ECB leaves rates at record lows in 2% inflation push; US jobless claims rise – as it happened

Time to recap.

The European Central Bank has pledged to maintain its record low interest rates until eurozone inflation is firmly at its new 2% target. At its first meeting since its strategy review, the ECB said it would maintain “persistently accommodative monetary policy stance” to hit its goals.

ECB president Christine Lagarde also warned that the delta variant of Covid-19 could hold back the recovery, with some restrictions expected to remain in place for the rest of the year.

More Americans have filed new claims for unemployment support, raising concerns that the US recovery is being hurt by rising delta cases. There were 419,000 ‘initial claims’ for jobless help last week, a rise of over 50,000.

The UK government has outlined plans to cut its majority shareholding in NatWest bank.

The trading plan, otherwise known as a “drip” sale, means the Treasury could end up selling up to 15% of the average amount of NatWest shares usually traded over 12 months. That could net the government a maximum £1.2bn based on the current share price, which would be on top of any additional bulk share sales the government chooses to launch over the next year.

However, the Treasury stressed it would only sell shares at a price that represented value for money for taxpayers. The government is expected to take a loss on any sale, having paid 502p a share as part of the bank’s bailout in 2008.

Consumer good giant Unilever has warned that the rise in raw material, packaging and transport costs is hitting its profit margins, sending its shares down almost 6% today.

UK factories have reported a surge in orders and output, and escalating fears that shortages of parts and labour will hurt growth.

Bank of England deputy governor Ben Broadbent has weighed into the heated debate on UK inflation, arguing that many of the factors driving up prices this year are temporary, and unlikely to create longer-term inflation pressures.

Bankers and advisers are in line for a £275m payday from the proposed takeover of the British supermarket Morrisons, according to newly published documents.

British Gas has more than doubled its profits for the first half of the year after cold weather prompted customers working from home to turn their heating up, and small companies began to reopen for business after Covid-19 lockdowns last year.

A Chinese billionaire has been granted planning permission to construct an eight-storey, 5,760-sq metre (62,000-sq-ft) private palace overlooking Hyde Park, central London.

Goodnight. GW

In the City, the FTSE 100 index has ended 30 points lower at 6968 points, down 0.45% today.

Unilever (-5.9%) dragged the blue-chip index down after warning that rising inflationary pressures were hitting its profit margins, as the cost of raw materials, packaging and transport soars.

Fellow consumer goods giant Reckitt Benckiser (-2.4%) took a knock too, with housebuilder Persimmon (-4.3%), miner Rio Tinto (-2.1%) and Primark owner AB Foods (-1.9%) all lower.

NatWest finished 2.7% lower at 194.2p, after the government announced plans to sell some of its stake, returning the bank to majority private ownership almost 13 years after its bailout.

European stock markets had a better day, though, with the Stoxx 600 finishing 0.6% higher with gains in Germany, France, Italy and Spain.

ECB chief Christine Lagarde has flagged that the Delta variant of Covid-19 could hold back Europe’s recovery.

Speaking at a press conference after today’s monetary policy meeting, she explained that the service sector recovery could be more affected by Delta:

“We expect manufacturing to perform strongly even though supply bottlenecks are holding back production in the near term.

“The reopening of large parts of the economy is supporting a vigorous bounceback in the services sector, but the Delta variant of the coronavirus could dampen this recovery in services especially.”

Lagarde also explained that the ECB expects some pandemic restrictions to continue through this year:

Our projection from June actually included some assumption that certain containment and lockdown measures would be continued into the third quarter and some of it still remaining during the fourth quarter of 2021.

“So it is factored into our projection, and all the elements that we are observing are confirming our projection of the second quarter and for the third quarter.”

Lagarde also insisted that the outlook for inflation in the medium term is subdued -- with the ECB pledging not to tighten policy until it sees inflation firmly at 2% in the medium term.

British Gas has more than doubled its profits for the first half of the year after cold weather prompted customers working from home to turn their heating up, and small companies began to reopen for business after Covid-19 lockdowns last year.

Profits at the UK’s biggest energy supplier rose to £172m for the first six months of the year, from £78m in the same period last year, even after losing 114,000 home energy customers since the end of last year.

Chris O’Shea, the chief executive of the British Gas owner, Centrica, said the unusually cold start to the year, compared with an unusually mild spring in 2020, helped to boost its first-half profits by about £50m.

Pharmaceuticals news: GSK has announced the head of its consumer healthcare division, Brian McNamara, will lead its new consumer healthcare company, once it’s spun off as a separate firm.

GSK outlined the spinoff last month, as part of CEO Dame Emma Walmsley’s plan to shake up the pharmaceuticals and vaccines business (provisionally called “New GSK”) and deliver strong sales and profit growth.

Walmsley will lead New GSK, despite pressure from the activist investor Elliott Management who earlier this month claimed she should effectively reapply for her own job.

GSK swatted this suggestion aside, saying that “focus and stability are now critical to deliver a successful separation”.

Shares in Chinese ride-hailing giant Didi have dropped by 7% after a report that Beijing is considering harsh penalties on the company -- from a massive fine to even a forced delisting after its IPO last month.

CNBC explains:

Shares of Didi fell more than 7% Thursday, bringing its month-to-date losses to over 24%. Bloomberg News reported Chinese regulators are planning a slew of punishments against Didi, including a fine likely bigger than the record $2.8 billion that Alibaba paid earlier this year.

The penalties could also include suspension of certain operations, delisting or withdrawal of Didi’s U.S. shares, the report s

Shares have fallen to $10.63, further below the $14 price at which they floated less than a month ago.

Didi faced a tough clampdown from Beijing regulators earlier this month, with the Cyberspace Administration of China banning its app from mobile app stores in China, only days after the company floated on the New York stock exchange.

The US stock market has opened mixed, as the rise in jobless claims last week dampens the mood.

The Dow has dropped, while the tech-focused Nasdaq is a little higher, suggesting investors are a little less optimistic about the economic rebound.

• Dow Jones industrial average: down 85 points or 0.25% at 34,712 points
• S&P 500: down 3 points or 0.1% at 4,355 points.
• Nasdaq Composite: up 26 points or 0.2% at 14,658 points

Insurance group Travelers is the top faller on the Dow (-1.75%), followed by oil company Chevron (-1.4%), aircraft maker Boeing (-1.2%) and entertainment firm Walt Disney (-1%).

Big tech firms are rising, though, including Salesforce.com (+1.2%), Microsoft (+1.35%), Apple (+1%) and Alphabet (+0.3%).

The jump in US jobless claims is partly driven by auto plants temporarily shutting down to ‘retool’, explains Pantheon Macroeconomics’ Ian Shepherdson:

Robert Frick, corporate economist at Navy Federal Credit Union, fears that the Delta variant of Covid-19 could lead to fresh job losses in the US.

On today’s jobless claims report, he says:

The unexpected bump in claims could be noise in the system, but it’s also not hard to see how the rise of the Covid-19 Delta variant could add thousands of layoffs to numbers that already are double what they were pre-Covid.

We should keep a close watch on Covid-19 related layoffs in this “fourth wave”.

The total number of Americans receiving unemployment support has fallen across the US.

That’s due to several factors – people find new jobs, exhaust their benefits, or their states end pandemic support early.

The total number of people receiving jobless support fell to 12.57 million in the week to Saturday 3 July, down from 13.8 million in the last full week of June.

Oxford Economics’ Greg Daco explains: