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London open: Stocks flat after UK GDP
London stocks were flat in early trade on Thursday after data showed that the UK economy stagnated in February as strikes dented productivity.
At 0825 BST, the FTSE 100 was steady at 7,828.07.
According to the Office for National Statistics, there was zero growth, down from 0.4% growth in January and versus expectations of a 0.1% increase. January’s growth was revised up from 0.3%.
Falls in services and production were offset by growth in construction.
The services sector fell by 0.1% following 0.7% growth the month before. The ONS said the biggest contributor to the negative growth in services was education, which fell 1.7% due to teacher strikes. This followed growth of 2.5% in January.
Public administration – which was also hit by strikes – was the second largest contributor, falling by 1.1% in February.
Production output fell 0.2% in February following a 0.5% drop the month before, but construction output rose 2.4% following a 1.7% decline in January.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Looking ahead, we continue to expect GDP to be broadly flat again in Q2. Admittedly, households’ real disposable incomes likely will rise by almost 1% quarter-on-quarter in Q2, primarily due to a sharp increase in the value of benefits in April. But some households will prioritise rebuilding the savings buffer that they have run down over the last year, while others will step up debt repayments in response to the rise in interest rates, ensuring that real expenditure rises only marginally.
“Meanwhile, business investment and residential investment look set to fall sharply in Q2, in response to the jump in interest rates and government policies, such as the end of the super-deduction for capital investment and the phasing out of the Help to Buy Scheme in Q1. GDP also will be depressed again in Q2 by ongoing strikes in the health and education sectors. Accordingly, we are sticking to our forecast for a 0.1% quarter-on-quarter decline in GDP in Q2.”
Investors were also digesting the latest data out of China, which showed that exports unexpectedly spiked in March versus forecasts of a contraction, as the economy continued to recover from its zero-Covid policies and months of falling trade due to lockdowns.
Dollar-denominated exports grew 14.8% year-on-year, after falling 6.8% in January and February and against forecasts of a 7% contraction. Imports fell 1.4%, compared with expectations of a 5% decline.
In equity markets, housebuilders were the best performers after HSBC upgraded its stance on Barratt, Bellway, Berkeley, Crest Nicholson, Persimmon, Redrow and Taylor Wimpey.
Supermarket chain Tesco gained after saying it expects to post flat profits this year and announcing a £750m share buyback as annual earnings fell last year after it absorbed the cost on inflation instead of passing it on to customers. The company said group pre-tax profit halved to £1bn. Retail adjusted operating profit fell 6.3% to £2.49bn.
Tobacco company Imperial Brands lost ground despite saying it was on track to deliver earnings in line with expectations and low single-digit constant currency net revenue growth.
Imperial Leather maker PZ Cussons advanced after it backed its full-year expectations and posted a rise in third-quarter revenues as price increases underpinned margins.
Darktrace shares rose as the cyber security firm downgraded its full-year annual recurring revenue (ARR) guidance to the lower end of its previous range, but increased its adjusted EBITDA margin expectations.
Oxford Instruments rallied as it said trading for the full year was ahead of expectations.
Lloyds, Unite, TP Icap, ITV and Harbour Energy were all in the red as they traded without entitlement to the dividend.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Rightmove Plc | +2.37% | +13.20 | 570.40 |
| 2 |  |
Tesco Plc | +2.32% | +6.20 | 273.60 |
| 3 |  |
Taylor Wimpey Plc | +2.29% | +2.70 | 120.75 |
| 4 |  |
Barratt Developments Plc | +2.21% | +10.30 | 477.40 |
| 5 |  |
Auto Trader Group Plc | +1.92% | +11.60 | 614.20 |
| 6 |  |
Berkeley Group Holdings (the) Plc | +1.88% | +79.00 | 4,277.00 |
| 7 |  |
Burberry Group Plc | +1.80% | +45.00 | 2,543.00 |
| 8 |  |
Fresnillo Plc | +1.71% | +13.40 | 798.60 |
| 9 |  |
Croda International Plc | +1.66% | +112.00 | 6,862.00 |
| 10 |  |
Spirax-sarco Engineering Plc | +1.52% | +175.00 | 11,685.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Itv Plc | -4.30% | -3.60 | 80.08 |
| 2 |  |
Lloyds Banking Group Plc | -3.23% | -1.61 | 48.27 |
| 3 |  |
Smurfit Kappa Group Plc | -2.45% | -74.00 | 2,946.00 |
| 4 |  |
Imperial Brands Plc | -2.32% | -43.50 | 1,834.50 |
| 5 |  |
Persimmon Plc | -1.92% | -24.50 | 1,252.00 |
| 6 |  |
Hargreaves Lansdown Plc | -1.89% | -15.20 | 790.80 |
| 7 |  |
British American Tobacco Plc | -1.70% | -48.50 | 2,810.50 |
| 8 |  |
Tui Ag | -1.68% | -9.40 | 548.60 |
| 9 |  |
Bhp Group Limited | -1.56% | -39.00 | 2,462.50 |
| 10 |  |
Vodafone Group Plc | -0.96% | -0.88 | 91.12 |
US close: Stocks fall as Fed minutes stoke recession fears
Stocks on Wall Street closed in the red on Wednesday, with all three major indexes ending lower, after the latest Federal Reserve meeting minutes raised concerns over the possibility of economic recession.
The Dow Jones Industrial Average slipped 0.11% to close at 33,646.50, while the S&P 500 dropped 0.41% to 4,091.95, and the Nasdaq Composite declined 0.85% to finish trading at 11,929.34.
In the currency market, the dollar was in the red against its major trading pairs, last sitting 0.03% lower on sterling at 80.09p.
It slipped 0.02% on the common currency to trade at 90.96 euro cents, and it weakened 0.01% against the yen to change hands at JPY 133.12.
“The US dollar slid back to its early April low on the back of softer-than-expected US inflation data, with euro-dollar being one of the biggest benefactors as the cross rallied to the $1.10 mark and neared its February peak,” noted IG senior market analyst Axel Rudolph.
“[This was] boosted by hawkish comments from ECB governing council member and Austrian Central Bank chief Robert Holzmann.
“In a newspaper report he said that the inflation outlook alone would warrant another 50 basis point rate hike in May.”
Fed minutes stoke recessionary fears, while inflation slows in March
At the top of the agenda were the latest Federal Reserve meeting minutes released late in the session, further fanning the flames of recessionary concern.
They revealed that “many” officials were considering lowering their estimates of the peak interest rate needed to bring consumer inflation under control, as the effects of stress in the banking sector became evident.
Fed staff meanwhile were projecting a “mild recession” in the US economy later in the year, with a recovery over the next two years.
The release of the Fed minutes came after the news earlier that inflation growth weakened more than anticipated in March.
According to the Department of Labor, the consumer price index rose 0.1% on the month in March, with the annual rate of gain down to 5.0%, compared to the 5.1% economists had pencilled in.
Price rises for food remained unchanged, while energy costs declined by 3.5%.
Used car and truck prices dropped by 0.9%, new vehicle prices were up by 0.4%, and apparel prices increased by 0.6%.
Medical care services prices fell by 0.5%.
Finally on the economic front, US mortgage applications rose 5.3% in the week ending on 31 March according to a release from the Mortgage Bankers Association, with applications to purchase a home jumping 7.8%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances fell ten basis points to 6.3%.
Tessco Technologies leaps on takeover deal, American Airlines loses lift
In equities, wireless technology firm Tessco Technologies soared 87.02% after it announced an acquisition deal with GetWireless and Alliance Corporation to take it over at a premium of 91.5% to its share price.
On the downside, legacy carrier American Airlines Group descended 9.22% after it issued a pessimistic outlook on its profits.
The company was grappling with rising costs and weaker consumer demand for discretionary travel spending amid its downbeat forecast.
Thursday newspaper round-up: ULEZ, Arm, British Steel
A legal challenge to the expansion of London’s ultra-low emission zone will be heard in the high court later this year, after a judgment permitted councils to proceed. The city’s mayor, Sadiq Khan, vowed to press on regardless with plans to extend the Ulez, which he has argued is needed to tackle toxic air that is responsible for thousands of premature deaths a year. – Guardian
The music industry is urging streaming platforms not to let artificial intelligence use copyrighted songs for training, in the latest of a run of arguments over intellectual property that threaten to derail the generative AI sector’s explosive growth. In a letter to streamers including Spotify and Apple Music, the record label Universal Music Group expressed fears that AI labs would scrape millions of tracks to use as training data for their models and copycat versions of pop stars. – Guardian
Matt Hancock is being investigated over claims that he put undue pressure on Parliament’s standards watchdog. The former health secretary was told he was being investigated over allegations that he broke the MPs’ code of conduct by “lobbying the commissioner in a manner calculated or intended to influence his consideration” of whether a separate breach had been committed. – Telegraph
Intel will work with Arm, the UK-based chip designer, to make sure mobile phone chips that use Arm technology can be made in Intel factories, the US company has announced. Intel was once the leading global manufacturer of the top-end microchips known as central processing units (CPUs), but in recent years the company has faced fierce competition from rivals such as Taiwan Semiconductor Manufacturing Company, which produces chips for Apple products. – The Times
A legal challenge to the financial watchdog’s launch of a redress scheme for former members of a British Steel pension scheme has been dropped. The British Steel Action Group claimed that recent rises in interest rates had created a fundamental change of circumstances since the scheme closed, and that further consultation was required. – The Times
