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(Alliance News) - The UK economy weathered the lockdown restrictions imposed at the start of 2021 better than expected, figures showed on Friday.
Gross domestic product contracted 2.9% month-on-month in January, a far better performance than market consensus, according to FXStreet, of a 4.9% decline. This followed 1.2% monthly growth in December.
UK Prime Minister Boris Johnson at the start of 2021 imposed the toughest national lockdown in England since March of last year, shutting schools, non-essential shops and restaurants.
January's GDP was 9.0% below pre-pandemic levels, compared with 4.0% below in October.
The service sector declined 3.5% in January from the month before, acting as the main drag on growth, while manufacturing fell by 2.3% month-on-month in the first decline since April 2020. Production was down 1.5%. Construction, meanwhile, posted 0.9% growth, driven by a rise in new work.
UK GDP contracted by 1.7% sequentially in the three months to January, reversing a 1.0% increase in the three months to December.
"The economy took a notable hit in January, albeit smaller than some expected, with retail, restaurants, schools and hairdressers all affected by the latest lockdown," said Jonathan Athow, deputy national statistician for Economic Statistics at the ONS.
"Manufacturing also saw its first decline since April with car manufacturing falling significantly," Athow added. "However, increases in health services from both vaccine rollout and increased testing partially offset the declines in other industries.
Commenting on the January figures, Paul Craig, portfolio manager at Quilter Investors, said: "It is not surprising to see the economy go back into reverse during the first month of the year given we saw national lockdown 3.0 introduced.
"The bigger question is going to be what impact this lockdown will have on long-run growth, particularly given the real unlocking of the economy doesn't come until April. This is likely to be a very sobering first quarter of economic growth, but for now it is a case of keep calm and carry on."
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 6,717.21
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Hang Seng: down 2.2% at 28,744.89
Nikkei 225: closed up 1.7% at 29,717.83
DJIA: closed up 188.57 points, or 0.6%, at 32,485.59
S&P 500: closed up 40.53 points, or 1.0%, at 3,939.34
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EUR: down at USD1.1946 (USD1.1960)
GBP: down at USD1.3946 (USD1.3970)
USD: up at JPY108.99 (JPY108.51)
Gold: down at USD1,709.47 per ounce (USD1,722.35)
Oil (Brent): soft at USD69.24 a barrel (USD69.32)
(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
1100 CET EU industrial production
0830 EST US producer price index
1000 EST US University of Michigan survey of consumers
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US President Joe Biden signed the USD1.9 trillion American Rescue Plan on Thursday, a day earlier than planned. Biden said he hoped the plan would "rebuild the backbone of the country" and give people a fighting chance, in a video posted on Twitter by the White House. Getting the measure through Congress was a major victory for the new president. Aside from freeing up funding to support a pandemic-stricken economy, it also includes a sweeping expansion of the country's social safety net. Biden had originally been expected to ink the legislation on Friday, but Press Secretary Jen Psaki told reporters he was able to move up the signing because Congress went through the bureaucratic enrolment process of the bill "more quickly than we anticipated", US media reported. Later, in his first prime-time address as president, Biden called the plan "an historic piece of legislation, that delivers immediate relief to millions of people."
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The number of motor insurance claims settled by insurers in the UK fell by nearly a fifth annually in 2020 as fewer cars were on the roads during the coronavirus lockdowns. The number of claims settled last year stood at 2.1 million, marking a 19% decrease compared with 2019, the Association of British Insurers said. Total payouts, at GBP8.3 billion, reduced by 6% compared with the previous year. The ABI said the declines reflect the impact of the national lockdowns, with reduced road usage. The overall average value of a claim paid was GBP4,000, up from GBP3,400 in 2019. The 17% increase on 2019 reflected rises in average personal injury and vehicle repair cost claims, the ABI said.
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Inflation in Germany quickened February, in line with market forecasts and previous Destatis estimates. Consumer prices rose 1.3% annually in February, confirming the earlier provisional result. The pace of annual inflation quickened from 1.0% in January. Destatis was expected to confirm the 1.3% consumer price index hike, according to consensus cited by FXStreet. Monthly, consumer prices were 0.7% higher in February, also in line with provisional estimates. On a harmonised basis, allowing for EU-wide comparison, consumer prices in Germany rose 1.6% annually in February and 0.6% monthly.
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BROKER RATING CHANGES
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GOLDMAN SACHS RAISES BARCLAYS TO 'BUY' (NEUTRAL) - PRICE TARGET 240 (200) PENCE
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SOCGEN RAISES CENTRICA TO 'BUY' ('HOLD') - TARGET 77 (54) PENCE
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BERENBERG RAISES PETRA DIAMONDS TO 'BUY' ('HOLD') - TARGET 2 PENCE
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BARCLAYS CUTS PETRA DIAMONDS PRICE TARGET TO 1 (2) PENCE - 'EQUAL WEIGHT'
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BERENBERG RAISES GEM DIAMONDS PRICE TARGET TO 80 (55) PENCE - 'BUY'
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COMPANIES - FTSE 100
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Burberry said it expects to report revenue and profit for its soon-to-end financial year ahead of market forecasts. Since December, the luxury fashion brand said it has continued to see a "strong rebound", with fourth quarter comparable store retail sales expected to be between 28% to 32% higher year-on-year. Thus, it expects revenue and adjusted operating profit to be ahead of consensus expectations. For the full financial year ending March 27, revenue is expected to decline around 10% to 11%, and the adjusted operating margin will be in a range of 15.5% to 16.5%.
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Housebuilder Berkeley said it has continued to trade "robustly" since the half-year. The company said it remains on track to deliver, in line with guidance, a similar profit to last year of GBP504 million, and forward sales are expected to be above GBP1.7 billion at the year-end. The market fundamentals remain strong, Berkeley said, while sales reservations have been "robust". "Looking forward, Berkeley is on track to deliver a similar level of profitability in its next financial year and to achieve its long-term 15% pre-tax return on equity guidance. This underpins Berkeley's ongoing commitment to return GBP280 million per annum to shareholders," the company said.
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JD Sports Fashion said it has agreed to buy a 60% stake in Krakow, Poland-based Marketing Investment Group. The business operates 410 retail stores, and associated trading websites, across nine countries in central and eastern Europe selling sports fashion footwear, apparel and accessories. In the financial year ended January 31, 2020, MIG generated GBP200 million in revenue. "This is an exciting acquisition for JD that will further build on the success of our international development strategy, expanding our operations into Central and Eastern Europe," said Executive Chair Peter Cowgill. No financial details of the deal were given, with JD noting that the size of the transaction does not meet the thresholds for mandatory notification. However, it confirmed that put and call options have been agreed, to enable future exit opportunities for the sellers "with whom we will work in partnership".
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COMPANIES - FTSE 250
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Shopping centre owner Hammerson reported EPRA net tangible assets of 82p per share as at the end of 2020, down 29% respectively on 116p at the end of 2019. Hammerson said it was "hit hard" by the pandemic. "The retail sector, already in the grip of major structural change, has been significantly impacted by the restrictions imposed to tackle the pandemic, and we've also seen an increasing number of retail failures. Combined, this has resulted in the largest fall in net rental income and UK asset values in the group's history," said Chief Executive Rita-Rose Gagne. Net rental income slumped 49% to GBP157.6 million, tumbling 41% on a like-for-like basis, excluding premium outlets.
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Shares in Manchester-based smart energy provider Calisen were suspended from trading in London on Friday ahead of their de-listing, expected on Monday, after Calisen's GBP1.43 billion takeover by a consortium including funds managed by BlackRock.
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Allied Universal lowered the acceptance condition for its offer to buy security services provider G4S to 50% plus one share. This is down from 75% previously, as Alliance Universal seeks to seal the GBP3.8 million takeover deal to which the G4S board agreed in December but which has faced a GBP3.7 billion rival offer from GardaWorld. The offer was extended until Tuesday next week at 1300 GMT, but Allied Universal said this is the final closing date and the offer will lapse if it doesn't reach the new acceptance threshold.
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COMPANIES - GLOBAL
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Credit Suisse executives approved a USD160 million loan to Greensill Capital, ignoring advice from its own risk managers, the Financial Times reported on Thursday. The FT noted collapsed Greensill is now unable to repay the loan. The newspaper, citing people with direct knowledge of the situation, said London-based risk managers in the CS investment bank initially rejected the loan. This verdict, however, was overruled by top executives at the Swiss bank. The USD160 million financing was meant to be a bridge loan until Greensill sealed a private fundraising.
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Friday's Shareholder Meetings
Autins Group PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
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