Better-than-expected growth data gave the pound a boost on Wednesday, but that came at the expense of UK stocks weighed by big oil companies and a poor debut for a much-anticipated IPO.
The UK’s gross domestic product rose 1.3% in the last quarter of 2020 compared to the previous three months and has been revised upwards of 1% according to the Office of National Statistics. “Even so, the UK’s 2020 economic decline is still -9.8%, the largest decline in three centuries,” said Sophie Griffiths, market analyst at Oanda.
The household saving rate rose to 16.1% in the fourth quarter after 14.3% in the previous quarter. For the year as a whole, the savings rate reached a record high of 16.3%.
The pound
GBPUSD,
+ 0.33%
rose 0.4% to $ 1.3802 while the FTSE 100
UKX,
+ 0.35%
fell 0.5% to 6,740.32. A stronger pound can work against the index as many publicly traded multinational companies generate revenue from overseas and the strength of the currency makes their goods less competitive.
The FTSE is expected to gain 4% compared to the previous month and 4% compared to the previous quarter, compared to increases of 6.3% and an increase of around 8% for the Stoxx Europe 600
SXXP,
+ 0.61%.
“While UK stocks were expected to outperform this quarter by underperforming other companies, this has not yet materialized.” The FTSE needs to see movement above 6800 out of its current holding pattern for the bulls to gain momentum, ”Griffiths said.
Weighted down, stocks in oil companies BP
BP,
-1.65%
BP,
+ 0.44%
and Royal Dutch Shell
RDSA,
-0.11%
RDS.A,
+ 2.22%
fell over 1% in each case. Shares in the heavily weighted bank HSBC
HSBC,
+ 0.48%
HUKX,
+ 0.37%
decreased by 1.3%.
It made a disappointing debut for Deliveroo stock, which fell 25% in London. The food company is supported by the online retailer Amazon
AMZN,
+ 1.84%.
Deliveroo’s stock fell from its IPO price of 390p to just 275p in its first 20 minutes of trading Wednesday, up more than £ 2 billion ($ 2.8 billion) from the company’s original valuation of 7.6 billion. GBP ($ 10.5 billion) wiped off.
“There are different ways of looking at business. Cops will say that [COVID-19] The pandemic has made online grocery ordering a part of everyday life, and that trend will continue once life returns to normal, “Russ Mold, investment director of AJ Bell, said in a statement to customers.
“Bears will say it is a highly competitive area, Deliveroo is not making any money, and that takeaway orders will decline after the pandemic ends.” Tomorrow’s fast-growing stocks are no longer in vogue as investors now favor low-valued stocks that are selling jam today. That meant Deliveroo was already fighting headwinds as soon as it went public, ”said Mold.
