12th Feb 2021 17:01
(Alliance News) - Stocks in London ended higher on Friday, shrugging off weak UK economic growth figures, as optimism grew amid signs lockdown restrictions were having a positive effect.
The reproduction number, or R value, of coronavirus has fallen below one for the first time since July and is now estimated to be between 0.7 and 0.9 across the UK.
In a sign that lockdown restrictions are having an effect and the epidemic is shrinking, scientists advising the UK government gave their most optimistic outlook for the R number since cases fell last summer.
The latest figures come as the UK presses ahead with its mass-vaccine rollout. According to Sky News around 14 million UK adults have received the first dose of a Covid-19 vaccine.
The FTSE 100 index closed up 61.07 points or 0.9%, at 6,589.79 - closing the week 1.3% higher.
The FTSE 250 ended up 19.62 points, or 0.1%, at 21,037.47, rising 1.1% since the start of the week. The AIM All-Share closed up 0.96 of a points, or 0.1%, at 1,219.76, and finished the week 1.3% higher.
The Cboe UK 100 ended up 0.9% at 654.00, the Cboe UK 250 closed flat at 18,502.20, and the Cboe Small Companies ended down 0.2% at 12,653.88.
In Paris the CAC 40 ended up 0.6%, while the DAX 30 in Frankfurt ended up 0.1%.
"The week is ending on a more positive note than seemed likely a few hours ago, as European markets tick higher and the US avoids a more substantial selloff. News of a drop in the UK R rate was greeted positively by investors, helping the FTSE 100 to move towards the top end of its recent range, although it remains far below the highs of late January and continues to lag behind many other major indices, which have recovered and often pushed to new all-time high," said IG Group's Chris Beauchamp.
In the FTSE 100, AstraZeneca ended up 1.1% and was up 1.2% for the week after reporting positive annual results on Thursday. UK-based asset manager St James's Place ended the best performers, up 3.9%.
"UK assets were in demand more generally, exemplified by a rise in the pound against the dollar and the euro, as the national vaccine programme began to bear fruit, coupled with the ongoing efforts to control the virus via lockdowns. With Israel's vaccination success now showing very few infections at all, the path for the UK seems much brighter, although the risks of new variants and continued spreading among the non-vaccinated will mean that lockdown will continue for the time being," added Beauchamp.
The pound was quoted at USD1.3847 at the London equities close, up from USD1.3815 at the close Thursday, recovering after disappointing UK economic growth figures.
Sterling fell to a low of USD1.3780 versus to greenback immediately after the release of UK economic growth data Friday morning.
The UK's economy grew at a faster pace than expected in the fourth quarter, though the country's gross domestic product for the whole of 2020 fell by a record 9.9%, according to numbers on Friday.
According to the Office of National Statistics, UK gross domestic product grew 1.0% on a quarterly basis in the final three months of 2020, topping expectations of a 0.5% rise, according to consensus cited by FXStreet. However, this still was a marked slowdown in the economy's rebound from the Covid-19 health crisis, following a third-quarter when GDP rose by 16%.
Annually, the UK's economic decline was less than what was forecast by market consensus. The UK's GDP was 7.8% lower year-on-year in the fourth quarter, compared to an 8.1% fall forecast.
"Over the year 2020 as a whole, GDP contracted by 9.9%, marking the largest annual fall in UK GDP on record," the ONS.
The latest figures will stoke fears about the pace of the UK's economic recovery from the coronavirus crisis with lockdown restrictions still in place.
Investors are becoming increasingly fearful that the UK Treasury could risk denting any post-covid economic recovery by raising taxes and cutting spending in a bid to rebalance the country's books.
Speculation has risen over recent weeks that Chancellor of the Exchequer Rishi Sunak will start to tighten fiscal policy as soon as March.
There has been tensions within the ranks of the UK government as a vociferous minority of Conservative MPs have argued the current lockdown is too severe and needs to lift as soon as possible in order for the economy to rebuild. But scientists argue that case numbers are still too high for a significant loosening of restrictions.
Reacting to the data, Sunak said the figures revealed the "serious shock" the pandemic has had on the economy.
"While there are some positive signs of the economy's resilience over the winter, we know that the current lockdown continues to have a significant impact on many people and businesses," the chancellor said.
The UK furlough scheme - subsidising wages for temporarily laid-off workers - is currently due to run until the end of April, but has crucially been credited with saving millions of workers from redundancy.
Robert Alster, chief investment officer at Close Brothers Asset Management said: "While these figures don't make cheery reading, particularly considering they reflect the critical pre-Christmas trading period, they do represent the metaphoric calm before the storm, with January's data forecast to be bleak due to the UK-wide lockdown.
"Moving forward, much depends on the clear stand-off between the prime minister and the Chancellor over when, and to what extent, COVID restrictions start being lifted. With the UK halfway through the first quarter already, the real question is, will the second quarter of the year usher in a real recovery? And critically, can the hospitality and retail sectors hang on until then."
The euro stood at USD1.2120 at the European equities close, down from USD1.2130 a day before. Against the yen, the dollar was trading at JPY104.95, up from JPY104.75 late Thursday.
Stocks in New York were subdued at the London equities close, as investors remain hopeful that the expected US government economic stimulus package is imminent.
The DJIA was flat, the S&P 500 index up 0.1% and the Nasdaq Composite flat.
On the corporate front, Walt Disney Co was down 1.1%. The entertainment giant late Thursday reported a sharp decline in earnings for the first quarter of its financial year, as the Covid-19 pandemic took a heavy toll on its Disney Parks, Experiences & Products business.
For the three months ended January 2, net income plunged by 99% to USD18 million from USD2.15 billion the year before, as did diluted earnings per share to USD0.01 from USD1.17. This was on revenue that fell by 28% year-on-year to USD16.25 billion from USD20.88 billion.
Disney+ subscribers to grew to 94.9 million as of January 2, helping Disney's streaming ecosystem to a total of more than 146 million paying users.
Brent oil was quoted at USD61.53 a barrel at the equities close, up from USD61.35 at the close Thursday.
Gold was quoted at USD1,828.25 an ounce at the London equities close, lower against USD1,836.55 late Thursday.
The economic events calendar on Monday has Japan GDP readings overnight and eurozone industrial production figures at 1000 GMT. Financial markets in the US will be closed Monday for the President's Day holiday, while markets in China and Hong Kong remain closed for Chinese New Year.
The UK corporate calendar on Monday has interim results from City of London Investment Group.
By Arvind Bhunjun; [email protected]
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