A flurry of data and announcements helped boost the London stock market on 1 February, despite the political crisis in Egypt affecting global investor sentiment.

Media reports on 31 January and 1 February suggest Egypt’s economy has ground to a near halt with some disruption to trade routes. A rising oil price was attributed to concerns that the protests seen in Tunisia and Egypt could spread to oil producers in the region, affecting supply.

The outlook for Egypt remains uncertain, with the BBC reporting ‘huge rallies’ in Cairo and other cities on 1 February and calls for President Hosni Mubarak to leave office by Friday.

While there was some negative impact in the UK markets, manufacturing data published on 1 February by Markit and the Chartered Institute for Purchasing and Supply showed the UK manufacturing sector expanded at its fastest rate since the PMI (purchasing managers’ index) was carried out, 19 years ago.
 
Markit said: “Growth of both new orders and employment picked up sharply to the highest rates in the 19-year survey history, allowing manufacturers to ramp up production to the greatest extent since 1994.”

However, the index did identify significant inflationary pressures for firms with steep rises in raw materials and increasing costs in areas such as chemicals, cotton, energy, food products, metals and timber.

The PMI data, along with company announcements, boosted FTSE indices on the London Stock Exchange, as trading came to a close on 1 February, the FTSE 100, FTSE 250 and FTSE 300 were all up in the day.

Amongst the announcements to the stock exchange on 1 February was the statement from confirming that it was resuming quarterly dividend payments to investors. The firm made a loss in 2010, but said 2011 would a year of ‘recovery and consolidation’ as it implemented changes identified to reduce operational risk and meet commitments from the oil spill in the Gulf of Mexico.

The long view for the UK

Publishing its latest forecast for the UK economy, the National Institute for Economic and Social Research said it expected the economy will grow by 1.5 per cent in 2011 and 1.8 per cent in 2012.

The NIESR said: “The economy will expand by 1.5 per cent, barely higher than the 1.4 per cent expansion in 2010. Some of the output lost to the exceptionally poor weather in late 2010, when GDP fell by 0.5 per cent, will be regained in early 2011, but the average rate of growth across the two quarters will be just 0.1 per cent. With the recovery so subdued, this year’s surge in inflation will peter out and CPI inflation will fall to 1.8 per cent in 2012.”

The NIESR also predicts that growth will be largely supported by net trade, expecting UK exports to increase by a greater amount than imports, reflecting a ‘belated response by exporters to a more competitive pound and the opportunities of faster-growing foreign markets.’

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