FTSE lifted by falling R number and post-lockdown glimmers of hope

The FTSE 100 closed higher on Friday after a positive update on coronavirus numbers helped shares recover losses from earlier in the day.

The blue-chip index rose 61 points, or 0.9%, to close at 6,590, its highest level since late January as it notched up a 1.6% gain over the week.

Earlier concerns centred on whether summer holidays will be cancelled this year and the UK’s shocking GDP figures, revealing a 9.9% GDP contraction in 2020, underlined the economic damage wrought by the pandemic.

Spreadex analyst Connor Campbell pointed to signs that there could be life after lockdown, with the spread of Covid-19 slowing and the government committing to provide a timetable for easing restrictions in 10 days’ time. 

‘With the UK’s R value dropping below 1 for the first time since last July, and the government confirming they will issue their roadmap out of lockdown on February 22, the FTSE and pound swung positive on Friday afternoon,’ he said. 

Sterling strengthened 0.1% against the dollar to just over $1.382, a fraction off Wednesday’s 33-month peak. The pound was more robust against the euro, jumping 0.4% to €1.143, close to a nine-month high. 


(10:08) FTSE shrugs off record GDP slump

London-listed stocks were flat on Friday morning despite confirmation that Britain’s economy suffered its biggest fall in annual output in more than 300 years as the coronavirus pandemic raged last year.

The FTSE 100 rose 4 points to 6,533, recovering from early losses to be in positive territory at 10am, although, there was fresh pain for the worst-hit travel, leisure and retail sectors.

Figures today revealed the UK economy contracted by 9.9% in 2020, but a more resilient performance in the final three months of the year, despite a second national lockdown, was one silver lining.  

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Official figures showed GDP grew by 1% in the last three months of the year, meaning the UK economy is likely to avoid the technical definition of a recession, two successive quarters of negative growth.

Hargreaves Lansdown analyst Susannah Streeter said the ‘temporary reprieve from lockdown in December’ had given a leg-up to the services industry, helping push overall growth in the month up to 1.2%, slightly better than expected.

But with the UK economy almost 10% smaller in size than before the pandemic hit and more pain to come given the ongoing virus curbs, markets are struggling to see the upside.

‘The UK may have swerved a technical double dip recession, but the record breaking annual fall in economic output underlines the damage wreaked by Covid on businesses up and down the country,’ she said.

‘With no road map yet laid out to the reopening of the economy, it’s hard to see the light at the end of the tunnel when the tunnel keeps getting longer.’

Robert Alster, chief investment officer at investment management firm Close Brothers Asset Management, said the December numbers represented the ‘metaphoric calm before the storm’. He added that much will now depend on the tussle between the prime minister Boris Johnson and the chancellor Rishi Sunak (pictured), ahead of the Budget on 3 March, over when and to what extent Covid restrictions start being lifted.

Travel stocks were hit as the odds on Britons being allowed to go on holiday this year widened. Among blue chips, BA-owner International Consolidated Airlines (IAG) fell 1.8% to 146p. On the mid-cap FTSE 250 index, EasyJet (EZJ) fell 2.5% to 743p. International cruise line operator Carnival (CCL) slumped 4% to £12.489

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CMC Markets’ Michael Hewson said it had been a ‘disappointing week’ for the airline sector, as it becomes ‘increasingly apparent that the summer holiday season this year is likely to see the UK population confined to the home market’.

Financials also slipped, with NatWest Group (NWG) falling 2.3% to 168p. Miners were another area of weakness. Antofagasta (ANTO) traded down 2.3% to £15.04 while Glencore (GLEN) declined 2% to 264p.

Relx (REL) led the risers, up 1.9% to £18.60. AstraZeneca (AZN) gained 1.5% to £73.52, after muted action on its results day yesterday.

The FTSE 250 index, which is more exposed to the domestic economy, fell 87 points, or 0.4%, to 20,931.

Restaurant group Mitchells & Butlers (MAB) dropped 6.9% to 313p, while travel agent Tui (TUI) fell 3.7% to 311p. Downstream petroleum company Vivo Energy (VVO) was a bright spot, up 6.7% to 83.4p, after reporting higher earnings guidance.

Trust news

Tritax Eurobox (EBOX), a £435m real estate investment trust focused on warehouses and depots, rose 0.5p to 103.5p after the 4.3%-yielder reported full rent collection in the fourth quarter of last year.

Renewables Infrastructure Group (TRIG) slipped 2.2p, or 1.7%, to 126.4p after buying Grönhult, a 67.2 MW ready-to-build onshore wind farm in southwest Sweden, from developer Vattenfall, and saying it would fund the construction with equity. The project is expected to finish at the end of next year and represent 3% of the portfolio.

JLEN Environmental Assets (JLEN) eased a penny to 114.5p after the 5.8%-yielder reported a 1% total increase in net asset value (NAV) in the fourth quarter, and by 1% in 2022 as a whole.

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Honeycomb (HONY) shed 7.5p to 955p after the debt fund’s NAV gained 0.7% in December, giving a total return of net assets of 8% in 2020.



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