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London open: Stocks gain as UK economy returns to growth
London stocks gained in early trade on Friday after data showed the UK economy returned to growth in November, and as investors eyed earnings from US banking behemoths.
At 0825 GMT, the FTSE 100 was up 0.7% at 7,625.65.
Figures released earlier by the Office for National Statistics showed that GDP grew by 0.3% in November following a 0.3% contraction in October. This was ahead of economists’ expectations for a 0.2% expansion.
The ONS said most of the growth was down to the services sector, which expanded 0.4% in November, having shrunk 0.1% in October.
In the three months to November, however, GDP was estimated to have fallen by 0.2% on the previous three-month period. Economists were expecting a 0.1% drop.
ONS chief economist Grant Fitzner said of the latest data: “The economy contracted a little over the three months to November, with widespread falls across manufacturing industries, which were partially offset by increases in public services, which saw less impact from strike action.
“GDP bounced back in the month of November, however, led by services with retail, car leasing and computer games companies all having a buoyant month.
“The longer-term picture remains one of an economy that has shown little growth over the last year.”
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The UK’s economy squeezed out a small drop of economic juice in November, with month-on-month GDP rising to 0.3%, from minus 0.3% in October. This could be a sign that people were getting ready for Christmas early, and all eyes will now be on how December itself shaped up, once consumers had potentially emptied their wallets on Black Friday deals.
“A sluggish metabolism has become the new norm for the UK as higher interest rates and deep-rooted productivity problems continue to bite. The lack of meaningful movement, in theory, adds weight to hopes that the Bank of England will be comfortable holding interest rates where they are, but there are unfortunately some more hoops to jump through before that becomes a certainty.
“Inflation’s moving in the right direction but still isn’t where it needs to be, and that’s a major blocker to looser monetary policy being allowed through.”
Looking ahead to the rest of the day, attention will turn to earnings across the pond, with big banks JPMorgan, Bank of America and Citigroup among those slated to report.
In UK equity markets, luxury fashion group Burberry tumbled as it delivered a significant profit warning on the back of the well-cited slowdown in luxury demand that has rocked the industry over recent months.
The company now expects adjusted operating profit for the financial year to 30 March 2024 to be between £410m and £460m, well below the £552m to £668m range guided to at its interim results just two months ago.
UK housebuilder Vistry was up as it said its 2023 financial performance would be ahead of expectations, driven by strong forward sales.
Oil industry services company Wood Group also rose as it said full-year adjusted core earnings would be slightly ahead of expectations on the back of a strong order book.
In broker note action, Bunzl was boosted by an upgrade to ‘equalweight’ at Morgan Stanley.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
British Land Company Plc | +2.35% | +9.30 | 404.80 |
| 2 |  |
Melrose Industries Plc | +2.31% | +13.20 | 585.00 |
| 3 |  |
Rightmove Plc | +2.22% | +12.20 | 562.00 |
| 4 |  |
Whitbread Plc | +2.04% | +74.00 | 3,706.00 |
| 5 |  |
Legal & General Group Plc | +1.98% | +4.90 | 252.60 |
| 6 |  |
Bae Systems Plc | +1.85% | +21.50 | 1,185.00 |
| 7 |  |
Carnival Plc | +1.81% | +22.00 | 1,237.00 |
| 8 |  |
Pearson Plc | +1.76% | +17.00 | 981.80 |
| 9 |  |
Relx Plc | +1.71% | +54.00 | 3,214.00 |
| 10 |  |
Bunzl Plc | +1.69% | +54.00 | 3,248.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Burberry Group Plc | -6.98% | -95.00 | 1,265.50 |
| 2 |  |
Tui Ag | -1.31% | -7.50 | 565.50 |
| 3 |  |
Ocado Group Plc | -1.24% | -8.20 | 653.20 |
| 4 |  |
Informa Plc | -1.23% | -9.40 | 756.20 |
| 5 |  |
International Consolidated Airlines Group S.a. | -0.50% | -0.75 | 147.85 |
| 6 |  |
Centrica Plc | -0.43% | -0.65 | 151.70 |
| 7 |  |
Diageo Plc | -0.18% | -5.00 | 2,810.50 |
| 8 |  |
Bhp Group Limited | -0.14% | -3.50 | 2,478.00 |
| 9 |  |
Shell Plc | -0.00% | -0.00 | 1,894.60 |
| 10 |  |
Just Eat Plc | -0.00% | -0.00 | 861.00 |
US close: Stocks little changed as traders digest CPI reading
Wall Street stocks were little changed at the close on Thursday as market participants digested some key inflation data.
At the close, the Dow Jones Industrial Average was up 0.04% at 37,711.02, while the S&P 500 lost 0.07% to 4,760.24 and the Nasdaq Composite saw out the session flat at 14,970.19.
The Dow closed just 15.29 points higher on Thursday, narrowly building on gains recorded in the previous session.
Thursday’s primary focus was December’s all-important consumer price index report, which revealed inflation had risen more than expected in December, according to figures from the Labor Department. Consumer prices rose by 3.4%, up from 3.1% in November and above economists’ expectations of a 3.2% increase. The jump was driven mainly by higher housing costs. Core inflation – which strips out volatile food and energy prices – ticked down to 3.9% from 4%. Economists were expecting 3.8% growth.
“In short: You ain’t getting a March rate cut. It is the kind of print that shouts the Fed does not need to rush to cut this quarter. Disinflation won’t be linear and we think the Fed is going to be rather (perhaps overly) cautious in easing in this kind of environment,” said Finalto’s Neil Wilson. “It’s going to take way, way longer to get to target – if indeed at all – and the market is the wrong side of this reality.”
Also drawing an amount of investor attention, the Securities and Exchange Commission has approved changes to its rules, allowing bitcoin exchange-traded funds. The hotly-anticipated move will result in an expansion of access to the benchmark cryptocurrency. Crypto stocks jumped on the back of the news.
Elsewhere on the macro front, Americans filed claims for state benefits at a decelerated clip in the week ended 6 January, according to the Labor Department, hitting their lowest level since October. Initial jobless claims fell by 1,000 from the previous week’s upwardly revised value to 202,000, well below consensus expectations for a reading of 210,000.
Finally, the Federal Government posted a deficit of $129.0bn in December, up 52% year-on-year as outlays rose and receipts fell.
No major corporate earnings were slated for release on Thursday but investors will be looking ahead to the beginning of earnings season on Friday, with the likes of Bank of America and JPMorgan Chase both set to report their latest quarterly figures tomorrow.
Friday newspaper round-up: Post Office, Boeing, Tesla
The former UK boss of Fujitsu, the technology firm whose flawed IT system is at the heart of the Post Office Horizon scandal, received a £2.6m payoff after standing down from the company in 2019, corporate filings suggest. Fujitsu has come under increasing scrutiny during the public inquiry into the Horizon scandal, which led to thousands of people who owned and ran smaller post offices being falsely accused or convicted of theft or fraud between 1999 and 2015. – Guardian
Boeing is facing a formal investigation into whether it made sure 737 Max 9 planes were “in a condition for safe operation” after a cabin panel blew off during an Alaska Airlines flight. “This incident should have never happened, and it cannot happen again,” the Federal Aviation Administration said, announcing an investigation into whether the planemaker “failed to ensure” the jets complied with safety regulations. – Guardian
Out of stock. Those words may be coming back to haunt shoppers just as it appeared that supply chains were beginning to go back to normal. The boss of shipping giant Maersk warned on Thursday that the “brutal and dramatic” disruption to shipping through the Red Sea caused by Houthi rebel attacks could last for months, raising fears of price rises and empty shelves. – Telegraph
The UK boss of EY, who backed the now-abandoned scheme to split up the professional services group, has been granted another extension to his tenure, allowing him to continue to run the Big Four firm well beyond its mandatory retirement age. Most EY partners are required to step down when they reach 60, but Hywel Ball, 61, has received a one-year extension allowing him to continue in his role until June 2025, when he will be almost 63. – The Times
Tesla last night suspended most car production at its factory near Berlin, citing a lack of components caused by shifts in transport routes because of attacks on vessels in the Red Sea. The American maker of electric cars, which will restrict output in Germany between January 29 and February 11, said that “the armed conflicts in the Red Sea and the associated shifts in transport routes between Europe and Asia via the Cape of Good Hope” were leading to “considerably longer transportation times are creating a gap in supply chains”. – The Times
