(Alliance News) - Stock prices in London are seen opening lower on Friday as investors fret over new variants of Covid-19, and despite data showing the UK's economy performed slightly better than expected in the fourth quarter of 2020.
UK gross domestic product grew by 1.0% on a quarterly basis in the final three months of 2020, topping expectations of a 0.5% rise. For the whole of 2020 however, UK GDP fell by a record 9.9%, signalling just how badly the nation's economy has been hurt by Covid-19.
IG futures indicate the FTSE 100 index is to open 19.8 points lower at 6,508.92. The blue-chip index closed up 0.1%, or 4.36 points, at 6,528.72 on Thursday.
"Stock futures are trading lower on the final trading day of the week. One of the main reasons that we see a bit of hesitancy among investors today is the arrival of the South African coronavirus variant in California. Altogether, there are four US States where have confirmation of new variant," AvaTrade analyst Naeem Aslam commented.
"The fact that the current vaccine is not highly effective, if any, against the new variant is making traders cautious. The last thing that anyone wants to see is the increase in the new variant cases in the US, which could further adversely influence economic activity."
In early UK corporate news, speciality chemicals firm Victrex said it has made a "positive start" to its new financial year. Travel firm Jet2 said it has raised over GBP400 million as it bids to weather the Covid-19 crisis.
The UK will now likely avoid a double-dip recession after a better-than-expected end of 2020, analysts at Capital Economics said.
Annually, the UK's economic decline in the fourth-quarter was less than what was forecast by market consensus. The UK's GDP was 7.8% lower year-on-year in the fourth quarter, compared to an 8.1% fall forecast.
Figures for just the month of December showed the UK economy grew 1.2% on a monthly basis. In November, GDP had fallen by 2.3%, hurt by a second national lockdown in England. Month-to-month, a 1% rise was expected by the market for December.
"This means a technical double-dip recession will probably now be avoided. And even though the third Covid-19 lockdown means that the economy will almost certainly take another step down in January, GDP should rebound sharply in the second half of 2021," Capital Economics commented.
In January, England entered a third national lockdown, meaning non-essential retail, pubs and restaurants were forced to down tools again.
Capital Economics added: "The third lockdown and the closure of schools will take the level of GDP a bit lower in January than in December when it was 6.3% below its pre-crisis level. But the rapid vaccine rollout means that Covid-19 restrictions should be eased from the spring."
The pound was quoted at USD1.3798 early on Friday morning in the UK, down from USD1.3815 at the London equities close.
The euro stood at USD1.2124, down from USD1.2130 at the European equities close. Against the yen, the dollar was trading at JPY104.85, up from JPY104.75.
Among London Stock Exchange mid-caps, Victrex said revenue in the first quarter ended December 31 grew 1% annually to GBP68.7 million from GBP67.7 million.
"Overall, the group saw a positive start to FY 2021. Although Q1 was slightly ahead of our expectations, performance remains variable by end market. Asia is seeing the most incremental improvement on a geographic basis, with a mixed performance in Europe and the US," the company said.
It left its annual guidance unchanged, though said the first half will be weaker than a year before. It said business in January was "robust" but lower than a year prior.
Elsewhere in London, Jet2 said it tapped investors for GBP422 million through a placing and subscription.
It comes as the UK government has once again advised against non-essential travel and Health Secretary Matt Hancock on Thursday said the rollout of coronavirus vaccines is "absolutely essential" for summer holidays to take place.
"The UK government is continuing to advise against all non-essential travel, with a negative test result required to fly into the UK and 5 day 'test to release' or 10 day quarantine required on return to the UK from foreign travel. Official guidance therefore, remains changeable. As a result, the company continues its cautious approach to Summer 2021, with seat capacity continually being refined as UK and EU travel guidance evolves," Jet2 said late Thursday.
It added that it has cancelled all flights until April 15 and it is "subsequently scheduled to operate with a reduced flying programme".
Brent oil was quoted at USD60.68, down from USD61.35 a barrel at the London equities close.
Gold was quoted at USD1,820.04, down from USD1,836.55.
By Eric Cunha; ericcunha@alliancenews.com
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Victrex (VCT)
Jet2 (JET2)