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Biden priced in; GDP shrinks; Petrofac inquiry latest

REFRESH PAGE FOR UPDATE

5.30pm: Borders closed

Boris Johnson has announced that anyone arriving in the UK from next week will need to have tested negative for coronavirus 

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4.30pm: FTSE falls

The FTSE 100 ended a downbeat week by falling 66 points, nearly 1%, to end the day at 6,736, though much of the selling was attributed to dealers are cutting back on their equity positions now that Joe Biden’s relief package has been announced.

10am: Business interruption ruling

Thousands of small businesses are in line for insurance payouts covering losses in the first national lockdown, following a court ruling.

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Joe Biden

9am: Biden deal ‘priced in’

Joe Biden’s proposed $1.9 trillion stimulus plan is already priced in by markets which are now starting to worry about the negative side, namely how it will be funded, says Russ Mould, investment director at AJ Bell.

“The large scale of the proposed support measures adds fuel to the fire that taxes and interest rates will have to go up. Both have negative connotations for equities, therefore casting a cloud on the ability for stock markets to keep rallying at the same pace they have enjoyed for much of 2021.

“However, the Federal Reserve has been at pains to stress that it won’t raise rates any time soon, so it is feasible to suggest that we could continue to see burst of energy among stocks for a while yet.

“Expectations for higher inflation have been driving cyclical stocks such as commodity producers, which is a key reason why the FTSE 100 did so well at the start of 2021 with miners and oil companies leading the way.

“Sadly, this trend has started to lose momentum, with these sectors among the weaker ones on Friday and contributing to a 0.7% drop in the FTSE 100 to 6,757.

“Germany’s DAX index was also weak, down 0.4% with utilities and industrials among the worst performing sectors. The biggest faller was Adidas, down 1.5%. The pound fell 0.3% against the US dollar to $1.3647 while Brent Crude oil dipped 1.2% to $55.76.”

8am: London lower

The FTSE 100 opened 33 points lower at 6,768.96.

Shares in Babcock International tumbled 17.7% to 216.8p in early trading after saying it will continue to withhold financial guidance for its current year amid more weakness in its civil aviation business. 

It said that it has recently started a “detailed review” of its balance sheet and contract profitability which suggests there may be “negative impacts” on its balance sheet or its incomes in the current and future years.

Easter-Inch-Business-Park-Bathgate

Economy shrinks

The UK economy shrank by 2.6% in November as lockdown restrictions reduced economic activity.

The Office for National Statistics said UK gross domestic product was 8.5% below its pre-pandemic peak. With a new lockdown in place since January, the country is likely to have fallen into a double-dip recession.

The construction sector was one bright light, with growth of 1.9% in November , recovering to 0.6% above the February 2020 level.

November’s decline came after sixth consecutive months of growth and amid expectation of further shrinkage during the current lockdown.

British Chambers of Commerce head of economics Suren Thiru said:  “The latest figures highlight the continued damage being done to the UK economy by coronavirus.

“A third lockdown means that a double-dip recession in the first quarter of this year may be inevitable, particularly if the current post-Brexit disruption persists through the quarter. 

“A clear and comprehensive plan is urgently needed to support the economy throughout this year.”

Alpesh Paleja, CBI lead economist, said: “Steps taken by businesses earlier in the year to Covid-proof their operations – combined with the time-limited nature of the restrictions, and schools remaining open – meant more companies were able to continue trading safely. 

“However, the tougher current lockdown means a bigger hit to the economy lies ahead. Nonetheless, with vaccine rollout gathering pace, there are tangible reasons for optimism later in 2021.

Petrofac investigation

The Serious Fraud Office has announced that a former employee of a Petrofac subsidiary has admitted additional charges under the UK Bribery Act 2010.  These charges relate to three historic contract awards in the UAE in 2013 and 2014.

Petrofac confirms that no charges have been brought against any group company or any other officers or employees. A small number of former Petrofac employees are alleged to have acted together with the individual concerned, although none has been charged. No current board member of Petrofac is alleged to have been involved.

Petrofac said its management is “committed to operating at the highest standards of ethical business practice”. Petrofac continues to engage with the SFO and will respond to any further developments as appropriate.

Traders on Wall St (pic: NYSE)

Markets

US markets headed lower amid concern that president-elect Joe Biden’s stimulus package may underwhelm, with the Dow Jones industrial average down 69 points and the S&P 500 off 14 points.

Japan’s Nikkei 225 is 137 points softer and Hong Kong’s Hang Seng is 75 points lower.

Denial of worker rights dilution

Business Secretary Kwasi Kwarteng has denied a report that his department is planning to scrap some UK workers’ rights following its exit from the EU.

The Financial Times said some protections brought in under EU law – such as the 48-hour limit on the working week – could be scrapped.

Labour said the report suggested the government was out of step with public feeling on workplace rules.

But Mr Kwarteng insisted he wanted to “protect and enhance workers’ rights going forward, not row back on them”.

A government spokesman said: “We have absolutely no intention of lowering the standards of workers’ rights.”



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