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London open: Stocks gain as UK GDP misses expectations
London stocks rose in early trade on Thursday as weaker-than-expected UK growth figures added to expectations of a rate cut next month.
At 0820 GMT, the FTSE 100 was up 0.6% at 8,350.92.
Data released earlier by the Office for National Statistics showed the economy grew 0.1% in November following contractions of 0.1% in October and September. This was below expectations of 0.2% growth, however.
Most of the growth was put down to a 0.1% expansion in the services sector, following a revised 0.1% drop the month before.
The figures showed that production output fell by 0.4% in November following an unrevised 0.6% contraction in October, while construction output grew 0.4% following a revised 0.3% decline in October.
Liz McKeown, director of economic statistics at the ONS, said: “The economy continues to be broadly flat, having grown slightly in November following two small falls in the previous months.
“Services grew a little, with wholesaling, pubs and restaurants and IT companies all doing well, partially offset by falls in accountancy and business rental and leasing.
“Construction also grew led by new commercial developments, while production continued to decline in November with further falls across a range of manufacturing industries and oil and gas extraction.”
On Wednesday, ONS data showed that inflation unexpectedly fell in December after two months of increases.
Consumer price inflation rose 2.5%, down from 2.6% in November, and versus expectations for it to remain unchanged.
Meanwhile, core inflation – which excludes food and energy – declined to 3.2% from 3.5%, versus expectations for a smaller drop to 3.4%.
Services inflation eased to 4.4% in December from 5% the month before. Economists were expecting 4.8%.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “European markets are waking up with a spring in their step, thanks to cooling US core inflation and upbeat bank earnings fuelling risk-on sentiment. The FTSE 100 is joining the party, up 0.6% in early trading, despite UK GDP data for November that showed growth of a meagre 0.1%.
“Although this was shy of expectations it still signals some resilience, with services and construction pulling their weight despite a manufacturing slump. With inflation easing and sluggish economic growth, a 25bps rate cut by the Bank of England in February seems increasingly likely. UK government bond yields have felt an immediate impact, pulling back yesterday from multi-decade highs, offering some relief to risk-on investors and borrowers alike.”
In equity markets, Antofagasta jumped as it reported a 12% increase in copper production for the fourth quarter.
Trustpilot rallied as it said full-year constant currency bookings growth and adjusted EBITDA were set to be ahead of consensus.
Deliveroo and Bakkavor also gained after a fourth-quarter trading update and a full-year update, respectively.
On the downside, educational publisher Pearson was weaker even as it reported 3% underlying group sales growth for 2024, flagging expected adjusted operating profit of £595m to £600m, up 10% year-on-year, with a margin of 16.8%.
Primark owner AB Foods was under the cosh after a downgrade to ‘sell’ at Citi.
Taylor Wimpey lost ground as the housebuilder backed its profit expectations for the full year but sounded a note of caution as it pointed to increased build costs in 2025.
Dunelm fell as the homeware retailer reaffirmed its full-year profit expectations and reported an uptick in first-half, but said the environment remained “challenging”.
Premier Inn owner Whitbread was also in the red as it held full-year guidance and said UK accommodation sales in the Christmas/New Year period were up 2%.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Antofagasta Plc | +3.45% | +58.50 | 1,755.50 |
| 2 |  |
Banco Santander S.a. | +2.80% | +11.00 | 403.50 |
| 3 |  |
Wheaton Precious Metals Corp. | +2.16% | +100.00 | 4,740.00 |
| 4 |  |
Rolls-royce | +2.13% | +12.00 | 575.40 |
| 5 |  |
Prudential Plc | +1.99% | +12.20 | 624.80 |
| 6 |  |
Experian Plc | +1.82% | +64.00 | 3,582.00 |
| 7 |  |
Bae Systems Plc | +1.77% | +21.00 | 1,209.00 |
| 8 |  |
Beazley Plc | +1.63% | +13.00 | 811.00 |
| 9 |  |
Hsbc Holdings Plc | +1.55% | +12.50 | 816.90 |
| 10 |  |
Glencore Plc | +1.49% | +5.50 | 374.25 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Pearson Plc | -2.63% | -34.00 | 1,261.00 |
| 2 |  |
Wise Plc | -2.37% | -25.00 | 1,030.00 |
| 3 |  |
Associated British Foods Plc | -1.89% | -37.50 | 1,946.00 |
| 4 |  |
Ck Infrastructure Holdings Limited | -1.54% | -9.00 | 574.00 |
| 5 |  |
Ferguson Enterprises Inc. | -1.52% | -220.00 | 14,260.00 |
| 6 |  |
Marks And Spencer Group Plc | -1.45% | -4.90 | 332.30 |
| 7 |  |
Bt Group Plc | -1.21% | -1.70 | 138.90 |
| 8 |  |
Flutter Entertainment Plc | -1.17% | -250.00 | 21,160.00 |
| 9 |  |
Diploma Plc | -1.16% | -50.00 | 4,248.00 |
| 10 |  |
Sse Plc | -0.79% | -12.50 | 1,570.00 |
US close: Stocks surge as core inflation slows, bank results impress
US stocks surged on Wednesday after a closely watched inflation report showed an easing of underlying price pressures while quarterly results from the banking sector smashed expectations.
Earnings from heavyweights Goldman Sachs, JPMorgan Chase, Wells Fargo and Citigroup were lifting sentiment with share prices of all four banks rising strongly.
The Dow jumped 1.7% to 43,221.55, its highest close since 26 December, while the S&P 500 and Nasdaq gained 1.8% and 2.5% respectively.
According to the Department of Labor, the headline consumer price index for December was 2.9% higher than the year before, with the annual rate of inflation picking up for the third straight month due to a jump in gas prices. This was up from 2.7% in November but in line with economists’ forecasts.
However, core annual inflation, which strips out volatile food and energy prices, eased to 3.2% after three straight months at 3.3%, coming in slightly below expectations.
The data follows Tuesday’s producer price index for December, which showed that annual wholesale inflation increased less than predicted, to 3.3% from 3.0% the month before.
“Yesterday’s PPI data in the US raised the prospect that today’s figures wouldn’t come in too hot, and while the headline figures were slightly higher, the key core figures delivered the good news,” said Chris Beauchamp, chief market analyst at IG.
“Investors can live with a cautious Fed so long as inflation remains contained. Today’s news seems to support that thesis, and has seen risk appetite switch firmly back to bullish.”
The yield on the benchmark 10-year Treasury note dropped sharply on the back of the report and was sitting roughly 14 basis points lower at 4.655% in afternoon trade.
Elsewhere on the macro front, mortgage applications surged by 33.3% in the week ended 10 January, according to the Mortgage Bankers Association of America, erasing the previous four weekly declines with the sharpest increase seen since 2020.
Finally, the NY Empire State manufacturing index fell to -12.6 in January, down from 2.1 in December, according to the New York Federal Reserve, missing forecasts for an increase to 3 and marking a return to a contraction in manufacturing activity.
Banks impress with earnings
JPMorgan Chase reported Q4 earnings and revenues that came in ahead of expectations, while Wells Fargo said net interest income was set to grow, Goldman Sachs beat on both the top and bottom lines, and Citigroup shares traded higher after coming in better than consensus estimates with its Q4 earnings.
“There’s been a lot of talk about American exceptionalism, and it has undoubtedly helped deliver a stonking run for US markets over the past year,” said Danni Hewson, head of financial analysis at AJ Bell.
“Questions may abound about how long the run can last and whether Donald Trump’s form of isolationism will be a boon or a curse, but as a host of Wall Street banks delivered robust and even record-breaking profits, no one is really thinking about the answers just yet.”
Thursday newspaper round-up: Nuclear fusion, BT, Dyson
The UK government has promised a record £410m investment in nuclear fusion which could help construct a world-leading fusion power project on the site of an old coal plant in Nottinghamshire. Ministers hope the funding, which will be made available for the coming financial year, will support the rapid development of the UK fusion energy sector and deliver “a future powered by limitless clean energy”. – Guardian
A slump in trade with the EU should spur ministers to negotiate a fundamental rewrite of post-Brexit rules to more closely align the UK with Brussels, a leading left-of-centre thinktank has said. Donald Trump’s arrival in the White House next week should also encourage the government to get on the front foot in trade agreement talks with the US to support the growth of UK exports, said the Institute for Public Policy Research (IPPR). – Guardian
BT has scrapped a major electric car charging scheme after installing just one charging point. The telecoms giant last year outlined plans to convert old broadband street cabinets into electric vehicle (EV) charging points. Around 60,000 cabinets had been earmarked for possible conversion in what bosses described as a “once in a lifetime opportunity” to boost the number of chargers across the country. – Telegraph
Sales of Murphy’s Irish stout have skyrocketed amid claims of a nationwide Guinness shortage. Heineken, which owns Murphy’s, said sales of the 169 year-old stout had enjoyed a 632pc rise in British pubs and bars in December compared with a year earlier. – Telegraph
Dyson has scrapped plans to move into a £100 million technical and research centre in Bristol and will move all its staff in the southwest into one location. The vacuum and hairdryer maker, which announced the centre in 2023, will move 180 staff to its Malmesbury campus 30 miles away in Wiltshire, home to the Dyson Institute, where undergraduate and postgraduate engineers study while working for Dyson. – The Times
