Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Markets like certainty. But that affection melts away when it’s the certainty of a four-week lockdown that will derail parts of England’s economy in the run-up to Christmas.
Retailers, hospitality firms and travel companies are reeling after Boris Johnson ordered English restaurants, pubs, leisure facilities and non-essential shops to shut this Thursday. Customers won’t be allowed back in until 2nd December (and possibly later).
This will leave Britain’s FTSE 100 index of leading companies struggling to recover from the near seven-month low hit last week.
Paul Dales, chief UK economist at Capital Economics, has warned that the UK economy could shrink by 5% in November
“The economy is likely to show zero growth or even have a small decline in the fourth quarter of the year.
This has all the signs of a double-dip recession.”
This new lockdown is potentially disastrous news for struggling English retailers and food and drink outlets who have been limping along through the pandemic.
As Dame Carolyn Fairbairn, CBI Director-General, put it:
“Lockdown is a decision for government, not business, and firms share the Prime Minister’s ambition to defeat the virus, But for many businesses, a second national lockdown marks the start of a bleak midwinter.”
Helen Dickinson of the British Retail Consortium warned bluntly that the new measures would cause “untold damage to the high street in the run-up to Christmas”.
“With the right support firms will do everything possible to minimise the damage. Across the country they have already shown how resilient they can be in the face of tighter restrictions. And thanks to huge efforts by businesses to make workplaces Covid secure, more of the economy can now stay open.”
The lockdown is also going to leave more families worrying about unemployment in the run-up to Christmas, even though the furlough scheme is being resurrected for another month (too late for those already off this autumn, though).
If uncertainty is more your taste, try the race for the White House. US election day is tomorrow, but investors fear we won’t see a clear victory in 48 hours time.
Recounts and contested results seem more likely, especially with speculation that Donald Trump might try to claim the winner’s rosette while the votes are still being counted.
This is the ‘red mirage’ scenario, which would melt away if Joe Biden roared away with key states, vindicating pollsters who give him a healthy lead.
Wall Street’s primary concern is whether the next president can agree a huge new spending package with Congress, points out analyst Alastair Winter:
US investors expect, surely rightly, Mr Biden to win but can cope with a Trump second term and their main interest is the size of the inevitable fiscal stimulus (which will be determined by the party that controls the Senate).”
On the economic front, the latest purchasing manager surveys are expected to confirm that UK factory growth slowed last month, but accelerated in the US and eurozone.
That October data could soon be pretty historic, though, if European lockdowns trigger a double-dip recession……
- 9am GMT: Eurozone manufacturing PMI for October
- 9.30am GMT: UK manufacturing PMI for October
- 2.35pm GMT: US manufacturing PMI for October