British economy grows 0.3%

12 September 2019

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Market news

Brexit and an unprecedented political situation continue to dominate the news in the UK. The longest parliament since the English Civil War ended amidst colourful scenes last night, although the opposition's legislation to prevent a no-deal Brexit received royal assent on Monday. Downing Street has threatened to ignore the bill and refuse a delay to Brexit, which could prompt an emergency judicial review  - and risk a possible jail sentence for Mr Johnson. The Prime Minister's woes deepened at the weekend with the resignation from both Cabinet and Conservative Party of Amber Rudd, the Work & Pensions Secretary.

As a counterpoint to the political chaos, the British economy has generated some positive numbers. GDP growth in July was 0.3%, higher than expectations, which vastly reduces the likelihood that the country will slide into a technical recession. Wage growth remains strong, with the figure excluding bonuses for May to July reported at 3.8%. Also at 3.8% is the unemployment rate, lower than the 4% recorded this time last year.  

Meanwhile, the government has indicated that the years of austerity may be over. Chancellor Sajid Javid announced his spending review last week, which included a 4.1% increase in day-to-day spending on public services, billed as the fastest year-on-year increase for 15 years. 

Saudi Arabia has appointed King Salman's son, Prince Abdulaziz bin Salman, to take over as energy minister, replacing one of the most powerful figures in the global oil industry and breaking a long-held convention separating the royal family from the position. Crude oil prices nudged higher on Monday. 

Mario Draghi is expected to propose fresh stimulus measures at the European Central Bank's board meeting on Thursday, but the outgoing ECB president faces growing opposition from other eurozone policymakers. 

Japan's economy grew at a slower rate than previously estimated in the second quarter, as the US-China trade war weighed on business spending. 

Stock Focus

Pilots at British Airways are striking for a second day in an ongoing dispute over pay and conditions, with 1,700 flights being cancelled. Pilots' union Balpa said BA management's cost cuts and “dumbing down” of the brand had eroded confidence in the airline, whilst BA chief executive Alex Cruz countered that investment in the operator had never been so big. Shares in BA's owner IAG were up 4% this morning, although are still down 35% on a year ago.  

Barclays and Lloyds Banking Group both revealed on Monday that they face multi-million pound bills to handle a new wave of claims for payment protection insurance. Lloyds reported a “significant spike” in claims in the run-up to the final deadline of 29th August. 

Bovis Homes has reported record profits in the first half of £72.4m, a rise of 20%. Private sales rate increased 15% and it said Help to Buy "remains an important scheme" with 25% of total completions using the government scheme in the first half. 

JD Sports has reported a 6.6% rise in pre-tax profits and a 47% jump in revenue for the half-year, which it attributes to its significant investment in digital to complement its retail stores. 

A group of 50 states and territories in the US have launched an investigation into Google's dominance of the online advertising market, raising concerns over the way Google ranks its search results and protects users' personal data. This follows a separate, similar probe of Facebook which was launched on Friday by a group of US states. 

Pub group and brewer Greene King  - which announced last month that it had agreed to be bought by Hong Kong operator CKA  - has reported a 1.8% fall in first quarter sales, reflecting the “tough comparatives of last year's World Cup and good weather”.  

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