What to Watch: Germany avoids recession, First Group swings to loss, and National Grid beats forecasts

Oscar Williams-GrutSenior City Correspondent, Yahoo Finance UK
A German flag flies over the Reichstag in Berlin, Germany. Photo: Sean Gallup/Getty Images
A German flag flies over the Reichstag in Berlin, Germany. Photo: Sean Gallup/Getty Images

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Germany avoids recession

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Germany has narrowly avoided recession after reporting economic growth of 0.1% in the third quarter of the year.

Analysts had forecast that German GDP would contract by 0.1% in the third quarter, which would have been the second straight quarter of decline and tipped the country into recession.

“The press release issued by the German statistical office, DESTATIS, suggests that positive contributions came from private and public consumption, trade and fixed investment in the construction sector, while investment in machinery and equipment contracted,” Barclays analyst Iaroslav Shelepko wrote in a note to clients.

However, analysts at ING drew attention to the fact that second quarter growth was downgraded to a decline of 0.2% in Thursday’s announcement.

“Recession or not, the German economy has fallen into a de facto stagnation,” Carsten Brzeski, chief economist at ING Germany, wrote.

“The German economy can still be divided into two worlds: the depressive world and the happy-go-lucky one.

“In the depressive world, there are very few signs of an imminent bottoming or recovery of the manufacturing sector since the summer of 2018. The sector is facing and will continue to face cyclical challenges, as ongoing trade conflicts, Brexit uncertainty and slower Chinese growth, along with structural challenges, disrupt the automotive industry.

“In the happy-go-lucky world, private consumption remains solid on the back of low inflation, low interest rates and a still-strong labour market.”

First Group swings to loss

Shares in FirstGroup (FGP.L) have plummeted after the train and bus operator posted a half-year loss.

FirstGroup’s stock crashed 16.2% after the company announced a pre-tax loss of of £187.1m in the first half of its financial year.

The company was weighed down by its US Greyhound coach business, which suffered a £124.4m write down as a result of disappointing profits.

“This principally reflects the decline in immigration-related flows on the Southern US border states in the second quarter and increased competition on some routes,” the company said.

Revenues rose 6.9% to £3.5bn in the six months to September 30.

National Grid beats forecasts

National Grid (NG.L) beat forecasts with its half-year results on Thursday.

Operating profit declined by 1% to £1bn and pre-tax profit declined by 23% to £404m. However, these numbers were still better than analysts expected.

“In the first half of this year we have delivered solid financial performance and continued to deliver strong organic growth at the top end of the 5 to 7% range,” chief executive John Pettigrew said in a statement.

The electricity infrastructure company also announced a goal of achieving net zero emissions by 2050. Pettigrew said the announcement “underlines our commitment to lead the industry towards a cleaner energy future.”

Burberry’s relief rally

Burberry (BRBY.L) shares topped the FTSE 100 after the luxury group maintained forecasts in the face of ongoing disruption in Hong Kong.

Burberry reported a 5% rise in half-year sales to £1.28bn and said operating profit rose by 17% to £203m. The group held its full-year forecasts for sales growth but cut forecasts for margins in the face of disruption in Hong Kong, a key market for luxury sales.

The British brand, known for its iconic check pattern, said Thursday that sales in Hong Kong declined by a double digit percent in the first half of the year, without specifying the exact decline. Burberry also took a £14m impairment charge on its Hong Kong stores.

Hong Kong has been rocked by protests since March and clashes between demonstrators and police have this week brought the city close to standstill.

Investors were worried about the extent this could hit Burberry but were relieved by Thursday’s numbers, which were seen as not as bad as they could have been. The stock popped over 8% at the open in London and was still up more than 5% after two hours of trade.

Markets

European markets were trading lower on Thursday, despite US President Donald Trump saying overnight that trade talks with China were “moving along rapidly.”

“China wants to make a deal, that I can tell you,” Trump said.

The FTSE 100 (^FTSE) was down 0.4%, Germany’s DAX (^GDAXI) was down 0.2%, France’s CAC 40 (^FCHI) was flat, and the Euronext 100 (^N100) was flat.

Overnight in Asia, Japan’s Nikkei (^N225) closed down by 0.7%, the Hong Kong Hang Seng Index (^HSI) was down 0.9%, and China’s Shanghai Composite (000001.SS) closed up 0.1%.

What to expect in the US

US stocks futures are pointing to a lower open. S&P500 futures (ES=F) were down 0.1%, Dow Jones futures (YM=F) were down 0.1%, and Nasdaq futures (NQ=F) were down 0.1%.

158 companies are reporting in the US later today, including:

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