US industrial production rose by less than expected last month, though.
Industrial output increased by 1.4% in March, below the 2.8% growth which economists expected after a contraction in February.
Manufacturing output jumped by 2.7% month-on-month (missing forecast of a 4% rise).
That may show that supply contraints are hurting. Lumber prices, for example, have hit record highs as mills have struggled to keep pace with demand.
It’s important to remember that millions of Americans are still out of work following the pandemic, even though the number of new jobless claims has dropped sharply.
Almost 17m are receiving unemployment support from the various support programs:
“This week’s new jobless claims came in much lower than expected. This data has been volatile recently and it’s good to see an impressive mark. Similarly retail sales blew estimates away and the Philadelphia Fed business outlook number was way ahead of expectations.
We know the US is on an upward path and this set of data provides real evidence of that. Investors and the Fed alike will take notice of this and look for more of the same.”
Mohamed El-Erian of Allianz confirms the data is stronger than expected:
Michael Pearce of Capital Economics says retail spending was driven by easing virus fears as well as the latest stimulus payments.
The near-10% surge in retail sales in March reflects not only the boost from $1,400 stimulus cheques but also the effects of loosening restrictions, with spending in bars and restaurants now back within 5% of its pre-pandemic level. Assuming spending on other services did not rebound as rapidly last month, that’s consistent with real consumption growth of close to 3% in March, and 10% annualised in the first quarter overall.
Pearce also points out that there was a rise in spending on ‘big ticket items’, and in clothes shops, bars and restaurants:
Motor vehicle sales up by 15.1%, electronics stores sales increasing by 10.5%, though furniture sales were up by “just” 5.9%. But what caught our eye was the 13.4% surge in spending on food and drink services, while clothing store sales were up by 18.1%.
In another boost, the number of Americans filing new unemployment claims has hit its lowest level since the pandemic began.
The weekly jobless claims total (seasonally adjusted) has plunged to 576,000 last week, a decrease of 193,000 from the previous week’s revised level.
This is the lowest number of people seeking jobless support since March 14, 2020 when it was 256,000 – just as the first wave of Covid-19 hit the US.
On an unadjusted basis, initial claims dropped to 612,919, down by 152,833, confirming that companies slowed their layoffs as the US economy strengthened, and as Covid-19 vaccinations lifted optimism.
Another 152,000 self-employed and gig economy workers sought help from the Pandemic Unemployment Assistance.
Here’s some early reaction:
Just in: US retail spending soared almost 10% last month, in another sign that the American economy is recovering strongly from the pandemic.
Retail sales surged by 9.8% in March compared with February, and much stronger than the 6% rise which was expected.
It’s the biggest monthly jump in 10 months, since the easing of the first lockdown back in May 2020.
On an annual basis, retail sales were 26.9% higher (reflecting the impact of the pandemic a year ago).
That follows the latest stimulus checks sent out to American families, and the reopening of the US economy in recent weeks as the vaccination programme has sped along.
Sales at motor vehicle and parts dealers surged 71% year-on-year, while sales at restaurants and bars were up 36% compared with March 2020, the Commerce Department adds.
Elliott’s Management’s interest in GlaxoSmithKline comes after the UK drugs firm took a backseat role in the race for a Covid-19 vaccine, points out Reuters:
Britain’s GSK warned in February of a bigger than expected fall in 2021 earnings as the COVID-19 pandemic continues to disrupt other healthcare treatments and it invests in new medicines ahead of a split from its consumer products business next year.
Rather than developing its own COVID-19 shot, GSK has so far focused on supplying its vaccine booster to other drugmakers. But a project with Sanofi has been delayed, and China’s Clover has ended its deal with the British drugmaker.
Last summer, GSK explained that it was focused on helping to produce the best Covid-19 vaccine, not the first, by using its “adjuvant technology” to boost the efficiency of protein-based vaccines (this fact sheet has more information).
Here’s Chris Bailey of Financial Orbit on the jump in GSK’s shares:
Shares in UK pharmaceuticals firm GlaxoSmithKline have jumped over 7%, to the top of the FTSE 100 risers.
It follows a Financial Times report that activist hedge fund Elliott has built a “multibillion-pound stake” in GSK, amid concern among some leading shareholders about the company’s performance.
Activist hedge fund Elliott Management has built a multibillion-pound stake in UK drugmaker GSK, setting up a potential battle over the company’s future after it underperformed peers and lagged in the race to develop a Covid-19 vaccine.
The stake taken by Elliott, the $42bn fund known for its campaigns at BHP, SoftBank and Whitbread, was confirmed by people with knowledge of the investment and is a “significant” position, according to one of them.
Elliott’s investment comes as GSK shareholders have become increasingly disillusioned with the leadership of chief executive Dame Emma Walmsley, who is breaking up the company from next year by separating the consumer health business from its pharma and vaccine division.
The FT flags that “one person familiar with the mood of some GSK shareholders” suggests investors would rather Walmsley ran the consumer health business, given her background in that field, rather than her stated intention of running the demerged pharma business.
Other shareholders are backing the CEO, though, they add. More here.
Europe stock markets have hit a fresh record high today, with the pan-European Stoxx 600 up 0.4% at 438 points.
Sophie Griffiths, Market Analyst for UK & EMEA at OANDA, says strong earnings results from the US are lifting stocks (yesterday, Goldman Sachs and JP Morgan unveiled soaring profits for the start of 2021).
European stocks are charging higher after the US earning season kicked off on the right foot. US banks are often considered a proxy for the broader economy. As a result, their earnings are strong drivers of sentiment.
The upbeat numbers served to reinforce expectations of a strong US economic recovery. If the world’s largest economy is performing well, this is good news for the global economy and risk sentiment.
The European economic calendar is quiet this morning, with in-line inflation data from Germany providing little impetus.
Positive earnings in Europe have given markets a boost, overshadowing concerns over the Covid vaccine rollout on the continent.
The FTSE is outperforming its European peers, boosted by heavyweight miners, which are tracing metal prices higher. A weaker US dollar combined with rising expectations of strong Chinese economic expansion in the first quarter are keeping metal prices elevated. Chinese GDP data is due on Friday with 18.9% year on year growth pencilled in.
The UK’s blue-chip FTSE 100 index has hit its highest level in over a year.
The FTSE 100 is up 35 points or 0.5% at 6975, eyeing the 7,000 points mark for the first time since February 2020.
DIY chain Kingfisher (+3.7%) and discoutn retailer B&M (+2.9%) are leading the FTSE 100 risers, followed by speciality chemicals firm Johnson Matthey (+2.4%) and software firm Aveva (+2.3%).
Unlike the FTSE 250, though, the ‘Footsie’ is still below its pre-crisis levels. Major constituents such as oil companies and banks have been hit hard by Covid-19.
Hospitality firms are hiring staff as they prepare for an end to the lockdown, says Jo Ferreday, managing director of the UK-wide hospitality and events company, Sheer Edge:
“We have seen a marked shift in the number of companies seeking to book and organise events in recent weeks.
“The economy is starting to open up and many hospitality businesses are beginning to hire staff so that they can hit the ground running when things hopefully return to normal in the not too distant future.
“Major events don’t come together overnight and can take weeks if not months to organise, which has almost certainly been a factor in the number of online job adverts returning to pre-pandemic levels.
“Hospitality and catering could provide a massive boost to the economy in the second half of 2021.”
This chart from the ONS shows how UK online job adverts have risen to their highest level since the start of the pandemic:
The largest weekly increases were in “legal” and “catering and hospitality”, which rose by 12 percentage points and 10 percentage points to 81% and 58% of their February 2020 average levels, respectively.
This is the highest proportion of online job adverts for catering and hospitality since 20 March 2020, following “its notable uptick in recent weeks”, the ONS explains.
But, the largest decrease since 1 April 2021 was in “travel and tourism”, which fell 16 percentage points to 84% of its February 2020 average level on 9 April 2021.
This “substantial dip” follows a gradual increase over the last few months, says the ONS.