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London open: Stocks gain despite dire GDP data
London stocks rose in early trade on Wednesday despite confirmation that the UK economy has fallen into its worst recession on record.
At 0845 BST, the FTSE 100 was up 0.6% at 6,190.29, while sterling was down 0.1% against the dollar at 1.3042.
Figures released earlier by the Office for National Statistics showed the economy shrank by a fifth in the second quarter of 2020 as the country sank into the deepest recession on record because of the Covid-19 crisis.
Gross domestic product dropped 20.4% in the three months to the end of June from the previous quarter. This was bigger than reported to date by any EU member and double the fall recorded in the US. The record drop, broadly in line with expectations, was caused by the near shutdown of the economy from late March as the government sought to stem the spread of the coronavirus.
The second-quarter plunge followed a 2.2% contraction in the first three months of 2020 which covered the early stages of the virus’s spread in the UK and the start of the economic shutdown.
Still, investors appeared to be taking some comfort from the June figures, which showed that GDP increased 8.7% as shops, factories and construction sites started to reopen, although the economy is still 17.2% smaller than before the virus hit the UK.
Spreadex analyst Connor Campbell said the June growth “has sparked hopes that the country can turn the ship around”.
In equity markets, Admiral rallied as the insurer reinstated its special dividend and reported a better-than-expected jump in first-half pre-tax profit after motor claims fell as drivers stayed home during the lockdown.
Just Eat Takeaway was also in the black as first-half earnings and revenue grew as it benefited from lockdowns.
M&G gained even as it said first-half profit more than halved as the savings and investments company suffered fund outflows and pressure on retail margins.
On the downside, Spirax-Sarco fell as it said organic revenue growth in the second half of the year will be lower than it anticipated in May.
Avast was weaker even as the cybersecurity firm said full-year organic revenue should be at the upper end of forecasts as it reported a strong first half driven by more people working from home during lockdown.
In broker note action, shares of British Airways and Iberia parent IAG flew lower after a downgrade to ‘neutral’ at Davy, while Dunelm was boosted by an initiation at ‘overweight’ by Barclays.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Tui Ag | +5.24% | +6.95 | 139.50 |
| 2 |  |
Rolls-royce Holdings Plc | +4.35% | +3.27 | 78.43 |
| 3 |  |
Glencore Plc | +2.95% | +14.55 | 508.40 |
| 4 |  |
Carnival Plc | +2.94% | +22.60 | 791.80 |
| 5 |  |
Easyjet Plc | +2.59% | +9.00 | 356.00 |
| 6 |  |
Ocado Group Plc | +2.54% | +15.80 | 639.00 |
| 7 |  |
Lloyds Banking Group Plc | +2.50% | +1.16 | 47.37 |
| 8 |  |
Compass Group Plc | +2.23% | +42.50 | 1,949.50 |
| 9 |  |
International Consolidated Airlines Group S.a. | +2.21% | +2.36 | 109.38 |
| 10 |  |
Intercontinental Hotels Group Plc | +2.12% | +102.00 | 4,915.00 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Melrose Industries Plc | -2.44% | -2.85 | 113.90 |
| 2 |  |
Marks And Spencer Group Plc | -1.91% | -2.30 | 117.90 |
| 3 |  |
Hikma Pharmaceuticals Plc | -1.45% | -18.00 | 1,224.00 |
| 4 |  |
Burberry Group Plc | -1.35% | -24.00 | 1,748.00 |
| 5 |  |
United Utilities Group Plc | -1.25% | -13.00 | 1,026.00 |
| 6 |  |
Severn Trent Plc | -1.08% | -29.00 | 2,655.00 |
| 7 |  |
Tesco Plc | -0.97% | -2.30 | 235.00 |
| 8 |  |
Centrica Plc | -0.87% | -0.72 | 81.68 |
| 9 |  |
National Grid Plc | -0.81% | -8.50 | 1,045.00 |
| 10 |  |
Bunzl Plc | -0.71% | -20.00 | 2,790.00 |
US close: Stocks end session slightly higher following worst day in two years
Wall Street stocks closed slightly higher on Wednesday following the previous session’s heavy CPI-fuelled losses.
At the close, the Dow Jones Industrial Average was up 0.10% at 31,135.09, while the S&P 500 was 0.34% firmer at 3,946.01 and the Nasdaq Composite saw out the session 0.74% stronger at 11,719.68.
The Dow closed 30.12 points higher on Wednesday, taking only a very modest bite out of losses recorded in the blue-chip’s worst session in more than two years.
After August’s consumer price index showed that headline inflation rose 0.1% month-on-month, despite a drop in gas prices throughout the period, Wednesday’s primary focus will be last month’s producer price index, which declined again as fuel costs continued to fall.
According to the Labor Department, the producer price index for final demand fell 0.1% from July, in line with consensus expectations. Compared with August 2021, the PPI was up 8.7%. Excluding food and energy, the producer price index rose 0.4% in August and was 7.3% higher than a year earlier.
Elsewhere on the macro front, US mortgage applications fell 1.2% week-on-week in the seven days ended 9 September, according to the Mortgage Bankers Association, marking a fifth consecutive week of declines amid rising interest rates.
Applications to refinance a home loan fell 4.2%, easily erasing a 0.2% uptick in purchase applications, as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances rose to 6.01% – the highest level seen since 2008.
Treasury yields were also in focus on Wednesday, with the benchmark 10-year note sitting at roughly 3.412% and the 2-year note surging more than 20 basis points to 3.802%.
No major corporate earnings were slated for release on Wednesday.
Thursday newspaper round-up: Amazon, Patagonia, SoftBank, Hornby
California is suing Amazon, accusing the company of violating the state’s antitrust laws by stifling competition and engaging in practices that push sellers to maintain higher prices on products on other sites. The 84-page lawsuit filed on Wednesday in San Francisco superior court mirrors another complaint filed last year by the District of Columbia, which was dismissed by a district judge earlier this year and is now going through an appeals process. – Guardian
Setting a new example in environmental corporate leadership, the billionaire owner of Patagonia is giving the entire company away to fight the Earth’s climate devastation, he announced on Wednesday. Patagonia founder Yvon Chouinard, who turned his passion for rock climbing into one of the world’s most successful sportswear brands, is giving the entire company to a uniquely structured trust and nonprofit, designed to pump all of the company’s profits into saving the planet. – Guardian
The taxpayer is to fund profits of up to £1.6bn for energy suppliers this year after their earnings were protected in Liz Truss’s freeze on household bills. Businesses will be allowed to make a margin of 1.9pc on energy that they sell to the public through the Prime Minister’s subsidy scheme, which caps the average bill at £2,500. – Telegraph
SoftBank is weighing up whether to launch a third large investment fund for start-ups as the Japanese conglomerate seeks to draw a line under record losses. Executives at the world’s most prolific technology investor have held discussions over how to proceed after its billionaire founder pledged to move forward with care. – The Times
The company behind Scalextric and Airfix indicated yesterday that it had not fully complied with stock market disclosure rules regarding related-party transactions with a company owned by its executive chairman. Hornby bought about £502,000 of stock, tooling and other items from Oxford Diecast, which makes and supplies diecast model vehicles and was owned by LCD Enterprises, a company owned by Lyndon Davies, Hornby’s chief executive. LCD was fully acquired by Hornby in July last year. – The Times
