UK Economy Recovers To Pandemic Levels; Pound Highest Since 2016; US Retail Sales Slide – As It Happened

And finally, European stock markets have closed on the red.

The pan-European Stoxx 600 finished the day down around 1%, as worries about inflation and looming US interest rate rises weighed on stocks. For the week, it fell 1.1%, its biggest fall since the last full week of November (the Omicron selloff).

In London, the FTSE 100 fared relatively well as traders welcomed the better-than-expected growth figures this morning. The blue-chip index closed 21 points lower at 7543, down 0.3% today, having its highest level in two years this week.

Banks, utilities and oil companies were among today’s risers, including Standard Chartered (+2.3%), Lloyds (+1.85%), BP (+1.25%) and National Grid (+1.35%).

Retailer B&M were among the fallers, down 5.3%, after the family office of CEO Simon Arora, sold 40 million shares overnight at a 1.8% discount.

Online grocer Ocado lost 4.9%, extending its losses as investors lost interest in low-profitability growth stocks

That’s all for this week. Have a lovely weekend, we’ll be back on Monday. GW

Simon French, chief economist at Panmure Gordon, has sent over a neat chart showing how the UK recovery from Covid was much faster than after the financial crisis.

With the economy back at pre-pandemic levels within two years, he predicts the economic scarring will be low, at just 1% of GDP.

Here’s a reminder of all today’s main stories, including the latest on the UK economy:

The energy crisis:

Crypto:

And also

Back in the UK, the NIESR thinktank has lifted its forecast for growth at the end of last year, thanks to the stronger-than-expected expansion in November.

NIESR now expects GDP to rise by 1.2% in the October-December quarter, due to the “rapid and broad-based growth in November”.

However, only expect growth of 0.6% in the first quarter of 2022.

Rory Macqueen, principal economist at NIESR, says:

“November 2021’s growth in GDP was broad-based, with output increasing almost across the board and transport and education among those returning to their pre-Covid output levels.

Omicron is likely to have caused a significant slowing in growth in December, but the November data show little sign of headwinds from supply shortages: manufacturing and construction both enjoyed their strongest month-on-month growth since March 2021.”

Another gloomy sign from the US economy – consumer confidence has weakened this month:

In New York, the Dow Jones Industrial Average has opened lower as the slump in US retail sales in December worries investors.

The Dow has dropped by 211 points to 35,902, down 0.6%.

JP Morgan is the top faller, down 5% after beating profit expectations today (see earlier post), followed by American Express (-3.5%), Walt Disney (-2.7%) and Goldman Sachs (-2.5%).

Tech stocks are holding up better, though, with the Nasdaq Composite up 0.3% in early trading, as a weaker economy may mean US interest rates don’t rise as fast.

Britain’s cost of living crisis is no laughing matter, something the energy suppliers are struggling to grasp.

E.ON Next has apologised to thousands of British households after sending them a pair of socks alongside unwelcome advice on how to keep warm during the national energy crisis.

My colleague Jillian Ambrose explains:

E.ON Next said it was “incredibly sorry” after sending pairs of polyester socks branded with advice to turn heating down to help reduce carbon emissions to about 30,000 households which had taken part in an energy saving campaign last year.

Many of the new E.ON Next sock-owners took to social media to criticise the “pitiful package” which was delivered to homes in the same week that Ovo Energy was forced to apologise for a customer letter urging households to cuddle a pet or perform star jumps to keep warm.

British households face some of the highest energy bills on record this winter, due to record high market prices which could drive fuel poverty levels to the highest since records began.

Age UK warned this week that millions of older people in the UK face an energy emergency, with some forced to switch off their heating, limit hot showers and live off soup and sandwiches to pay their increased energy bills.

Back on Monday, energy supplier Ovo apologised and said it was “embarrassed” after it advised customers to keep their heatings bills low by “having a cuddle with your pets”, eating “hearty bowls of porridge” and “doing a few star jumps”.

The slide in December US retail spending could discourage the US Federal Reserve from tightening policy quickly, suggests Craig Erlam, senior market analyst at OANDA:

The US retail sales report was rather disappointing in December, perhaps a sign of consumers being more restrained as a result of omicron, not to mention early Christmas prep in anticipation of supply issues.

Markets seem a little directionless after the release, which could be a sign that investors don’t know how to take the data. A strong report would have been positive for the economy but also feed into the argument for faster tightening, which is not being particularly well received at the moment. A few weak reports may, on the other hand, encourage caution from policymakers.

Rob Davies

Cryptocurrency firms bombarded Londoners with a record number of adverts on public transport during 2021, fuelling calls for a ban to prevent people being lured into risky investments.

The surge in adverts for crypto assets, which are unregulated in the UK, has prompted concerns about the risk of addiction and financial harm, particularly given the wild volatility in the price of digital currencies such as bitcoin, which reached record highs last year before crashing again.

It also emerged that Transport for London (TfL) has not implemented a ban on gambling adverts promised by the mayor, Sadiq Khan, allowing the industry to step up its marketing activity in the meantime.

Records obtained by the Guardian under the Freedom of Information Act show that TfL services displayed 39,560 crypto adverts from 13 firms in the six months between April and September 2021.

Major advertisers include the trading platform eToro, floki – “a “meme coin” named after Elon Musk’s dog – Crypto.com and Luno Money, whose campaign telling people it was “time to buy” bitcoin was banned by the advertising regulator for being “irresponsible”. More here.

Meanwhile, Dogecoin, the cryptocurrency with a shiba inu dog meme, soared in value by 15% on Friday after the billionaire Elon Musk said it could be used to buy Tesla merchandise.

The French government will force EDF, the state energy giant, to take an €8.4bn (£7bn) financial hit to protect households from rocketing energy costs by limiting bill hikes to 4% this year.

The company lost a fifth of its market value on Friday after the French government set out plans to cap rising energy bills which include forcing EDF to sell electricity generated by its fleet of nuclear reactors to rival home suppliers at well below the current record high market prices.

The move underlines pressure on governments across Europe to help households squeezed by the cost-of-living crisis. The UK chancellor, Rishi Sunak, has been accused of being “missing in action” over soaring energy bills. He has been in talks with MPs and companies to agree a package of measures to soften the blow of the national energy crisis, but no decisions have been made.

Here’s the full story:

Ouch! US retail sales fell by 1.9% in December, as worries over the Omicron variant, product shortages and rising inflation hit spending.

That’s much weaker than expected and shows America’s consumers are under growing pressure.

Inflation hit its highest level since 1982 in December, the pandemic escalated, and supply problems created shortages.

Stripping out cars and gasoline, retail sales were down 2.5% in December – showing little festive cheer for retailers.

Back in the UK, wage growth is lagging behind inflation despite the pick-up in growth.

Data from jobs site Indeed shows a rise in advertised pay, but a slow start to new vacancies in the new year:

BlackRock has become the first public asset manager to hit $10 trillion in assets, propelled by a surge in fourth-quarter flows into its exchange-traded funds.

New York-based BlackRock has reported that assets grew by 15% during 2021 to reach over $10.01trn.

BlackRock saw $540bn of total net inflows during the year, including $104bn into ETFs in the last three months of 2021, it says, a record for the world’s largest money manager.

It benefitted from the boom in trading, and rising asset prices, last year, as people invested in actively managed funds and also passive vehicles that track the markets.

Larry Fink, chair and chief executive, says:

“BlackRock delivered the strongest organic growth in our history, even as our assets under management reached new highs. We generated $540 billion of net inflows in 2021, including an industry leading $267 billion of active net inflows.

Fink adds that the firm is more diversified than ever before:

Active strategies, including alternatives, contributed over 60% of 2021 organic base fee growth. Our industry-leading iShares ETF platform remained a significant growth driver with record flows of $306bn.

Higher pay also ate into JP Morgan’s profits.

“Noninterest expense” rose 11% to $17.9bn, largely due to higher compensation.

Just in: Profits at JPMorgan Chase have dropped, but the Wall Street bank has still beaten forecasts.

JP Morgan’s fourth quarter earnings came in at $3.33 per share, topping expectations for $3.01 per share, but down from $3.79 a year ago.

Revenue came in at $30.35bn, also ahead of forecasts for $29.9bn.

JP Morgan also took a $1.3bn benefit from releasing reserves set aside for loan losses that didn’t materialize.

CEO Jamie Dimon explains:

JPMorgan Chase reported solid results across our businesses benefiting from elevated capital markets activity and a pick up in lending activity as firmwide average loans were up 6%.

The economy continues to do quite well despite headwinds related to the Omicron variant, inflation and supply chain bottlenecks. Credit continues to be healthy with exceptionally low net charge-offs, and we remain optimistic on U.S. economic growth as business sentiment is upbeat and consumers are benefiting from job and wage growth.”

Victoria Scholar, head of investment at interactive investor, says merger and activity deals helped boost JPM:

Unprecedented M&A activity helped boost global investment banking fees this quarter after a stellar year for deals and IPOs. Quarterly net interest income also grew by 3%, thanks to balance sheet growth with the bank pointing to further growth in NII for the year ahead on the back of higher rates and a pick-up in loan growth. However capital markets suffered with trading revenues falling 2% in equities and 16% in fixed income.

However, JP Morgan’s shares are down 3% in pre-market trading, she adds:

Pre-market price action points to a weaker print out of the gates, marking the sixth consecutive decline in its shares on earnings day. There has been a big run up for the sector to kick off the year with high expectations for these results with a lot of today’s positivity already baked into the cake.

Many traders may have bought the rumour and sold the fact to avoid today’s event risk.

Mark Sweney

The Hollywood blockbuster Spider-Man: No Way Home pulled in the cinema crowds in December, driving Cineworld’s box office revenues to almost 90% of pre-pandemic levels despite the rapid spread of Omicron over the festive season.

The world’s second-largest cinema operator, the owner of the Cineworld and Regal Picturehouse chains in the UK and Regal Cinemas in the US, said that across its global business, box office and concession revenue hit 88% of 2019 levels in December. In the UK and Ireland revenues hit 89% of pre-pandemic levels, and 91% in the US.

Cineworld credited the phenomenal success of the latest Spider-Man film, which has taken £80m in the UK despite the reintroduction of face masks in cinemas to curb the spread of Omicron days before its release and has become the only film to make more than $1.5bn (£1.1bn) globally since the pandemic began.

Mooky Greidinger, the chief executive of Cineworld, said:

“Spider-Man: No Way Home has shown the importance for studios of cinematic releases.

“We are pleased to see continued strong demand among audiences for cinema experiences, supported by a slate of high-quality and high-performing movies.”