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What to watch: UK firms’ COVID-19 woes mount, banks boosted by US senate race and oil surges

Kumutha Ramanathan
·4 min read
LONDON, ENGLAND - DECEMBER 27: A view of The Shard skyscraper and City of London skyline from the top of Greenwich Park on December 27, 2020 in London, United Kingdom. Last week, the British government scrapped a plan to allow household mixing in England for five days over Christmas. In London and southeast, household mixing was banned, and in other parts of the country indoor meetups were confined to Christmas Day.  (Photo by Hollie Adams/Getty Images)
A view of The Shard skyscraper and City of London skyline from the top of Greenwich Park. Photo: Hollie Adams/Getty Images

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and around the world.

UK firms’ COVID-19 woes mount

Greggs, Topps Tiles and Auto Trader joined the chorus of firms warning of the hit to trade from coronavirus restrictions as England’s lockdown came into force on Wednesday.

The bakery chain (GRG.L) told investors it did not expect profits to return to pre-COVID levels until 2022 “at the earliest,” highlighting uncertainty over how long social restrictions will last.

It comes as strict stay-at-home orders are applied across the UK, and as England’s chief medical officer Chris Whitty told the country on Tuesday some restrictions could be in place next winter.

Greggs confirmed in a trading update that 820 staff had been made redundant in recent months, and predicted pre-tax losses of up to £15m for 2020. Its full-year preliminary results will be published in March.

Meanwhile Topps Tiles (TPT.L) said it had been advised to close its tile aisles in stores “to prevent browsing” during England’s lockdown, even though stores can remain open building supplies are exempt from restrictions.

Banks boosted by US senate race

UK banking stocks are leading FTSE (^FTSE) gains on Wednesday as US TV networks and the Associated Press news agency are calling the first of two runoff Senate races in Georgia, USA, for Democratic candidate Raphael Warnock, which would unseat Republican Kelly Loeffler. Democratic challenger Jon Ossoff also holds a slim lead over Republican David Perdue in the other race, with 98% of votes counted, according to Reuters.

Standard Chartered (STAN.L) gained 6.6% on Wednesday at around 9.45am in London.

The UK's Standard Chartered Bank saw a dramatic rise in value on Wednesday as the market focuses on a more expansionary fiscal programme in the US. Chart: Yahoo Finance
The UK's Standard Chartered Bank saw a dramatic rise in value on Wednesday as the market focuses on a more expansionary fiscal programme in the US. Chart: Yahoo Finance

Barclays (BARC.L) was also gaining, up 6% on the news.

HSBC Holdings (HSBA.L) also rose 5.3%.

With markets assuming a Democratic sweep, there is also now a greater expansion of more expansionary US fiscal policy and higher taxes, which has resulted in a higher yield environment for fixed income assets.

“There are important implications for the markets evidenced by the US 10yr Treasury yield breaking above 1% for the first time in nine months, whilst the dollar made fresh lows,” said Neil Wilson, chief market analyst at MarketsDotCom. “Markets have a habit of overreacting to news but we should consider what a shift in Washington will mean.”

Oil surges

Oil prices rose dramatically on Wednesday, with Brent (BZ=F) hitting a peak last seen 11 months ago, after Saudi Arabia surprised the market by agreeing to make bigger output cuts than expected.

The net result of this decision is that the group’s output in the first quarter will be significantly lower than what was expected after the December Organization of the Petroleum Exporting Countries and its allies (OPEC+) meeting.

“The decision came as a huge surprise as the organisation struggled yesterday [Monday] to agree to a deal,” said Capital Economics in a note. “The Saudi Energy Minister justified the decision on the grounds that the near-term oil demand outlook remains very downbeat due to virus-containment measures. Meanwhile, today’s [Tuesday] agreement also raises the probability that OPEC+ cuts will be higher than 5.7m bpd in Q2.”

Brent (BZ=F) rose 1% at around 10am in London, sitting at $54.11 (£39.05) per barrel.

European markets brace for new lockdown measures and potential US Democratic sweep

European markets are bracing on Wednesday as more countries put stricter lockdown measures in place to curtail the spread of COVID-19 and the first of two votes in the Georgia Senate race goes to Democrats.

The FTSE 100 (^FTSE) opened higher 0.8% in London at the market open. Germany’s DAX (^GDAXI) gained 0.4% in Frankfurt, while the CAC 40 (^FCHI) was also up 0.7% in Paris.

US futures markets cooled a bit as the US Senate votes are still being counted. The S&P (ES=F) futures were down 0.2%. Dow Jones (YM=F) gained 0.4% and the Nasdaq (NQ=F) fell 1.7%.

Asian markets were mixed ahead of the final US Senate vote count. While Japan’s Nikkei (^N225) fell 0.4% at market close, the Hong Kong Hang Seng (^HSI) leapt up 0.2% and the Shanghai Composite (000001.SS) also gained 0.6% at market close. South Korea’s KOSPI (^KS11) headed lower 0.8%.

-With additional reporting from Tom Belger

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