Pound and FTSE stumble amid dire economic data – live updates

Services - AP Photo/Kirsty Wigglesworth
Services – AP Photo/Kirsty Wigglesworth

11:40 AM

Bitcoin tumble puts London’s crypto companies in a tough spot

Bitcoin’s recent price slump has caused the share prices of several London-listed cryptocurrency companies to tumble in the last two weeks.

My colleague Matthew Field reports:

One stock, Bitcoin mining company Argo Blockchain, had soared nearly 1,000pc since the start of December to a high point of 125p on January 7. It has since dipped 40pc, falling 12pc in trading on Thursday.

Online Blockchain PLC, UK-listed company that was founded in 1996 but swapped its business to cryptocurrency in 2017, saw its share price surge 200pc since the end of December to January 7, although it has since pulled back more than 50pc.

11:13 AM

Germany cuts growth forecast

Angela Merkel - HAYOUNG JEON/EPA-EFE/ShutterstockAngela Merkel - HAYOUNG JEON/EPA-EFE/Shutterstock
Angela Merkel – HAYOUNG JEON/EPA-EFE/Shutterstock

Germany will cut its prediction for 2021 growth to just 3pc as extended lockdown restrictions put a drag on the country’s economic recovery.

Bloomberg has more details:

The government cut its forecast of 4.4pc made at the end of October, according to a person familiar with its annual economic report to be published next week. Germany entered a partial shutdown – including the closing of non-essential stores – at the start of November and it has since been tightened and extended until at least mid-February.

Economy Minister Peter Altmaier is due to present the latest report at a news conference on Wednesday. Europe’s biggest economy has not suffered as much as some countries from the effects of the coronavirus crisis, in part thanks to generous government support.

10:46 AM

Bitcoin tumbles amid worst week since March – live tech updates

Bitcoin is on course to record one of its worst weeks since March after the cryptocurrency slipped below $30,000 (£22,000) in the early hours of the morning.

My colleague Hannah Boland reports:

It is down by more than 12pc this week, according to Coin Telegraph, having experienced a rapid rally last year. In 2020, its price jumped by more than 300pc, and in January it jumped to $42,000.

However, some cautioned against being overly pessimistic over the cryptocurrency’s latest rout. Jeffrey Halley, senior market analyst at Oanda said: “Being Bitcoin, a 10pc range intraday is a mere flesh wound to the digital asset, in a world where tradable versus investible is seriously blurred.”

10:27 AM

Market moves

A string of poor PMI readings have done no favours to European equities, which are solidly in the red to round out a disappointing week of trading. The FTSE 100 is the top performer, but that’s largely because international earners have been pumped up by the pound’s woes:

10:05 AM

Money round-up

Here are some of the day’s top stories from the Telegraph Money team:

09:48 AM

Companies cut jobs amid new restrictions

Today’s PMI report says higher operating expenses, squeezed margins and lower demand led to a “modest acceleration in the pace of private sector job shedding in January”.

Mr Williamson says the pace of cuts was slower than in March and November, however. The worst-affected the sectors are the usual suspects of customer-facing services companies:

The steepest loss of jobs was recorded in the hotels, restaurants, travel and leisure sectors, reflecting the new lockdown measures

09:39 AM

Key findings

Here are the key findings from the latest PMI surveys by IHS Markit and CIPS:

  • Apart from April 2020, latest data pointed to the largest increase in suppliers’ delivery times since the UK Manufacturing PMI survey began almost 30 years ago

  • Despite a swift return to falling business activity at the beginning of the year, latest data indicated that UK private sector companies remain upbeat about their prospects on a longer-term basis

  • The speed of the downturn in UK private sector output was still softer than at the start of the pandemic

  • Volumes of new work meanwhile decreased for the fourth consecutive month

  • Strong cost pressures persisted at the start of 2021

IHS MarkitIHS Markit
IHS Markit

IHS Markit’s Chris Williamson said:

A steep slump in business activity in January puts the lockeddown UK economy on course to contract sharply in the first quarter of 2021, meaning a double-dip recession is on the cards. Services have once again been especially hard hit, but manufacturing has seen growth almost stall, blamed on a cocktail of Covid-19 and Brexit, which has led to increasingly widespread supply delays, rising costs and falling exports.

CIPS’ Duncan Brock added:

This is a sudden blow to the UK economy as recovery in the two sectors lost its momentum after some improvement at the end of last year. Affected by consumer caution and dried-up pipelines of new work from domestic and export customers, new orders dropped to an extent not seen since May, underlining the continuing instability in a marketplace no longer propped up by pre-Brexit stockpiling or reduced restrictions on business conditions

09:35 AM

Output slumps amid lockdowns and Brexit disruption

UK private sector activity has slumped this month amid disruptions caused by new lockdown measures and the biggest jump in delivery times in at least 30 years (excluding last April).

PMI readings were worse than expected across the board, with a particularly acute slump in services:

  • Manufacturing: 52.9

  • Services: 38.8

  • Composite: 40.6

IHS Markit, which gathered the data, said:

UK private sector companies signalled a renewed downturn in business activity during January, which largely reflected national lockdown restrictions due to the Covid-19 pandemic. The service economy was hard-hit by restrictions on trade and reduced consumer spending at the start of the year, with business activity falling at the fastest pace for eight months.

09:24 AM

Coming up: UK PMIs

We’ll get flash PMIs for the UK’s private sector at half past.

Economists are expecting a broad-based slowdown in activity, with a divergence between rising manufacturing output and a continued services slowdown driven by the latest lockdown. Here are the predictions (per Bloomberg):

09:09 AM

Eurozone private sector activity slows

Follow divergent manufacturing and services performances in France and Germany, the eurozone-wide flash PMIs show evidence of a bloc-wide schism between sectors.

The eurozone manufacturing gauge came in at 54.7, clearing the growth threshold at 50, while services stood at 45. Together, that shifted the composite gauge of overall private sector activity to 47.5, indicating an overall decline.

IHS Markit, which gathered the data, said:

Eurozone business activity fell at an accelerated rate in January as companies continued to struggle amid the ongoing pandemic and related restrictions. The rate of factory output growth weakened to the slowest since the recovery began and the service sector saw output fall at the second-fastest rate since May.

Here are some key findings:

  • The worsening performance in January was broad based across the eurozone, albeit with marked variations

  • Eurozone factory output expanded for a seventh consecutive month

  • There was an incidence of supply constraints limiting production

  • Employment across the eurozone fall for an eleventh consecutive month

  • Business expectations about output in the coming 12 months pulled back from December’s recent peak, largely linked to worries about the persistence of the pandemic’s impact on demand

IHS Markit’s Chris Williamson said:

A double-dip recession for the eurozone economy is looking increasingly inevitable as tighter Covid-19 restrictions took a further toll on businesses in January. Output fell at an increased rate, led by worsening conditions in the service sector and a weakening of manufacturing growth to the lowest seen so far in the sector’s seven-month recovery.

08:47 AM

German manufacturing boom continues

A rise in German manufacturing activity continued to gain pace in January, with the sector’s strength continuing to offset a services slowdown.

The country’s manufacturing PMI stood at 57, a mild slowdown in the pace of gains but well clear of the no-change threshold at 50. Services continued to slowdown amid tighter restrictions, but overall composite private sector growth gauge held in positive territory.

IHS Markit, which gathered the data, said:

Tougher measures to control the spread of Covid-19 infections further depressed activity across Germany’s service sector at the start of the year, although overall economic output in the country continued to see support from growth in the manufacturing sector and rising goods exports.

Here are some key findings:

  • January’s survey revealed unprecedented delays on the delivery of inputs to manufacturers amid growing pressure on supply chains and widespread freight disruption

  • Despite temporary closures across the tourism industry and restrictions on travel, German export business continued to rise thanks to another steep increase in international sales of manufactured goods

  • Overall backlogs of work across the German private sector rose for the sixth month running

  • Employment across Germany’s private sector crept higher… The increase was driven by an acceleration in the rate of job creation across the service sector to the quickest seen since before the pandemic

IHS Markit’s Phil Smith said:

All in all, the German economy has made a slow start to the year, and the extension of the current containment measures until at least mid-February means this looks like being the picture for several more weeks to come.

08:27 AM

Divergence continues as French private sector slows down

There’s evidence of a continued divergence between France’s manufacturing and services sectors, as activity in the former accelerated alongside a slowdown in the latter.

The latest PMI data for the French private sector showed factories mildly above the growth threshold of 50, while tighter restrictions knocked services – putting a drag on wider performance that knocked the composite reading 47.

IHS Markit, which gathered the data, said:

Latest PMI data pointed to a quicker contraction in French business activity during January, partially driven by the imposition of stricter Covid-19 curfews. The result extended the current sequence of contraction to five months, as the country continued to try and contain the second large-scale outbreak of the virus.

Here are some key points:

  • The latest decrease in business activity was accompanied by another fall in new business

  • Foreign demand for French goods and services continued to decline

  • French businesses increased their staff numbers in the first month of 2020

  • Input costs faced by private sector firms continued to rise

  • Businesses cut their average output prices for the fifth month running

IHS Markit’s Eliot Kerr said:

The French private sector started the new year as it ended the last, with Covid-19 restrictions driving a further decline in business activity. However, there were one big positive to be gleaned from the latest PMI data, and that was the return of employment growth.

08:11 AM

FTSE falls at open

The FTSE 100 has opened lower amid widespread but moderate declines across European equities. London’s blue-chips would likely be underperforming were it not for some upwards pull from a weaker pound.

Bloomberg TV - Bloomberg TVBloomberg TV - Bloomberg TV
Bloomberg TV – Bloomberg TV

08:01 AM

Full report: Christmas sales a letdown as borrowing spree continues

My colleague Tom Rees has a full report on this morning’s economic figures. He writes:

Paul Dales, UK economist at Capital Economics, said it “wasn’t a very merry Christmas for retailers”, warning the weak sales “highlight how the economy still needs the Government’s financial support”.

“The poor performance is surely because many were forced to close again from 20th December as some regions were put in tier 4 Covid-19 restrictions,” he said.

07:59 AM

The blowout year for borrowing

Here’s how public sector net borrowing for the UK so far this financial year compares to the full year figures for previous years. As is clear, the pandemic has already created a total blowout in terms of borrowing:

07:49 AM

John Lewis plans to repay loan on stronger profits

John Lewis  - TOLGA AKMEN/AFP via Getty ImagesJohn Lewis  - TOLGA AKMEN/AFP via Getty Images
John Lewis – TOLGA AKMEN/AFP via Getty Images

John Lewis is to repay a £300m emergency Covid loan earlier than expected after trading picked up over the key Christmas period.

My colleague Simon Foy reports:

The department store chain said it now expects full-year profits to be ahead of its previous guidance of a “small loss or a small profit for 2020/21″ after trading “held up better than anticipated” in recent months.

“Despite the headwinds of the last year when John Lewis stores were closed for several months, and future trading volatility, the partnership believes it has sufficient liquidity going forward,” it said.

07:45 AM

Pound dips after weak economic data

A moderate decline in the strength of the pound picked up pace following this morning’s disappointing data. However, sterling remains close to a three-year high against the dollar.

07:39 AM

Food delivery is the big winner

Online retail sales soared by 46.1pc during 2020, with all sectors feeling the benefit of the drive to web ordering.

Nobody benefitted more than online food stores, which saw annual sales value growth of 79.3pc. That’s likely to have been heavily driven by supermarkets, which scrambled to expand their delivery offering in the face of the pandemic.

Online orders come with heavy costs, however – with several retailers reporting that the heightened cost of fulfilling web orders has put pressure on their profit margins. So even if the blow to values and volumes of sales have been padded by online operations, the bottom line will be tougher for companies.

07:29 AM

Divided fates for the retail sector

Total annual figures for UK retail sales show the quantity bought fell by 1.9pc, the steepest drop since records began in 1997.

It ends a streak of unbroken growth since 2011, with many Britons cutting down on purchases due to the pandemic.

Although that fall may seem relatively in mild in the face of the pandemic, it’s worth looking at a further breakdown to see how uneven Covid-19’s impact has been:

The sectors that stick out like a pair of sore thumbs are clothing stores (where sales dropped more than a quarter), and fuel retailers who saw a 22.2pc drop.

The standout was non-store retailers – primarily ecommerce – who reaped the benefits as restrictions forced shoppers online.

07:21 AM

Debt ratio highest since 1962

The latest round of borrowing means public sector net debt rose £333.5bn in the first nine months of the financial year.

That took the total level to £2,131.7bn by the end of December, or around 99.4pc of GDP – the highest level since the financial year ending 1962. It’s also the first time the national debt has topped £2 trillion.

07:13 AM

Pandemic deficit at £270.8bn as borrowing boom continues

Another month of huge Government borrowing brings the total deficit for the current financial year to £270.8bn.

That’s a huge level, but it remains beneath the latest forecasts by the Office for Budget Responsibility.

The ONS notes borrowing is “£212.7 billion more than in the same period last year and the highest public sector borrowing in any April to December period since records began in 1993.”

07:07 AM

Tepid retail growth likely to be followed by January drop

Retail sales are one of the few areas to have experienced a truly ‘V-shaped’ recovery in the wake of the first lockdowns, with consumer demand booming over the summer.

Difficulties are setting in, however, and December’s poor growth figuresshow how devastating things have been for Britain’s retailers:

The ONS note a series of record annual declines in sales:

07:01 AM

Christmas retail sales disappoint as borrowing surge continues

  • Retail sales including auto fuel rose 0.3pc month-on-month, missing estimates for 1.3pc growth. November’s growth was also revised to an even-worse -4.1pc.

  • Public sector net borrowing excluding banks was £34.1bn, beating estimates for £32bn. November’s figures were revised down to £26.1bn.

06:53 AM

What economists expect today

December is the most important month of the year for retailers – and there have been few years with a outlook for the holiday period as grim as 2020’s.

Sales as likely to have rebounded early in the month as November’s English lockdown lapsed, before falling off a cliff post-Christmas on tighter restrictions.

Economists polled by Bloomberg expect sales including fuel to have risen 1.3pc during the month, reversing a 3.8pc drop during November. That would leave them 4pc higher year-on-year.

Once again, online sales are likely to have been strong as many members of the public avoided heading out to the shops.

Payments data released by the Office for National Statistics yesterday showed card purchases were 4pc higher than pre-lockdown levels last month on average, the first time they have cleared that threshold:

Released simultaneously, the latest data on public sector net borrowing (excluding banks) is expected to show £32bn borrowed over the month, which would top November’s £31.6bn – marking the steepest December borrowing ever, and the third-highest of any month.

As of November’s figures, the UK’s debt-to-GDP stood at 99.5pc – it might clear the symbolic 100pc threshold today, but that is unlikely.

06:39 AM

Agenda: Econ-heavy day for UK

Good morning. We’ll get the latest data on UK retail sales during the crucial Christmas period today, as well as data on public borrowing as the Government continues to spend at a huge rate to combat the economic effects of Covid-19.

Later on, we’ll get flash PMI readings, which will give an indication of how private sector performance around the world has held up in the face of new restrictions.

5 things to start your day

1) Brexit deal gives Nissan a competitive advantage, boss declares: Chief operating officer Ashwani Gupta said Boris Johnson’s deal has prevented major turmoil – and dismissed ports disruption as “peanuts”.

2) Next pulls out of Topshop bidding war: The joint venture between Next and US hedge fund David Kempner Capital Management withdrew from the auction on Thursday after it failed to match rival bids.

3) Pandemic forces 6,000 licensed venues to close: Despite almost 4,000 venues opening last year, more than 9,000 shut their doors for the last time as the pandemic wreaked havoc.

4) France demands Britain help bail out Eurostar: French transport minister Jean-Baptiste Djebbari said he is in discussions with his UK counterpart Grant Shapps about a bailout.

5) Furlough bill to soar by £9bn if job support extends to July: The Treasury’s furlough bill could surge as high as £75bn by summer, piling an extra £3bn of costs per month onto taxpayers.

What happened overnight

Asian shares slipped off record highs on Friday as investors took profits after a recent rally that was driven by hopes of US economic stimulus by newly inaugurated President Joe Biden.

Sentiment was also hit by worries of new coronavirus restrictions in China which reported 103 COVID-19 cases on Friday.

MSCI’s broadest index of Asia Pacific stocks outside of Japan extended losses in afternoon trading to be last off 0.6pc at 720.17 points following three straight sessions of gains.

The index is up a stellar 8.8pc in January so far, after hitting an all-time high of 727.31 on Thursday.

Bitcoin fell heavily on Friday and was heading toward its sharpest weekly drop since last March, as worries over its technology and regulation extended a pullback from recent record highs.

The world’s most popular cryptocurrency fell more than 5pc to an almost three-week low of $28,800 in the Asia session, before steadying around $30,000. It has lost 15pc so far this week, the biggest drop since a 33pc fall in March.

Coming up today

Corporate: Ninety One (Interim results); Computacenter, TheWorks.co.uk (Trading statements)

Economics: Public sector net borrowing, retail sales, GFK consumer confidence (UK), flash PMIs (UK, eurozone, Japan, France, Germany, US)

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