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London open: Gains muted as UK economy contracts again
London stocks were in the black in early trade on Friday but gains were muted as data showed the UK economy unexpectedly contracted again in October.
At 0820 GMT, the FTSE 100 was up 0.1% at 8,319.24.
Figures released earlier by the Office for National Statistics showed the economy shrank 0.1%. This followed a 0.1% decline in September and missed expectations for 0.1% growth.
The data showed that production output fell by 0.6% due to a decline in manufacturing and mining and quarrying output, following a fall of 0.5% in September.
Meanwhile, construction output was down 0.4% in October following growth of 0.1% the month before.
Liz McKeown, director of economic statistics at the ONS, said: “The economy contracted slightly in October, with services showing no growth overall and production and construction both falling.
“Oil and gas extraction, pubs and restaurants and retail all had weak months, partially offset by growth in telecoms, logistics, and legal firms. However, the economy still grew a little over the last three months as a whole.”
Paul Dales, chief UK economist at Capital Economics, said: “The weak starting point for the quarter means that it is unlikely that GDP will match our 0.2% q/q Q4 forecast or the Bank of England’s 0.3% q/q forecast.
“That said, with the Bank still worrying that inflation is too high, we don’t think the economy is weak enough to prompt the Bank to follow November’s 25bps rate cut with another cut at next Thursday’s December meeting. That said, we’re not as confident about that as we were before this data release.”
Elsewhere, a long-running survey showed that consumer confidence nudged modestly higher in December.
The latest consumer confidence index from GfK was -17, up one point on November and continuing a run of modest increases. However, it was only five points stronger than December 2023, when the index was -22.
The index for expectations about the economy over the next 12 months was unchanged at -26.
The major purchase index was also flat, at -16. “Consumers are still thinking twice about big ticket purchases, and whether they will bring Christmas cheer,” said Neil Bellamy, consumer insights director at GfK
However, the personal financial situation measure for the coming year improved by two points, nudging back into positive territory at 1 and echoing the more upbeat trends seen in spring and summer.
Bellamy said: “In December, consumers adopted the holding pattern we’ve seen for much of 2024, with the one point increase to -17 very close to the 2024 average of -18.
“Consumer confidence is still far from strong, but there is some room for optimism.
“We need to see robust improvements in these perceptions [about the economy] before we can start talking about sustained improvements in the consumer mood.”
In equity markets, Tullow Oil edged lower, having surged on Thursday as it emerged the oil and gas exploration company was in preliminary takeover talks with US-based Kosmos Energy.
Asset manager Schroders ticked higher following a report it is looking to sell its Indonesian business as it considers exiting some sub-scale markets under new boss Richard Oldfield.
After several disappointing results, Oldfield is attempting to turn the company around by offloading underperforming units, the Reuters news agency reported citing two unnamed sources with knowledge of the matter.
St James’s Place was boosted by an upgrade to ‘buy’ at Deutsche Bank, while Greggs rose after an initiation at ‘outperform’ by RBC Capital Markets.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Banco Santander S.a. | +1.69% | +6.50 | 390.50 |
| 2 |  |
Diageo Plc | +1.45% | +37.00 | 2,595.50 |
| 3 |  |
Aib Group Plc | +1.36% | +6.00 | 447.00 |
| 4 |  |
Pershing Square Holdings Ltd | +1.13% | +44.00 | 3,936.00 |
| 5 |  |
Auto Trader Group Plc | +1.00% | +8.20 | 826.80 |
| 6 |  |
Coca-cola Europacific Partners Plc | +0.96% | +60.00 | 6,280.00 |
| 7 |  |
Next Plc | +0.96% | +94.00 | 9,864.00 |
| 8 |  |
Admiral Group Plc | +0.91% | +24.00 | 2,652.00 |
| 9 |  |
Flutter Entertainment Plc | +0.86% | +190.00 | 22,290.00 |
| 10 |  |
Imperial Brands Plc | +0.85% | +22.00 | 2,616.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Hemogenyx Pharmaceuticals Plc | -2.33% | -10.00 | 420.00 |
| 2 |  |
Bae Systems Plc | -1.07% | -13.00 | 1,201.50 |
| 3 |  |
Anglo American Plc | -0.99% | -25.00 | 2,497.50 |
| 4 |  |
Astrazeneca Plc | -0.93% | -98.00 | 10,470.00 |
| 5 |  |
Ck Infrastructure Holdings Limited | -0.92% | -5.00 | 540.00 |
| 6 |  |
Prudential Plc | -0.75% | -5.00 | 657.80 |
| 7 |  |
Rio Tinto Plc | -0.73% | -36.50 | 4,963.50 |
| 8 |  |
Bhp Group Limited | -0.63% | -13.00 | 2,058.00 |
| 9 |  |
Wheaton Precious Metals Corp. | -0.61% | -30.00 | 4,880.00 |
| 10 |  |
Melrose Industries Plc | -0.36% | -2.00 | 556.20 |
US close: Stocks slip as traders digest data ahead of Fed meeting
US stocks broadly declined on Thursday with the Nasdaq pulling back from a record high, as investors digested inflation and labour-market data ahead of the Federal Reserve’s final policy meeting of the year next week.
Jobless claims jumped last week, while wholesale inflation figures for November came in a little stronger than expected, but that didn’t alter market bets for another rate cut next week. Wednesday’s consumer price index report for last month was in line with estimates, underscoring the belief that the central bank will likely lower the Fed Funds Rate by 25 basis points.
The Dow declined for the sixth day running, falling 0.5% to 43,914.12, having now dropped 2.4% since setting a record closing high of 45,014.04 on 4 December.
The S&P 500, which reached an all-time high of 6,090.27 last week, declined 0.5% to 6,051.25. Meanwhile, the Nasdaq slipped 0.7% to 19,902.84, pulling back from Wednesday’s record peak of 20,034.90.
The US producer price index rose by 0.4% in November, compared with an upwardly revised 0.3% gain in October and ahead of the 0.2% increase expected by analysts. However, core inflation – which excludes food, energy and trade services – eased to 0.1% from 0.3%.
“Goods prices were the driver of the upside surprise due to a boost from food prices, which is unlikely to be sustained. Encouragingly, though, core producer prices registered the smallest monthly gain since May 2023,” said Matthew Martin, senior US economist at Oxford Economics.
The annual rate of wholesale inflation picked up to a 21-month high of 3.0%, compared with expectations of no change from October’s 2.6% level. However, the core annual rate held steady at 3.5%.
Elsewhere on the macro front, initial jobless claims unexpectedly increased by 18,000 to 242,000 last week, compared with the consensus forecast for a drop of 4,000 from the prior week’s upwardly revised reading to 220,000, marking the steepest new claims count since October.
Continuing claims rose by 15,000 to 1.86m, close to November’s three-year high of 1.90m, while the four-week moving average, which aims to strip out week-to-week volatility, rose by 5,750 to 224,250.
Adobe slumps
Software giant Adobe was the big mover of the day, dropping 14% after revenue guidance for its first quarter underwhelmed. The company pointed to revenues of $5.63bn-5.68bn, short of the $5.73bn expected by the market.
Warner Bros Discovery’s plans to restructure were welcomed by the market, with the entertainment stock popping 15%. The company said it will segment its business into two new divisions – linear networks and streaming/studios – to “enhance strategic flexibility and create potential opportunities to unlock additional shareholder value”.
Drinks companies were bubbling higher after Deutsche Bank upgraded Coca-Cola, PepsiCo and Keurig Dr Pepper to ‘buy’ from ‘neutral’, while confectionary group Hershey was hit with a downgrade by Wells Fargo to ‘underweight’ from ‘equal weight’.
Friday newspaper round-up: Shein, clean power, farmers
Britain’s financial regulator is taking longer than usual to approve the fast-fashion retailer Shein’s stock market listing because it is checking its supply chain oversight and assessing legal risks after an advocacy group for China’s Uyghur population challenged the listing, according to two sources close to the matter. Britain’s Independent Anti-Slavery Commissioner, a monitoring body of the Home Office, has also raised concerns within government over a Shein initial public offering (IPO) because of allegations about labour practices at its suppliers. – Guardian
Labour’s plan to switch to a clean power system by 2030 faces “significant challenges” to avoid delays and prevent vulnerable households paying higher bills, experts have warned. The UK Energy Research Centre (UKERC) has said there is “very little room for error” in meeting the government’s plan to create a 95% low-carbon electricity grid by the end of the decade. – Guardian
Britain’s workforce will shrink to a record low as a surge in the number of people who are too sick to work drags on the economy. Projections by the tax and spending watchdog show the share of over-16s in work or looking for a job will never get back to pre-lockdown levels, as an ageing population and rising ill health leaves a permanent scar on the economy. The Office for Budget Responsibility (OBR) believes the share of the adult population either in employment or looking for a job will fall to just 61.8pc in the 2060s. – Telegraph
Britain’s farmers are braced for £600m of collective losses after poor weather led to the second-worst harvest on record. According to figures from the Department for Environment, Food and Rural Affairs, the UK’s harvested wheat crop plunged to 11.1m tonnes in 2024, down from 14m the year prior. – Telegraph
Britain’s farmers are braced for £600m of collective losses after poor weather led to the second-worst harvest on record. According to figures from the Department for Environment, Food and Rural Affairs, the UK’s harvested wheat crop plunged to 11.1m tonnes in 2024, down from 14m the year prior. – The Times
