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(Alliance News) - The UK economy rebounded sharply on an annual basis in June as the economy continued to reopen and the country pressed head with its mass-vaccination drive, the Office for National Statistics said on Thursday.
In the three months to June, UK gross domestic product grew 4.8% quarter-on-quarter, following a contraction of 1.6% in the first quarter of 2021. The print was in line with market forecasts, cited by FXStreet.
On an annual basis, the UK economy expanded 22% in the second quarter, rebounding significantly from the height-of-pandemic comparison, having shrank by 6.1% in the first quarter from a mostly pre-pandemic comparative period. The second-quarter reading was in line with the market estimate.
For the month of June, UK GDP grew by 1.0% for a fifth consecutive month but remained 2.2% below its pre-pandemic level. Still, the reading beating the market estimate of 0.8%.
During the second quarter, many of the Covid-19 restrictions were eased significantly in England as part of the UK government's four-stage roadmap out of lockdown. April saw the reopening of non-essential retail, hair and nail salons, and public buildings such as libraries.
In May, England entered into stage four. This meant indoor venues such as the inside of pubs and restaurants, hotels, cinemas, museums and group exercise classes reopened.
"These figures knock fears over the impact of the Delta variant on the head. Consumers are continuing to spend, regardless," commented Steve Clayton, fund manager of HL Select at Hargreaves Lansdown.
"The economy is still some 4.4% smaller than it was at the end of 2019, but is clawing that back with each month. With the big surge of the initial reopening behind us, we expect the pace of growth to moderate over the remainder of the year. But if businesses pick up the baton and start investing to support growth once more, then we could see upside to our already positive view of the prospects for the UK economy this year.â€
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.1% at 7,210.87
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Hang Seng: down 0.8% at 26,441.07
Nikkei 225: closed down 0.2% at 28,015.02
DJIA: closed up 220.23 points, or 0.6%, at 35,484.90
S&P 500: closed up 0.3% at 4,447.70
Nasdaq Composite: closed down 0.2% at 14,765.14
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EUR: flat at USD1.1740 (USD1.1737)
GBP: flat at USD1.3862 (USD1.3863)
USD: down at JPY110.41 (JPY110.47)
Gold: up at USD1,754.05 per ounce (USD1,748.19)
Oil (Brent): up at USD71.33 a barrel (USD70.14)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
1000 CEST France IEA oil market report
1100 CEST EU industrial production
1100 BST Ireland consumer price index
0830 EDT US producer price index
0830 EDT US jobless claims
1030 EDT US EIA weekly natural gas storage report
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The average price tag on a detached home has increased by around 23 times that of a flat in cash terms during the coronavirus pandemic. Typical asking prices on flats have increased by around GBP2,000 or 1% since February 2020 – while those on detached homes have surged by about GBP46,000, or 10% – Rightmove said. The average asking price for a flat is GBP277,302 while detached homes now command a typical price tag of GBP517,180. There are, however, signs that flats are starting to make a comeback, with the number of sales agreed for flats up by 14% in June and July this year compared with June and July 2020.
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A law firm representing travellers affected by the UK's quarantine hotel policy is seeking a judicial review of the regulations. London-based PGMBM believes requiring people who are fully vaccinated and have recently tested negative for coronavirus to spend 11 nights in a hotel is an "unlawful deprivation of liberty" and violates their human rights. Travellers arriving in the UK from a red list country must enter a quarantine hotel, even if they have had both doses of a Covid-19 vaccine. There are currently 60 locations on the red list, such as Mexico, Pakistan, Turkey, and much of South America and Africa. The cost of staying in a quarantine hotel rose from GBP1,750 to GBP2,285 on Thursday.
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Australia's capital Canberra was ordered into a seven-day lockdown Thursday, after a single Covid-19 case was detected in the city that has largely avoided virus restrictions. About 400,000 people in the nation's political hub will be under stay-at-home orders from 5:00 pm local time, joining millions more already under lockdown in Australia's southeast. Canberra has not been in lockdown since a nationwide shutdown in the early stages of the pandemic in 2020. After months of pursuing a "Covid zero" strategy, Australia is struggling to contain multiple outbreaks of the highly transmissible Delta variant. More than 10 million people in the country's biggest cities, Melbourne and Sydney, are currently in lockdown as authorities try to bring case numbers down.
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BROKER RATING CHANGES
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JPMORGAN REINITIATES ASTRAZENECA WITH 'OVERWEIGHT' - PRICE TARGET 10,000 PENCE
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INVESTEC CUTS NATWEST TO 'SELL' ('HOLD') - TARGET 200 (185) PENCE
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BANK OF AMERICA REINITIATES FLUTTER WITH 'BUY' - PRICE TARGET 19,000 PENCE
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GOLDMAN SACHS RAISES DELIVEROO PRICE TARGET TO 460 (440) PENCE - 'BUY'
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COMPANIES - FTSE 100
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Aviva reported pretax profit from continuing operations for the six months that ended June 30 of GBP396 million, down from GBP739 million a year before. Total income more than doubled to GBP14.78 billion from GBP6.98 billion, as Aviva swung to net investment income of GBP7.35 billion from a net investment expense of GBP1.28 billion. However, the company booked a GBP8.45 billion hit on changes in investment contract provisions, swung from a GBP5.72 billion gain a year before. Net earned premiums declined by 12% to GBP6.65 billion from GBP7.51 billion a year ago. Aviva said it has made good progress on all fronts in the 12 months since it launched its new strategy to focus on the UK, Ireland and Canada, having sold operations elsewhere. Aviva declared an interim dividend of 7.35 pence a share, up 5.0% from 7.00p a year before. What's more, Aviva said that it aims to buy back up to 300 million shares for up to GBP750 million to reduce its share capital. "We intend to return at least GBP4 billion to investors by the end of the first half of 2022," Chief Executive Amanda Blanc said. The stock was up 2.4% early Thursday.
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Entain said it saw strong first half performance with continuing momentum across its brands. For the six months to June 30, revenue was GBP1.77 billion, up 12% from GBP1.58 billion last year, and pretax profit was GBP130.6 million, almost triple from GBP45.1 million. Entain said first half retail net gaming revenue was down 46% amid betting shop closures, but online NGR excluding Germany was up 38%. Entain said a new regulatory regime in Germany was hurting the online gaming market there. Despite the strong results, Entain did not propose an interim dividend, but it said it expects that with full-year results in March it will be in a position to recommence payouts. The Ladbrokes brand owner in the UK also said its joint venture in the US with MGM, ResortsBetMGM, continues to perform strongly and is well positioned for further success in the second half. Chief Executive Officer Jette Nygaard-Andersen said: "In the US, BetMGM goes from strength to strength with our position as number 2 operator firmly established in the fast-growing sports-betting and iGaming market. We expect to be operational in around 20 states, representing 33% of the US adult population, over the next 12 months."
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COMPANIES - FTSE 250
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Cineworld said its pretax loss narrowed to USD576.4 million in the first half of 2021 from USD1.64 billion a year before, as its movie houses were allowed to reopen. Revenue totalled USD292.8 million, down from USD712.4 million a year before, a period that included some time pre-pandemic. Cineworld declared no interim dividend, the same as last year. With 9,269 screens worldwide, Cineworld said it expects strong trading in the fourth quarter due to a strong film slate and pent-up demand and said the actions it took to cope with the virus pandemic have strengthened the business. "Cineworld's results reflect a tough period of closures in both the US and UK," commented Harry Barnick, a senior analyst at Third Bridge. "With cinemas now open, limited capacity constraints and a strong content pipeline, Cineworld is hoping for a strong recovery in Q4. However, some estimates suggest that box office revenues will be 10% lower post-Covid permanently as customers have grown accustomed to watching films at home, studios have shortened the theatrical window and exhibitors have permanently closed the curtains on unprofitable cinemas." The stock was up 5.9% early Thursday.
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COMPANIES - GLOBAL
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Zurich Insurance Group hailed an "outstanding" first half despite extreme weather events. The company posted business operating profit of USD2.71 billion for the first half of 2021, up 60% on a year ago. "Growth was driven by an underlying improvement across all businesses and reduced claims from Covid-19, which more than offset higher levels of natural catastrophe and weather-related claims," Zurich said. The pandemic dented business operating profit by USD73 million in the first half, sharply reduced from USD686 million a year ago. Net income after tax attributable to shareholders surged 86% year-on-year to USD2.19 billion.
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Deutsche Telekom bumped up full-year financial guidance once more after posting quarterly profit growth. The Bonn, Germany-based company reported organic net revenue growth of 6.8% for the second quarter of 2021 from a year before, reaching EUR26.59 billion. At actual rates, net revenue dipped 1.7%. Pretax profit surged 74% from a year before to EUR3.19 billion. Personnel costs fell 8.4% to EUR4.70 billion and 'other' operating expenses dropped 35% to EUR954 million. Adjusted earnings before interest, tax, depreciation and amortisation after leases rose 1.1% organically to EUR9.4 billion, though slipped 4.2% at reported rates.
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Thursday's Shareholder Meetings
BMO Global Smaller Companies PLC - AGM
Lookers PLC - GM
MGC Pharmaceuticals Ltd - GM re shares for MediCaNL, Cannvalate
Montanaro UK Smaller Cos Investment Trust PLC - AGM
Napster Group PLC - AGM
Victoria Oil & Gas PLC - GM re annual report and accounts
WH Ireland Group PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
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