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London Open: Stocks Steady Ahead Of Third-Quarter GDP Data
London stocks were little changed in early trade on Wednesday as investors eyed the release of third-quarter UK GDP data.
At 0830 BST, the FTSE 100 was flat at 7,524.23, with the pound steady against the euro and the dollar at 1.1166 and 1.3129, respectively.
An hour ahead of the release of UK growth data, Spreadex analyst Connor Campbell said: “With Bank of England deputy governor Jon Cunliffe muddying the rate hike waters on Tuesday, will the MPC hawks get any support from Wednesday’s UK Q3 GDP reading?
“Towards the end of summer it seemed highly likely that the UK would see a rise in interest rates before 2017 was over. Now, however, there’s no such certainty, even with last week’s five-year high inflation data. The continued drop in real wages, lagging retail sales and a sharp jump in the number of UK companies reporting profit warnings in the third quarter have all undermined the case for a hike, something that has begun to weigh on sterling.”
The GDP figures are one of the final pieces of economic data ahead of the next meeting of the Bank of England’s Monetary Policy Committee on 2 November.
After inflation reached 3% last month, there is a feeling among many economists that the UK gross domestic product update could seal the deal for a rate hike in November, despite the mixed signals from MPC members and other economic gauges.
Analysts are expecting GDP growth to come in at 0.3% for the quarter, the same as in Q2, while at the annual rate growth could slip to 1.5%.
While a weak performance, a 0.3% outturn is unlikely to derail the rate hike, said Investec economist Victoria Clarke.
Indeed it “should seal the deal”, said Capital Economics‘ chief economist Jonathan Loynes.
Over a decade since the BoE last increased rates, markets are implying an 80% chance of a move from 0.25% to 0.50% at next month’s MPC meeting.
In corporate news, British American Tobacco was in the black after saying it expects revenue from next generation products to double to over £1bn next year.
Lloyds Banking Group was on the back foot as investors seemed to worry more about loan impairments and rising consumer credit risk than solid income and profits growth up 8% to £4.62bn and 9% to £2.08bn respectively.
Power station operator Drax nudged up after agreeing the sale of Billington Bioenergy, a distributor of wood pellets in the UK heating market.
Virgin Money nudged higher as it said it is in talks to make former HSBC banker Irene Dorner its next chairman in a move that would assemble the first all-female leadership team at a major British bank.
Fellow challenger bank Metro Bank retreated after it reported a 77% jump in underlying pre-tax profit for the third quarter and announced that chief financial officer, Mike Brierley, plans to retire next year.
Fresnillo was weaker despite posting a rise in the production of silver and gold for the third quarter and saying it remains on course to achieve its output targets for 2017, while Antofagasta was in the red despite cutting cost forecast and reporting a rise in third-quarter copper production.
In broker note action, Whitbread was cut to ‘equalweight’ at Morgan Stanley, while Wizz Air was downgraded to ‘hold’ at Investec, but Lancashire was bumped up to ‘equalweight’ at Barclays.
