Pound and FTSE 100 rally as Covid vaccine optimism lifts markets – as it happened

And finally, the UK stock market has closed sharply higher, on a good day for UK assets.

The blue-chip FTSE 100 index has closed 166 points higher at 6756 points, a gain of 2.5%. That’s its highest closing level in a month, having hit a three-week intraday high earlier in the session.

That’s also the Footsie’s best day since 6th January, when the City was enjoying a New Year bounce.

The success of the UK’s vaccine rollout, and the prospect that the lockdown would be rolled back in the coming weeks, lifted shares in travel companies and hospitality firms.

Earlier today, prime minister Boris Johnson told reporters that the UK’s plan to lift the current lockdown would be ‘cautious but irreversible’. Johnson also said the government would provide target dates for sectors to reopen “if we possibly can” when he reveals his roadmap for releasing lockdown next week.

Hotel chain Whitbread was the top riser on the FTSE 100, closing 7% higher, followed by British Airways parent company IAG (+6.7%).

Oil companies also led the charge, with BP and Royal Dutch Shell up around 6% after crude prices hit 13-month highs today.

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The smaller FTSE 250 jumped by 1.8%, with UK-focused companies such as retailer WH Smiths up 12%, travel operator National Express gaining almost 11%, and cinema chain Cineworld up 10.5%.

Markets across Europe also rallied, with the Stoxx 600 jumping 1.4%.

Craig Erlam, senior market analyst at OANDA Europe

European stocks are enjoying a very strong start to the week, led by energy stocks as WTI jumps above $60 for the first time since the pandemic hit.

There’s real momentum behind the global recovery trade and with every passing week, it seems investors are becoming more optimistic about it. The vaccine rollout is providing enormous encouragement, with the UK surpassing 15 million vaccinations and the topic of conversation finally turning to reopening the economy.

Cases and fatalities are falling rapidly due to a combination of the vaccine and the lockdown and the progress of the last two months should ensure restrictions are eased for the last time starting in a few weeks. The UK economy has suffered worse than most this last 12 months but could now be positioned for a powerful recovery.

The pound remains at a 33-month high tonight, over $1.39, as it approaches levels seen in the run-up to the EU referendum in June 2016.

That’s all for today. See you tomorrow! GW

With Wall Street closed for President’s Day, it’s time for a recap.

The pound has hit its highest level against the US dollar in almost three years, amid optimism that the UK economy will recover strongly once the lockdown is lifted. Sterling is trading over $1.39 for the first time since April 2018, with analysts predicting it will keep rising.

Global stock markets are also rallying, amid hopes that Covid-19 vaccines will allow a return to more normal times.

In London, the FTSE 100 index is now up 150 points, or 2.3% at 6740, on track for its best day in almost six week. Travel companies, oil firms, miners and banks among the risers.

In Tokyo, the Nikkei has closed at its highest level in over 30 years, ending the day over 30,000 points after Japan’s economy grew faster than expected last quarter.

The oil price has also jumped, hitting its highest level in 13 months. Analysts cited increased demand for energy, and rising tensions in the Middle East.

Commodity prices are also jumping, with tin hitting a seven-year high and copper at an eight-year peak.

Electricity prices have soared in Texas amid a chilling winter storm that has forced rolling blackouts to be imposed.

Jaguar Land Rover, the UK-based carmaker, will make its Jaguar brand electric-only by 2025 as part of a drive to achieve net zero carbon emissions by 2039.

Former Nigerian finance minister Ngozi Okonjo-Iweala, has been named as the first woman, and the first African, to run the World Trade Organization.

In the pub world, Mitchells & Butlers is raising £350m from a group of investors including currency trader Joe Lewis, the Irish billionaires and horse racing tycoons John Magnier and JP McManus....

.... while rival chain Wetherspoon’s is urging the government to ropen pubs alongside non-essential shops.

And it’s 50 years since the UK moved to decimalisation -- prompting a great behind-the-scenes tale from the daughter of the man who designed the new coins.

Congratulations to former Nigerian finance minister Ngozi Okonjo-Iweala, who has received unanimous backing to become the first woman, and the first African, to run the World Trade Organization.

Okonjo-Iweala was chosen as the WTO’s next director general at a special meeting of its General Council today -- nearly three months after her appointment was blocked by the US.

With protectionism on the rise in recent years, and the global economy battered by Covid-19, Ngozi Okonjo-Iweala faces a tough task. She’s highly experienced, though, having worked as managing director of the World Bank and also chaired Gavi, the vaccine alliance.

Here’s a profile of the WTO’s next leader:

And here’s a flavour:

“The WTO needs … a fresh look, a fresh face, an outsider, someone with the capability to implement reforms and to work with members to make sure the WTO comes out of the partial paralysis that it’s in,” Okonjo-Iweala said in an interview with CNN.

Ada Osakwe, an economist who worked with Okonjo-Iweala in government, said the appointment was “big deal for Africa and it’s a big deal for the world”. “Having such a remarkably accomplished woman take the helm of an institution that needs some level of a shake-up, given everything that’s happening with trade in the world, the fights between the US and China. She has been in the trenches,” she told the Guardian.

Last week Okonjo-Iweala told her Twitter followers that she was looking forward to “finalising the process of WTO’s DG”. “There is vital work ahead to do together,” she said.

Over in Texas, electricity prices have surged dramatically as the state is hit by a harsh winter storm, forcing blackouts.

Reuters flags up that the spot price of electricity on the Texas power grid spiked more than 10,000% on Monday, as snow and ice sent temperatures plunging across the southern US plains states.

They explain:

Real-time market prices on the power grid operated by the Electric Reliability Council of Texas (ERCOT) have climbed as high as $11,000 per megawatt, according to ERCOT. A typical price on the grid, which supplies most of the electricity for Texas, is less than $100 per megawatt.

Gas prices also rocketed over the weekend:

ERCOT was forced to launch rotating power outages began this morning, meaning thousands went without electricity for short periods, with the temperature in Dallas currently -14C (7F).

As well as driving up demand for heating, these ice storms have frozen some of Texas’s wind turbines, leaving them unable to generate power for the grid.

Chetan Ahya, global head of economics at Morgan Stanley, reckons US policymakers will try to create a ‘high-pressure’ economy to get growth up, and unemployment down, after the pandemic.

Ahya writes:

After hunkering down for much of 2020, people are eager to make up for lost time. Much the same can be said of policy-makers, who are taking action to recoup lost economic output and return to maximum employment as quickly as possible. To get there, we think they are aiming for a high-pressure economy – an environment of stronger-than-average economic growth that helps to reduce unemployment. That’s exactly where we think the US economy is headed in the coming quarters....

Spending patterns indicate that households have been forced to accumulate excess saving as restrictions on mobility have limited their opportunities to go out and spend. With warmer temperatures coming and vaccinations set to cover a large part of the vulnerable population, we are confident that the relaxation of restrictions, which has begun in the states with the tightest controls, will pick up speed as spring approaches.

Charlie Bilello, CEO of Compound Capital Advisors, shows how infections in the US - and the UK - have dropped:

Tim Martin, the founder and chairman of pub chain Wetherspoon’s, is urging the government to get locals open again.

Martin warned that the pub industry was on its knees under the latest lockdown rules, and should be allowed to reopen alongside non-essential shops.

He argues:

“Surely it is possible for the hospitality industry to reopen at the same time as non-essential shops, now that a vaccine exists, on the basis of the social distancing and hygiene regulations, which were agreed with the health authorities, after full consultation, for the July 4 reopening last year.

“Unless the industry does reopen on that basis, economic mayhem will inevitably follow.”

The challenge facing the government, though, is that any loosening of the lockdown risks pushing the R rate up - so it must prioritise how to reopen various parts of the economy without risking a 4th lockdown.

The Sun reported last Friday that UK pubs and restaurants will be able to serve outdoors in April if Covid cases continue to fall. Given the British weather, drinkers might want to wrap up....

The stock market rally is gathering pace in London, where the FTSE 100 is now up 2% or 132 points at 6722.

That’s the index’s highest level in three and a half weeks (since 21st January), putting the Footsie on track for its best day since 6th January.

Hospitality stocks are on a charge, on optimism that travel and social events will resume as the vaccine rollouts allow lockdowns to end.

Hotel operator Whitbread is up 5.7%, airline group IAG gaining 5.7%, catering group Compass up 5.3%. UK banks are also stronger, with Barclays and Lloyds up over 5% each.

Mihir Kapadia, the CEO of Sun Global Investments, says investors look towards a post-lockdown world

“Global markets have started the week higher as investors remain confident that the pandemic will soon give way to an economic boom. Rising for the 11^th day in a row, stocks appear to have recovered from the GameStop fiasco as there is now a concrete sign that the global economy is back on track. In Asia, the Japanese Nikkei rose 1.9%, to its highest since 1990, while the South Korean KOSPI has also rallied to provide some impressive gains.

Europe has also felt this momentum with the UK leading the charge across the continent.

The US stock market is closed today for President’s Day, but the futures market is indicating Wall Street will rally tomorrow:

Raffi Boyadjian, senior investment analyst at XM, says US stimulus hopes and vaccine-led euphoria continued to bolster sentiment today, pushing both oil and the pound higher.

It was a bullish mood in commodity markets as well on Monday as rising optimism for the economic outlook fuelled expectations of higher demand for commodities such as oil and copper. WTI oil was up almost 2%, breaking above $60 a barrel today to a new 13-month high. Brent crude was also up sharply (1.3%) to trade above $63.

Aside from the growth optimism, fresh tensions in the Middle East also supported oil prices following reports of an Iranian-backed drone attack in Yemen against Saudi-led forces.

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Commodity prices are also rallying hard today, on expectations of higher demand as the global economy rebounds from the pandemic.

Tin has hit a seven year high, which the Financial Times attributes to a “manufacturing-driven buying frenzy” that has drained physical stocks of the commodity.

The dark grey metal, usually associated with cans, has become a key material for the global electronics industry. It is used to make solder — the substance that binds together circuit boards and wiring.

The shift to working from home has boosted demand for computers and other electronic devices, while China has also been stockpiling the metal to meet its goal of self-sufficiency in semiconductors, according to traders.

More here: Tin-buying frenzy sends prices to seven-year high

Copper has hit its highest level since 2012, trading as high as touching $8,406 per tonne, amid predictions of rising inflation and stronger than expected demand from China’s factories, according to Reuters.

These higher commodity prices could, one assumes, force factories to put up their own prices - ultimately leading to higher costs in the shops....

The US dollar has dipped broadly in the markets, hitting a two-week low against a basket of currencies.

Optimism about COVID-19 vaccine rollouts, and the prospect of more US stimulus measures, pushed investors into riskier assets and out of the dollar.

Analysts at MUFG predict further dollar weakness ahead, which indicates the pound could have further to rally.

“We believe there is plenty yet to go in the so-called ‘reflation trade’ with market participants under-estimating the willingness of global policymakers to let the economy run hot and fuel stronger-than-expected global growth through the remainder of the year.