Key events
Closing summary
European shares are rallying for a second day, partly boosted by luxury stocks after strong results from Switzerland’s Richemont.
This lifted shares of other luxury goods makers such as LVMH and Kering in France, and the UK’s Burberry. The French stock market is the standout performer, rising by 2.09%. In London, the FTSE 100 index is 70 points or 0.85% ahead at 8,371.
Meanwhile, Wall Street has dipped after strong gains yesterday, and following a slightly disappointing rise in US retail sales.
The UK economy grew by 0.1% in November, reversing a 0.1% drop in the previous month and easing pressure on embattled chancellor Rachel Reeves.
The rise in activity will be welcomed by the Treasury, as it shows the economy expanded after the budget at the end of October.
But growth was slower than expected. City economists had forecast that GDP would rise by 0.2% in November, with some warning that November’s growth was weak, making an interest rate cut by the Bank of England next month more likely. Markets are estimating an 82% chance of a cut on 6 February, and have fully priced two cuts this year.
In the three months to the end of November, the Office for National Statistics (ONS) said the economy showed no growth, as GDP fell by 0.1% in September and October.
The pound fell by nearly 0.4% to $1.2191.
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Thank you for reading. We’ll be back tomorrow. Take care – JK
Ryanair cuts 12 Spanish routes over ‘excessive’ airport fees
Ryanair has decided to eliminate 12 routes and 800,000 seats from its Spain summer schedule this year.
It is ceasing operations at two airports and reducing them at another five, citing “excessive fees” applied by Spain’s airport authority Aena, which it accused of a “monopoly”. The budget airline is cutting 800,000 passenger seats overall, reducing its capacity in Spain by almost a fifth.
The company’s chief executive, Eddie Wilson, said at a press conference that Aena’s measures are “ineffective” and do not support the government’s objectives of getting more traffic at Spain’s regional airports, according to Majorca Daily Bulletin.
Ryanair has decided to stop flying from Jerez (Cádiz) in southern Spain and Valladolid in the north west. It will withdraw an aircraft based at Santiago de Compostela, and also reduce flights at Vigo, Santiago, Zaragoza, Asturias and Santander.
Here is our analysis of today’s UK economic growth data from our economics correspondent Richard Partington.
A return to economic growth, better-than-expected inflation figures, and breathing room in the bond markets. After a difficult start to the year for Rachel Reeves, there are at last a handful of positives to cling on to.
For the chancellor, however, she will know talking up a few green shoots of economic recovery would be a dangerous game. The broad story from the economy is it continues to be flat, having eked out modest growth in November after two small monthly falls in output.
It’s hardly surprising Reeves says she is “determined to go further and faster to kickstart economic growth”. Growth of 0.1% in November is unlikely to be enough to avoid stagnation in the fourth quarter. After a similar performance in the third quarter, it lays the ground for an entire half-year without any progress on Labour’s primary mission. Combined with inflation sticking above the Bank of England’s 2% target, a period of “stagflation” beckons.
Fall in UK trade with EU should spur rewrite of post-Brexit rules, says IPPR
A slump in trade with the EU should spur ministers to negotiate a fundamental rewrite of post-Brexit rules to more closely align the UK with Brussels, a leading left-of-centre thinktank has said.
Donald Trump’s arrival in the White House next week should also encourage the government to get on the front foot in trade agreement talks with the US to support the growth of UK exports, said the Institute for Public Policy Research (IPPR).
In a report revealing the full extent of the decline in Britain’s trading position that has been inherited by the Labour government, the IPPR said ministers needed to consider a wide range of measures to give industries – including energy, defence, food, communications, healthcare and pharmaceuticals – a better chance of selling products and services overseas.
The report said UK trade policy had been “muddled” and “rudderless” since the 2016 Brexit vote, adding that since leaving the EU single market and customs union in 2021, efforts to strike mini-deals with non-EU countries had run their course.
Estimates suggest that compared with staying inside Europe’s free trade zone, UK goods exports to the EU between 2021 and 2023 were down by 27% while EU goods imports to the UK were down by 32%, the report said.
Meanwhile, other G7 countries including the US, Japan, France and Italy enjoyed a boom in trade. The UK experienced a 10% decline in total goods trade from 2019 to the end of 2023. Figures from 2019 to the end of the third quarter of 2023 show other G7 countries saw an average 5% increase.
Trump’s inauguration next week could usher in a series of restrictive policies by Washington that prove to be a turning point in global trade policy. The incoming US president has said he wants to increase the cost to US consumers of imported goods that he alleges benefit from subsidies. China is his main target, but businesses based in the EU and UK could also be caught by tariffs charged by US customs and passed on to consumers.
Neil Birrell, chief investment officer at the London-based fund manager Premier Miton Investors, said:
The good news on core US inflation [yesterday] was followed up by retail sales for December that were slightly lower than forecast. The US economy continues to perform well, with most metrics following a path that will keep the Fed happy and on track with their plan for interest rate cuts.
However, next week is a big one and it won’t be data that is making the headlines and driving markets, it will be the news coming out of the White House.
US retail sales grow 0.4% in December
Retail sales in the United States have come in slightly weaker than expected.
Sales volumes grew by 0.4% in December compared with November’s 0.8% rise, and economists’ forecasts of 0.6% growth.
The dollar pared gains after the figures were released, and is now up 0.16% against a basket of currencies.
Christian Fromhertz, chief executive of the Tribeca Trade Group, said:
Kathy Jones, chief fixed income strategist at Charles Schwab, said:
Morgan Stanley and Bank of America report bumper profits
Morgan Stanley and Bank of America have reported bumper profits, following a wave of dealmaking in their investment banking divisions.
Morgan Stanley made a profit of $3.7bn in the fourth quarter of last year, up from $1.5bn a year earlier. Its investment banking revenue climbed by 25% to $1.6bn, mirroring strong results at Goldman Sachs and JPMorgan Chase, out yesterday.
Bank of America posted a profit of $6.7bn for October to December, up from $3.1bn.
Wall Street banks have benefited from a jump in mergers and acquisitions that boosted investment banking fees, on the back of a strong US economy, interest rate cuts and expectations of lighter regulations under incoming president Donald Trump.
Banks have also cashed in on rallying stock markets, which encouraged public listings and stock sales.
The UK economy is projected to grow by 0.3% in the first quarter of this year, after flatlining in the final three months of 2024, according to a think tank.
The National Institute of Economic and Social Research estimates that the services and production sectors stagnated between October and December while construction posted a slight decline.
Hailey Low, NIESR associate economist, said:
The subdued growth figures today elevate concerns over the UK’s economic outlook moving into 2025. The continued slowdown into Q4 may indicate falling confidence in the short term. However, it is crucial to wait until the additional government spending announced in the budget comes into effect in April before drawing conclusions about economic growth in the medium term.
Two-year gilt yield falls to lowest since 3 January
The yield, effectively the interest rate, on the two-year UK government bond has fallen to the lowest since 3 January at 4.402%, down 6 basis points on the day.
The two-year gilt reflects interest rate expectations.
With UK inflationary pressures reducing and data today showing the UK economy eked out just 0.1% growth in November, expectations of an interest rate cut from the Bank of England next month are rising.
BP cutting 4,700 jobs
Graeme Wearden
BP announced on Thursday that it will cut around 4,700 staff, or over 5% of its total workforce, as part of CEO Murray Auchincloss’ efforts to reduce costs.
BP told staff that 3,000 contractor positions will also be cut, according to a statement to Reuters.
The cuts were announced in an internal memo seen by Reuters earlier on Thursday.
Graeme Wearden
Shares in luxury goods makers are rallying today, after strong results from Switzerland’s Richemont.
Richemont, which owns the Cartier and Van Cleef & Arpels brands and Swiss watch brands Piaget, IWC and Jaeger-LeCoultre, reported a 10% jump in year-on-year sales in the last quarter of 2024, beating forecasts for a 1% rise.
Shares in Richemont have jumped almost 18% today.
Rivals Kering and LVMH Moet Hennessy Louis Vuitton both rose by 9%, as did Burberry.
