Sunak: Extending furlough would give people false hope
Rishi Sunak has been doing the breakfast broadcast rounds this morning. Among the most important comments so far from the (tieless) chancellor are the low likelihood of a furlough extension and hopes that a Brexit deal can be done in September.
Here is a run-down of some of the lines from the interviews, as collected by Reuters:
- Extending the furlough scheme (perhaps in a similar way to Germany’s Kurzarbeit system) would trap people, Sunak said. “It’s wrong to keep people trapped in a situation and pretend that there is always a job that they can go back to,” Rishi Sunak told BBC Radio Scotland.
- Furlough is not sustainable in the long run, Sunak said. The government should be helping people prepare for new opportunities, and the chancellor cannot save every single business or every single job, he said.
- There will not be a return to austerity, Sunak said – although he did say he wanted sustainable public finances over the medium term. Public spending will grow in real terms, he said.
- “On Brexit, as you will have heard recent reports, we remain confident that it’s possible to get a deal in September,” he told Sky News.
- The Bank of England’s forecasts are right to show that economic difficulties will remain, he said. Sunak told BBC News: “They are right to say that hardship lies ahead.”
- If the government can drive a recovery he is confident the UK will be repaid many of the emergency loans given to companies – but some of the loans will “absolutely” have to be written off.
- And asked whether he has a desire to be prime minister, he said he does not have that desire.
The FTSE 100 is pretty much flat in the early exchanges, gaining 0.1%.
The biggest gainer is Hikma, up more than 7% after it reported that the pandemic had boosted pharmaceutical sales.
Hargreaves Lansdown, the online investments broker, is up 3.8% after reporting a jump in full-year earnings thanks to increased share trading during the crisis – even though the size of the assets managed through its platform was hit.
In Germany the Dax index has gained 0.3%, while France’s Cac 40 is flat and Spain’s Ibex has lost 0.1%.
Introduction: Markets held back by Chinese app retaliation concerns
Good morning, and welcome to our live coverage of business, economics and financial markets.
There was some mild optimism growing in financial markets on Thursday as US politicians moved closer to agreement on the terms of another round of massive fiscal stimulus, but US President Donald Trump has put paid to that with an offensive against two prominent social media apps.
Hong Kong’s Hang Seng fell 1.8%. WeChat owner Tencent, Asia’s second-biggest company by market capitalisation, dropped as much as 10%, before recovering to a 5% fall. Mainland China’s CSI 300 Index fell 0.9% while Japan’s Nikkei slipped 0.4%. S&P 500 futures slid 0.2%.
Trump has given American companies 45 days to stop dealing with ByteDance, the Chinese owner of TikTok, and WeChat, the messaging platform owned by Tencent. His executive order said:
the spread in the United States of mobile applications developed and owned by companies in the People’s Republic of China (China) continues to threaten the national security, foreign policy, and economy of the United States.
TikTok in particular is targeted because of its immense popularity in America, and its consequent ability to harvest personal data for China’s Communist party – although the company denies that it would ever hand data over. The Tencent ban was issued on similar grounds, causing concerns that retaliation from China against US companies could be imminent.
The FTSE 100 is expected to open flat today, but many traders’ eyes will turn towards the major economic event of the day: the US non-farm payrolls data due this afternoon in London time.
The consensus forecast of 1.58m for July would be a large drop from the 4.8m measure of how many new jobs were created in June.
Han Tan, market analyst at trading platform FXTM, said:
The July jobs figures is expected to unveil a marked slowdown in hiring compared to stunning gains seen in the prior two months, which may fuel concerns that the US recovery is losing its momentum.
Still, Thursday’s better-than-expected weekly jobless claims figure of 1.19 million, which is the lowest number of applications for US jobless benefits since March, offers hope that the US economy can continue moving into the post-pandemic era. If the jobs market can stage a sustainable recovery from here, that could spur more risk-on market activity while offering relief for the beleaguered Dollar.
- 8:30am BST: Halifax house price index (July; previous -0.1% month-on-month)
- 1:30pm BST: US non-farm payrolls (July; prev. 4.8m, consensus 1.58m)