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European markets fall after U.K.’s record economic slump

economic slump

The DAX dropped 0.8%, the CAC 40 fell 0.6%, and the FTSE index shed 0.5%

European stock markets fell Friday after the U.K.’s biggest economic slump on record.

The DAX in Germany dropped 0.8%, the CAC 40 in France fell 0.6%, and the U.K.’s FTSE index shed 0.5%.

In its biggest annual fall in output since modern records began, the U.K. economy slumped 9.9% in 2020, according to official figures released earlier Friday. This comes as the Covid-19 pandemic ravaged the country’s services sector.

Still, it’s good news, as Britain’s GDP actually grew better than expected (0.5%) at 1.0% between October and December

Even though the economy is set to shrink sharply in early 2021 due to the effects of a third lockdown, the quarterly growth makes it unlikely that Britain will fall into recession this year.

The U.K. is still also struggling with its past trading relationship with the EU. The two sides are looking for a breakthrough over the implementation of the Brexit deal in Northern Ireland, despite more than three hours of talks between top officials on Thursday, while anecdotal data shows that much of London’s financial trade is moving to the continent.

In the corporate sector, positive results from European banks continued, with ING stock gaining 4.8% after the Dutch bank reported better than expected fourth-quarter earnings.

ASML stock advanced 1.5% after the tech company said chip shortages were a symptom of broader increased demand that is placing strains on suppliers across the semiconductor sector.

Elsewhere, L’Oreal stock rose 1.9% after the cosmetics company beat expectations with a 4.8% rise in currency-adjusted sales in the quarter, although the performance was entirely dependent on its performance in China.

Oil prices dropped Friday, as a couple of influential industry bodies took a cautious tone on demand recovery from the pandemic this year.

The OPEC cut its forecast for world oil consumption in 2021 by 100,000 barrels a day, while the IEA cut its forecast by 200,000 barrels a day citing the lockdowns in major developed countries, particularly Europe, in the first half of the year.

U.S. crude futures were 1.2% lower at $57.55 a barrel, while the international benchmark Brent contract dropped 1.1% to $60.48. Both contracts closed on Wednesday at their highest levels since January 2020.

Elsewhere, gold futures were down 0.8% to $1,813.10/oz, while EUR/USD declined 0.2% at 1.2107.

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