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(Alliance News) - The UK economy entered into recession for the first time since the 2008-09 financial crisis with the sharpest quarterly decline in economic activity in at least 65 years, according to figures the Office for National Statistics on Wednesday.
On an annual basis, UK gross domestic product fell 21% in the three months to June, having contracted 1.7% in the first quarter of 2020. Market forecasts, cited by FXStreet, was for an annual contraction of 22%.
On a quarterly basis, UK GDP shrank by 20% having contracted 2.2% in the first three months of 2020. The quarterly figure was in line with the consensus estimate.
A recession is defined as two successive quarters of decline in gross domestic product, which has not occurred in the UK since the financial crisis.
"This is the largest quarterly contraction in the UK economy since Office for National Statistics quarterly records began in 1955, and reflects the ongoing public health restrictions and forms of voluntary social distancing that have been put in place in response to the coronavirus pandemic," the ONS said.
The ONS highlighted there has been a phased easing of lockdown restrictions through May and June, including the reopening of non-essential shops. The ONS said this is reflected in the latest figures, which show some rebound in June, when GDP increased by 8.7% on the month.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.1% at 6,163.19
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Hang Seng: up 0.9% at 25,120.51
Nikkei 225: closed up 0.4% at 22,843.96
DJIA: closed down 104.53 points, or 0.4%, at 27,686.91
S&P 500: closed down 0.8% at 3,333.69
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GBP: down at USD1.3051 (USD1.3084)
EUR: down at USD1.1747 (USD1.1770)
Gold: down at USD1,929.03 per ounce (USD1,947.40)
Oil (Brent): flat at USD45.23 a barrel (USD45.12)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
1230 BST UK NIESR monthly GDP tracker
1100 CEST EU industrial production
0700 EDT US MBA weekly mortgage applications survey
0830 EDT US consumer price index
1030 EDT US EIA weekly petroleum status report
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Economic uncertainty caused by the pandemic means Chancellor Rishi Sunak may delay his autumn Budget, according to the Financial Times. The paper said fears of a second wave of Covid-19 had led Sunak to consider delaying major public spending decisions until after the crisis, most likely until the spring.
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BROKER RATING CHANGES
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BARCLAYS INITIATES DUNELM GROUP WITH 'OVERWEIGHT' - TARGET 1425 PENCE
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CITIGROUP RAISES EVRAZ TO 'NEUTRAL' ('SELL') - TARGET 290 (250) PENCE
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DAVY CUTS IAG TO 'NEUTRAL' (OUTPERFORM)
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COMPANIES - FTSE 100
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Avast said it saw a resilient performance in the first half during the Covid-19 outbreak as more people work from home during the pandemic. For the half-year ended June 30, revenue was up 1.5% at USD433.1 million from USD425.4 million last year but pretax profit was down to USD115.3 million from USD143.9 million. Avast declared an interim dividend of 14.7 US cents, up 8.1% from last year. Looking ahead, Avast maintained previous annual guidance for organic mid-single-digit revenue growth and raised organic billings growth expectation from in-line to be slightly in excess of organic revenue growth. "While we do not anticipate the strongly elevated performance levels of the second quarter to be sustained, we are confident that Avast is able to capture material benefits from the most recent period beyond the short term."
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Just Eat Takeaway.com said revenue rose as a result of increased demand for food deliveries during lockdown. The firm said the integration of Takeaway.com with Just Eat is on track and progressing well. For the half-year ended June 30, revenue multiplied to EUR675 million from EUR179 million last year. The figures are presented as if the combination was completed on January 1, 2019 to provide comparable information for the full six-month period, the company said. Like-for-like revenue grew by 44% to EUR1 billion from EUR715 million a year ago. But the company's net loss widened to EUR158 million from EUR27 million. Adjusted earnings before interest, taxes, depreciation and amortization came in at EUR177 million, up from EUR76 million a year earlier. Pretax loss widened to EUR121 million from EUR7 million.
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COMPANIES - FTSE 250
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Capital & Counties Properties reported a decline in net asset value and a widened loss for the first half of 2020, following a fall in the value of its Covent Garden properties as a result of the Covid-19 pandemic. As at June 30, the London & Johannesburg-listed property firm said its EPRA net asset value per share was 241 pence per share, down 23% from 315p the same date the year before and 18% from 293p at the end of December. The total value of Capco's property portfolio as at June 30 was GBP2.31 billion, down 16% on a like-for-like basis from GBP2.77 billion. The group's pretax loss widened significantly to GBP441.1 million from GBP8.5 million the prior year, following a loss on the revaluation and sale of investment and development property of GBP431.6 million. Net rental income dropped by 41% year-on-year to GBP18.1 million from GBP31.0 million. Capco said it has deferred its decision to pay an interim dividend until the end of the year. For the prior year, the group made an interim payout of 0.5 pence per share.
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COMPANIES - MAIN MARKET AND AIM
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ASOS said it has continued to deliver a strong operational performance and improvements in profitability as a result of a focus on "trading dynamically and managing the business rigorously". The fast-fashion retailer said it expects to report annual results "significantly ahead of market expectations". Revenue growth is now expected to be between 17% and 19%, with pretax profit in the region of GBP130 million to GBP150 million. In the financial year that ended August 31, 2019, ASOS reported pretax profit of GBP33.1 million on GBP2.73 billion in revenue. The improvement in expectations is supported by stronger than anticipated underlying demand as more people shop online during lockdown restrictions. "We had expected to see underlying returns normalise once lockdown measures eased and customers were both able to ship returns and felt more comfortable doing so. However, in recent weeks, we have gained better visibility on this pattern in customer behaviour as we have progressed through the returns cycle and it has become evident that returns are not increasing at the rate we originally anticipated. As a result, we have seen a significant and sustained reduction in returns rates since April," ASOS said.
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COMPANIES - GLOBAL
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A California court has given Uber Technologies and Lyft until the middle of next week to reclassify drivers as employees in compliance with a new state law. The order came Monday when a judge granted a restraining order in a lawsuit filed by California attorney general Xavier Becerra and three cities including San Francisco, where Lyft and Uber are based. The suit calls on the companies to comply with a state law that went into effect at the start of this year that requires "gig workers" such as Uber and Lyft drivers to be classified as employees, eligible for unemployment, medical and other benefits.
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Wednesday's Shareholder Meetings
Fastjet - GM re cancellation, share reorganisation
Mountview Estates
JZ Capital Partners - EGM re new investment policy
Premier Foods
SSE
Staffline Group
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
