US jobless claims jump; UK factories suffer record slump - as it happened

Time for a recap:

UK factories have suffered their worst slump in output on record. The CBI’s latest Industrial Trends report showed that orders fell at the fastest pace since 1980, forcing firms to keep cutting jobs.

But the worst may be over. Manufacturers reported that they expect output to rise in the next quarter.

Bank of England policymaker Professor Jonathan Haskel has warned that the UK recovery could be held back by rising unemployment, or by consumer anxiety about the virus.

When the economy re-opens, customers might still fear infection and therefore stay away from consumption that has a social element to it (pubs, restaurants etc.). It seems likely that such demand weakness will therefore drag on the economy and hold back the recovery.

America’s labor market has weakened. The number of new claims for unemployment benefit jumped last month, to 1.4m. That’s worse than expected, and the first week-on-week rise for four months.

Economists say the US economy is ailing, as states are forced to reverse their efforts to reopen their economies because the Covid-19 pandemic is worsening.

The US dollar responded...by slipping to its weakest level in nearly two years.

Consumer giant Unilever became the most valuable company listed in London, after posting strong results for the last quarter. The firm enjoyed solid demand for cleaning goods and food products as people were stuck at home for months, while grooming products fell out of favour.

CEO Alan Jupe warned, though, that “A deep global recession has already started” which is changing consumer habits “dramatically”

South Korea underlined this point. by slumped into recession, after suffering the worst drop in exports in decades.

Technology firm Dyson announced plans to cut 900 jobs worldwide, with two-thirds being lost in the UK.

Staff are unhappy, with one source telling our Rob Davies:

“There’s a lot of resentment that we are owned by the richest man in the UK but a temporary blip in sales has resulted in 900 job losses worldwide.”

The media industry is also suffering from the pandemic, with Daily Mail & General Trust reporting a sharp plunge in revenues.

Social media firm Twitter also posted a drop in advertising revenue, but also attracted more users than ever before....as it continues to investigate this month’s hack:

The ONS reported that the UK economy is slowly reopening, with more businesses operating and more people travelling to work.

And there was a glimmer of optimism in Germany - where consumer confidence has risen.

Goodnight. GW

There’s some late drama in the currency markets: the US dollar has just dropped to its lowest level against other major currencies in nearly two years.

The dollar index has extended its recent weakness, hitting levels last seen in September 2018.

This has lifted the pound back to $1.276, while the euro has trading at a fresh 21-month high of $1.162.

Today’s disappointing US jobs report didn’t provide much support for the dollar, as it suggests further policy easing will be needed.

European stock markets have ended the day roughly where they started it.

The UK’s FTSE 100 and the German DAX both rose just 0.07%, while France’s CAC slipped slightly. Spain (-0.4%) and Italy (-0.7%) both lost ground, as optimism over the EU’s recovery fund faded.

But it was a strong day for Unilever, which ended 7.8% higher tonight after beating City sales forecast today. That pushes the consumer goods firm’s market capitalisation up to over £121bn, by my maths, over AstraZeneca to become the most valuable company on the FTSE 100.

Russ Mould of stockbrokers AJ Bell says investors appreciate Unilever’s resilience:

“Business resilience is a much sought-after attribute in the current economic climate and Unilever has certainly got the right ingredients. While it failed to deliver any sales growth on a group basis during its first-half period, its performance was considerably better than expected.

“Analysts had forecast a 7.4% drop in second quarter sales, yet Unilever delivered a mere 0.3% decline. High demand for hygiene products helped make up for a decline in food and drink sales. While people are home were busy ordering ice cream and tea bags, Unilever suffered from a reduction in demand from cafes, bars, restaurants and ice cream vans.

My colleague Rob Davies points out that Dyson’s UK workforce really are bearing the brunt of today’s job cuts:

Just in: A Guardian investigation has found that Sports Direct may be paying staff less than the minimum wage, nearly five years after problems were first uncovered at its Shirebrook warehouse in Derbyshire.

My colleague Simon Goodley explains:

In the latest investigation, the Guardian placed an undercover reporter inside the same Shirebrook, Derbyshire, warehouse during two weeks in late June and early July, where an estimated 3,000-4,000 workers distribute goods for Frasers Group, the holding company that also includes retailers such as Flannels, Jack Wills and USC.

The reporter recorded how warehouse staff at the group were unable to leave the warehouse during their 30-minute unpaid breaks – a practice some employment law experts say should count as paid working time and, if correct, would push Shirebrook’s effective hourly wage rates below the legal minimum of £8.72 to about £8.20.

The investigation also found that many of the issues raised five years ago have been addressed, but other problems appear to remain or have re-emerged.

Here’s the full story:

Technology firm Dyson is joining the ranks of companies cutting jobs since the Covid-19 crisis began.

Dyson is cutting 600 jobs in the UK and a further 300 worldwide, as part of an ongoing restructuring, the BBC reports. Most of the cuts are among customer service and retail staff.

A Dyson spokesman said:

“The Covid-19 crisis has accelerated changes in consumer behaviour and therefore requires changes in how we engage with our customers and how we sell our products.”

American Airlines has tumbled into the red for the last quarter, after the pandemic forced it to slash flights.

It made a net loss of just over $2bn, down from a profit of $662m a year ago, with revenues tumbling by 86%.

CEO Doug Parker summed up the situation:

“This was one of the most challenging quarters in American’s history.

COVID-19 and the resulting shutdown of the U.S. economy have caused severe disruptions to global demand for air travel.”

Wall Street has opened in subdued mood, following the rise in unemployment claims.

The Dow Jones industrial average has dipped by 48 points, or 0.2%, to 26,957 points, while the S&P 500 and the Nasdaq are flat.

But there are some movers. Twitter has jumped 7% after reporting that record jump in user numbers earlier today.

Tesla shares also rose at the open after it reported its fourth quarterly profit in a row. That could qualify it to join the S&P 500 index (which would force index trackers to buy the stock).

Unilever has now overtaken AstraZeneca to become the most valuable FTSE 100 company.

Shares are now up 9%, after the company beat City expectations this morning (see here) and outlined plans to break up its tea business.

That values Unilever at around £122bn.

CEO Alan Jope didn’t sound too cheerful today, though, warning that the economy is struggling:

“We believe that talk about a quick recovery is too optimistic. A deep global recession has already started and we are seeing consumer habits changing dramatically. Unemployment is rising across many markets and even for those with jobs, people are saving a bit harder.”

The jump in US jobless claims underlines the need for a new stimulus package to protect the unemployed, says Charles Hepworth, investment director at GAM Investments:

“US jobless claims for the week ending 18 July came in at 1.416m – a higher amount compared to the previous week and importantly the first increase the US has seen since March. The impressive falls in unemployment through April and May now appears to have stalled and this should be no major surprise as the Covid-19 pandemic continues to ravage across the US. With states halting reopening plans it feels that these numbers will continue to contrast President Trump’s more bullish view on the economy.

The jobless benefits CARES Act of $600 per week payments is due to end next week and an extension of sorts is expected to help keep the economy from cratering.”

The jump in US unemployment claims last week was particularly sharp in states which are also suffering a surge in Covid-19 cases.

Those states have recently been forced to order bars and restaurants to close again; employers have responded by laying staff off.

Our US business editor, Dominic Rushe, has the details:

Claims for unemployment have dropped sharply since the shutdown orders in March which triggered more than 6m claims in just one week. But they remain stubbornly high and in recent weeks have hovered around 1.3m a week, twice as high as the pre-pandemic record of 695,000 set in 1982.

There are signs that claims could rise higher as more states report increases in infections and reconsider their reopening plans. In the week ending 11 July the largest increases were in California, Florida and Georgia, all states struggling with rising infection rates, the labor department announced.

About 273,000 Arizona residents filed first-time unemployment claims last week, a new record as the state’s coronavirus case numbers passed 150,000. In North Carolina, where cases are also continuing to climb, unemployment claims are now approaching 2m.

Here’s Dom’s full story:

Richard Flynn, UK managing director at Charles Schwab, says the spike in jobless claims shows that the US economy is struggling:

“Today’s rise in initial jobless will disappoint the market, especially following over two straight months of positive data. With coronavirus hotspots flaring up around the country and some businesses pausing or rolling back their grand re-opening, key parts of the U.S. economy are still ailing.

While stocks have held on to their gains, the market’s internal conditions suggest there is some valid scepticism around how long this strong performance can last.

Economist and investors are alarmed and disappointed that the number of Americans filing for unemployment benefits last week jumped last week to 1.4 million.

Financier Steve Rattner, the former head of Barack Obama’s Auto Task Force, fears initial jobless claims will keep rising unless the Covid-19 pandemic is brought under control.

Naeem Aslam of Think Markets says the report shows that the US economy is in desperate need of help.

Today’s number has fueled fears that the economic data is rolling over and the optimism about the US economy is fading.

The US initial jobless claims data has a bit of mixed news for the US stock market. On one hand you have the data that is showing more Americans are out of jobs but on the other side we have hope that policy makers will deliver the second stimulus check now.

Randy Frederick of Schwab points out that weekly jobless claims have been extremely high for months:

Scott Horsley of NPR points out that nearly a million gig economy workers applied for unemployment help (which aren’t counted in the initial claims figure).

Newsflash: the number of Americans filing new claims for unemployment benefit has jumped for the first time since the end of March.

The rise comes after some States imposed new lockdown measures in an attempt to control the surge in Covid-19 cases.

The initial jobless claims total rose last week to 1.416m last week, up from 1.3m in the previous seven days.

That’s a larger increase than expected, and the first increase in the weekly jobless total in four months (back in March, it soared to a record high over 6 million people but had been dropping since).

It suggests that the labour market is weakening again, as efforts to reopen the US economy start to unwind.....

More to follow...

Social media firm Twitter has posted a surge in usage during the pandemic, and a drop in advertising revenues too.

Average daily user numbers surged by 34% in April to June compared to a year earlier, to 186m - beating forecasts of 176m.

That suggests the lockdown has left people with more time to engage with social media, and more to talk about --including Covid-19, and the Black Lives Matter protests in America for example.

But advertising sales - the core of Twitter’s revenue - fell 23% during the last quarter. Ad revenues had gradually recovered after slumping in March, but then tumbled in late May to mid June when “many brands slowed or paused spend in reaction to US civil unrest”.

Jack Dorsey, Twitter’s CEO, has hailed the jump in monetizable daily active users (mDAUs).

Our product work is paying off, with tremendous growth in audience and engagement.

We grew mDAU to 186 million, a 34% year over year increase in Q2, the highest quarterly year-over-year growth rate we’ve delivered since we began reporting mDAU growth.”

Shares have jumped 6% in pre-market trading....

Back in the markets, the pound is sliding as the UK’s trade talks with the EU continue to struggle.

Following the latest round of talks in London, the UK’s chief negotiator David Frost warned that there are still hurdles, so the UK must “face the possibility” that it can’t agree its future relationship with the EU by the end of the year.

Frost warned:

“We have always been clear that our principles in these areas are not simple negotiating positions but expressions of the reality that we will be a fully independent country at the end of the transition period.”

The EU’s chief negotiator, Michel Barnier, also warned that the two sides are still divided on two key issues - the ‘level playing field’ and access to fisheries.

He also blamed the British side for budging, saying:

By its current refusal to commit to conditions of open and fair competition and to a balanced agreement on fisheries, the UK makes a trade agreement - at this point - unlikely.

In response, the pound had dropped by half a cent against the US dollar to $1.268. It’s also down 0.4% against the euro, to €1.096.