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ADVFN Morning London Market Report: Thursday 15 February 2024

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London open: FTSE gains as investors mull GDP data


London stocks rose in early trade on Thursday, taking their cue from gains in the US and Asia, as investors mulled news that the UK fell into recession at the end of 2023.

At 0830 GMT, the was up 0.6% at 7,610.79.

Provisional figures released earlier by the Office for National Statistics showed the UK fell into recession at the end of last year, after a bigger-than-expected contraction in GDP in the fourth quarter.

GDP contracted by 0.3% in the three months, following a 0.1% decline in the third. A recession is defined as two consecutive quarters of negative growth.

Analysts had been expecting another quarter of no growth, although most had been looking for a smaller contraction, of 0.1%.

Over the entirety of 2023, however, the ONS said GDP edged up by 0.1% year-on-year.

During the fourth quarter, there were falls in all three main sectors. Construction output slid 1.3%, production by 1% and services by 0.2%.

On a monthly basis, GDP fell by 0.1% in December, compared to growth of 0.2% in November – revised down from an 0.3% improvement – and a 0.5% fall in October, which was revised down from a 0.3% fall.

Richard Hunter, head of markets at Interactive Investor, said the market impact of the GDP print was “limited not only due to the better-than-expected inflation number yesterday, but also because some of the UK market’s recent lethargy has been based on anaemic or negative growth over recent months”.

“In addition, the economy is estimated to have grown by 0.1% for the year as a whole. The indicator is also akin to driving in the rear-view mirror and as such does not indicate the current state of play. The GDP print for January is not due for release until March and the Bank of England has indicated that it expects the economy to pick up this year. In the meantime, the news also raises the possibility of interest rate cuts to bolster a struggling economy, although inflation including the impact of currently strong pay rises are complicating the central bank’s decision on timing, with no easing expected until June at the earliest.”

In equity markets, British Gas owner Centrica was the standout gainer on the FTSE 100 even as it posted a fall in annual profits on the back of “sharply lower” commodity prices.

Adjusted operating profit for the year to December 2023 came in at £2.72bn from £3.3bn. The full-year dividend was up 33% to 4p a share.

Business information and analytics firm Relx advanced as it hiked its dividend after a robust full-year performance.

On the downside, BPImperial Brands and Shell all lost ground as they traded without entitlement to the dividend.

Animal genetics firm Genus tumbled as it warned that full-year profits would be below expectations.

Close Brothers was also sharply lower after saying it was suspending its dividend this year and that future payouts were under review as it awaits the Financial Conduct Authority’s review of motor finance.


Top 10 FTSE 100 Risers

Sponsored by Plus500
# Name Change Pct Change Cur Price
1 Centrica Plc +3.57% +4.80 139.20
2 Rolls-royce Holdings Plc +2.79% +8.70 320.90
3 Coca-cola Hbc Ag +2.77% +66.00 2,448.00
4 International Consolidated Airlines Group S.a. +2.47% +3.55 147.50
5 Easyjet Plc +2.17% +12.20 574.20
6 Direct Line Insurance Group Plc +1.98% +3.30 169.85
7 Burberry Group Plc +1.85% +24.00 1,320.50
8 Pearson Plc +1.71% +16.20 962.20
9 Ocado Group Plc +1.61% +8.60 541.40
10 Prudential Plc +1.57% +12.40 802.80


Top 10 FTSE 100 Fallers

Sponsored by Plus500
# Name Change Pct Change Cur Price
1 Imperial Brands Plc -4.41% -83.50 1,808.50
2 Bp Plc -2.16% -10.30 466.20
3 Shell Plc -1.58% -39.50 2,458.00
4 Smith (ds) Plc -1.25% -4.00 315.10
5 Tesco Plc -1.01% -2.80 274.40
6 Gsk Plc -0.89% -14.80 1,653.20
7 Bhp Group Limited -0.78% -18.50 2,352.50
8 Itv Plc -0.69% -0.40 57.52
9 Unilever Plc -0.54% -21.50 3,964.50
10 Sainsbury (j) Plc -0.32% -0.80 250.00


US close: Stocks regain some of yesterday’s CPI-fuelled losses

US stocks closed higher on Wednesday as major indices attempted to bounce back from yesterday’s CPI-fuelled heavy sell-off.

At the close, the Dow Jones Industrial Average was up 0.40% at 38,424.27, while the S&P 500 advanced 0.96% to 5,000.62, and the Nasdaq Composite saw out the session 1.30% firmer at 15,859.15.

The Dow closed 151.52 points higher on Wednesday, taking only a small bite out of losses recorded in the previous session as hotter-than-expected inflation data led to a sell-off that saw the Street register its worst day since March 2023 as traders worried that the Federal Reserve may not cut interest rates quite as early as initially hoped.

The consumer price index gained 0.3% in January versus December and was 3.1% higher year-on-year, with economists originally expecting to see a 0.2% and 2.9% increase, respectively. This means January’s CPI reading likely pushes the likelihood of the central bank making any changes to interest rate policy out to the second half of the year – later than previous expectations of a rate cut taking place as early as March.

On the macro front, mortgage applications fell 2.3% in the week ended 9 February, according to the Mortgage Bankers Association, cutting into the prior week’s 3.7% increase and marking the second fall in mortgage demand so far this year. Applications to purchase a home fell 3% week-on-week, while those to refinance a home dropped 2%.

In the corporate space, Lyft traded higher in pre-market after the ride-sharing giant reported stronger-than-expected quarterly earnings, while online accommodation booking platform operator Airbnb was trading lower despite the company posting results that beat revenue expectations for its latest quarter.

Kraft-Heinz beat earnings per share estimates by a single cent but said revenues had fallen short of expectations amid market headwinds.

Elsewhere, Bitcoin was up 4.09% at the close, hitting its highest level in two years and pushing the bellwether cryptocurrency’s market cap back over $1.0trn as the growing success of US spot bitcoin ETFs lifted investor sentiment.


Thursday newspaper round-up: Rate cuts, Virgin Money, NatWest, Lyft

The Bank of England governor has doused hopes that better-than-expected inflation news last month will accelerate cuts in interest rates, stressing the need for further evidence of wage moderation before Threadneedle Street moves. Appearing before the House of Lords economics committee on Wednesday, Andrew Bailey said it was “encouraging” that inflation had remained unchanged at 4% in January but the previous month’s figure for the cost of living had been higher than predicted. – Guardian

Virgin Money bosses could be at risk of an embarrassing investor backlash, after an influential adviser hit out at a £2.6m package for its chief executive, David Duffy, saying it was “not appropriate” compared with the bank’s average employee. Pensions and Investment Research Consultants (Pirc), which advises shareholders including UK local authority pension funds, also raised concerns over what it said was “a lack of board-level accountability for sustainability issues” at Britain’s sixth largest lender. – Guardian

NatWest is poised to appoint an insider as chief executive in an effort to move on from its costly debanking crisis. The FTSE 100 bank is preparing to appoint interim chief Paul Thwaite to the role full-time. The board will meet on Thursday to approve the decision with confirmation expected on Friday when NatWest publishes its annual results. – Telegraph

Executives at Lyft were left red-faced after a typo in the ride-hailing company’s financial results prompted a near-70 per cent jump in its share price before the error was spotted and the gains fell away dramatically. The turbulent trading began when Lyft reported that its margin growth for the year ahead would be far better than expected, up by five percentage points in 2024 compared with last year. – The Times

One of Britain’s key producers of reinforced steel has been put up for sale by its Spanish parent company. The Celsa Steel UK plant in Cardiff, which has been supplying the vast Hinkley Point nuclear power station project in Somerset, claims to be the largest producer of reinforced steel for the British construction market and one of the country’s largest recyclers of scrap metal, which it uses to feed its electric arc furnaces. – The Times


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