Recession Risk Revisited: The London Rush

Article content

(Bloomberg) — Hi, I’m Leo from Bloomberg’s UK Breaking News team, catching you up on this morning’s business stories. 

The UK economy shrank in the third quarter, with revised GDP figures showing a 0.1% drop instead of the zero growth initially estimated. This raises the possibility that we’re already in a recession, albeit a technical one. But before we get too gloomy: 

Article content

Article content

Retail sales data for November showed a stronger-than-expected increase — which could bode well for the flood of Christmas trading updates due next month.

As the City closes up shop on what remains of 2023, The London Rush will be taking a break, too. We resume on Jan. 2 — with all the news and snap analysis you need before lumbering back to your desk.

In the meantime, please do share any feedback, thoughts or banter with me via X, LinkedIn or lkehnscherpe@bloomberg.net.

Key Business News

Revolut’s investors can breath a sigh of relief. The London fintech finally published its delayed 2022 annual report this morning. Auditor BDO said an issue that left it unable to sign off on 2021 revenues has now been resolved. Revolut, which has yet to receive its British banking licence, sees itself on track to record a double-digit net profit margin by the end of this year.

Shell CEO Wael Sawan — nearing his one-year anniversary at the helm — is taking more steps to close the gap on US rivals. The company is starting to cut roles beyond previously announced reductions in its low-carbon division, people familiar with the matter told Bloomberg. Shell employed about 93,000 people at the end of last year, more than double that of Chevron — whose market value is 34% higher.

Article content

Article content

Brookfield and Qatar injected £300 million into Canary Wharf just weeks ago. But the conurbation of steel and glass towers is now entering a more difficult phase that will test their owners’ unity and resolve, according to Bloomberg Opinion’s Chris Hughes. Their implicit support is key, he writes.

UK Stocks in 2024

The FTSE 100 has been left behind this year. Despite repeated calls for it to do better at the end of 2023 because 1. they’d had a poor run and ultra-cheap valuations would prove all too tempting 2. the war in the Middle East would send oil prices higher and 3. the risk of recession would weaken the pound, none of those three factors have played out strongly enough to drive meaningful flows into London’s stock market. That’s meant the worst performance for the FTSE 100 relative to a euro area stocks index since 1999.

Things could look better to start 2024 as traders bet a worsening economic outlook and slowing inflation will prompt the BOE to cut interest rates. And a loosening of monetary policy threatens to weaken the pound too — with Europe’s largest asset manager among those shorting the currency — a factor that should help the exporter-heavy FTSE 100. The risk is that weaker growth in the UK will limit earnings growth next year. For now, some money managers, like those at Man GLG and Artemis UK, see pockets of value in UK stocks at a time when plenty of things (like the euro area, the US and tech) look far more expensive. With UK stock funds bleeding about $100 billion since the 2016 Brexit vote and the market continuing to shrink from a dearth of IPOs, the question is whether valuations will ever be enough to bring that money back.

Article content

— Sofia Horta e Costa

For more news and analysis throughout the day, follow Bloomberg UK’s Markets Today blog. 

City Moves 

Hiring announcements were scarce this week, but thankfully it’s bonus season (or at least the season to ponder about comp). Barclays delayed the final decision on its bonus pool after dealmakers asked for more time to reflect last-minute wins.

Meanwhile, Deutsche Bank cut the gardening leave for some senior traders, and Balyasny may bulk out to its energy trading desk.

Pub Quiz

For those eyeing a move to Asia — which finance hub in the region has the best cost of living? Hint: it’s not Singapore.

Article content