Yahoo Finance FTSE 100 Live: UK economy grows 7.5% in 2021 despite Omicron hit, US facing big rates hike
The UK economy grew 7.5% last year as disruption from the Omicron variant dealt a smaller-than-expected blow to activity in December.
New GDP figures from the Office for National Statistics show output fell by 0.2% in December, better than the City's 0.6% forecast and leaving the economy in line with its pre-pandemic level.
The fourth quarter performance was 1% higher while 2021 overall showed expansion of 7.5%, a significant rebound after the UK suffered the largest fall of all major economies in 2020.
FTSE 100 Live Friday
UK GDP down 0.2% in December after Omicron hit
Rate rise fears hit global markets
British American Tobacco pledges £2 billion buyback
FTSE clawing back to break-even for the day
15:15 , Oscar Williams-Grut
The FTSE 100 is paring back losses in afternoon trade. The bluechip index is down just 0.3%, or 22 points, at just after 3pm, having been down over 60 points mid-morning.
Unilever is top of the index with a gain of 3.5%, rebounding from a sell-off yesterday driven by margin concerns.
In the US, Wall Street has largely stopped the sell-off that shook stocks on Thursday: the Dow is up 0.25% after around 45 minutes of trade, the S&P 500 is flat, while the Nasdaq is 0.2% lower.
Spire CFO in cycling accident
14:25 , Oscar Williams-Grut
The chief financial officer of the second largest provider of private healthcare in the UK has been in a serious cycling accident, it was announced today.
Jitesh Sodha, CFO of Spire Healthcare, is “recovering well” in hospital after being left in a “serious condition” following the accident, the company said.
Spire Healthcare has appointed group financial controller Harbant Samra as Sodha’s temporary replacement, reporting to chief executive officer Justin Ash.
Nelson Peltz, the Wall Street billionaire stalking Unilever
14:09 , Oscar Williams-Grut
Wall Street activist investor Nelson Peltz was recently revealed as an investor in Unilever, raising speculation as to what the notoriously involved Peltz might want to do at the company.
The 79-year-old billionaire is a well-known figure in the US, having run high-profile campaigns at the likes of P&G and Heinz, but is less well known over here.
Our reporter, Lucy Tobin, has profiled him for today’s paper. Here’s a flavour:
Billionaire Nelson Peltz is used to interesting meetings. Still, the first sitdown with his daughter’s soon-to-be in-laws must have stood out.
Victoria and David Beckham flew out to meet the Peltzes at their 44,000sq-ft Floridian mansion over Christmas. The house will soon host Nicola Peltz’s wedding to Brooklyn Beckham.
Of course, the rendezvous took place on the elder Peltz’s territory: the 79-year-old founder of Trian Fund Management is used to getting his way. The activist investor has made a career out of driving change — often forcefully — at firms he invests in, including Heinz and Procter & Gamble. Doing so has made Peltz a personal fortune of $1.7 billion.
Hurricane Ida pushes insurer Lancashire to annual loss
13:43 , Oscar Williams-Grut
2021 was one of the costliest years on record for the insurance industry, according to speciality insurer Lancashire Holdings.
The FTSE-250 firm, which operates mainly in the property, marine, aviation and energy areas, lost $92.9 million last year, compared to a $24.3 million profit in the previous year.
It was only the second annual loss suffered by the company since it was founded in 2005.
11:30 , Oscar Williams-Grut
Mercedes-Benz has managed to overcome the global semiconductor shortage to post better-than-expected results.
The German car maker said unaudited results suggest a earnings before interest and tax of €14 billion for the year just gone. The company said it is making a return on sales of 12.7%, above guidance of 10% to 12%.
The performance was driven by strong demand for the company’s cars and vans in the final few months of 2021, with a return on sales of 15%.
The stronger-than-expected performance came despite a global shortage of semiconductors, which are now essential in the construction of modern cars. UBS said this week supply was likely to remain tight for the rest of the year.
Mercedes-Benz chair Ola Källenius said: “We continue to execute our strategy at full speed. Our focus on profitable growth and cost discipline combined with a desirable product lineup translated into strong financial performance. As the world’s most valuable luxury car brand we are accelerating toward an all-electric, software-driven future.”
Stagflation is here
11:09 , Simon English
Pessimists have been forecasting that Britain will suffer a nasty dose of stagflation – a shrinking economy combined with high inflation.
They can at least stop worrying – it’s here.
Today’s figures show that the economy was down 0.2% in December while inflation stood at 5.4%.
It is no wonder the view from the shop floor, and from the Dog & Duck, is gloomy.
Economists say that fall in GDP is temporary, and it was only a small fall in the first place, let’s be clear.
But the inflation is here to stay and that is surely the more worrying factor. The price of seemingly everything is up and the squeeze in incomes is getting tighter.
Interest rate fears send markets lower
10:41 , Graeme Evans
Bets on a quick-fire series of US interest rate hikes starting from next month today triggered another big market sell-off as fears grow over the impact of red-hot inflation.
Yesterday's 40-year high for the US consumer price index of 7.5% topped Wall Street forecasts, raising the chances of an aggressive response from the US Federal Reserve.
Some traders are even considering the possibility of the Fed raising rates between scheduled meetings for the first time since 1994.
Most expect a 0.5% hike in rates in March before five more quarter point rises in 2022.
Deutsche Bank's US economists also highlighted the increasing risk of a 2023 or 2024 recession as the pace of monetary tightening strangles the economic recovery.
The Vix ‘fear’ index rose last night to indicate more volatile market conditions, while the US 10-year bond yield went above 2% for the first time since August 2019.
Tech and growth stocks, whose valuations are built around future cash flows, were under most pressure in London trading. Fallers included Baillie Gifford's Scottish Mortgage Investment Trust and its US Growth Trust, down by 3% and 4% respectively.
The FTSE 100 index, which has held up well in recent weeks thanks to its old economy exposure, fell 63.35 points to 7609.05 on fears over slower global growth.
Russia-focused miner Polymetal International dropped 3% after the US rates outlook put pressure on the gold price. A shortened risers board was led by a 1.5% gain for Unilever.
The FTSE 250 index fell 1.2% or 264.38 points to 21,943.37 but Tate & Lyle shares jumped 6% after the food ingredients business reported a “positive outcome” on its 2022 pricing round. With another quarter of double-digit revenues growth, shares upped 40p to 730.2p.
Price pressures set to hit UK recovery
09:05 , Graeme Evans
The UK got a taste of stagflation in December after the 0.2% GDP fall combined with an inflation rate of 5.4%.
It's possible that GDP also fell in January, although the reverse should be short-lived as Omicron fades and the economy shows it is increasingly able to cope with Covid-19.
However, inflation is set to stay around for longer in a blow to the UK recovery.
Paul Dales, chief UK economist at Capital Economics, said: “A 2% fall in real household disposable incomes this year will restrain GDP growth from April.
“With inflation soaring, we doubt this will prevent the Bank of England from raising interest rates from 0.5% to 1.25% this year and to 2% next year.”
CMA reaches deal with Google on cookies
08:51 , Oscar Williams-Grut
Search engine Google will be closely monitored by the UK’s competition watchdog after agreeing commitments about the way it uses customer data.
The Competition and Markets Authority (CMA) launched a probe into Google last year amid concerns around the company’s Privacy Sandbox, which looked at how to prevent tracking of people as they browsed the web.
The CMA was worried that the changes could force more ad dollars to Google and has acted to stop Google squeezing competition when removing third-party cookies on its Chrome browser.
The search engine has now signed up to legally-binding rules to avoid growing its market dominance even further in online advertising.
Andrea Coscelli, CMA chief, said: “While this is an important step, we are under no illusions that our work is done.”
Stocks lower after US inflation shock
08:48 , Graeme Evans
The FTSE 100 index has weathered the inflation storm blowing through US markets, with London's top flight down by a respectable 32.73 points at 7639.67.
Consumer goods firms Unilever and Reckitt Benckiser rose 1% and energy giant BP also found positive territory.
Last night's weakness for US tech stocks meant Scottish Mortgage Investment Trust fell 2% while miner Polymetal International dropped 3% after the interest rates outlook in the US put pressure on the gold price.
Tate & Lyle shares surged 8% in the FTSE 250 index after the food ingredients business reported a “positive outcome” from its annual pricing round. It follows another quarter of double-digit revenues growth for its food and beverage solutions division.
The FTSE 250 index fell 0.75% or 166.47 points to 22,041.28, with Trustpilot and Baillie Gifford US Growth Trust among the stocks down by more than 3%.
BAT reports surge in vaping revenues
08:26 , Graeme Evans
Lucky Strike maker British American Tobacco has announced a £2 billion share buyback, following Shell, BP and Unilever in announcing big investor returns in the past week.
Results for 2021 showed a 2.7% higher profit of £10.2 billion on flat sales of £25.6 billion, with BAT benefiting from higher prices and growth in new categories.
BAT said global tobacco industry volumes are expected to be down 2.5% for the year, but it has been encouraged by progress on its 2025 target for £5 billion of revenues from new categories such as vaping businesses Vuse and Vype and tobacco heating brand glo.
It said its non-combustible products reached 18.3 million consumers last year, up 4.8 million on a year ago as new category losses reduced for the first time. Revenues from vaping rose 59% , with Vuse now the leading brand by value share.
Chief executive Jack Bowles said: “The BAT of tomorrow will be a high-growth, consumer centric, multi-category consumer goods company.”
BAT shares opened slightly higher today.
Services sector contracts 0.5% after Plan B hit
08:06 , Graeme Evans
Plan B restrictions triggered by the Omicron variant meant the services economy contracted 0.5% in December, whereas construction continued its growth with a rise of 2%.
Hargreaves Lansdown fund manager Steve Clayton said: “The impact of Omicron might have been less in terms of overall economic activity than earlier variants, but it still knocked the consumer sectors badly, just as they were starting to claw back lost ground.”
The UK's growth across 2021 was the fastest since the Second World War, but the outlook for 2022 appears uncertain based on expectations for a sluggish performance in January and with ongoing pressures from inflation.
Clayton added: “Longer term, the UK’s biggest challenge still seems to be productivity growth, which has been lacklustre for over a decade. Until that is fixed the UK economy is likely to have a pretty humdrum underlying pace of growth.”
Markets forecast 0.5% US rates hike
07:32 , Graeme Evans
A 40-year high for US inflation has jolted stock markets amid fears that the Federal Reserve will be forced to hike interest rates by 0.5% at its next meeting.
Yesterday's inflation reading for January of 7.5% was higher than expected, dashing hopes that price pressures in the US economy are easing.
Expectations for the first 0.5% rate rise in two decades were given added weight when Fed policymaker James Bullard called for two such rises in March and July.
Deutsche Bank's US economists yesterday forecast a 50 basis points hike in March plus five more quarter point hikes in 2022, with increases at all but the November meeting, They also highlighted the increasing risk of a 2023 or 2024 recession.
The developments sent the 10-year bond yield above 2% for the first time since August 2019 and led to a sell-off for tech and growth stocks whose valuations are built around future cash flows.
The Nasdaq lost 2.1% yesterday and the Dow Jones Industrial Average and S&P 500 were both down by around 1%, with US futures pointing to a weak start later.
The FTSE 100 index closed lat night at two-year high, aided by its exposure to the energy, commodities and financial sectors. CMC Markets is forecasting a weaker session today, with the FTSE 100 set to fall by 82 points to 7590.
