UK stocks down as OECD predicts its growth to be worst of G7

The FTSE 100 fell 0.1% to 6,329.13 as market participants held off on adding risk ahead of the Federal Reserve’s statement. The OECD also released its growth forecasts today predicting the UK would have the toughest road ahead as compared to its G7 peers.

If the good news regarding declining Covid-19 infection rates in the the UK continues, the OECD forecasts a drop in economic growth of 11.5% in 2020. However, if we do in fact see a second-wave of infections, as some investors fear particularly in light of widespread protesting, then growth is projected to decline by 14.5%.

Turning to unemployment, under what the OECD dubs a “single-hit” scenario, the unemployment rate is projected to rise to 9.7% by the end of 2020. This could increase to 14.8% if there were to be a second wave of infections.

British American Tobacco (Ticker:BAT), the cigarette and tobacco manufacturer, led the FTSE 100 and closed up 3.24% at £31.24. The company committed to maintaining its dividend at 65% of adjusted diluted earnings per share, which markets cheered amid widespread withdrawals of dividends.

Constant currency adjusted revenue growth for 2020 is expected to come in between 1-3%, which is lower than the 3-5% guidance the company provided at the last trading update.

The company makes 75% of its revenues from developed markets and management were delighted to reveal its US business had remained resilient throughout the pandemic. British American Tobacco now expects US cigarette industry volumes to decline less (at 4% rather than 5%) this year. Its year-to-date sales to retail outlets are down 2% versus the same period last year.

The worst performer in the FTSE 100 was JustEat (Ticker: JET), the online food order and delivery provider, as it tumbled 13.08% to trade at £76.26. This came after the announcement that it was in advanced talks to merge with GrubHub, its American equivalent, after GrubHub changed its mind on pursuing a tie up with UberEats following weeks of negotiation.

The combined group processed 593m orders last year and together have 70 million active users. The deal will create the world’s largest online food delivery company by gross meal value, as well as revenue, and is expected to close in the first quarter of 2021.

For every one GrubHub share, GrubHub shareholders will receive 0.6710 of JustEat American depositary receipts – this gives a total equity consideration for GrubHub of $7.3bn. GrubHub shares closed up 1.95% on the news and, at the time of writing this article, is up 4.4% in after-hours trading.