Global stocks are extending their rally on hopes of a swift recovery from the Covid-19 crisis, but gains are limited by fears over a second wave, after an increase in infections in several US states and in Beijing. On Wall Street:

• S&P 500 up 0.16% at 3,129
• Dow Jones up 0.1% at 26,316
• Nasdaq up 0.5% at 9,944

In Europe:

• UK’s FTSE 100 up 0.56% at 6,277
• Germany’s Dax up 0.49% at 12,375
• France’s CAC 40 up 0.89% at 4,996
• Italy’s FTSE MiB down 0.01% at 19,623

Oil prices are heading lower, with Brent crude down 0.78% at $40.64 a barrel and US light crude falling 1.17% to $37.93. The Opec oil cartel forecast a gradual recovery in global demand for oil in its monthly report today. It estimates demand will drop by 6.4m barrels per day (bpd) in the second half of 2020, less than the 11.9m bpd decline in the first six months of the year when many economies around the world came to a virtual standstill because of Covid-19.

UK inflation eased for a fourth month to 0.5% in May, a two-year low, as oil and petrol prices tumbled, along with toys and games, while food prices rose. The US released disappointing data on housing starts and building permits, suggesting the recovery in the housing market is slower than expected.

HSBC has revived a plan put on hold three months ago to cut 35,000 jobs worldwide.

One of Britain’s biggest mortgage lenders, Nationwide, is to triple the minimum deposit that first-time buyers must put down from Thursday (not immediately, as reported earlier).

Commerzbank was fined £38m by the UK financial watchdog for money-laundering failures.

Housebuilders will need government support such as a simplified planning system, similar to action taken after the financial crisis, argued Berkeley Group.

With this, we are closing for today. We’ll be back tomorrow. Thank you for reading and stay safe! -JK

The number of new US houses started in May rose 4.3% to 974,000, according to data from the US Commerce Department – less than the £1.1m expected. In April, housing starts fell 26.4% during the Covid-19 lockdown.

The number of housing permits granted rose 14.4% to 1.2m in May vs a 21.4% drop in April.

The figures suggest the housing market is recovering more slowly from the coronavirus crisis than expected.

Britain’s financial watchdog has fined the London division of Germany’s Commerzbank £37.8m for failing to have proper controls to prevent money laundering between October 2012 and September 2017.

The penalty would have been even higher – £54m – had the bank not agreed to resolve the matter at an early stage of the investigation.

The Financial Conduct Authority said:

Commerzbank London was aware of these weaknesses and failed to take reasonable and effective steps to fix them despite the FCA raising specific concerns about them in 2012, 2015 and 2017.

The FCA executive director of enforcement and market oversight, Mark Steward, said:

Commerzbank London’s failings over several years created a significant risk that financial and other crime might be undetected. Firms should recognise that AML [anti-money laundering] controls are vitally important to the integrity of the UK financial system.

The watchdog found that the bank failed to:

• carry out timely regular due diligence checks on its clients.
• address long-standing weakness in its automated tool for monitoring money laundering risk on transactions for clients. For example, in 2015 Commerzbank London identified that 40 high-risk countries and 1,110 high-risk clients were missing from the tool
• have adequate policies and procedures in place when undertaking due diligence on clients.

Germany’s flag carrier Lufthansa has warned that its €9bn bailout deal is in jeopardy. In an effort to garner support from investors, it said it might need to apply for protection from creditors if the state-backed rescue deal fails to win the backing of shareholders on 25 June.

The airline issued the statement after the German billionaire Heinz Hermann Thiele – one of Germany’s richest men and Lufthansa’s biggest single shareholder – heavily criticised the rescue package, which will give the German government a 20% stake in Lufthansa and two seats on its supervisory board.

In an interview with the Frankfurter Allgemeine Zeitung newspaper, Thiele said he had upped his stake to more than 15% and asked that alternative options be explored, suggesting that indirect state participation via the lender KfW could be an alternative to an outright government stake. He declined to say whether he would vote against the bailout package.

Lufthansa’s executive board expects low attendance at its emergency meeting next Thursday, of below 50%, which would mean that two thirds of those present would need to vote in favour of the deal. The company said:

In view of the latest public statements by the company’s largest single shareholder, Heinz Hermann Thiele, the board considers it possible that the stabilisation package could fail to achieve the two-thirds majority of votes cast that would be required in this case.

This would mean that Deutsche Lufthansa AG would possibly have to apply for protective shield proceedings under insolvency law a few days after the annual general meeting if no other solution is found immediately.

Lufthansa has also announced 22,000 job cuts as it battles for survival.

The eurozone consumer price inflation rate for May was 0.1%, down from 0.3% in April, according to Eurostat’s final reading.

Similar to the UK, the highest contribution to the inflation rate came from food and alcohol. In several countries, the annual rate is negative, for example -0.9% in Spain, indicating that prices are falling year-on-year. In Germany, the eurozone’s biggest economy, inflation is running at 0.5%.

You can view the details here.

Scotland’s economic output fell by a record 24% in March and April, the first weeks of the coronavirus lockdown, according to provisional GDP figures released by the Scottish government, reports our Scotland editor Severin Carrell.

The interim data, which came with a warning they were subject to high levels of uncertainty, showed output dropped by 5% in March and then by 18.9% in April.

This is the first time the Scottish government has produced monthly GDP estimates and suggests warnings that the lockdown has had a severe impact on the economy are correct. Its official data for the first quarter of 2020, covering the period before the lockdown fully took hold, said GDP fell by 2.5%.

On Tuesday, UK data showed Scotland had the worst joblessness figures of any UK nation. The labour market survey put its unemployment rate at 4.6%, up 1.3 percentage points on a year ago compared to a 0.1 point rise for the UK as a whole, to 3.9%. Scotland’s employment rate was at 74.3% versus 76.4% for the UK.

These data will strengthen demands from businesses to speed up the relaxation of Scotland’s strict lockdown regulations, adding to pressure on Nicola Sturgeon to respond. The country’s substantial tourism and hospitality industries are particularly vulnerable.

Andrew Wilson, a lobbyist and pro-independence economist who advises Sturgeon, told BBC Radio Scotland that Scotland’s short term prospects were dire. He said:

What’s clear to me is the UK is set to be the worst performing economy in the developed world and Scotland’s probably going to be a bit worse because of the nature of our sectors and how the virus has behaved north and south of the border.”

Fiona Hyslop, the Scottish government’s economy secretary, said it was now essential Scotland’s devolved parliament had greater borrowing and financial powers to deal with the crisis, and appealed again for the UK government to extend the Brexit transition period. She said:

The coronavirus pandemic is having an extremely serious impact on the economy right across the UK and - as these figures demonstrate - Scotland is no exception.

Ever since the start of this crisis the Scottish government has been working tirelessly to keep businesses afloat and ensure as many people as possible keep their jobs, and we will continue to do that.”

Brexit negotiations between the UK and the European Union will enter a “hot phase” in September, according to a German government document, Reuters reports.

The UK prime minister, Boris Johnson, suggested on Monday that an agreement could be reached in July with “a bit of oomph”. But the German government document, dated 15 June, appears to pour cold water on that idea. It says:

From September the negotiations enter a hot phase. Britain is already escalating threats in Brussels, wants to settle as much as possible in the shortest possible time and hopes to achieve last-minute success in the negotiations.

Europe’s main stock markets continue to push higher on economic recovery hopes. The mood in markets has also been lifted by clinical trial results yesterday that showed the steroid dexamethasone cut death rates by a third among severely ill Covid-19 patients in hospital.

But fears of a second coronavirus wave persist, following an increase in Covid-19 cases in Beijing that has sparked a new travel ban in the Chinese capital, school closures and flight cancellations. Some US states have also seen higher infection rates.

• UK’s FTSE 100 up 0.75% at 6,289
• Germany’s Dax up 0.9% at 12,429
• France’s CAC 40 up 1.06% at 5,005
• Italy’s FTSE MiB up 0.36% at 19,695

UK consumer price inflation fell to 0.5% in May, a four-year low, as oil prices tumbled. This has reinforced expectations that the Bank of England will respond with further economic stimulus tomorrow, by boosting its bond-buying quantitative easing programme by £100bn to £150bn.

Crude oil prices have reversed earlier falls today. Brent crude is now trading almost 1% higher at $41.35 a barrel while US light crude is 0.86% ahead at $38.71.

HSBC is pressing ahead with a massive redundancy programme that it put on hold three months ago because of the coronavirus pandemic. This will mean 35,000 job cuts across the bank’s 235,000 workforce. Chief executive Noel Quinn told staff in a memo, first reported by Reuters: “We could not pause the job losses indefinitely - it was always a question of ‘not if, but when’.” He said the measures first announced in February were “even more necessary today”.

New car sales in the EU suffered another sharp drop in May, with registrations down 52.3%, to 581,161 cars from 1.2m a year earlier. This was less steep than the 76.3% fall in April, at the height of the Covid-19 pandemic, according to figures from the European Automobile Manufacturers Association. This means car sales are down 41.5% in the first five months of this year.

Double-digit declines were recorded in each of the 27 EU countries last month, although the percentage falls were less dramatic than in April. Spain posted the biggest fall among four major EU markets (-72.7%), while sales fell by roughly half in France (-50.3%), Italy (-49.6%) and Germany (-49.5%).

European stock markets are rising again, as the rally of recent days continues.

• UK’s FTSE 100 index up 0.38% at 6,266
• Germany’s Dax up 0.2%
• France’s CAC 40 up 0.2%
• Spain’s Ibex down 0.2%
• italy’s FTSE MiB up 0.4%

Aside from the worrying spike in new Covid-19 cases in Beijing, which has prompted a new travel ban in the Chinese capital, school closures and flight cancellations, there has been some good news in the pandemic.

Trial results for a steroid called dexamethasone released yesterday showed it reduced death rates by around a third among the most severe Covid-19 patients admitted to hospital.

The steroid is normally used to reduce inflammation in diseases such as arthritis. UK health secretary Matt Hancock hailed the news this morning, speaking to Sky News.

It does increase your chances of survival quite significantly. It is one of the best pieces of news we’ve had through this whole crisis.

The housebuilder Berkeley Group, which focuses on London, Birmingham and the South East, has reported a 35% drop in pretax profits to £503.7m for the year to 30 April.

The company called on the government to step in and support housebuilding, similar to the action taken after the global credit crunch of 2008/9. Rob Perrins, the chief executive, says:

Housebuilding and construction can play a vital role in the broader economic recovery following Covid-19. This will require government support, similar to that seen following the 2008/09 financial crisis, including: the reversal of the property tax increases seen since 2014; a reduction in the bureaucracy and cost of planning; and direct investment into affordable housing.

Good morning, and welcome to our live coverage of business, economics and financial markets.

Headline news this morning: HSBC will push ahead with 35,000 job cuts, Reuters reports, after getting hold of a memo. The bank is resuming a massive redundancy programme it had put on ice after the Covid-19 outbreak.

The bank will also maintain a freeze on nearly all recruitment from outside, chief executive Noel Quinn said in the memo, which was sent to 235,000 staff worldwide. (Reuters said a spokeswoman confirmed the contents of the memo.)

We could not pause the job losses indefinitely – it was always a question of ‘not if, but when’.

UK consumer price inflation eased for the fourth month in a row in May and came in at an annual rate of 0.5%, as expected, according to the Office for National Statistics. That’s the lowest inflation rate since June 2016 and compares with April’s reading of 0.8%.

Inflation has fallen as the coronavirus pandemic forced the government to impose a nationwide lockdown in late March and caused oil prices to tumble. Economists said this will no doubt add to the debate over whether the Bank of England might at some point be persuaded to take Bank rate below zero.

Stock markets are expected to open flat after yesterday’s rally. In Asia, Japan’s Nikkei dropped 0.56%, Hong Kong’s Hang Seng rose 0.2% while the Shanghai market has lost 0.18%. Beijing shut all schools again and cancelled flights after a spike in new Covid-19 cases, fuelling fears of a second wave.

The UK’s FTSE 100 finished 2.9% higher at 6,242 points yesterday, and on Wall Street the S&P 500 gained 1.89% while the Dow Jones industrial average climbed 2.04%.

Stocks were boosted by reports of a draft $1tn infrastructure spending plan from the Trump administration, targeted mainly at roads and bridges, and news of a 17.7% surge in US retail sales in May after the Covid-19 lockdown was eased.

The stock market rally came despite another cautious message from Federal Reserve chairman Jerome Powell, who warned of a “long road” to recovery that will leave the US economy “well short of” where it was in February for some time.

Stocks came off their highs when Powell, in his semi-annual testimony to the Senate, also said that the Fed’s corporate bond-buying programme could be tapered if the market function improves. On Monday, it was announced the Fed would start to buy individual corporate bonds.

James Knightley, chief international economist at ING, says:

Recent data flow has offered hope of a more vigorous economic rebound than we initially thought possible. The Fed remains wary though, with a renewed wave of infections arguing for caution. As such, Powell again emphasised policy will remain ultra-loose with the potential that they could have to do more to ensure the recovery continues.

He again tries to provide a reality check to the optimism in risk markets, such as equities, which are seemingly seeing only good things ahead. He warned of the risk of insolvencies, particularly in the small business sector and suggested that “until the public is confident that the disease is contained, a full recovery is unlikely”. Given a vaccine appears some way off and fears over a pick-up in Covid-19 cases in several states, he is clearly sitting on the more cautious side of the fence.

The Agenda

• 10am BST: Eurozone inflation for May (final reading)
• 1:30pm BST: US Housing starts and building permits
• 5pm BST: US Fed chair Jerome Powell testifies to House Financial Services Committee