Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:
The UK’s services sector emerged from the doldrums of the coronavirus crisis and returned to growth in July, with activity expanding at its fastest pace since 2015.
A closely watched survey by IHS Markit found that the sector’s purchasing managers’ index (PMI) reading came in at 56.5 in July, up from 47.1 in June and sharply higher than the all-time record low of 13.4 in April.
The services sector is hugely important to the UK economy — it includes finance, law, retail, engineering, and consulting — and accounts for around 80% of the country’s economic output.
PMIs are an indicator of private sector activity and are given on a scale of 1 to 100. Anything above 50 signals growth, and anything below means contraction.
While the index has climbed each month since April, the latest reading — the highest since July 2015 — is the first to signal a return to growth for the sector.
Some 38% of respondents to the survey said they had seen an increase in business activity in July, while around 24% signalled a decline.
Premium German carmaker BMW (BMW.DE) today reported a quarterly net loss of €212m (£191m, $250m) in the second quarter, compared to a profit of €1.45bn the same time a year ago, as the coronavirus crisis forced car plants and dealerships to shut and dented sales.
“Our swift responsiveness and consistent management strategy enabled us to limit the impact of the corona pandemic on the BMW Group during the first half of the year,” said BMW chief executive Oliver Zipse in a statement. “We are now looking ahead to the second six-month period with cautious optimism and continue to target an EBIT margin between 0 and 3% for the Automotive segment in 2020.”
Before interest and taxes, the Munich-based carmaker posted a €666m loss in the second quarter. It said today it expected group pretax profit this year to be “significantly lower than 2019.”
In the first six months of the year, new registrations were down by 26% for BMW, with sales in the UK seeing the biggest drop of 49%.
New car registrations in the UK increased in July for the first time this year, after lockdowns lifted and dealerships fully opened again.
The July data from Society of Motor Manufacturers and Traders (SMMT) shows an 11.3% increase in new car sales last month, to 174,887 units, compared to the same month last year.
However, demand is down 41% for the year to date, the forecast is for a full-year drop in demand of around 30%, totalling £20bn ($26.2bn) in lost sales, the SMMT said.
“July’s figures are positive, with a boost from demand pent up from earlier in the year and some attractive offers meaning there are some very good deals to be had,” SMMT chief executive Mike Hawes said. “We must be cautious, however, as showrooms have only just fully reopened nationwide and there is still much uncertainty about the future.”
Carmakers in the UK suffered their worst sales slump since the year after World War II in April and May — just 197 cars were produced in April and 5,314 in May.
Virgin Atlantic is “confident” in a £1.2bn ($1.6bn) rescue plan to tide the struggling airline through the coronavirus crisis, despite filing for protection under US bankruptcy law.
The company announced a restructuring plan last month to “keep Virgin Atlantic flying,” which would include £400m of deferrals and waivers by shareholders and at least £450m of deferrals by creditors. Past efforts to secure a bailout from the UK government appear to have fallen on deaf ears.
It has said it has the backing of the majority of stakeholders, but secured a UK high court judge’s approval to bring together creditors to meet and vote on the plans on 25 August. The proposals could be made binding on all lenders, whether or not they vote for them.
David Allison, representing Virgin Atlantic, told the court in London on Tuesday (4 August) the group was currently projected to “run out of money altogether” by the first week of October, according to PA.
Without an injection of new cash, airline directors would have little choice but to put the company in administration to wind down the business and sell any assets, Allison said. “This would result in a poor outcome for the company’s creditors,” he added.
William Hill (WMH.L) has announced 119 betting shops have closed for good in the UK, despite managing to stay in profit this year.
The bookmaker blamed the pandemic and “increased uncertainty of future high street retail cashflows” for the closures, which were revealed in its interim results published on Wednesday.
The company had already announced last month it will close around 700 branches, blaming the reforms as it put 4,500 jobs at risk.
“We anticipate that longer-term retail footfall will not return to pre-COVID levels,” said the company.
But the company swung into profit in the first half of the year, making £141.1m ($185.1m) after losing £63.5m in the same period a year earlier.
Net revenues were down but only by 32% to £554.4m, when many other major firms across sectors have posted steeper declines because of the pandemic.
European stocks rose on Wednesday as investors across the continent examined a batch of broadly positive earnings releases from firms weathering the coronavirus crisis.
Shares in Dutch international retailer Ahold Delhaize (AD.AS), which operates supermarkets in both the US and Europe, surged after it raised its sales outlook for the year.
Bank of Ireland (BIRG.IR) was the biggest gainer on the the pan-European STOXX 600 index (^STOXX), which climbed by 0.6% on Wednesday, after it said that its outlook was “cautiously more optimistic” than it had previously indicated.
Shares on London’s FTSE 100 (^FTSE) rose by 1%. Germany’s DAX (^GDAXI) climbed by around 0.9% after residential real estate firm Vonovia (VNA.DE) reported a jump in core profits during the first half of its financial year. France’s CAC 40 (^FCHI) climbed by around 0.8%.
What to expect in the US
Futures were pointing to a higher open for stocks in the US, even after lawmakers there warned that they were not close to reaching a deal on a batch of new stimulus measures.
“We are still far away on a lot of the important issues, but we are continuing to go at it,” Chuck Schumer, the Democratic Senate minority leader, said on Tuesday (4 August).