BUSINESS CLOSE: One in three firms expects to cut jobs

The FTSE 250 has closed up 0.6%, or 102 points, at 17,724.

Official figures due on Tuesday are expected to show employment levels heading towards three million – reaching depths unseen since the 1980s.

Up to 60,000 more people are believed to be claiming unemployment benefits as job losses mount.

Read our preview below…

Michael Hewson, chief market analyst at CMC Markets UK, sums up the day:

European markets have undergone a fairly subdued session today, with gains constrained by today’s decision by Chinese authorities to retaliate on the US decision to sanction its Hong Kong officials, by implementing sanctions of its own against US senators Marco Rubio and Ted Cruz amongst others.

It could well be that the decision by Chinese authorities to limit their retaliation to the senior Republican senators, and not senior administration officials is limiting any damage to risk in the short term.  

The decision by Hong Kong police to implement a fresh crackdown on the media by arresting a number of pro-democracy figures, is also concern given that one of the people arrested is independent media tycoon Jimmy Lai, whose Next Media company owns the second best-selling newspaper in the region, Apple Daily.

The signing by President Trump of a number of executive orders to mitigate the loss of the $600 enhanced unemployment benefit, appears to have introduced an element of comfort to markets who believe rightly, or wrongly that there will be a longer term agreement in the coming weeks. In short, the President’s executive actions appear to be being interpreted as a starting point for a possible deal in the coming days.

Travel stocks appear to be getting a lift despite concerns over rising infection rates in Europe, however this could well be the inevitable result of higher testing rates. The big test will come if fatality rates start to edge up again, and evidence of this could well start to manifest itself over the course of the next couple of weeks. 

Outsourcing giant Capita said it has won a £335million contract with Transport for London to run London’s congestion charge and low emission zones for another five years.

As part of the deal, Capita picks up added work with the expanded ultra-low emission zone and other TfL plans. To cope with the extra workload, it will hire another 900 people. 

The multimillion-pound contract is a major coup for chief executive Jon Lewis after some speculation that TfL might cancel the contracts and decide to do everything itself.

The lawsuit reveals that McDonald’s received allegations in July. The filing states:

In July 2020, the Company received an anonymous report alleging that a McDonald’s employee (“Employee-2”) engaged in a sexual relationship with Easterbrook while he was CEO.

An internal investigation into this allegation discovered photographic evidence that, while he was CEO, Easterbrook had engaged in a physical sexual relationship not only with Employee-2, but also with two other Company employees in the year before his termination.  That evidence consisted of dozens of nude, partially nude, or sexually explicit photographs and videos of various women, including photographs of these Company employees, that Easterbrook had sent as attachments to messages from his Company e-mail account to his personal e-mail account.  The date and time stamps on the photographs of the three Company employees show that the photographs were all taken in late 2018 or early 2019.

McDonald’s says it is suing Steve Easterbrook, the chief executive it ousted last year over an inappropriate relationship with an employee, in order to to recover his exit package.

It said an internal investigation showed that he ‘concealed evidence and lied about his wrongdoing’ to the company as he had sexual relationships with multiple employees, violating company policy.

Based on what the company knew in November, McDonald’s board approved a separation agreement ‘without cause’ that allowed Mr Easterbrook to keep around $40million (£36million) in stock-based benefits plus 26 weeks of pay, amounting to compensation of about 670,000 dollars (£603,000).

The filing states:

Based on the results of the investigation, the Board concluded that Mr. Easterbrook lied to the Company and the Board and destroyed information regarding inappropriate personal behavior and in fact had been involved in sexual relationships with three additional Company employees prior to his termination, all in violation of Company policy.  Had the Board been aware of this information, it would not have approved the terms of the Separation Agreement […].

The Dow is up 0.9% at 27,666.

The S&P 500 is up 0.1% at 3,355.

The Nasdaq has slipped into the red, falling 0.4% to 10,969.

Rishi Sunak’s Eat Out to Help Out scheme has served up a huge 25 per cent increase in people going out – but most diners picking the evening to eat mean neighbouring shops may not see the benefit.

Hungry Brits locked down during the Coronavirus pandemic found the scheme’s ingredients of up to £10 on Monday to Wednesday irresistible.

The drive saw the number of people in retail destinations surge by 18.9 per cent after 6pm last Monday compared with the week before, with market towns seeing 25 per cent more.

Full story below…

Employment in shops in town and city centres fell by a quarter in some places between 2015 and 2018, and dropped in three quarters of local authorities.

The figures emerged amid fears that urban areas are being ‘hollowed out’ because so many people are still working from home due to coronavirus.

The Office for National Statistics (ONS) has analysed figures on the structure of the high street from this year, and the most recent employment figures and residential from 2018.

Full story below…

Volkswagen’s appeal against a High Court ruling that it fitted unlawful ‘defeat devices’ in thousands of UK diesel cars has been rejected. 

The German car maker failed in its attempt to fight the decision via the Court of Appeal, which has been described as a ‘landmark’ ruling in what looks set to become the UK’s largest group action in history.

Rob Hull has the story…

Craig Erlam, an analyst at OANDA, sums up the day so far, and what’s in store for the rest of the week:

Stock markets are edging higher in a relatively chilled start to the day, as we navigate through the low-tier economic data portion of the week.

The data this week is likely to show unemployment rising and the economy shrinking by more than 20% in the second quarter. I don’t think there’ll be much dwelling on the data though, especially with the Bank of England having significantly improved their growth forecast for this year on Thursday, albeit with a sharp annual contraction on the cards.

On Capitol Hill, lawmakers failed to pass a new relief package on Friday which prompted Trump to sign executive orders on Saturday on unemployment benefits – at a reduced rate of $400 a month, from $600 – evictions, payroll tax and student loan repayements. While the legality and details of the orders will undoubtedly be challenged, it may temporarily ease any market fears, while angering a sidelined Congress at the same time.

Tensions between the US and China will remain at the forefront this week after the Treasury sanctioned officials linked to the controversial national security law. This comes after Trump signed executive orders against WeChat and TikTok and effectively forcing through the sale of the latter to an American firm, with Twitter now entering the frame alongside Microsoft. Retaliation from China is inevitable.

Royal London, the UK’s largest mutual insurer, slumped to a loss in the first half as the coronavirus pandemic resulted in lower investment returns and a reduction in bond yields.

The insurer also said it paid out £85million to the families of more than 1,200 customers who lost their lives as a result of Covid-19 and set aside another £10million for potential future claims.

But it added: ‘There remains uncertainty over the eventual impact of the pandemic including both future rates of mortality, as well as the wider health impacts from the deferral of non Covid-19 related medical treatments.’

Royal London, which provides life and protection insurance as well as pensions and savings policies to around 8million people in the UK, posted a pre-tax loss of £181million in the first six months of the year, compared to a profit of £397million in the same period in 2019.  

Rishi Sunak’s Eat Out to Help Out scheme seems to be working.

Between Monday and Wednesday last week – the days of the Eat Out to Help Out scheme –  footfall rose in all retail destinations across the UK by 18.9 per cent after 6pm and 9.6 per cent at lunchtime (12pm to 2pm), Springboard said.

The scheme, which was launched last Monday, offers 50 per cent off the bill for eat-in food and drink with a maximum discount of £10 pounds per person and excluding alcohol.

Springboard also said shopper numbers rose 3.8 per cent in the week to August 8 versus the week before.

Because the world’s central banks are piling huge amounts of money into the global economy – and that money has to go somewhere, explains The Mail on Sunday’s columnist Hamish McRae.

Read his full column from the weekend below…

Shares in Superdry jumped today after the fashion retailer agreed to a new £70million financing deal with its banks and said sales fell less than expected.

The fashion chain, which was already struggling before the coronavirus crisis, said the new loans it has secured through its lenders HSBC and BNPP will run until January 2023.  

It comes as it posted a 24 per cent decline in sales in the three months to the end of July, which the company says is smaller than they had feared.

Full story below…

British Airways owner IAG is the top riser, with shares up 5 per cent. 

Oil giants BP and Shell are also among some of the biggest risers this morning, on the back of rising oil prices, with shares up 2.4 per cent and 1.4 per cent respectively.

Shares in miners and banks are in demand too, with Evraz, Antofagasta and Natwest Group all up between 2 and 3 per cent.

Unilever said the move to end its Anglo-Dutch structure and establish a single headquarters in London is set to complete in November.

The consumer giant behind Ben & Jerry ice cream announced the decision in June – less than two years after it was forced into an embarrassing U-turn on a previous proposal to switch its HQ from London to Rotterdam in 2018 following widespread shareholder anger.

The group’s former chief executive, Paul Polman, and previous chairman, Marijn Dekkers, both quit soon after the botched plan.

The company’s shares are shooting up this morning, up 20 per cent, after it said it secured extra funding from lenders. And sales fell less than expected.

Yet, Russ Mould, investment director at AJ Bell, said the ongoing concern with the company is more that its hoodies and jackets adorned with Japanese text may have just fallen out of fashion. He said: 

With the immediate issue of survival seemingly addressed for now, attention will turn back to Dunkerton’s efforts to restore the brand’s appeal and credibility among shoppers.

The fear for shareholders is that its traditional customer base may just have tired of its faux-Japanese stylings and moved on.

Dunkerton will have to demonstrate to the market that there is some light at the end of the tunnel as he looks to set the business on an upwards trajectory or investors may run out of patience.

Fears are mounting of a ‘bonfire of jobs’ amid warnings a third of firms are planning to lay off staff this autumn.

Shock research found huge numbers of companies expect to axe roles in the third quarter of the year as coronavirus hammers the economy. 

Many of the cuts are set to come from hospitality businesses such as hotels, restaurants and cafes, as well as shops that were already on the brink before the pandemic.

The hit emerged in a survey carried out by the Chartered Institute of Personnel and Development (CIPD) with recruiter the Adecco Group. 

Full story below…

After a positive start, the FTSE 100 is now flat at 6,033.

The FTSE 250 is up 0.4% at 17,693.

Reuters reports:

China’s foreign ministry said it would apply sanctions against U.S. officials including Senators Ted Cruz and Marco Rubio starting Monday, in response to Washington’s move on Friday to impose sanctions on 11 Hong Kong and Chinese officials whom it accused of curtailing political freedoms in the city.

Last month, China had already announced sanctions against Cruz, Rubio and other U.S. officials after Washington penalised senior Chinese officials over the treatment of Uighur Muslims in its Xinjiang region.

Pret a Manger is set to slash the working hours of its staff by around 20 per cent, blaming the move on a reduced footfall.

The sandwich shop has been using Rishi Sunak’s furlough scheme to maintain its workforce during the coronavirus lockdown.

However, despite Prime Minister Boris Johnson’s drive to get people back to work, only a third of office workers in Britain have done so, according to a survey conducted by US investment bank Morgan Stanley in mid-July, the Sunday Times reports.

Full story below…

Holiday Inn owner Intercontinental Hotels Group (IHG) and Mike Ashley’s Frasers Group are expected to be the latest firms to warn of job losses this week as Britain reels from the fallout of coronavirus. 

The companies will report financial results after months of being battered by lockdown restrictions. Both have warned of potential redundancies. 

Full story below…

Arguably against the odds the European markets got off to a strong start of Monday, choosing to ignore the many issues that arose over the weekend, says Connor Campbell, an analyst at Spreadex.

There’s a list the length of your arm why investors should be feeling edge. Congress is yet to agree on a fresh stimulus plan. The number of covid-19 cases in the United States has now crossed 5 million. The UK just saw its daily number of fresh cases surpass 1000 for the first time since June, ahead of the likely confirmation of a 21% economic contraction in Q2 on Thursday.

And, most importantly, Donald Trump followed up his TikTok and WeChat bans with sanctions on 11 Chinese and Hong Kong officials, while having US health chief Alex Azar praise Taiwan’s democracy and response to the pandemic in a move designed to rile up Beijing. This as China starts to aggressively enforce the new national security laws in Hong Kong, including the arrest of pro-democracy property tycoon Jimmy Lai.

Setting all of that aside, the markets decided to instead celebrate the latest payroll tax-cutting executive orders from Trump, designed to bypass the blockade in Congress regarding coronavirus relief – despite critics of the actions claiming, in the words of Joe Biden, that it is a ‘reckless war on Social Security’, and may not actually provide much benefit to American citizens.

Oil prices are on the rise today, with analysts putting this down partly to comments by Saudi Aramco’s chief executive Amin Nasser, who yesterday said that he sees oil demand recovering in Asia as economies gradually open up after the easing of coronavirus lockdowns.

This is what he said:

Look at China, their gasoline and diesel demand is almost at pre-COVID 19 levels. We are seeing that Asia is picking up and other markets (too).

As countries ease the lockdown, we expect the demand to increase.

That’s despite Aramco posting a 73 per cent plunge in profits in the second quarter.

Fiona Cincotta, an analyst at City Index, sums up what’s moving the markets this morning:

The FTSE, along with its European peers are being boosted by upbeat data from the US and China. However, gains could remain capped in a quiet day for corporate releases and as the focus remains on US lawmaker’s ability to agree additional stimulus.