Closing post
Time for a quick recap.
UK and European gas prices have jumped to their highest level this year following an outage at a gas processing plant in Norway, which has disrupted supplies to the UK.
The UK manufacturing sector has returned to growth, with output expanding at the quickest pace in over two years in May on the back of improved intakes of new work.
The Labour party has indicated its support for Shein’s potential London listing, as the Chinese online fashion company prepares to push the button on the UK’s biggest ever stock market flotation.
Shares in GSK have tumbled 9%, wiping around £6bn off its market value, after a US judge ruled that lawsuits alleging that heartburn treatment Zantac caused cancer could proceed.
The US manufacturing sector lost momentum in May, according to the latest healthcheck from the Institute of Supply Management (ISM).
The ISM manufacturing PMI, released this afternoon, fell further into contraction territory with a drop to 48.7, from 49.2, mainly due to a fall in new orders.
ISM manufacturing comes in below expectations at 48.7 vs 49.2 last month. New orders 45.4 vs 49.1 and prices paid index 57.0 vs 60.9.
— Kathy Jones (@KathyJones) June 3, 2024
Capital Economics explains:
The drop in the ISM manufacturing index in May adds to the sense that the economy is losing momentum, while the drop back in the prices paid index should soothe concerns about a potential renewed rise in goods price pressures.
The ISM has not been a particularly good leading indicator of activity over the past 18 months, however, and the decline is at odds with the S&P Global manufacturing PMI, which rallied a little last month.
New York Stock Exchange is investigating technical issue as dozens of stocks are halted
The New York Stock Exchange is investigating a “technical issue” that was leading to large fluctuations in the listed prices of certain stocks.
Warren Buffett’s Berkshire Hathaway is caught up in the glitch, with its Class A shares shown falling 99% today.
BREAKING: Berkshire Hathaway Class A stock, $BRK.A, has been halted down 99.97% in what appears to be a market glitch. pic.twitter.com/5cmzyHCd6V
— The Kobeissi Letter (@KobeissiLetter) June 3, 2024
NYSE said the technical issue is related to a mechanism designed to prevent stock prices from swinging wildly.
More than 50 stocks on the NYSE, including Berkshire Hathaway and Chipotle Mexican Grill are temporarily halted.
Talk of the meme stock craze is back in the financial markets, as certain share prices show remarkable volatility.
Shares in GameStop, surged 75% in pre-market trading this morning, after much-followed trader “Roaring Kitty” Keith Gill revealed he had taken a large stake in shares and stock options.
A post on Reddit appeared to show that Gill held 5m shares, worth $116m at last Friday’s prices, and a clutch of call options letting him buy more at $20 each.
This is RoaringKitty's, aka DeepFuckingValue, most updated position.
— unusual_whales (@unusual_whales) June 3, 2024
5 million GameStop, $GME, shares.
120,000 June 21st $20 $GME calls.
$29 million in cash.
A total of $210 million.
And Unusual Whales has been tracking him. pic.twitter.com/5wmHkoVf8F
Call options are a bet that a share price will rise – and can also push a share price higher, if the company which wrote the options decides to protect itself by buying the underlying asset, just in case.
So far today, GameStop’s shares surged from $23 to $40 when Wall Street opened…. before promptly turning south, and back to $28, up around 25%.
As expected...#GME #GameStop #Short pic.twitter.com/LjkBZG79ds
— TheMillionOrNothing (@TheMillionOnly) June 3, 2024
Honestly, it’s a daily lesson in Caveat emptor….
“Norway [outage] and events surrounding #Gazprom customers is the main driving force [for] European gas prices,” said TMM, head of #natgas analytics at consultancy @ICISOfficial. He added that the outage could potentially cut Norwegian flows by more than 20%. https://t.co/Ly9Bi3iTQg
— Tom Marzec-Manser (@tmarzecmanser) June 3, 2024
Unite: Ford managers to begin nationwide industrial action
Ford managers at sites across the country will begin industrial action later this month in a dispute over pay, unions have warned.
Members of Unite at sites including Dunton, Stratford, Dagenham, Daventry and Halewood will begin working to rule and an overtime ban on June 14, with strikes threatened if the dispute is not resolved.
The workers have rejected Ford’s pay offer, which Unite said was only a performance related merit award, which they are not guaranteed to receive.
Unite general secretary Sharon Graham said:
“Not content with making billions in profits, Ford has decided to try and attack our members’ pay out of sheer corporate greed.
“Performance related payments give no guarantee of an actual pay rise and leave these workers in danger of facing cuts to their wages.
“They are absolutely right to take industrial action and they have the full support of Unite in doing so.”
Ford said in a statement that it will keep trying to resolve the situation:
“We regret that it has resulted in this outcome considering the fair and balanced offer made and the competitiveness of our LL6 pay and benefits package.
“We will continue to engage with Unite and our employees and endeavour to resolve the matter.”
This page on Gassco’s website confirms that gas flows into the UK’s Easington Gas Terminal, in Yorkshire have dropped to 0MSm3 today.
Anyone needing to follow the Norwegian gas supply situation in as real time as possible, and for free, bookmark this linkhttps://t.co/IEwz3wFzJs
— Ira Joseph (@ira_joseph) June 3, 2024
For now, Gassco’s hand is showing a loss of supply for a relatively minimal duration, though this can change quickly. #ONGT
Fortunately, the situation at the Sleipner Riser platform, where the pipeline crack has been discovered, is not considered dangerous according to Gassco.
But Alfred Hansen, head of pipeline system operations at Gassco, told Reuters:
“This has big consequences from a supply perspective.”
Today’s disruption show “the pivotal role” Norway plays in supplying Europe after most Russian pipeline deliveries were halted following the invasion of Ukraine, points out Bloomberg, adding:
Even after the energy crisis, the market remains very sensitive to supply issues and prices react quickly when there’s any deviation from the scheduled seasonal maintenance plans.
“We as Europeans are dependent on the rest of the world for our energy supply, and that’s a vulnerable situation to be in,” said Jesper Johanson, chief executive officer of Danish trader InCommodities A/S, in an interview.
Gassco says it is working on a plan to repair the crack in its pipeline, and on ‘compensationary measures’ to get as much gas to Europe as possible in the meantime:
⚠️ NOT YET KNOWN HOW LONG SLEIPNER REPAIR WILL TAKE, GASSCO SAYS
— PiQ (@PiQSuite) June 3, 2024
⚠️ GASSCO: WE ARE WORKING TOGETHER WITH EQUINOR WITH A PLAN FOR SLEIPNER REPAIRS AND WITH A PLAN FOR COMPENSATORY MEASURES TO DELIVER THE HIGHEST POSSIBLE GAS VOLUME TO EUROPE
— PiQ (@PiQSuite) June 3, 2024
UK gas prices surge after crack closes pipeline from Norway
In the energy sector, UK wholesale gas prices have hit their highest level of the year today after a pipeline between Norway and the UK was closed.
Norwegian gas pipeline system operator Gassco reported that a crack has been found in a two-inch pipeline onboard Norway’s offshore Sleipner Riser platform.
It is not known how long it will take to repair the crack.
But the problem has halted gas exports from Norway to Britain through the Langeled pipeline, which runs via Sleipner.
Norwegian flows into the UK’s Easington terminal, an entry point for a third of Britain’s total supply, plunged to zero today, Bloomberg reports.
This has driven European gas prices to their highest level this year, in a scramble for alternative supplies.
The day-ahead price of UK gas has jumped 11.7% to 93.25p per therm, while gas for delivery next month to the UK has jumped 13% to 92.3p. Both contracts are the highest since December 2023.
European gas is up 8% at €37.45/MWh, the highest in almost six months.
Labur confirms meeting with Shein
The Labour Party have confirmed they have held talks with Shein ahead of its possible flotation in London, as was reported this morning.
A spokesperson for Labour – who remain well ahead in the polls for the July election – explained:
“Labour has met a range of companies including Shein that are looking to invest or list in Britain.
Raising investment, productivity and growth is one of Labour’s missions for government.”
UK factories are doing better than their counterparts in the eurozone.
Manufacturing production in the euro area fell again in May, the latest poll of purchasing managers found, with new orders, exports and purchasing activity all softening again.
Encouraging, though, production fell at a slower rate than in April, and almost stabilised last month.
S&P Global explains:
Germany and France – the two largest economies in the single currency union – saw contractions slow, although the former was still the eurozone’s worst-performing manufacturing sector.
On the other hand, accelerated expansions were seen in Spain and the Netherlands, both of which registered the best improvements in factory operating conditions since 2022. Greece retained the top rank, despite growth here cooling to a four-month low.
More Shein news: it says its resale platform, where customers can resell pre-owned products from the fast fashion retailer, will be made available in Europe and the UK.
The platform, which was launched in the U.S. about two years ago, will now be accessible in France, followed by the UK and Germany in subsequent phases, Reuters reports.
A resale platform can address one of the criticisms of fast fashion chains like Shein – that clothes are bought cheaply and then ditched for new items.
Updated
Virgin Atlantic confirms September return to Israel
Virgin Atlantic has confirmed it will restart flights between London Heathrow and Tel Aviv on 5 September, almost a year after putting them on hold, PA Media reports.
The airline suspended the route in October last year after the start of the war in Gaza.
It had originally hoped to restart in March, but decided to push the date back to September.
Virgin Atlantic has also signed a codeshare and club sharing deal with Israel’s flag carrier, El Al Israel Airlines, uncer which customers of both airlines will be able to fly on the Tel Aviv-London Heathrow route.
Several other airlines, including Wizz Air, easyJet and British Airways, have already begun flying to Tel Aviv again earlier this year.
The UK general election hasn’t moved the markets, yet anyway, but it’s a different story elsewhere today.
In India, the Nifty 50 share index has hit a record high after exit polls showed Narendra Modi’s BJP party has won the largest election in the country’s history.
The Nifty 50 is up over 3% today, and has now almost doubled in value in the last five years.
News of Modi’s likely victory also pushed up the rupee against the dollar, and helped India’s sovereign bonds strengthen.
But it’s a different story in Mexico, where the currency weakened after official projections showed the ruling party wining power again.
The peso has fallen over 2% today, to 17.37 against the US dollar, following forecasts that Claudia Sheinbaum, the protege of President Andres Manuel Lopez Obrador, is on track for a major win in elections there.
Sheinbaum’s left-wing Morena party could also secure a supermajority in both houses of congress, which will allow it to implement sweeping constitutional reforms.
The latest drop in overseas orders at UK factories was due to reduced inflows of new work from several trading partners, including the US, the EU (with specific mentions of Germany and Poland) and the Middle East, S&P Global reports.
UK manufacturing could have turned the corner last month, suggests Caroline Litchfield, partner and head of manufacturing and supply chain at independent law firm Brabners:
“May could well prove to be a turning point for UK manufacturing after almost two years of weak output.
“While we are by no means out of the woods yet, manufacturers will be cautiously optimistic for the future given growth in the wider economy, inflation falling to manageable levels and the potential for interest rates to be cut in the coming weeks.
“A confirmed election date is also likely to boost business and consumer confidence, and firms will be hopeful of order books benefiting as a result.
“Longer term though, UK makers will want to see any incoming government setting out how it will help address the skills gap within the industry and support a shift to the modern, sustainable methods of manufacturing which will be the pillars of future growth.”
Retail analyst Nick Bubb points out that Shein would dwarf the retailers currently listed in London, were it to float here:…
Well, it may seem odd that the London stockmarket is courting a big Chinese business, quite apart from the ethical concerns about fast fashion, but if the IPO of Shein does go ahead, its mooted market cap of over £50bn would be bigger than Tesco, Sainsbury, Next, M&S and JD Sports combined…
Here’s Rob Dobson, director at S&P Global Market Intelligence, with analysis of tday’s UK factory PMI report (see 9.43am):
“May saw a solid revival of activity in the UK manufacturing sector, with levels of production and new business both rising at the quickest rates since early-2022. The breadth of the recovery was also a positive, with concurrent output and new order growth registered for all of the main subindustries (consumer, intermediate and investment goods) and all company size categories for the first time in over two years.
While the latest upturn was dependent on a strengthening domestic market, there were signs of overseas demand also moving closer to stabilisation. Business optimism rose in tandem with the improvement in current conditions, with 63% of manufacturers forecasting their output to be higher one year from now.
The latest PMI survey data provided a mixed picture for price pressures at manufacturers, however. At the factory gate, output charge inflation strengthened for the fifth successive month and to its highest level in a year. That said, a solid easing in the rate of increase in input costs should help prevent price pressures from becoming embedded.”
UK factories return to growth, but price rises accelerate
Just in: UK factories have returned to growth, with the most rapid expansion in output in over two years.
The latest poll of purchasing managers across UK manufacturing found that activity grew across the sector in May.
S&P Global Insight, which compiles the PMI report, says:
All three product categories covered by the survey (consumer, intermediate and investment goods) and all three size definitions (small, medium and large) registered concurrent expansions for the first time in over two years.
In another boost, business optimism rose to a 27-month high.
But, while domestic demand was strong, new export orders fell for the twenty-eighth month in a row.
This lifted the manufacturing PMI back into positive territory, as it rose to 51.2 in May, up from 49.1 in April, its highest reading since July 2022. Any reading over 50 = growth, and today’s final reading is only slightly below the ‘flash’ number released during May.
There are also signs that inflation pressures are building up; output price inflation, which tracks what factories charge for their wares, hit its highest level in a year.
The PMI report explains:
Rates of [price] increase accelerated in the consumer and intermediate goods sectors, but eased at investment goods producers.
Blackstone to sweeten offer for Beyoncé song fund Hipgnosis
A private equity company attempting to take over Hipgnosis has sweetened its offer to value the troubled music rights owner at nearly $1.6bn (£1.26bn) as it attempts to end a protracted sale process.
Blackstone has said it that it will switch the offer for the Hipgnosis Songs Fund to a “scheme of arrangement deal”, which would require it to meet a higher threshold of shareholder support but could make the takeover quicker if it is achieved.
In a bid to secure the support of more investors of the company, which owns the rights of artists such as Beyoncé, Neil Young, Red Hot Chili Peppers and Justin Bieber, it has increased its offer a share by $0.01 to $1.31, which would value Hipgnosis at about $1.58bn.
The revised offer comes after Blackstone fought off competition for Hipgnosis from the US-based royalties fund Concord Music, which had offered $1.4bn.
“IPO buzz could be in the air” this morning, reports Kathleen Brooks, research director at XTB, thanks to Shein’s plan to file a prospectus for a potential London stock market float:
The question for UK traders is will this lift the spirits of the FTSE 100, after the index fell 0.77% last week. If this does happen this week, then it would take London a step closer to being Shein’s IPO destination.
While this filing does not indicate when its IPO would take place, it could be in the next few months, with Autumn seen as a likely date. The company is expected to be valued at £50bn, which would put it in the top 15 UK listed companies by market cap.
Updated
Digital bank Monzo has reported its first annual profit this morning, as it continues to target a stock market flotation.
Monzo reported a pretax profit of £15.4m for the year to March 2024 in its latest annual accounts, up from a £116.3m loss the previous year.
It now has approaching 10 million customers since launching in 2015, and in February secured another £350m in funding from investors, which pushed its value towards £4bn.
Shares in UK pharmaceuticals firm GSK have dropped over 9% at the start of trading, after a Delaware judge ruled on Friday that more than 70,000 lawsuits over discontinued heartburn drug Zantac can proceed.
Judge Vivian Medinilla of the Delaware Superior Court in Wilmington ruled that expert witnesses can testify in court that the drug may cause cancer – a blow to GSK, and fellow former Zantac manufacturers Pfizer, Sanofi and Boehringer Ingelheim.
The news has knocked GSK’s shares to the bottom of the FTSE 100 leaderboard.
*GSK SHARES DROP 9.8% AFTER DELAWARE ZANTAC RULING pic.twitter.com/VsJLJVQpuM
— IG (@IGcom) June 3, 2024
GSK told the City that it disagrees with ruling by the Delaware State Court and will immediately seek an appeal.
In a statement, it says:
Scientific consensus is that there is no consistent or reliable evidence that ranitidine [or Zantac] increases the risk of any cancer and GSK will continue to vigorously defend itself against all claims
Ruling to permit claims is not consistent with the Federal Court’s Multidistrict Litigation (MDL) ruling under the same legal standard
Moody's raises China's growth forecast to 4.5% for 2024
Credit rating agency Moody’s has raised China’s growth forecast for 2024 to 4.5% from 4.0%, Reuters reports.
Moody’s noted that China’s post-pandemic manufacturing and export-focused growth strategy is taking shape, with trade and manufacturing activity supporting growth in the first quarter of this year.
But, 4.5% would still be a slowdown, as China’s GDP rose by 5.2% in 2023.
Updated
Elsewhere in the business world, Frasers – the company behind Sports Direct – has appointed Sir Jon Thompson, the chair of the HS2 high-speed railway, as a non-executive director.
Thompson is an experienced hire – he has previously worked as the former CEO of the Financial Reporting Council, as the CEO of HMRC, and Permanent Secretary of the Ministry of Defence.
Frasers says hiring Thompson is part of its plan of “elevating its board and its confidence in its long-term growth strategy.”
Michael Murray, chief executive officer of Frasers Group (and son-in-law of founder Mike Ashley) told the City this morning:
“I am pleased to welcome Sir Jon to the Board at a very exciting time for Frasers Group. His appointment reflects the progress we have made to date on Frasers’ transformation and Elevation Strategy, as well as our ambitions for the future.
Sir Jon’s expertise in corporate governance and major project management will be invaluable as we enter the next phase of our strategy.”
Frasers has been on a drive to improve its practices, and its image, since the Guardian reported in 2015 that temporary workers at Sports Direct were receiving effective hourly rates of pay below the minimum wage.
Ashley – who we learned in 2017 would challenge subordinates to extreme drinking competitions, which once ended with him vomiting into a fireplace – handed over the running of Frasers to Murray in 2022. He still owns over 70% of the company, though.
Frasers has also recently appointed the boyfriend of Ashley’s youngest daughter to the company’s board.
Labour 'holds talks with Shein' over potential London float
The Labour Party has held talks with the boss of Shein to try to persuade the Chinese-founded fast-fashion company to opt for a blockbuster London float, The Times reports this morning.
Jonathan Reynolds, the shadow business secretary, Sarah Jones, the shadow minister for industry, and Chris Bryant, the shadow minister for creative industries, are understood recently to have met Donald Tang, the executive chairman of Shein, to discuss a potential initial public offering in London.
Sources told The Times that Labour, which could come to power after the general election in July, was “very supportive” of Shein listing in the UK.
As Shein was valued at around $66bn in a recent fundraising, it could be London’s biggest ever float….
The Financial Times agrees that landing a flotation of Shein’s size would be “a coup” for the “faltering” UK stock exchange.
The company hit a record of more than $2bn in profits for 2023, surpassing the $700mn of net income it generated in 2022 and $1.1bn in 2021.
By comparison, rivals H&M and Zara owner Inditex reported net profits of SKr8.7bn ($820mn) and €5.4bn ($5.8bn), respectively, in their most recent fiscal years.
Shein fashion group plans to file for London listing in coming days https://t.co/MEksk2lbBh
— Financial Times (@FT) June 2, 2024
Introduction: Online fashion giant Shein to file prospectus for London float
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Online fashion giant Shein is heading closer towards floating on the London stock market – a boost for the City, after the company’s efforts to list in New York hit a snag.
Shein, which was recently valued at $66bn (£52bn), is planning to file a confidential prospectus with the City regulator this month, according to several reports this morning.
This would take it a step closer to a London listing, and let it list more quickly if it decides to take the plunge – perhaps this summer, or in the autumn.
Sky News reported last night that the confidential filing could take place as soon as the coming week, although it could yet take place later this month.
Shein had initially aimed for a Wall Street float, but those ambitions have been rocked by political opposition as tensions between Washington and Beijing have escalated.
Shein, which launched as SheInside in 2011 in Nanjing, China, has taken the fashion world by storm, offering a very wide range of very affordable clothing.
As my colleague Nicole Lipman explained in April:
On today’s “New In” page, there are 8,640 items (yesterday there were 8,760). The most expensive dress of the nearly 9,000 new arrivals – a floor-length, long-sleeved, fully sequinned plus-size gown, available in five sparkly colours – is $67. The cheapest – a short, tight piece of polyester with spaghetti straps, a cowl neckline and an all-over print of Renaissance-style flowers and cherubs – is $7.
I can buy casual dresses, going-out tops, workout leggings, winter parkas, pink terry-cloth hooded rompers, purple double-breasted suit jackets with matching trousers, red pleather straight-leg pants, cropped cardigans with mushroom embroidery, black sheer lace thongs and rhinestone-trimmed hijabs. I can buy a wedding dress for $37. I can buy clothes for school, work, basketball games, proms, funerals, nightclubs, sex clubs. I see patchwork-printed overalls and black bikinis with rhinestones in the shape of a skull over each nipple designated as “punk”. I can buy Christian-girl modesty clothing and borderline fetish wear.
In the grid of product listings, a yellow rectangle indicates if a product is trending: “Trending-Plazacore”, “Trending-Western”, “Trending-Mermaidcore”, and “Trending-Y2K” tags all appear in the new arrivals….
But, Shein’s high-octane ‘test and repeat’ model – in which it churns out thousands of new products a day – is also controversial, and seen the company dubbed “the unacceptable face of throwaway fast fashion”.
Shein has also been accused of using forced labour to produce its low-cost garments. In 2022, Bloomberg discovered that garments shipped to the US by Shein were made with cotton from the Xinjiang region, where China is accused of “serious human rights violations” against the Uyghur Muslim people.
But that probably won’t deter the City from embracing Shein, given the well-documented concerns that the London market is in crisis as some firms shift their listings across the Atlantic.
Also coming up today
It’s a busy day for economic news, with new surveys of factory bosses across the world giving a healthcheck on global manufacturing.
Traders are digesting yesterday’s Opec+ meeting, where oil producers agreed to extend their production cuts into 2025.
Tensions are rising in South Wales, where union leaders are preparing to ramp up industrial action at two steelworks, in a further escalation of a row over almost 3,000 job losses that threatens to become a big general election issue.
And in France, the government has been stung by a credit rating downgrade by S&P Global on Friday night, from AA to AA- with a stable outlook.
S&P Global cited France’s rising debts and lower-than-expected growth – a blow to Emmanuel Macron’s stewardship of the economy…
The agenda
7am BST: Russia’s manufacturing PMI for May
9am BST: Eurozone manufacturing PMI for May
9.30am BST: UK manufacturing PMI for May
3pm BST: US manufacturing PMI for May
Updated
