The UK economy dodged a double-dip recession as the economy grew by 1% in the final quarter of 2020, which was a pleasant surprise as economists were predicting 0.5% growth.
Last year, the British economy shrank by 9.9%, its worst contraction since 1709. Services in the UK account for roughly 70% of economic output so it was encouraging to see the sector grew by 1.7% in December, topping the 1% growth consensus estimate. Even though things finished on a relatively positive note last year, the Bank of England (BoE) has already warned the economy could contract by approximately 4% in the first quarter of 2021. In the same update, the BoE predicted there will be a strong economic rebound this year as restrictions will be eased as the UK’s vaccination distribution process builds on its already solid success. The major European indices are showing modest gains as we approach the end of the trading session. On the FTSE 100, AstraZeneca, GlaxoSmithKline, BP and Royal Dutch Shell are some of the biggest risers in terms of index points. For most of the day, the FTSE 250 was in the red but it is now showing a tiny gain.
Carnival, the cruise operator, has been hit by a downgrade from Berenberg. The bank cut its rating from hold to sell, but at the same time, it lifted its price target from 800p to 1,000p. Berneberg cautioned that the sector might be harder hit than investors initially thought.
Sticking with the travel sector, Jet2 raised £422 million from a share issue. The airline industry has been rocked by the pandemic, so it has been all too common for airlines to refuel their cash positions as a way of seeing out the turbulence of the next few months as restrictions will remain in place.
The Help to Buy scheme was introduced to assist young adults to get on the property ladder. It was due to expire at the end of March but it has been extended until the end of May. It didn’t have a major impact on housebuilders. Bellway, Berkeley Group and Redrow are showing modest gains.
Garda World Security and Allied Universal will enter into an auction process to settle the bidding war for G4S.
Stocks have handed back some of their gains after having enjoyed a very bullish run recently. It has been another quiet news day so far, which explains the low volatility.
Walt Disney’s first quarter figures topped analysts’ forecasts last night but certain aspects of its business remain hostage to the pandemic. EPS was 32 cents, which was way better than the -41 cents consensus estimate. Revenue was $16.25 billion, ahead of the $15.9 billion forecast. The company’s streaming service, Disney+, now has almost 95 million paid subscribers, which is an increase of around 9.5% from the final quarter of last year. Streaming services have experienced a major jump in demand on account of lockdowns. It is remarkable to think that Disney+ was launched 15 months ago and it now has nearly 95 million users. On the other side of the coin, Disney’s parks division saw revenue fall by 53% to $3.58 billion, the health crisis cost the unit roughly $2.6 billion in lost operating income. As there were no new theatrical releases in the last few months of 2020, the licencing and content division saw revenue slump by 56%. In 2021, investment will be more geared towards the entertainment and media, while fewer funds will be directed to theme parks.
Bumble is on its second date with the stock market. It is early days so far but things are going well. It had its debut on the exchange yesterday, the IPO price was $43. Trading commenced around $76, while it finished the session at roughly $70. According to its S-1 filing, in the first nine months of 2020, it generated revenue of $376.6 million and it lost $84.1 million. The dating app might be the darling of the market at the moment but when you are losing money, it is hard to justify a $7.7 valuation. That being said, Match Group – a rival - has a market capitalisation of $45 billion and it expects 2021 full year earnings to top $1 billion.
Virgin Galactic shares have taken a hit as its test flight has been delayed.
EUR/USD is in the red thanks to the rebound in the US dollar index. The greenback is higher after losing ground for five sessions in a row. Just over one week ago, the dollar hit its highest level since early December. The US’s economic rebound is far greater than that of Europe. In the fourth quarter of 2020, the US economy grew by 4%, while the UK expanded by 1%, and the eurozone contracted by 0.7%. In light of the growth figures, the dollar will probably remain in relatively high demand.
The CMC GBP Index is up over 0.15% following the better-than-expected UK data.
Bitcoin reached new highs last night following the announcement that Bank of New York Mellon will provide integrated services for cryptocurrencies. MasterCard plans to offer custodian service for digital currencies. The updates follow on from Tesla’s $1.5 billion investment in Bitcoin and that the auto-maker plans to accept the asset for payments. As more firms warm up to cryptocurrencies, demand is likely to increase too.
Gold’s inverse relationship with the US dollar has pushed it into the red. The commodity is traded in dollars so a firmer US dollar makes it more expensive to buy. It is not the only metal to come under pressure today as copper and platinum are offside too. In some sections of the market, Bitcoin has become preferable to gold, so the popularity of the cryptocurrency recently could have impacted gold’s demand.
Brent crude oil and WTI are up on the day having recouped earlier losses. The energies were in the red as OPEC cautioned that demand will be impacted by the restrictions connected to the coronavirus. Selling pressure also came from the IEA, who stated the oil market is still oversupplied. It says a lot about oil that it has managed to shake off the slightly bearish move and is now up on the day.