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(Alliance News) - The UK economy staged a mild recovery in May, following a historic fall in April according to the latest figures from the Office for National Statistics on Tuesday.
UK gross domestic product edged up 1.8% month-on-month in May, following a 20% drop in April - which was the biggest monthly fall since the series began. Market consensus had expected GDP growth to come in at 5.0% in May.
City Index analyst Fiona Cincotta said: "The data reveals that the UK economy is recovering at a much slower pace than initially expected pouring cold water over any V-shaped recovery talk. However, it was only at the end of May that non-essential shops reopened and the leisure and hospitality sectors remained behind closed doors.
"With these sectors reopening in June, the data should steadily keep improving. Patience will be the name of the game here. [Bank of England Governor] Andrew Bailey pointed out yesterday there are signs of economic recovery, but there is still a very long way to go."
The pound was quoted at USD1.2542 immediately after the data release, down from USD1.2615 at the London equities close Monday.
Meanwhile, the ONS said UK industrial production fell 20% in May on a year before, after having decreased 24% in April. The April fall was the biggest drop since records began. The May reading was in line with market expectations.
UK manufacturing production fell 23% year-on-year in May, having plunged at a record 29% in April. The May reading beat market expectations for a 24% decline.
The UK's total trade surplus was GBP4.3 billion in May, widened from GBP305 million in April.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.8% at 6,124.04
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Hang Seng: down 1.2% at 25,457.56
Nikkei 225: closed down 0.9% at 22,587.01
DJIA: closed up 10.50 points at 26,085.80
S&P 500: closed down 0.9% at 3,155.22
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GBP: down at USD1.2542 (USD1.2615)
EUR: soft at USD1.1345 (USD1.1359)
Gold: down at USD1,801.50 per ounce (USD1,806.50)
Oil (Brent): down at USD42.28 a barrel (USD42.92)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
France Bastille Day holiday. Financial markets open.
1230 BST UK NIESR monthly GDP tracker
1100 CEST EU industrial production
1100 CEST Germany ZEW indicator of economic sentiment
0830 EDT US consumer price index
1630 EDT US API weekly statistical bulletin
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UK retail sales made a welcome return to growth in June, registering the largest surge in over two years. According to the British Retail Consortium-KPMG sales monitor, total retail sales in the UK climbed by 3.4% annually in June, compared to a 5.9% year-on-year slump in May. The June result also compares favourably to the three-month average decline of 6.4% and the 12-month average fall of 2.1%. June was the first month since the lockdown to see annual growth. Prior to June, February's 0.1% climb was the last time retail sales grew in the UK. What's more, the 3.4% hike is the biggest year-on-year bounce in retail sales since May 2018, when they rose 4.1%.
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A second coronavirus wave in the UK this winter could see 120,000 deaths in hospitals alone in a "reasonable worst-case scenario", scientists warned. The Academy of Medical Sciences report, commissioned by the government's chief scientific adviser Patrick Vallance, urged immediate action to mitigate a second wave. With hospitals also battling seasonal flu cases, a second wave could eclipse the current outbreak resulting in up to 120,000 deaths between September and June next year. The modelling does not include deaths in care homes or the wider community, and assumes no government action to prevent a fresh surge in cases. Britain has seen almost 45,000 deaths so far in the first wave – the highest toll in Europe and third only to the US and Brazil.
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Chinese trade enjoyed surprise growth in June as the world slowly emerges from economy-strangling lockdowns, though officials warned of headwinds for recovery owing to the spread of the pandemic. The figures come days before the release of data expected to show the world's number two economy returned to expansion territory in the second quarter following a contraction in the first three months. The 2.7% growth in imports was the first since December and was much better than the nine percent contraction forecast in a Bloomberg News poll, while exports were up 0.5%, which also confounded expectations of shrinkage. The readings followed May's 17% collapse in imports and 3.3% retreat in exports.
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Japan's industrial production slumped in May with Covid-19 lockdowns gripping the globe, data from the Ministry of Economy, Trade & Industry showed. Industrial output slumped 26% year-on-year in May, with shipments down 27% but inventories just 0.5% lower. In April, production had declined 15% annually.
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BROKER RATING CHANGES
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GOLDMAN SACHS CUTS HSBC TO 'BUY' (CONVICTION BUY LIST) - PRICE TARGET 565 (695) PENCE
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BERENBERG CUTS CENTAMIN TO 'HOLD' ('BUY') - TARGET 200 (190) PENCE
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RBC RAISES IMI TO 'OUTPERFORM' ('SECTOR PERFORM') - TARGET 1140 (1000) PENCE
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RBC RAISES MORGAN ADVANCED MATERIALS TO SECTOR PERFORM (UNDERPERFORM) - TARGET 275 (250) PENCE
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RBC CUTS ROTORK TO 'UNDERPERFORM' ('SECTOR PERFORM') - TARGET 275 (265) PENCE
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COMPANIES - FTSE 100
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Ocado Group said it delivered a strong performance considering the challenging times created by the Covid-19 pandemic. For the half year ended May 31, Ocado's pretax loss narrowed to GBP40.6 million from GBP147.4 million a year before, as revenue increased to GBP1.09 billion from GBP882.3 million. Ocado said the coronavirus crisis has significantly accelerated the ongoing shift by consumers to online grocery. The company pointed to industry data that showed this is a global trend. UK online penetration has nearly doubled in the past few months. In the US, by late June, monthly online grocery sales had reached a level six times what they were in August last year, Ocado noted, and in China the major online grocery platforms saw triple-digit year-on-year sales growth during the Covid-19 outbreak. Looking ahead, Ocado said there is a positive outlook for online grocery, but it has suspended its Retail revenue growth forecast given uncertainties over the scale and duration of social distancing restrictions in the UK.
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Halma said it delivered record revenue and profit for the 17th consecutive year despite the effects of the coronavirus pandemic. For the financial year that ended March 31, Halma's revenue was up 11% to GBP1.34 billion from GBP1.21 billion in financial 2019. Pretax profit rose 8% to GBP224.1 million from GBP206.7 million the year prior. Adjusted pretax profit rose by 9% to GBP267.0 million from GBP245.7 million. Halma raised its total annual dividend 5% to 16.50 pence from 15.71p, which it said was the 41st consecutive year of dividend per share growth. Looking ahead, Halma expects financial 2021 adjusted pretax profit to be 5% to 10% below 2020. "We have previously announced that the Covid-19 pandemic was expected to have a net adverse impact on our markets and our full-year financial results to 31 March 2021, and for those results to have a significant second-half weighting. This remains our view, with the increased second-half weighting in part due to the costs of our employee support programmes in the second quarter," Chief Executive Andrew Williams said.
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COMPANIES - GLOBAL
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UK Prime Minister Boris Johnson is set to bar the Chinese tech giant Huawei from playing any role in Britain's 5G network, triggering a renewed clash with Beijing. Johnson is chairing a meeting on Tuesday of the National Security Council, which is expected to end any involvement by the firm in building the 5G system. The decision – following intense pressure from both the US administration of Donald Trump and backbench Tory MPs – marks a major U-turn by the government. In January, ministers announced Huawei could play a limited role in the 5G network, despite warnings that its equipment could be used by China for espionage or to disrupt the UK's critical national infrastructure. However, it is expected that the government will now announce that no new Huawei equipment can be installed in the network from as early as next year. It also expected to announce a so-called "rip out" date by which all the existing Huawei equipment must be removed.
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Boeing said it has secured a USD1.2 billion contract with the US Air Force, though the value of the deal could eventually rise to USD23 billion. First, Boeing will secure the USD1.2 billion to build the first lot of eight F-15EX fighter jets. The contract also include upfront, one-off engineering costs, Boeing noted. But Boeing also announced an "indefinite delivery indefinite quantity" contract for F-15EX with a maximum value of USD23 billion.
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Tuesday's Shareholder Meetings
easyJet (re fundraising)
Filta Group
Great Western Mining
Vistry Group (re bonus issue)
Itaconix (re fundraise)
Shires Income
QinetiQ
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
