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(Alliance News) - UK Chancellor Rishi Sunak will on Wednesday announce a GBP2 billion scheme aimed at alleviating youth unemployment by subsidising work placements when he sets out his coronavirus recovery package.
A three-point plan to boost the ailing economy by helping job creation will include a plan to help pay for six-month placements for some under-25s facing long-term unemployment.
Sunak will set out the measures in his summer economic update in the House of Commons, as he faces pressure to assist those who are most at vulnerable to the effects of a financial crisis.
Sunak will also offer an immediate stamp duty "holiday" to temporarily exempt the tax on the first GBP500,000 of homes purchased in England and Northern Ireland, according to unconfirmed reports.
The Treasury acknowledged that young people are more likely to be furloughed under the job retention scheme which is being wound up and is due to end in October.
So a "kickstart scheme" hoped by the Treasury to create hundreds of thousands of jobs will be unveiled for 16 to 24-year-olds who are claiming Universal Credit and at risk of long-term employment.
Government funding would cover 100% of the minimum wage for 25 hours a week in the scheme that will be open to all employers across Great Britain, with bosses able to top up wages.
Ahead of the announcement, Sunak said: "Young people bear the brunt of most economic crises, but they are at particular risk this time because they work in the sectors disproportionately hit by the pandemic.
"We also know that youth unemployment has a long-term impact on jobs and wages and we don't want to see that happen to this generation.
"So we've got a bold plan to protect, support and create jobs – a plan for jobs."
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 0.9% at 6,133.00
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Hang Seng: up 0.7% at 26,151.65
Nikkei 225: closed down 0.8% at 22,438.65
DJIA: closed down 396.85 points, 1.5%, at 25,890.18
S&P 500: closed down 1.1% at 3,145.32
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GBP: down at USD1.2551 (USD1.2586)
EUR: down at USD1.1273 (USD1.1297)
Gold: up at USD1,794.20 per ounce (USD1,793.61)
Oil (Brent): down at USD42.86 a barrel (USD43.26)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
UK Chancellor Rishi Sunak delivers summer economic update
0700 EDT US MBA Weekly Mortgage Applications Survey
0815 EDT Canada Housing Starts
1030 EDT US EIA Weekly Petroleum Status Report
1500 EDT US Consumer Credit
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Britain's economy will not recover to pre-pandemic levels until 2024 even without a second wave, according to research. A report by accountants BDO and the Centre for Economics and Business Research forecasts gross domestic product will fall 11% this year – but only if there is no large-scale second wave of coronavirus or another national lockdown. It warns that another peak in the pandemic and lockdown would send Britain's GDP tumbling 19% this year and see exports fall by 23%. The study cautions that the "dual threat" of the pandemic and Brexit to international trade will hammer the UK's export industry in either scenario. With no second lockdown, exports will still fall by 19% this year, which will weigh on economic growth, the study found. Exports may recover a little in 2021 before stagnating, according to the report.
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Japan's current account surplus was nearly ten times higher in May from the previous month, data from the country's Ministry of Finance showed Wednesday. Japan's current account surplus rose to JPY11.768 trillion, about USD109 billion, from JPY2.627 trillion in April. The dramatic rise was boosted by a sharp contraction in the country's Goods & Services deficit to JPY6.493 trillion from JPY15.967 trillion the previous month. May's surplus was ahead of consensus estimates, according to FXStreet, of a JPY1.088 trillion surplus. The surplus, however, was lower from May 2019, when it stood at JPY16.311 trillion. Exports slipped in May to JPY41.979 trillion from JPY49.090 trillion in April. Imports also slipped, falling to JPY47.547 trillion from JPY58.756 trillion. As a result, Japan recorded a trade deficit of JPY556.8 billion, which is lower than April's deficit of JPY966.6 billion.
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German Chancellor Angela Merkel is to meet the presidents of the three main EU institutions on Wednesday to discuss Germany's EU council presidency, which looks set to be dominated by the bloc's economic recovery following the coronavirus pandemic. During her first trip abroad since the beginning of the pandemic, Merkel will meet the presidents of the European Parliament, European Council, and European Commission: David Sassoli, Charles Michel and Ursula von der Leyen, respectively. Germany took over the EU Council presidency on July 1 and will hand it over to Portugal after six months. One of the biggest issues on their plate is the controversial multi-billion-euro coronavirus recovery plan.
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White House aides are considering undermining the Hong Kong dollar's peg to the greenback as part of efforts to punish China over its new security law in the city, a report said Wednesday. Bloomberg News said the idea from some officials to put a strain on the 37-year-old peg – possibly by limiting local banks' access to US dollars – was one of a number of measures flagged as Washington looks at ways to respond to the controversial law. However, it cited unnamed sources as saying the move had not been discussed at senior levels of the Trump administration, while analysts said such a measure was unlikely owing to the upheaval it would cause to global markets. Other measures being discussed included cancelling a US-Hong Kong extradition treaty and no longer cooperating with the city's police force, Bloomberg said.
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US President Donald Trump has formally started the withdrawal of the US from the World Health Organization, making good on threats over the UN body's response to the coronavirus, officials said Tuesday. The US is the largest financial contributor to the WHO – which leads the fight on global maladies from polio to measles to mental health – but it has increasingly been in Trump's crosshairs as the coronavirus takes a heavy toll. After threatening to suspend the USD400 million in annual US contributions and then announcing a withdrawal, Trump has formally informed UN Secretary-General Antonio Guterres that he has started the US pullout, a State Department spokesperson said. The withdrawal is effective in one year – July 6, 2021 – and Joe Biden, Trump's presumptive Democratic opponent, is virtually certain to stop it and stay in the WHO if he defeats Trump in the November election.
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BROKER RATING CHANGES
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CREDIT SUISSE REINITIATES WPP WITH 'UNDERPERFORM' - PRICE TARGET 565 PENCE
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RBC RAISES RIO TINTO TO 'SECTOR PERFORM' (UNDERPERFORM) - PRICE TARGET 4200 (3600) PENCE
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GOLDMAN CUTS RIO TINTO TO 'NEUTRAL' (BUY) - PRICE TARGET 4440 (4720) PENCE
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COMPANIES - FTSE 100
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Drugmaker AstraZeneca said Lynparza has been approved in the EU for patients with germline BRCA-mutated metastatic pancreatic cancer. The approval was based on results from the phase III Polo trial. "Today's approval opens the door to a new era of biomarker-led care for patients with metastatic pancreatic cancer in the EU, which has the highest incidence of any region globally," said Hedy Kindler, co-principal investigator of the POLO trial.
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Real estate investment trust SEGRO updated the market on rental collections from its UK portfolio associated with the UK quarterly payment date of June 24, saying that 93% of the GBP37 million of rent due was received. The company noted that GBP9 million of rent ordinarily due on the UK quarterly payment date has been re-profiled, mostly to be paid in the second half of 2020.
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COMPANIES - FTSE 250
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Aberdeen, Scotland-based transport company FirstGroup reported widened a pretax loss of GBP299.6 million for the year to the end of March compared with GBP97.9 million loss a year ago. FirstGroup explained that the loss reflects charges relating to the North American self-insurance provision, Greyhound impairment charges, restructuring and reorganisation costs and coronavirus-related charges. Trading trends prior to the pandemic were broadly similar throughout the year, the company noted, with industry cost pressures offset by revenue growth in First Student, First Transit and First Bus and management actions. Annual revenue, meanwhile, grew to GBP7.75 billion from GBP7.13 billion year-on-year. FirstGroup is not proposing to pay a dividend for financial 2020, but said it will continue to review the appropriate timing for restarting dividend payments.
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Property investment company CLS Holdings said vacancy rates have increased from the end of December 2019 levels due to refurbishments, acquired vacancy in the UK and some recent lease expiries across the portfolio. Since April 8, there have been 25 deals securing GBP3.2 million of annual rent, CLS said. The company said its balance sheet remains well-capitalised and robust. As at the end of June, CLS had cash of over GBP190 million, with a further GBP50 million in undrawn facilities.
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Lancashire, England-based Victrex said it had a solid start but weaker end to its third quarter as Covid-19 headwinds hurt performance. The polymer solutions provider reported a 12% drop in sales volume for the three months to the end of June to 805 tonnes, with revenue down 18% to GBP58.8 million, reflecting mix as a key driver. On a year-to-date basis, Victrex sales volume of 2,797 tonnes was broadly in line with the prior year's 2,811 tonnes. Year-to-date revenue stands at GBP210.3 million, down 3% compared to GBP217.8 million a year prior. Looking ahead, Victrex said with lower production levels and a weak product mix will hurt margins in the second half and in financial 2021.
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COMPANIES - MAIN MARKET AND AIM
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Boohoo said it is launching an immediate independent review of its UK supply chain, led by Alison Levitt QC. The fashion retailer said it is also accelerating its independent third party supply chain review with ethical audit and compliance specialists Verisio and Bureau Veritas. In addition, boohoo said it will be making an initial commitment to invest an incremental GBP10 million to eradicate supply chain malpractice. The move comes after Next and ASOS have dropped boohoo clothing from their websites after claims that the fast-fashion retailer sold clothes made in factories where staff were paid less than the minimum wage and worked in poor conditions. boohoo has had more than GBP1 billion wiped from its share value in the past two days after an article in the Sunday Times newspaper alleged that workers in a Leicester factory making clothes destined for boohoo were being paid as little as GBP3.50 an hour.
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COMPANIES - GLOBAL
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Intel Corp's Mobileye and transportation operator Willer are to collaborate on the launch of an autonomous robotaxi service in Japan and Southeast Asia, Intel said. Willer, which is among the largest transportation operators in Japan, Taiwan, and the southeast Asia region, will work with Intel on the testing and deployment of autonomous transportation. The collaboration will start in Japan, with the transportation solutions to be based on Mobileye's automated vehicle technology. Mobileye develops "computer vision and machine learning, data analysis, localisation and mapping for advanced driver-assistance systems and automated driving". The companies are planning to start testing their robotaxis on Japanese public roads starting 2021 before launching "fully self-driving ride-hailing and ride-sharing mobility services in 2023". The companies will also look for opportunities for similar services in Taiwan and elsewhere in southeast Asia.
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Wednesday's Shareholder Meetings
First Derivatives
Boku
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By Tapan Panchal; tapanpanchal@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
