The beginning of 2021 has been rocky for Britain. The exit from the European Union is a major part of the red tape that has left some industries desperate for help, and the country is under yet another lockdown due to the rapidly spreading strain of coronovirus.
But there is a glimpse of hope. More than four million people in Britain have been partially vaccinated against coronovirus, a rapid pace of vaccination.
Investors riding a wave of optimism about the vaccine rollout have turned to the UK stock market, which made a strong start to the year, jumping more than 6 per cent in the first week.
Overall, in the first two and a half weeks of January, the FTSE 100, the UK benchmark stock index of large companies, rose 4.3 percent from the S&P 500 index, which rose 2.6 percent, and the Stocks Europe 600 index, which was up 3 percent. Even when gains turn into US dollars, the FTSE 100 has a clear edge.
Beyond the vaccine rollout that helps ensure economic rebound, another factor is attracting investors: the relative cheapness of British stocks.
The UK’s FTSE 100 index is benefiting from an investment strategy in which traders buy so-called value stocks. These are companies that are trading below their true value because their business has been disrupted by the recession, particularly in the financial and energy sectors, and the FTSE 100 has a large share of these shares.
Analysts at Citigroup rank the UK stock market as their “preferred” value trade.
“I will be worth paying attention to the very unsavory and horrifyingly terrible UK market this year,” Citigroup’s equity strategist Robert Buckland said in a presentation last week. “We all know that this is a place to escape for many, many years.”
The British stock market has been lagging for years.
Once converted to dollars, the annual returns of the FTSE 100 have been the worst of the three indices for the past nine years.
Why are investors betting on turnaround now? For one, many of them are up for bargain. The equity bull market is dominated by shares of American tech companies that are expensive, which troubles some investors as to how much they can grow. Cheap stocks in industries that do well in times of economic boom are offering an alternative.
And then there is Britain’s free-trade deal with the European Union. Some investors have set aside whether it is a good or bad deal, in favor of relief that an agreement was reached at the end of December.
Carolyn Simmons, the UK’s chief investment officer at UBS Global Wealth Management, said the deal “fell short, leaving people who were in a state of uncertainty”.
The new Biden administration will get its first dose of economic reality on Thursday morning, when the Labor Department reports the latest weekly data on initial jobless claims.
Last week, the government reported an increase in demand for unemployment benefits with more than one million new claims, as epidemic-related restrictions and lockouts heavily impacted employment.
With 400,000 casualties in the United States, the virus has barely perished since then, and some economists expect any significant changes in layoffs. Although job losses have been concentrated in service industries such as restaurants and leisure and entertainment, the macroeconomy has recently indicated a slowdown.
“I think it’s going to be another bad number, but most of what we saw last week was caught after the holidays,” said Dion Swonk, chief economist at accounting firm Grant Thornton in Chicago. “I think we’ll be able to see on Thursday how much the catch-up was and how bad the economic situation was.”
The introduction of vaccination in December provided optimism about a quick turnaround, but a slow rollout in many parts of the country has returned these expectations. On the other hand, the passage of a $ 900 billion relief package at the end of last year and the possibility of more aid under the Biden administration have allayed fears of a double-dip recession.
An additional $ 300 a week in supplemental unemployment benefits can encourage people to file for benefits, said Carl Tannenbom, chief economist at Northern Trust in Chicago. The increased assistance was part of a new stimulus effort.
For all, the best bet for the economy is over-vaccination, Mr. Tannenbaum said.
“There is no better economic stimulus than a successful vaccine rollout,” he said. “This will reduce the risk of human interaction and provide a basis on which a wide variety of businesses can open up more sustainably.”
Stocks on Wall Street were scheduled to open on Thursday after the S&P 500 index closed at record highs following President Biden’s swearing-in last day.
The benchmark US index was rising by 0.2 percent as investors awaited the latest data on weekly unemployment claims. This will give the new Biden administration its first indication of how the US labor market is reacting to the new fiscal stimulus. Last week, the number of claims jumped, although some of them were attributed to catching up in data from the holiday period.
European stocks were mostly high as traders projected more US fiscal stimulus. The Stokes Europe 600 index rose 0.4 percent to an 11-month high. Most markets in Asia closed higher.
Renewable energy stocks increased gains this week after Mr. Biden recommended the United States for the Paris Climate Agreement. Shares in Denmark’s two wind energy companies Orsted and Vesta are up about 6 percent and 8 percent this week. Siemens Gamesa, the Spanish subsidiary of Siemens Energy, which manufactures wind turbines on Thursday, rose more than 3 percent on Thursday. Shares in First Solar, an American company, were up 2.8 percent in premarket trading.
Shares of Canadian company TC Energy fell 1.2 percent on Wednesday after it said it would stop working on the Keystone XL oil pipeline. Later in the day, Mr. Biden revoked the company’s construction permit.
Oil prices fell on Thursday. West Texas Intermediate futures fell 0.6 percent to just under $ 53 a barrel.
The euro rose 0.3 percent against the US dollar before the European Central Bank announced its latest policy decision, although traders were not expecting a change from negative interest rates and the current stance of asset purchases.
The pound rose 0.6 percent against the US dollar and remained strong against most major peers after a cautious accent by the Governor of the Bank of England about the use of negative interest rates, leaving some hope in the market that the device would soon Can be used. Central Bank Governor Andrew Bailey said he expected the British economy to experience a “clear recovery” as the vaccination program rolled out.
Suriname, Guyana and Brazil are new areas of focus for oil companies, attracting more new investment than the Gulf of Mexico and other established oil fields. They are helping to keep global oil prices relatively low, by reducing the efforts of Russia and its partners in the Organization of Petroleum Exporting Countries, such as Saudi Arabia, to increase global supply and prices.
The recent pickup in Guyana and Suriname is somewhat surprising as their promise as oil producers has often been vacated, reports Clifford Kruse of the New York Times. Companies drilled more than 100 failed wells, mostly in shallow water, from 1950 to 2014. But other companies returned to take another form after Brazil, Exxon Mobil and other companies found deep water-rich areas. Exxon hit a gusher in the waters of Guyana in 2015, opening up the current rush of exploration.
In Guyana, oil companies have found more than 10 billion barrels of accessible oil and gas offshore potential reserves, according to IHS Market, an energy consulting firm. Production started in 2019 and is growing rapidly. According to consultants, Guyana is already one of the top 50 oil basins worldwide.
Energy experts said, Suriname has at least three billion to four billion barrels of reserves, or up to half of the new oil and gas discovered worldwide last year.
Oil companies say they can reduce the price of oil in Suriname from $ 30 to $ 40 per barrel because of lower costs. This is roughly equivalent to the threshold in Guyana and below today’s oil price. It is also below the break-even level in many locations, including some US shale fields, where costs typically range up to about $ 50 per barrel.
United Airlines lost $ 1.9 billion in the fourth quarter, taking its total loss to over $ 7 billion for 2020, its worst year since the merger with Continental Airlines a decade ago. Despite that terrible loss, the airline said it expected 2021 to be a “transition year” as it prepared to recover from the coronovirus epidemic.
“The truth is that Kovid-19 has changed United Airlines forever,” the company’s chief executive Scott Kirby said in a statement. “The passion, teamwork and perseverance that the combined team showed in 2020 will really help to create a new United Airlines that is better, stronger and more profitable than ever.”
The airline reported $ 3.4 billion in operating revenue in the final three months of last year, more than two-thirds from the same period in 2019. It ended the year with about $ 20 billion in cash or cash-equivalent funds, not including federal stimulus loans.
Delta Air Lines reported a $ 12.4 billion loss in 2020 last week, which its chief executive called “the toughest year in Delta’s history.”
In hopes of recovery, United has resumed major maintenance and engine overhauls, so that aircraft, sidelined by weak demand, are ready as more people start flying again, it said.
But that recovery is unlikely to last long. United said it expects to bring about one-third of its revenue in the first quarter of this year as it did during three months in 2019. Most analysts believe that the airline industry will not fully recover from the epidemic for many years.