(Alliance News) - The UK economy posted sluggish growth in October as the country continues to recover from the coronavirus pandemic, according to the Office for National Statistics on Friday.
UK gross domestic product advanced 0.1% in October from September, slowing from month-on-month growth of 0.6% in September. The October print missed the market estimate, cited by FXStreet, of 0.4%. The ONS said the UK economy remains 0.5% below its pre-coronavirus pandemic level.
UK GDP grew by 0.9% in the three months to October compared to the three months prior, mainly reflecting the strong performance of the services sector in September, the ONS noted. The three-month growth rate slowed from 1.3% in the three months to September from the previous three months.
"While GDP growth slowed in October the UK health sector again grew strongly while second-hand car sales and employment agencies also boosted the economy. Taken as a whole, the dominant services sector reached its pre-pandemic level for the first time in twenty months," said Grant Fitznet, the chief economist at the ONS.
The sluggish growth figures will likely fuel expectations that the Bank of England will keep interest rates on hold once again next Thursday.
"The interest rate dilemma has intensified for the Bank of England," commented Susannah Streeter, senior investment & markets analyst at Hargreaves Lansdown.
"The latest reading for the economy shows just how vulnerable the economy was to a fresh shock, with output in October growing by just 0.1%, weaker than expected...Although a rate rise can’t be completely ruled out next week, most bets are off that the bank will push them up so soon, given this latest downbeat reading."
Separately, the ONS said the UK recorded a trade deficit of GBP2.03 billion in October, narrowed from GBP2.8 billion in September.
The main economic indicator of the day is the US consumer price index, due at 1330 GMT and considered key to the pace that US Federal Reserve will set for tapering its monetary stimulus.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.3% at 7,302.33
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Hang Seng: down 1.2% at 23,963.61
Nikkei 225: closed down 1.0% at 28,437.77
S&P/ASX 200: closed down 0.4% at 7,353.50
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DJIA: closed down 0.059 of a point at 35,754.69
S&P 500: closed down 0.7% at 4,667.45
Nasdaq Composite: closed down 1.7% at 15,517.37
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EUR: firm at USD1.1288 (USD1.1280)
GBP: up at USD1.3215 (USD1.3191)
USD: up at JPY113.60 (JPY113.52)
Gold: down at USD1,772.15 per ounce (USD1,777.03)
Oil (Brent): down at USD74.10 a barrel (USD75.22)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Friday's key economic events still to come
0930 GMT UK Bank of England/Kantar Quarterly inflation attitudes survey
1230 GMT UK NIESR monthly GDP tracker
0830 EST US consumer price index
0830 EST US real earnings
1000 EST US quarterly services
1000 EST US University of Michigan survey of consumers
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Masks must be worn in more settings including cinemas, theatres and churches from Friday, as measures are tightened in England in a bid to slow the spread of the latest coronavirus variant. Tougher restrictions have been branded a "necessary evil" by a scientist advising the UK government, who said the new approach "absolutely is not an overreaction". From Friday, in England the legal requirement to wear masks has been extended to more indoor spaces including museums, galleries and community centres. Sports stadia are also included in regulations published on Thursday evening, but the Department of Health confirmed face coverings will only be mandatory in indoor areas.
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Fresh claims have emerged over an alleged Christmas bash in No 10 as UK Prime Minister Boris Johnson remained under intense pressure, fighting several fires threatening his party, PA reports. A senior Tory MP urged Johnson to "get a grip" on matters following reports that Downing Street's director of communications made a speech and handed out awards at the event said to have taken place on December 18, 2020. ITV News reported on Thursday that Jack Doyle, who was then deputy director of communications at No 10, addressed up to 50 people at a Christmas gathering said to have been held on that date. It is understood that Doyle spoke to the press office to thank them for their work, as he did every week, and presented some awards to mark the team's efforts. Downing Street refused to comment further than to say a fact-finding review was ongoing.
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BROKER RATING CHANGES
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GOLDMAN SACHS CUTS ASHMORE GROUP TO 'NEUTRAL' (BUY) - PRICE TARGET 340 (400) PENCE
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JPMORGAN RAISES CREST NICHOLSON TO 'NEUTRAL' (UNDERWEIGHT) - PRICE TARGET 390 (370) PENCE
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JPMORGAN CUTS COUNTRYSIDE PROPERTIES TO 'UNDERWEIGHT' (NEUTRAL) - PRICE TARGET 450 (470) PENCE
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COMPANIES - FTSE 100
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Anglo American confirmed 2021 guidance and promised 35% growth over next decade at an "attractive 50% margin". The miner expects 2021 production to be up 7% from 2020, on strong platinum-group metals performance and higher rough diamond demand. For 2022, Anglo expects capital expenditure in a range between USD6.2 billion to USD6.7 billion. Anglo also raised its performance improvement target to USD3.5 billion to USD4.5 billion by 2023. Finance Director Stephen Pearce commented: "Our balanced approach is supporting sequenced investment in value accretive growth and considerable long term business improvement, alongside attractive shareholder returns. We have delivered USD10.3 billion in cash returns to our shareholders since 2017 and USD4 billion in the second half 2021 alone. Our ongoing investment in the business also supports our emissions reduction objectives and we therefore expect our normal cycle of capital investment to continue to fund the majority of our operational decarbonisation projects."
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Anglo American also upgraded the scope of its Woodsmith polyhalite fertiliser project in Yorkshire, while also moving Tom McCulley to take over from Chris Fraser as CEO of Crop Nutrients. McCulley had been leading Anglo's Quellaveco copper project in Peru.
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Associated British Foods said its fast-fashion retailer Primark has traded ahead of expectations in the new financial year to date, with improved like-for-like sales compared to the fourth quarter of the previous year, which ended September 18. "We are managing disruption in our supply chain by prioritising products most in demand with the support of our logistics providers for whom we are a very important customer. We have stock cover on the vast majority of lines for the important Christmas trading period," Chair Michael McLintock will tell AB Foods' annual general meeting. He added that Primark's margin has been ahead of expectations. Meanwhile, McLintock said, trading in the Grocery, Sugar, Ingredients and Agriculture divisions has been in line with expectations.
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COMPANIES - FTSE 250
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Hilton Food said it has agreed to buy Dutch Seafood Co, the owner of smoked salmon producer Foppen, at enterprise value of EUR90.0 million. The company said the move expands its presence in a growing protein category, as well as entering the US, a new geography for Hilton. Hilton Food launched an equity placing to raise gross proceeds of around GBP75 million to part fund the acquisition, with the remainder coming from a bridge debt facility. Hilton said the share placing is to be conducted by Numis as sole bookrunner.
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COMPANIES - MAIN MARKET AND AIM
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Recycling Technologies said it plans to complete its initial public offering on AIM in "early Q1 2022". Previously, the plastic recycling firm had targeted a mid-December date for its float. It had hoped to raise up to GBP40 million for the company and attain a market capitalisation of GBP102 million to GBP111 million. "The company has received interest from a broad range of investors in the IPO marketing process, including investors that are more strategic in nature that require additional time to make a final investment decision, as well as significant blue chip funds," Recycling Technologies said Friday.
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COMPANIES - GLOBAL
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McDonald's has opened a "net zero carbon" restaurant in both building construction and everyday operation, in what it believes is a UK first. The restaurant, in Market Drayton, Shropshire, is powered by renewable energy from two wind turbines and 92 square metres of solar panels, and has walls insulated with British sheep wool. The building's cladding is made from recycled IT equipment and white household goods, amounting to 250 square metres of materials. Elsewhere, wall signs are made from used coffee beans, each kerb stone is made from 182 recycled plastic bottles and the drive-through lane has been constructed from recycled tyres.
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Friday's shareholder meetings
Associated British Foods PLC - AGM
Royal Dutch Shell PLC - GM re simplified share structure
Tritax EuroBox PLC - GM re Gelsenkirchen proposal
UP Global Sourcing Holdings PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
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