate. And as Europe is a net importer of energy, that actually pushes down underlying inflation as it depressing the net revenues of European firms and the disposable income of European households.
As such, Lane argues there are “solid reasons” to expect inflation to decline through the course of next year. And as it takes time for monetary policy to affect the inflation rate, tightening too early would hurt the economy.
As Lane puts it:
In particular, an abrupt tightening of monetary policy today would not lower the currently-high inflation rates but would serve to slow down the economy and reduce employment over the next couple of years and thereby reduce medium-term inflation pressure.
Given our assessment that the medium-term inflation trajectory remains below our two per cent target, it would be counter-productive to tighten monetary policy at the current juncture.
Lane added that it will be crucial to watch wage growth, to deduce the path of underlying inflation. But he also signalled that a one-off jump in pay might not show that inflation was taking off.
In particular, a one-off shift in the level of wages as part of the adjustment to a transitory unexpected increase in the price level does not imply a trend shift in the path of underlying inflation.
Back in Heathrow, travellers excited to see family and friends for the first time since
the COVID-19 pandemic began have been arriving to fly to the US.
Months of pent-up demand triggered a major spike in bookings on Monday, with travellers only required to show official proof of vaccination and a recent, negative viral test.
Alice Keane, travelling to Miami to see her sister, told Reuters at London’s Heathrow airport that the resumption of flights was very exciting.
I mean, I was meant to go just before Covid happened, and obviously it’s been delayed this long, so it’s really exciting to finally be able to go.”
Heads-up: It was UK business output growth that slowed again in October (see earlier post, now updated). Sorry for the confusion, and thanks to kind readers for flagging.
UK business output growth falls for sixth month in a row [updated].
British businesses’ output growth has fallen for the sixth month in a row amid a supply chain crisis, energy price rises and a shortages of workers, according to a closely watched survey of big employers [updated].
UK business output growth hit its lowest level since March (during the last national coronavirus lockdown), according to the accountancy firm BDO.
Its measure fell from 105.23 points in September to 103.35 points in October.
BDO’s manufacturing index dropped two points to 97, nearing the 95 mark, which indicates declining output, while staff shortages prompted a slowdown in growth in the services sector, which dominates the UK economy.
“Businesses are facing an increasingly difficult winter,” said Kaley Crossthwaite, a BDO partner, adding:
“Between rising inflation and a lack of staff, 2022 could be a difficult year for companies who have been forced to prioritise short-term problems over long-term growth.
At the same time, consumers are beginning to see the impact of these shortages, with rising fuel and energy prices, which may in turn lead to cutbacks in discretionary spending.
“In the final months of the year, businesses and consumers alike will be hoping that the economy can find some Christmas spirit over November and December and help take us into the new year on a high.”
Gambling firms among heaviest radio advertisers during school run
Gambling companies are among the heaviest advertisers on radio during “school run” hours when millions of children are in the car, according to research that prompted warnings about their exposure to promotions for the national lottery, online casinos and sports betting.
Data shows gambling came second in a list of industries that spend the most to appear on commercial radio between 7am and 8am and from 3pm to 4pm, according to an analysis for the Guardian by market analysis firm Nielsen.
The analysts found that gambling accounted for 5% of all spending during school-run hours, with about 1,200 hours of ads airing during those times over the past 12 months.
The amount spent on gambling ads was exceeded only by government communications – including Covid-19 messages – and motor supplies. Nielsen does not disclose the actual spending figures because it is commercially sensitive data. Here’s the full story.
Workers at two Weetabix factories are launching four-day strikes from today in a dispute over pay and conditions.
Members of Unite at the company’s Kettering and Corby factories have been on strike every Tuesday and Wednesday since September over proposed changes to working practices that they claim could leave them up to £5,000 a year worse off.
The union claims engineers face cuts to their pay, terms and conditions, describing it as an example of a “fire and rehire” policy and Weetbix’s “corporate greed”, which the company denies.
In an escalation of the dispute, strikes are to take place every Monday, Tuesday, Wednesday and Thursday. More here:
A spokesperson for Weetabix Food Company says the group has plans to mitigate shortages:
“We are working hard to minimise disruptions to our operations. We have a naturally resilient supply chain and have robust planning in place to help mitigate any shortages as a result of the strikes,”
There could be shortages in the snacks aisle too, after a botched computer upgrade disrupted the world’s biggest crisp factory.
Walkers has been forced to prioritise its most popular varieties – including cheese and onion, ready salted and salt and vinegar, as well as Quavers and Wotsits – after the glitch forced it to slow production.
A spokesperson said “more niche” varieties had been slowed, explaining:
“A recent IT system upgrade has disrupted the supply of some of our products. Our sites are still making crisps and snacks but at a reduced scale.
“We’re doing everything we can to increase production and get people’s favourites back on shelves. We’re very sorry for the inconvenience caused.”
There’s not much drama in the City so far today, with the FTSE 100 flat and the pound slightly higher after last week’s losses.
Cyber-security firm Darktrace is doing its best to provide some excitement, surging 10% this morning after analysts at Berenberg reiterated its ‘buy’ stance after a visit to its headquarters last week.
Darktrace had tumbled last week, as the lock-up on insiders selling shares expired.
Asset manager Abrdn have jumped 3.4%, after it confirmed it’s in talks to potentially buy Interactive Investor, the UK’s second-largest fund supermarket.
A deal could value II at over £1.5bn. It would boost Abrdn’s direct-to-consumer offering, and derail II’s plans to float on the stock market.
Travel and hospitality stocks are having a weaker day, though, having surged on Friday after Pfizer announced that its experimental antiviral pill, paxlovid, had cut hospitalisations and deaths from Covid by nearly 90% in a large trial.
British Airways parent company IAG is down 2.3%, despite the reopening of the US borders, alongside broadcaster ITV (+2.3%), conference organiser Informa and property developer British Land.
Rolls-Royce is expected to announce a major investment this week in its plans to develop small-scale modular nuclear reactors to rival the floundering multi-billion plans for large-scale nuclear plants.
The company is expected to confirm that a consortium of investors has agreed to back plans for an initial four Small Modular Reactors (SMR) based on the same nuclear technology which propels submarines.
The imminent announcement, which was first reported by the BBC, comes after the UK government promised to provide £210m in funding to SMR developers if they could match the funds with private capital as part of the Prime Minister’s ten point Green Plan.
Small modular reactors have emerged as an alternative to building large-scale nuclear power plants – such as the 3,200MW Hinkley Point C project – which face enormous construction risks, and are prone to spiralling costs and delays.
Rolls’ SMRs are expected to have a generation capacity of 500MW and cost around £2bn each, meaning they should cost less than a tenth of the £20bn each of EDF’s Hinkley project, and its successor plant at Sizewell in Suffolk.
Here are more details from last month:
Here’s the scene at Heathrow airport as the US reopens its borders:
Robert Courts, under-secretary of state for transport, has told the PA news agency that today is a ‘massive moment for the aviation sector’.
“It’s about people fundamentally, it’s about getting families back together…
“That’s particularly important with Thanksgiving and Christmas coming up.
“That’s on top of the massive economic benefit that there is from having the United States and Great Britain – these great friends and allies, countries that have so much in common – back in regular contact with each other again.”
Hotel group Hilton has seen a jump in bookings since the US announced it would lift travel restrictions for fully vaccinated arrivals today.
Simon Vincent, EVP & President, Europe, Middle East & Africa at Hilton, says:
“Since news broke of the planned reopening of US borders, we’ve seen a surge of interest from European and UK guests planning to visit our US hotels. Hilton search data reveals the extent of that demand, with a 63% increase in digital reservations in the five weeks following the news of plans to ease restrictions.
We’ve seen similar trends across Europe, with inbound demand from US guests growing as travel rules have lifted. The reopening of the US border signals the next important phase of recovery for the industry, and we look forward to welcoming a new dawn of international travel.”
UK consumer confidence lowest since March as pessimism rises
Airlines may be in celebratory mood today, but UK consumers are feeling less optimistic.
Pessimism about household finances have dragged down consumer confidence for the third month running, as people judge that their financial situation has deteriorated – and is going to get worse.
This follows rising inflation, surging gas prices, looming tax increases, growing supply chain problems, and the recent fuel shortages.
The latest poll from YouGov and the Centre for Economics and Business Research found that consumer confidence is the lowest since the last Covid-19 lockdown ended this spring.
Confidence about household finances over the next year has taken a sharp dive.
The survey, conducted during October, shows:
- Consumer confidence has fallen to its lowest level since March 2021, down -1.3 points to 109.2
- Outlook on household finances continued its five-month freefall, dropping 9.7 points
- October’s household finances fell by 5.0 points for the second month
- Expectations for business activity continued to worsen for the second month in a row
- But business activity reported for October saw largest leap since March 2021
For the second consecutive month, Britons reported a decline in their household finances over the past month. This measure dropped by 5.0 points to 84.6.
People are also more pessimistic about their economic outlook. The outlook on household finances slumped to 81.1 – a decline of 9.7 points and the third-largest fall on record.
Darren Yaxley, direct of reputation research at YouGov, says there’s a mood of ‘general pessimism’.
“October’s index confirms that consumer confidence is on a downwards trajectory, largely propelled by Britons’ concern for their personal finances. The decreases seen for household financial situation over the past 30 days and the coming 12 months are the largest since the start of the pandemic.
“While three metrics saw improvements – October’s business activity, and job security for the past month and coming year – the remaining metrics decreased indicating this month’s index is one of general pessimism. This indicates that the last few months of fuel and food shortages paired with rising bills and prices have led Britons to be concerned for the future.”
There is one bright note: Despite the end of the government furlough scheme, workers feel more optimistic about their job security in the next 12 months than they did in September.
But generally, families are worried about living standards. Kay Neufeld, Head of Forecasting and Thought Leadership, says:
“The slump in consumer confidence continued in October, meaning that the YouGov/Cebr Index has erased the gains made since March 2021, when strict lockdown measures were still in place. Consumers judge their financial situation to have deteriorated in October and show even greater pessimism for the year ahead. With inflation expected to exceed 4% before the end of the year and steeply rising energy prices, households are understandably worried about the impact on living standards.
On a more positive note, increases in the two job security measures highlight the ongoing resilience of the UK labour market that seems to have coped well with the end of the furlough scheme. However, ongoing shortages of inputs could lead some firms to scale back production in coming months, which would reduce labour demand.”
Tesla’s Frankfurt-listed shares are down nearly 6% this morning as investors prepared for the chief executive Elon Musk’s proposed sale of about a tenth of his holdings in the electric carmaker after his Twitter poll.
Musk, the world’s richest person, tweeted on Saturday that he would offload 10% of his stock if users of the social media network approved the proposal.
The poll attracted more than 3.5m votes and 57.9% of people voted “yes”.
Musk had said previously he would have to exercise a large number of stock options in the next three months, which would create a big tax bill. Selling some of his stock could free up funds to pay the taxes.
“I was prepared to accept either outcome,” Musk said, after the voting ended. Market participants expected speculators would try to front-run his selling.
Tesla’s stock is currently down over 5% in pre-market trading in New York (although only to its lowest level in a week).
Virgin CEO: day trips to Brussels or New York maybe not best use of time
Shai Weiss, Virgin Atlantic chief executive, has told Sky News that it’s a big, dramatic day, and a fantastic one for aviation and his own company.
But he’s also suggested that travellers may need to rethink behaviour such as day trips abroad, due to the impact on the climate.
It’s really lovely to see families reuniting, grandparents meeting grandchildren, people belatedly going on honeymoon, says Weiss, speaking from Heathrow as transatlantic leisure flights resume after 600 days of the US border being shut down for UK nationals.
Weiss says this morning’s parallel takeoff with British Airways at 8.50am took a lot of organising. And in a nod to concerns over environmental impact of transatlantic flights, Weiss says both airlines are using A350-1000s, the most fuel-efficient planes in their fleets.
The competition will not be who gets their quickest, but rather who gets there on time with the most efficient use of fuel.
Looking ahead, Weiss says that demand will be unpredictable for a bit, but Virgin Atlantic is already seeing very strong demand for Christmas, Easter, and next summer. And this week is ‘absolutely full’.
Business travel will follow, he insists, despite the boom in video-conferencing tools since the move to homeworking, with signs that small and medium-sized firms are travelling again.
Q: But what about the climate damage caused by international travel? Two A350s just took off simultaneously to take passengers to the US, in the middle of the Cop26 talks in Glasgow. What can passengers do to be more environmentally aware?
Weiss says aviation ‘needs to do its part’. Airlines have committed to become net-zero by 2050, — but he admits that’s a long way away. So Virgin is taking steps like using younger planes (68% of its fleets are next-generation jets which are more fuel-efficient).
And Weiss suggests that travellers need to be conscious about the issue too, saying:
The day trip to Brussels, the day trip to New York may be not the best use of time. But combining leisure and business into a longer trip is the thing to do.
And on the pandemic, Weiss says that the successful vaccination development, high vaccination rates and new treatments coming online gives him confidence that we are moving forwards not backwards. It’s a testament to scientists, governments, and the NHS that we are in this position now.
BA CEO to passengers: This is a real moment of celebration
There were clear skies and a bright new dawn at London Heathrow for its biggest customers, British Airways and Virgin Atlantic, who took off simultaneously in a show of extraordinary solidarity on Monday morning, flying west with planes fully loaded with passengers and revenues rolling in as the US finally opened its borders to foreign visitors again.
Our transport correspondent Gwyn Topham, who is aboard BA’s flight, reports.
For both airlines, US markets constitute the biggest part of their business – almost 40% for BA, with six flights scheduled today to New York JFK, alone while 10 of 21 Virgin flights taking off today are for America.
A few Americans have travelled the transatlantic throughout, and more since August when the UK and EU relaxed restrictions for incoming, quarantined visitors. But it is more than 600 days since the airlines have been able to sell into their biggest market, crucial as they seek to recover from the pandemic.
Speaking before the flight, Virgin chief executive Shai Weiss described it as “a tipping point”.
Plenty of other flights were taking off from Heathrow Terminal 5 – if roughly half the number of two years ago – but there was only one destination in town. To underline the significance for anyone who missed it, the BA check-in, the cabins and even the air bridge from the gate to the plane festooned with American flags.
The planes took to the skies just after 8.50am – using their most fuel-efficient models, A350s, after both airlines having retired their famous 747 jumbos early as a cost-saving measure during the pandemic. BA flight 001 took off on the northern runway, with Virgin flight VS3 rising into the air exactly in parallel.
BA chief executive Sean Doyle told passengers over the tannoy:
“This is a real moment of celebration. I know how much today means to you – some have not seen your loved ones for two years, others have not been able to do business.”
He also told them that flight BA001 was powered by a blend of 35% sustainable aviation fuel [SAF] – the largest mix used yet on a commercial flight, while remaining emissions would be offset, via wind and solar power projects.
“In the years ahead,” Doyle said, “we envisage all our long haul flights will be powered by SAFs.”
It was a reminder that aviation still has plenty of challenges ahead. For now, though, some optimism has returned.
Friends and family were some of the first to book to fill planes this week, the airlines said, with planes across Virgin’s US departures 98% full till Wednesday. Doyle said there had been a significant bookings too from corporate customers and small businesses, giving lie to the idea that business travel was dead. Bankers in particular had booked to fly back, boosting the revenues from premium cabins.
But holidaymakers have also filled the front ends of the planes, according to BA Holidays managing director Claire Bentley:
“People are upgrading, treating themselves.”
City breaks had generally not been sought after during the pandemic, for those who did try to get away despite the testing requirements and travel restrictions, she said.
The US east coast’s biggest city has long been its best seller though and is coming back fast:
“New York is in a category of its own.”
There are expected to be few if any empty seats on many of the international flights to the US from London, Paris and elsewhere on Monday, and passenger volume is expected to remain high in the coming weeks, Reuters predicts.
Bindiya Patel was one of those intending to be on the first New York-bound BA flight leaving Heathrow this morning.
Patel, from south London, was so excited at the prospect of being able to finally meet her first grandchild in New York that she could not sleep.
“I think we might just start crying,” she told Reuters on Monday.
Airlines, which have warned there will likely be long queues at first, will check vaccination documentation for international travellers as they currently do for COVID-19 test results.
Delta said that in the six weeks since the U.S reopening was announced it had seen a 450% increase in international point-of-sale bookings versus the six weeks prior to the announcement, though most experts believe that corporate travel will lag the recovery in leisure travel.
More here: Reuters: Travellers head to the United States as flights reopen
BA and Virgin flights to US takeoff, as 20-month ban ends
And they’re off!
The first British Airways and Virgin Atlantic transatlantic flights carrying leisure travellers to the US since the border closures of March 2020 have taken off.
As planned, they left Heathrow in a simultaneous departure from parallel runways, heading for New York’s JFK airport.
Here’s a video feed from Heathrow of the takeoff…..starting right now….
Sean Doyle, BA’s chief executive, and Shai Weiss, Virgin Atlantic’s chief executive, have put aside their usual rivalry to pose for the cameras at Heathrow today, before their joint take-off.
Before today’s flights, both CEOs have spoken about how the resumption of flights was a moment to celebrate.
Sean Doyle, BA’s chief executive, said:
“We’re setting aside rivalry and for the first time ever, British Airways and Virgin Atlantic aircraft will be seen taking off together to mark the vital importance of the transatlantic corridor.
“Transatlantic connectivity is vital for the UK’s economic recovery, which is why we’ve been calling for the safe reopening of the UK-US travel corridor for such a long time. We must now look forward with optimism, get trade and tourism back on track, and allow friends and families to connect once again.”
Shai Weiss, Virgin Atlantic’s chief executive, said:
“Today is a time for celebration, not rivalry. The US has been our heartland for more than 37 years and we are simply not Virgin without the Atlantic.”
Relief and reunions in sight as US finally lifts Covid travel restrictions
The restrictions lifting today have effectively halted tourism and non-essential travel from 33 countries, including the UK, most of Europe and China, Kevin T. Dugan writes.
They separated families and loved ones, with thousands missing out on birthdays, holidays – and in the case of the British tennis star Emma Raducanu’s parents – a US Open final.
Now all visitors with a WHO-approved vaccination (which includes AstraZeneca) will be allowed to visit the US. Visitors with passports from any country where fewer than 10% of the country’s population has been vaccinated will also be allowed.
Virgin Atlantic say bookings to the US, largely to New York, have surged 600% since the announcement was made. Delta Air Lines’ CEO, Ed Bastian, has predicted an “onslaught of travel all at once”, in November with queues likely at airports.
Hotel prices in New York are also returning to normal levels after a summer where discounts abounded.
Tourism industry experts expect this surge to last for a while.
Tim Hentschel, HotelPlanner’s co-founder and CEO, told the Guardian.
“The pent-up demand from overseas to visit the US will remain strong for at least several years.”
Some form of travel ban has been in place since the start of 2020, Donald Trump issued the first proclamation that stopped most travellers from China visiting the US – with the list of banned countries quickly expanding. Land crossings from Mexico and Canada were also banned, although there were exemptions for green cards and some work visas.
For many, that ban has only worsened the toll of the pandemic, further isolating people as family members fell ill or life teetered on the edge of what was manageable… Here’s the full story.
Crypto rally lifts ether to new record, bitcoin at near 3-week high
Meanwhile in the cryptocurrency world, bitcoin rallied toward its all-time high on Monday and ether has climbed to a fresh record.
Bitcoin is over 6% overnight to reach $66,357, approaching the previous record around $67,000 set on October 20.
Ether – which underpins the ethereum network – has risen to a fresh record at a record top of $4,767.55 on Coindesk.
Reuters says that “momentum, flows, favourable news and inflation fears” are all lifting crypto assets:
Ether is up around 59% since the start of October and bitcoin about 51% as investors have cheered last month’s launch of a U.S. futures-based bitcoin exchange-traded fund and sought exposure to an asset class sometimes regarded as an inflation hedge.
Falling real yields, as traders brace for inflation, adds to the attractiveness of assets such as gold and cryptocurrencies which do not pay a coupon, said Kyle Rodda, analyst at broker IG Markets, adding that the mood in the sector has also been good.
“Financial institutions want to be a part of it, regulators don’t want to clamp down on it too much,” he said. “We’re almost past the inflection point, where it’s part of the system and its going to be very, very hard to extricate it.”
In recent weeks, Australia’s biggest bank has said it will offer crypto trading to retail customers, Singaporean authorities have sounded positive on the asset class and spillover from a positive mood in stocks has also lent support.
Here’s what you’ll need to know before travelling:
Airlines have ramped up their UK-US flight schedules to meet the increased demand for travel, now fully-vaccinated passengers can travel to America:
PA Media has the details:
A total of 3,688 flights are scheduled to operate between the countries this month, according to travel data firm Cirium.
That is up 21% compared with October, but remains 49% down on the pre-pandemic levels of November 2019.
Around 3.8 million British nationals visited the US every year prior to the pandemic, according to the Foreign, Commonwealth and Development Office.
A survey of 2,000 UK consumers commissioned by travel trade organisation Abta suggested that the US is only behind Spain in the foreign destinations that holidaymakers say they plan to visit.
Introduction: US reopens borders to UK passengers
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
After more than 600 days, flights from the UK to the US are resuming today as the White House lifted its travel restrictions for fully vaccinated international air and land border travelers.
In a major boost to the travel sector, thousands of travellers will set off on transatlantic flights from Britain, many for long-awaited reunions with family and friends that haven’t been possible since the pandemic began.
To mark the occasion, rival airlines British Airways and Virgin Atlantic will operate a synchronised departure from Heathrow this morning to celebrate the end of the travel ban.
Their aircraft will take off from parallel runways at the west London airport at 8.30am before flying to New York JFK, where there could be emotional scenes as people are reunited.
Fully vaccinated travellers from dozens of other countries such as Ireland, the 26 Schengen nations in Europe, China, India and South Africa can also enter the US from Monday.
The bosses of Virgin and BA said it was a “pivotal moment” for the battered industry, with both airlines having registered enormous losses and shed thousands of staff during 20 months of restricted travel.
My colleague Gwyn Topham explains:
The transatlantic corridor has in recent years accounted for the majority of Virgin and BA profits, and the airlines said the reopening of the US borders to foreign travellers, announced in late September by the Biden administration, would be a significant boost for the industry. Before the pandemic, 22 million people a year travelled between the two countries, along with 900,000 tonnes of cargo.
Vaccinated US visitors have been able to travel to Britain since the summer, when the UK lifted quarantine restrictions, boosting passenger numbers, but the airlines are now increasing schedules and there are full planes this week for the first time.
With both airlines deeply damaged by the pandemic – BA’s owner, IAG, is expecting losses of €7.3bn over 2020 and 2021, and Virgin has been on the brink of collapse – the pair will put on a rare show of unity after decades of bitter rivalry.
The transport secretary, Grant Shapps, said it was a “historic event” and “marks a significant moment for the aviation sector”.
- 8.30am GMT: British Airways and Virgin Atlantic operate a synchronised departure from Heathrow
- 11am GMT: Ireland’s industrial production data for September
- 3.30pm GMTL Federal Reserve chair Jerome Powell speaks at the Gender and the Economy Conference
- 5pm GMT: Bank of England governor Andrew Bailey speaks at a BoE Citizens’ Forum