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11 February 2020
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Equity markets are generally higher today, bouncing back from another negative day of trading yesterday, which was dominated by fears that the coronavirus could cause the global economy to contract for the first time in over a decade. The virus has now claimed over a thousand lives and there are more than 40k confirmed cases. Researchers are suggesting that the mortality rate is around 1% and there is belief that the actual number of cases, in China and abroad, is much higher than the official count.
The World Health Organisation warned that the number of cases detected outside the country could be “the tip of the iceberg”, while the UK has declared coronavirus a “serious and imminent threat”. Some businesses are reopening in China, but Singapore is preparing itself for a 25-30% fall in tourism this year.
Preliminary readings show that the UK economy grew by 0.3 in December, reversing its slump in November, meaning there was zero growth for Q4 and 1.4% for 2019 as a whole. Manufacturing output fell by 1.1% in the quarter. Retail sales data for January, compiled by the British Retail Consortium, show that festive discounting could only help the retail sector perform in line with last year.
The government is reportedly preparing to demand `permanent equivalence' for the City of London in upcoming EU trade negotiations, hoping to secure UK financial services long-term access to the European market after Brexit. Yesterday, however, Michael Gove warned businesses to prepare for “inevitable” border checks, admitting that a Canada-style deal would necessitate “some friction”.
Elsewhere, some market focus is on upcoming updates from the central bank officials of the US, UK and EU. An ECB strategic review is reportedly underway, with its inflation target under scrutiny after years of unconventional policies have failed to achieve it.
In the US Democratic primaries, 78-year old Bernie Sanders has moved ahead in the national polls, with Joe Biden, Michael Bloomberg and Pete Buttigieg following in that order.
Ocado quadrupled its previous losses in its financial year to the beginning of December, but maintained that underlying performance and growth were “very encouraging”. £88m of the £214.5m loss can be attributed to burning down of one of its warehouses in Andover last February. Despite the problems the fire caused, Ocado was the fastest growing UK supermarket last year. Group revenue rose 9.9% to £1.8bn.
Tui Group has posted first-quarter results, saying that the year has started “exceptionally well” but that the grounding of the Boeing 737 Max will cost it between €220-245m in the 2020 financial year. the FTSE 100 travel company enjoyed the “best booking volumes month in the company's history” in the run up to Christmas, however, with especially strong demand from the UK.
The Competition and Markets Authority (CMA) has warned that JD Sports' acquisition of Footasylum could mean that the UK consumer is worse off. The watchdog's preliminary ruling expressed concern that younger customers could experience less choice and fewer discounts. JD's chairman called the analysis “fundamentally flawed”.
The US investment firm KKR has contradicted NMC Health's claim, made yesterday, that it has approached the struggling FTSE 100 operator about a potential takeover. NMC's shares swung 32% higher yesterday following the takeover talk before falling over 16% this morning. They remain down by more than 60% in the last two months following concern about its finances and management.
Last week, Compass Group announced that underlying revenues grew 5.3% over the last three months of 2019, citing strong new business generation and client retention, particularly in North America. Its two-year target to reduce costs by £300m is apparently progressing well and Compass still expects revenues for the full year to grow between 4-6%.
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