Market does a ‘Dorothy’ | GDP growth slows | shop footfall stalls
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10pm: Market has ‘done a Dorothy’
The three major US stock indexes rallied to record closing highs as financials and other economically focused sectors rebounded from a selloff sparked by growth worries earlier in the week.
The FTSE 100 clawed back most of yesterday’s loss, closing 91.22 points higher at 7,121.88.
Danni Hewson, AJ Bell financial analyst, said: “Close your eyes and pretend yesterday never happened. Investors in the UK and across the pond seem to have done a Dorothy, clicking their heels and transporting markets back to pretty much where they were before yesterday’s sell off.
“London’s FTSE 100, miners led the charge upwards, not surprising considering all the COVID uncertainty is pushing people to take a hard look at their portfolios.
“Vectura was the standout performer on the FTSE 250 today following the news that Phillip Morris International has trumped a previous bidder for the company, all part of the big tobacco business’ strategy shift. It’s a move that’s gone down well with investors on Wall Street with the stock also trading higher.
“Unsurprisingly the travel sector has had a good day as it enjoys a surge in bookings from hopeful holidaymakers, only TUI seems to have missed on the surge of optimism resulting from changing restrictions.
“There is still a huge question mark hanging over this summer which is why a legal challenge against the government has gone ahead today, clarity will help foster confidence and confidence means cash.”
10am: Philip Morris in move beyond nicotine
Marlboro cigarettes maker Philip Morris International iss buying British drugmaker Vectura for £1.05 billion in a clear move from tobacco or nicotine.
The deal, which topped a 136p-a-share proposal by investment firm Carlyle Group, means shareholders in the drugmaker that makes about 13 inhaled medicines will get 150p per share in cash, 11% higher than its Thursday closing price.
9am: FTSE 100 edges up
Investors crept back into the market today, pushing the blue chip index higher in early trade. After yesterday’s 120 point fall, the FTSE 100 was up 51 points at 7,081.77.
“Once again the FTSE 100 is having to rebuild after a fresh wave of negative sentiment knocked it over on Thursday,” says AJ Bell investment director Russ Mould.
“What may spook investors is that usually the concerns have centred around either inflation or the risk of Covid-19 tilting the recovery off course.
“This time it appeared both fears were rearing their head at the same time – raising the spectre of stagflation or slowing economic growth accompanied by rapidly rising prices.
“Latest GDP figures for May in the UK [see below] show the pace of recovery is starting to grind a bit – even if a fourth consecutive month of growth is nothing to be sniffed at.
“We may get more insight into how central banks are weighing these issues later today with Bank of England chief Andrew Bailey and European Central Bank head Christine Lagarde set to participate in a panel discussion at a big finance summit in Venice.”
7am: Output grows
The UK economy grew by 0.8% in May, a fourth straight month of growth, but below expectations of 1.7%.
It remains 3.1% below its pre-pandemic peak, according to the Office for National Statistics.
The accommodation and food service sector grew by 37.1%, triggered by a burst in consumer spending after restrictions on indoor dining were lifted in the middle of the month.
British Chambers of Commerce head of economics, Suren Thiru, said: “While the latest figures confirm the rebound in economic activity continued into May, the sharp slowdown in growth suggests that the recovery is losing a little steam as the temporary boost, from the earlier phases of reopening, fades.
“The UK economy remains on track for a strong rebound in the second quarter. However, economic activity may remain muted in June as the impact of rising covid infections and the delay to the end of the roadmap are felt, despite an uplift to consumer activity from Euro 2020.”
Rain Newton-Smith, CBI chief economist, said: “With further pent-up demand providing an engine for growth, all signs point to a promising economic outlook for the UK over the course of the year.
“It’s now critical business and government work together to rebuild customer and employee confidence in living with the virus, while also maintaining progress in tackling the pandemic itself.”
7am: Oil minnow deal
Parkmead, the Aberdeen oil and gas company, has acquired a historic royalty associated with the Group’s existing interests in the Drenthe IV, Drenthe V and Andel Va licences in the Netherlands from Vermilion Energy. These licences contain the Grolloo, Geesbrug and Brakel onshore gas fields, respectively.
It will increase its net gas production from these wells, doubling the Group’s effective financial interest from 7.5% to 15%.
The €565,000 cost will be satisfied through a part cash payment of approximately €150,000 with the balance being paid from part of the remaining 2021 net revenue from Parkmead’s working interest in the Geesbrug gas field. .
Tom Cross, executive chairman, commented: “This innovative deal enhances our gas interests in the Netherlands and adds significant value to Parkmead. The group is also benefitting from the very strong recovery in gas prices.
“We continue to build a portfolio of high-quality energy projects through acquisitions, organic growth and active asset management.
“Our team is carefully evaluating further potential gas, oil and renewable energy acquisitions that would complement our existing portfolio.”
6am: Shopper footfall down
Scottish retail footfall fell by 29.5% in June on the same month in 2019, a 4.8 percentage point decrease from May. This is below the UK average decline of 27.6% (Yo2Y). This meant Scotland saw the steepest decline in footfall out of all UK nations.
The Scottish Retail Consortium (SRC) said the disparity was probably driven by the delay in relaxing Covid restrictions north of the border.
Footfall in shopping centres fell by more than a third (34.1%) below the 2019 figure.
Glasgow was the biggest sufferer, with numbers down by more than 30% on June 2019.
Corporate tax call
Chancellor Rishi Sunak has called for world leaders to push ahead on a global deal to agree a minimum corporate tax rate and how to divide revenue from large multinationals.
Mr Sunak is due to host finance ministers from 20 of the world’s biggest economies in Venice on Saturday and wants to build on his conversations at the G7 last month which reached a provisional agreement.
After years of stalemate, global tax talks gained fresh impetus in recent months under US President Joe Biden.
UK stocks were expected to open modestly firmer ahead of the release of gross domestic product data.
Spread betting quotes indicate the FTSE 100, which closed 120.36 points or 1.68% lower at 7,030.66, would open 16 points firmer at 7,047 despite falls in the US.
Wall Street fell from the previous session’s record closing high, on a broad sell-off fuelled by fears that the US economic recovery may be faltering.
The Dow Jones Industrial Average was 260 points, or 0.94% lower and the S&P 500 lost 37 points, or 0.84%.
In Asia this morning, Tokyo’s Nikkei 225 is down 508 points but in Hong Kong, the Hang Seng is 178 points firmer.