Thursday, 31 March: European markets were in retreat mode today, after a bullish trading session yesterday as Brent Crude again broke $40 and gold was below highs seen for the week thus far. Falls in the primary UK index were prompted by a fall in mining shares, as TUI posted notable gains intraday.
TUI reached higher altitude today (+5.2%) as it issued a bullish trading statement. The tour operator announced it will deliver growth in underlying earnings before interest, tax and amortisation in the first half of its financial year to the end of March. This was despite taking a knock from recent terrorist attacks, prompting falling demand for some locations while transferring capacity to more popular destinations. It cited destinations such as Egypt, Tunisia and Turkey as falling out of favour with holidaymakers, as the Canary Islands, Spain and long-haul destinations proved more popular.
Today saw the release of revised UK GDP figures and further balance of payments data. The good news was that revised GDP growth came in higher than expected at 0.6% vs. analyst estimates of 0.5% quarter-on-quarter, an annualised equivalent rate of 2.4%. This improvement was driven by a smaller contraction in industrial production than previously believed, with a better performance from the services sector. Growth for 2015 was revised up to 2.3% from 2.2% previously. The bad news was that the current account deficit widened to the highest it has been since 1955, accounting for 7% of national income. This came in at £32.7bn in the fourth quarter, a sizeable surge from £20.1bn in the third quarter. The new borrowing figures will provoke further debate on the health of the economy, particularly as we move towards the EU referendum. In the recent past, markets have largely ignored developments in the balance of payments position as more prominent GDP, inflation and unemployment data was heavily scrutinised. However, this will surely play on the minds of investors should the position not improve, with the impending EU referendum and potential consequences for currency movements.
At the close European indices were down with the FTSE 100 -0.46%, with the CAC 40 -1.34%, and the DAX 30 -0.81%.