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London open: Stocks climb despite pound strength; GDP data eyed
London stocks rose in early trade on Friday despite a rallying pound, taking their cue from a record close on Wall Street as investors eyed UK and US economic growth figures.
At 0840 GMT, the FTSE 100 was up 0.4% to 7,644.20, after the Dow Jones and S&P 500 notched further record closes overnight.
In currency markets, the greenback got a brief respite from its slide late on Thursday after US President Donald Trump said in an interview at the World Economic Forum in Davos that he expects the currency to get “stronger and stronger”, adding: “Our country is becoming so economically strong again and strong in other ways, too.”
These comments helped to reverse the slide sparked by US Treasury Secretary Steven Mnuchin’s comments on Wednesday, when he said at Davos that a weaker dollar is good for trade.
The rally was short-lived, however, and by early Friday the dollar was back on its knees. The pound was up 0.6% at $1.4230 as Bank of England governor Mark Carney said he could see a “conscious re-coupling” between the UK and the booming world economy.
Carney, along with the European Central Bank’s bond-buying chief Benoit Coeure and Bank of Japan governor Haruhiko Kuroda, will be addressing the World Economic Forum later on Friday.
The BoE boss, speaking on BBC radio early on Friday, said the UK has been “a bit of an outlier” in underperforming the booming global economy due to a “Brexit effect in the short – term” as companies were uncertain about the future.
He added: “There is the prospect this year, as there is greater clarity about the relationship with Europe and subsequently with the rest of the word, for a recoupling ?” if I can use that term borrowed from Gwyneth Paltrow – a conscious re-coupling of the UK economy with the global economy.”
The main focus on the day’s data calendar will be the preliminary fourth-quarter GDP figures for the UK at 0930 GMT and the US at 1330 GMT.
British GDP is forecast to have grown at a 0.4% quarter-on-quarter clip in the fourth quarter of 2017, according to the consensus, with year-on-year growth to slow to 1.4% from 1.7%. As for US, the market is looking for GDP growth to ease to 3.0% from 3.2%.
Investors will also be looking ahead to a speech by Trump in Davos, during which he is expected to outline his ‘America First’ policy.
Spreadex analyst Connor Campbell said: “There’s quite a lot for the markets to deal with this Friday. Not only does Trump address the Alpine masses this afternoon, there’s also the release of the first glimpse at the UK and US Q4 GDP readings, a pair of figures that may either break the dollar’s back or give it a much-needed glimmer of hope. Currently it looks more likely to be the former: UK number is expected to come in at 0.4%, the same as in the third quarter, while the US figure is expected to slip from 3.2% to 3.0% at the annualised rate.”
In corporate news, AstraZeneca rose after saying it found a statistically significant improvement in eight out of nine lung patients as it tested its ‘PT010’ combination drug delivered with a pressurised metered-dose inhaler in late-stage clinical trials.
Spectris edged down after announcing the acquisition of Concept Life Sciences from Equistone Partners Europe and company management for £163m, on a debt and cash-free basis and met from existing cash and bank facilities.
HICL Infrastructure slipped as it updated the market on its operations following the collapse of Carillion earlier in the month, reporting that its priority is the continuation of services to public sector clients and the users of the facilities at the affected PPP projects.
Sports betting and gaming group GVC Holdings slumped as it said it has made a provision of around €200m in its 2017 financial accounts after its Greek subsidiary received a €186.77m tax bill for 2010 and 2011. The company, which pointed out that it was one of a number of online gaming operators that had been hit with a Greek tax bill, said it plans to appeal the assessment. Ladbrokes Coral and Rank Groupwere also under pressure.
Precious metals miners Randgold Resources and Fresnillo lost their shine as gold and silver prices fell.
On the broker note front, Goldman Sachs made some changes to its stance on utility and water stocks, upgrading National Grid to ‘neutral’ and initiated coverage of Severn Trent, United Utilities and Pennonat ‘sell’ and ‘neutral’, respectively.
Meanwhile, building materials group CRH was lifted to ‘neutral’ by Exane BNP Paribas.
