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What to watch: PMI data lifts European stocks, Brexit warnings, SSP cuts costs
Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and around the world:
European stocks higher as factory output hits two-year high
European stocks continued to recover from Monday’s sharp sell-off on Wednesday, with tech gains on Wall Street and strong eurozone manufacturing data lifting markets.
After a rout earlier in the week, Britain’s FTSE 100 (^FTSE) climbed 2.1%, France’s CAC 40 (^FCHI) rose 1.9%, and the DAX (^GDAXI) rose 1.7% in Germany.
It came after gains for tech lifted stocks on Wall Street on Tuesday, with the tech-heavy Nasdaq (^IXIC) leading the charge and the S&P 500 (^GSPC) rising for the first time in five sessions.
Closely watched purchasing managers’ index (PMI) data in Europe also boosted markets. Activity dropped for most services sector firms in September, but manufacturing activity was at its strongest in more than two years.
READ MORE: Eurozone business activity stagnates as recovery falters
The survey data by market research firm IHS Markit found the recovery in the eurozone “stalled,” but the manufacturing rebound was enough to boost investors’ moods.
The headline figure for services came in at 47.6, down from 50.5 in August, but the manufacturing figure rose from 51.7 to 53.7. Figures below 50 suggest most firms have seen activity decline, and figures above 50 suggest growth.
Stocks had been mixed overnight in Asia. Japan’s Nikkei (^N225) and Hong Kong’s Hang Seng (^HSI) both lost 0.1%, while China’s Shanghai Composite (000001.SS) rose 0.2%. The KOSPI (^KOSPI) in South Korea was flat.
No-deal Brexit to hit UK economy ‘three times’ as hard as COVID-19
The economic damage of a no-deal Brexit would be “two to three times” greater than COVID-19 over the long run, a think tank has warned.
A report by UK in a Changing Europe warns of “significant disruption” if Britain’s government fails to strike a trade agreement with the EU before the Brexit transition period expires at the end of the year.
The analysis said Bank of England forecasts suggest the economy will “recover quickly over the next 18 months” from the pandemic, and it will have “few, if any” long-term impacts on GDP despite the record decline in the second quarter.
By contrast the effects of Brexit “are expected to emerge slowly, but to be permanent.” It highlights the government’s own analysis, which suggests a no-deal Brexit would wipe 7.6% off GDP compared to existing trade arrangements over a 15-year period.
UK recovery ‘fading’ even before new curbs
The UK’s economic recovery has shown “signs of fading” in the past month even before the announcement of new coronavirus restrictions, according to a closely watched business survey.
Flash estimates for the purchasing managers’ index (PMI) survey for Britain’s manufacturing and services sectors — a bellwether survey on the state of the UK economy — showed activity losing momentum in September.
READ MORE: Firms warn on ‘potentially fatal blow’ of new coronavirus restrictions
The number of firms reporting growth in activity came in at a three-month low, though it still remained firmly in positive territory. The headline composite figure for factories and services came in at 55.7, compared to 59.1 in August, on an index where 0 means every firm reports decline and 100 marks growth for all firms.
“The UK economy lost some of its bounce in September, as the initial rebound from COVID-19 lockdowns showed signs of fading,” said Chris Williamson, chief business economist at IHS Markit, which produced the figures.
Upper Crust owner warns of 'extensive action to reduce the costs'
The owner of Upper Crust and Caffe Ritazza, SSP Group (SSPG.L) is taking “extensive action to reduce the cost base and preserve cash” as the spread of coronavirus is set to drag sales down further by 86% year-on-year.
SSP is a food and beverage concessions operator in travel locations and makes most of its sales from commuters.
SSP said in a pre-close trading statement sales were approximately 95% lower in April and May and 90% lower in June. While it said it saw sales improvement in continental Europe, revenue in the UK, North America and the rest of the world saw weekly sales remain around 80-85% lower year-on-year.
“COVID-19 continues to have an unprecedented impact on the travel industry and on SSP's businesses in all geographies,” said Simon Smith, CEO of SSP Group.
What to expect in the US
US futures were pointing to a continued rebound on Wednesday. S&P 500 futures (ES=F) were up 0.5%, Dow Jones Industrial Average futures (YM=F) were 0.8% higher, and Nasdaq futures (NQ=F) were up 0.4% at around 5am eastern time in the US (10am in the UK).
