ADVFN Morning London Market Report: Thursday 30 June 2022

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London open: Stocks slump amid recession fears; household incomes fall again

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London stocks slumped in early trade on Thursday amid ongoing concerns about a global downturn, as investors mulled the latest reading on UK GDP and household incomes.

At 0840 BST, the FTSE 100 was down 1.9% at 7,176.29.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “A sense of foreboding is again gripping financial markets, with anxiety rising that by attacking inflation, central banks risk severely weakening economies.

“Following fresh falls on Wall Street, Asian markets retreated and European indices also opened lower.”

Figures released earlier by the Office for National Statistics showed the economy grew 0.8% in the first quarter, in line with the initial estimate, and down from 1.3% growth in the fourth quarter of 2021.

On an annual basis, GDP growth for the first quarter was confirmed at 8.7%, up from 6.6% in the final quarter of last year.

ONS director of Economic Statistics, Darren Morgan, said: “Our latest estimate for economic growth in the first quarter is unrevised as a whole, showing the UK economy continued to recover from the pandemic.”

ONS data also showed that household incomes fell for the fourth quarter in a row in the first quarter of the year – the longest run of declines since 1955. Adjusted for inflation, disposable incomes fell 0.2%, leaving incomes down 1.3% on the year even before the increase in energy bills and National Insurance in April.

Capital Economics said: “The final Q1 GDP data leave households looking a bit more vulnerable to the big fall in real incomes that’s going to hit in Q2 and Q3.

“Although GDP and consumer spending won’t fall as far as real incomes, it’s pretty clear that the economy is going to be very weak for a while. A recession is a real risk.”

The latest survey from Nationwide was also in focus. It showed the pace of growth in house prices slowed in June from the previous month, with “tentative” signs of a slowdown in the market.

House prices in June were 0.3% higher than in May, when they rose 0.9%, and were up 10.7% year-on-year, a slowdown from May’s annual growth of 11.2%. Economists had forecast monthly and annual price rises of 0.5% and 10.8% respectively.

Investors were also digesting data out of China, which showed that activity in the manufacturing and services sectors rebounded in June as Covid restrictions were eased in Shanghai.

The official manufacturing purchasing managers’ index rose to 50.2 in June from 49.6 in May, coming in just below consensus expectations for a reading of 50.5 and marking its strongest level since February. Meanwhile, the non-manufacturing PMI ticked up to 54.7 in June from 47.8 the month before, versus consensus expectations of 50.5.

In equity markets, housebuilders were under the cosh after the release of the Nationwide survey, with Persimmon and Barratt among the worst performers on the FTSE 100.

Distribution and services group Bunzl rallied after it said first-half operating margin was expected to be slightly higher than historic levels as inflation and acquisitions drove underlying growth. Group revenue in the first half is expected to increase year-on-year by approximately 16% at actual exchange rates and by 12-13% on a constant currency basis, the company said.

Virgin Money also gained as it launched a £75m share buyback programme. It was also boosted by an upgrade to ‘overweight’ at Barclays.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Pearson Plc +0.35% +2.60 748.40
2 Bunzl Plc +0.11% +3.00 2,674.00
3 Morrison (wm) Supermarkets Plc +0.00% +0.00 286.40
4 Evraz Plc +0.00% +0.00 82.68
5 Royal Bank Of Scotland Group Plc +0.00% +0.00 120.90
6 Reckitt Benckiser Group Plc +0.00% +0.00 6,498.00
7 London Stock Exchange Group Plc +0.00% +0.00 8,620.00
8 Rsa Insurance Group Ld +0.00% +0.00 684.20
9 Standard Life Aberdeen Plc +0.00% +0.00 274.10

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Burberry Group Plc -5.13% -87.00 1,608.00
2 Easyjet Plc -4.89% -18.90 367.70
3 Marks And Spencer Group Plc -4.50% -6.30 133.80
4 Kingfisher Plc -4.44% -10.90 234.80
5 Intertek Group Plc -4.41% -192.00 4,158.00
6 Persimmon Plc -4.28% -82.00 1,833.00
7 Ocado Group Plc -4.27% -34.20 766.80
8 Barratt Developments Plc -4.20% -20.00 456.00
9 Smith (ds) Plc -4.07% -11.90 280.50
10 Mondi Plc -4.00% -60.50 1,452.50

 

US close: Stocks mixed following Powell’s ECB speech

Wall Street stocks turned in a mixed performance on Wednesday as market participants digested comments from Federal Reserve chairman Jerome Powell at the European Central Bank forum.

At the close, the Dow Jones Industrial Average was up 0.27% at 31,029.31, while the S&P 500 closed 0.07% weaker at 3,818.83 and the Nasdaq Composite saw out the session 0.03% softer at 11,177.89.

The Dow closed 82.32 points higher on Wednesday, reclaiming some of the losses recorded in the previous session when market participants came to terms with news that consumer confidence had hit a 16-month low.

Market participants were firmly focussed on goings-on across the pond on Wednesday, with Fed chairman Jerome Powell saying the US economy was in “strong shape” and that the central bank will be able to reduce inflation to 2% at the same time as maintaining a solid labour market.

On the macro front, the US economy shrank at a 1.6% annual clip in the first quarter of 2022, according to the Bureau of Economic Analysis, a sharp reversal from the 6.9% increase in the fourth quarter after corporate profits fell more than originally expected.

Elsewhere, mortgage applications rose 0.7% week-on-week in the seven days ended 24 June, according to the Mortgage Bankers Association, as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 5.84% from 5.98%.

In the corporate space, Bed, Bath and Beyond revealed chief executive Mark Tritton will depart the group after reporting a $357.7m first-quarter loss, while General Mills issued disappointing full-year profit guidance.

 

Thursday newspaper round-up: Gambling reform, Three Arrows Capital, Ocado

Ministers’ plans for reforming Britain’s gambling laws were in disarray on Wednesday as a rift emerged at the top of the Conservative party over whether to ban football shirt sponsorship and impose a levy to fund addiction services. Multiple sources said the process of putting the finishing touches to a white paper on gambling reform had driven a wedge between departments and senior MPs, with the publication deadline just weeks away. – Guardian

The government’s failure to tackle Russian kleptocrats laundering “dirty money” through the UK has led millions of pounds used to finance Putin’s invasion of Ukraine to flow through London, a powerful committee of MPs has warned. The commons foreign affairs committee said ministers’ complacency over “morally bankrupt billionaires using the UK as a safe deposit box” had led to “assets laundered through the UK … financing President Putin’s war in Ukraine”. – Guardian

Criminals are using deepfake video technology and stolen personal data to impersonate real people and apply for remote working jobs in the tech industry, the FBI has warned. The US law enforcement agency said it had received complaints about “voice spoofing” taking place during video interviews for remote workers, with the jobs being used to steal private information from corporate databases. – Telegraph

A cryptocurrency hedge fund set up by two former investment bankers has collapsed owing more than half a billion dollars. Three Arrows Capital entered liquidation on Wednesday after a British Virgin Islands court ruled in favour of creditors seeking repayment of debts. Shortly before its demise, the hedge fund had defaulted on a $674m loan, triggering creditors to seek its liquidation. – Telegraph

A City lawyer with 25 years’ experience, who ordered a client to “burn” a secure messaging system, told a judge he was unaware of the need to preserve evidence. Raymond McKeeve, formerly a partner at the law firm Jones Day, faces jail for contempt of court for advising an IT manager at a company set up by Jonathan Faiman, one of the founders of Ocado, to destroy messages to avoid them being handed over as part of a corporate espionage investigation. – The Times

 

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