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London open: Stocks edge lower after GDP, retail sales data
London stocks edged lower in early trade on Friday as a downward revision to UK GDP data raised the risk of recession, although retail sales figures were better than expected.
At 0840 GMT, the FTSE 100 was down 0.1% at 7,684.06. Markets will be open for just a half day’s trading as we head towards the Christmas break.
Data released earlier by the Office for National Statistics showed the economy contracted by 0.1% in the period from July to September, down from a previous estimate of no growth.
The services sector contracted 0.2%, revised down from a first estimate of a 0.1% decline.
The data also showed that there was no economic growth in the second quarter, down from a previous estimate of 0.2% growth.
Darren Morgan, director of economic statistics at the ONS, said: “The latest data from both our regular monthly business survey and VAT returns show the economy performed slightly less well in the last two quarters than our initial estimates. The broader picture, though, remains one of an economy that has been little changed over the last year.
“The latest VAT data, which takes a little time to receive and process means we now estimate the economy showed no growth in the second quarter, with weaker performances from smaller businesses, particularly those in both hospitality and IT than first shown.
“We also now estimate the economy contracted slightly in the third quarter, when we previously reported no growth, with later returns from our business survey showing film production, engineering & design and telecommunications all performing a little worse than we initially thought.”
Ashley Webb, UK economist at Capital Economics, said: “The 0.1% q/q fall in real GDP in Q3 may mean that the mildest of mild recessions started in Q3. But whether or not there is a small recession, the big picture is that we expect real GDP growth to remain subdued throughout 2024.”
Separate figures released by the ONS showed that retail sales volumes rose 1.3% in November, coming in ahead of consensus expectations for 0.4% growth and following no growth in October. The ONS said sales were boosted by heavily-discounted Black Friday deals
The previous month’s data was revised up from a 0.3% fall.
Morgan said: “Retail sales grew strongly in November as heavy Black Friday discounting encouraged shoppers to spend. However, with the three-month trend continuing to fall and overall sales still below pre-pandemic levels, it’s still a challenging time for retailers.
“In the latest month, household goods retailers, clothing shops and department stores all reported robust sales, with computer stores, sports equipment, toy shops and cosmetics stores particularly benefitting from the impact of their Black Friday promotions.
“Supermarket sales ticked up a little, but it was specialist food and drink stores that had a really strong November due to customers stocking up early for Christmas and spending more than we have traditionally seen at this time of year.”
In equity markets, JD Sports slid after Nike downgraded its revenue outlook and announced plans to cut costs by about $2bn over the next three years. Other retailers were under the cosh, with Sports Direct owner Frasers Group and B&M also down.
Elsewhere, the Canadian government has approved the $13.5bn takeover of HSBC Canada by RBC, allowing the sale to proceed despite calls for it to be blocked over fears of reduced competition in the sector.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Anglo American Plc | +1.28% | +24.60 | 1,948.60 |
| 2 |  |
Rio Tinto Plc | +0.95% | +55.00 | 5,867.00 |
| 3 |  |
Lloyds Banking Group Plc | +0.93% | +0.44 | 47.63 |
| 4 |  |
Fresnillo Plc | +0.79% | +4.60 | 586.00 |
| 5 |  |
Auto Trader Group Plc | +0.61% | +4.40 | 721.80 |
| 6 |  |
Shell Plc | +0.55% | +14.00 | 2,571.00 |
| 7 |  |
Hsbc Holdings Plc | +0.55% | +3.40 | 625.90 |
| 8 |  |
Burberry Group Plc | +0.52% | +7.50 | 1,436.50 |
| 9 |  |
Bhp Group Limited | +0.51% | +13.50 | 2,678.50 |
| 10 |  |
Gsk Plc | +0.50% | +7.20 | 1,457.20 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ocado Group Plc | -2.35% | -17.80 | 739.40 |
| 2 |  |
Carnival Plc | -1.92% | -26.50 | 1,350.50 |
| 3 |  |
Prudential Plc | -1.53% | -13.40 | 860.40 |
| 4 |  |
Spirax-sarco Engineering Plc | -1.29% | -135.00 | 10,360.00 |
| 5 |  |
Halma Plc | -1.25% | -29.00 | 2,287.00 |
| 6 |  |
Scottish Mortgage Investment Trust Plc | -1.19% | -9.40 | 781.80 |
| 7 |  |
Ashtead Group Plc | -1.14% | -62.00 | 5,378.00 |
| 8 |  |
Intertek Group Plc | -0.90% | -38.00 | 4,197.00 |
| 9 |  |
Melrose Industries Plc | -0.85% | -4.80 | 561.80 |
| 10 |  |
Tui Ag | -0.81% | -5.00 | 615.00 |
US close: Stocks resume December rally
Wall Street stocks resumed their recent rally on Thursday after registering some heavy losses in the previous session.
At the close, the Dow Jones Industrial Average was up 0.87% at 37,404.35, while the S&P 500 advanced 1.03% to 4,746.75 and the Nasdaq Composite saw out the session 1.26% firmer at 14,963.87.
The Dow closed 322.35 points higher on Thursday, reclaiming some of the previous session’s losses.
Yesterday’s losses came as investors indulged in a little bit of profit-taking, leading to the worst single-day drop since October and snapping the blue-chip’s winning streak at nine-straight sessions.
In focus on Thursday, Treasury yields continued to fall from recent highs, with the benchmark ten-year note hitting its lowest level since July before regaining some ground to sit at 3.885%.
On the macro front, the US economy grew less than previously estimated in the third quarter, according to figures released on Thursday by the Commerce Department. GDP for July to September was revised down to 4.9% from 5.2% in the second estimate. Economists were expecting growth to be unrevised.
Elsewhere, Americans lined up for unemployment benefits at an accelerated clip in the week ended 16 December but remained near the previous week’s two-month low. According to the Labor Department, initial jobless claims rose by 2,000 to 205,000 last week, well below consensus expectations of 215,000 and underscoring relative tightness in the US labour market. Continuing claims fell by 1,000 in the first week of December to 1.86m, firmly below market expectations of 1,88m, while the four-week moving average, which aims to strip out week-to-week volatility, fell by 1,500 to 212,000.
On another note, the downturn in manufacturing activity in the Philadelphia region worsened more than expected in December, according to the Philadelphia Federal Reserve. The Manufacturing Business Outlook Survey found that the current general activity index dropped to -10.5 this month, from -5.9 in November. This was the index’s 17th reading below zero in the past 19 months and significantly below the -3.0 level expected by economists.
Finally, the Kansas Federal Reserve‘s manufacturing activity index slipped from November’s reading of -3 to -4 in December as a decline in activity for durable goods offset an increase in activity for non-durable goods, specifically food and beverage and plastics manufacturing,
In the corporate space, Micron shares traded higher after beating Wall Street expectations with its first-quarter numbers, while Salesforce got a boost from an upgrade by analysts at Morgan Stanley.
Friday newspaper round-up: Property sales, Royal Mail, Revolut
Property sales and demand across the UK were almost a fifth higher in the final weeks of 2023 than a year earlier as sentiment improved, according to a survey. The property website Zoopla said new sales agreed were 17% higher in December than this time last year, when higher mortgage rates hit market activity. Demand is up 19%, measured by would-be buyers contacting agents to inquire about and arrange viewings for a specific property listed on Zoopla. An increase in the number of homes for sale is increasing choice and supporting sales, it said. – Guardian
Borrowing on the likes of credit cards and overdrafts will rise by £5,000 a household in the next five years, according to Labour analysis that the party says shows the fragility of national economic health. Analysis of statistics in the November economic outlook produced by the government’s Office for Budget Responsibility shows that unsecured debt, also covering many car loans, is forecast to rise £154bn by 2028, the party said. – Guardian
Jeremy Hunt has hinted at further tax cuts in the spring in the hope an anticipated fall in interest rates will lower the cost of servicing Britain’s debt. The Chancellor described a faster-than-expected drop in inflation last month as “really good news”, adding that Downing Street was already eyeing further tax cuts. – Telegraph
The chief executive of Royal Mail has been warned he could be hauled in front of MPs over “disturbing” claims that the postal service is prioritising parcel deliveries over letters. The Commons business and trade committee has demanded that Martin Seidenberg explain how the struggling company will improve punctuality, amid fresh claims that it is failing to meet its legal obligations. – Telegraph
The protracted attempt by Revolut to secure a banking licence from City regulators has received a boost after the fintech company’s external auditor said it had cleared up questions about the company’s revenues. Revolut faced intense scrutiny in March when its much-delayed accounts for 2021 showed that BDO had raised concerns about almost £477 million of the company’s annual revenues that year. – The Times
