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London open: Stocks edge up after UK GDP data, ahead of Fed
London stocks edged up in early trade on Wednesday as weak UK GDP data raised expectations of a rate cut by the Bank of England, and as investors eyed the latest policy announcement from the US Federal Reserve.
At 0820 GMT, the FTSE 100 was up 0.2% at 7,554.02, while sterling was down 0.3% against the dollar at 1.2530 after figures from the Office for National Statistics showed that the economy unexpectedly shrank in October, with all three sectors contracting.
The economy shrank by 0.3% following 0.2% growth in September and versus expectations for a flat performance. Over the last quarter, GDP was unchanged.
The data showed that services output fell by 0.2% in October, driven by a decline in information and communication, and was the main contributor to the fall in GDP growth. The sector had grown 0.2% in September.
Meanwhile, production output was down 0.8%, driven by widespread declines in manufacturing, after showing no growth in September. Activity in the construction sector declined 0.5% in October following 0.4% growth the month before.
ONS director of economic statistics, Darren Morgan, said: “Our initial estimates suggest that GDP growth was flat across the last three months.
“Increases in services, led by engineering, film production and education – which recovered from the impact of summer strikes – were offset by falls in both manufacturing and housebuilding.
“October, however, saw contractions across all three main sectors. Services were the biggest driver of the fall with drops in IT, legal firms and film production – which fell back after a couple of strong months.
“These were also compounded by widespread falls in manufacturing and construction, which fell partly due to the poor weather.”
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “The UK is still mired deep in stagnation territory and a fast rebound looks unlikely, particularly given that interest rates are set to be kept on hold tomorrow, prolonging the pain for borrowers.
“However, it does increase the likelihood that the Bank of England might cut rates earlier than forecast, although it’s still not likely until the second half of next year, given that wage increases, although slowing, are still strong.”
Still to come, the US producer price index for November is due at 1330 GMT, while the Fed’s final policy announcement of 2023 is at 1900 GMT.
In equity markets, BAE Systems was in the black after it won a contract worth up to $8.8bn with the US Army to continue as the operating contractor of the Holston Army Ammunition Plant (HSAAP) with a base period of 10 years.
Entain shot higher as it said that chief executive officer Jette Nygaard-Andersen has resigned from her position with immediate effect. It has appointed Stella David, a non-executive director, as interim CEO until a permanent replacement is selected.
B&M European Value Retail tumbled after SSA investments sold 27.8m shares in the discount retailer in a placing. The shares were priced at 582.5p each, raising aggregate gross sale proceeds of £162.1m.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Imperial Brands Plc | +1.37% | +24.50 | 1,817.00 |
| 2 |  |
Astrazeneca Plc | +1.36% | +138.00 | 10,310.00 |
| 3 |  |
Sainsbury (j) Plc | +1.28% | +3.80 | 300.60 |
| 4 |  |
Rentokil Initial Plc | +1.26% | +5.20 | 417.80 |
| 5 |  |
Croda International Plc | +1.25% | +59.00 | 4,763.00 |
| 6 |  |
Crh Plc | +1.23% | +64.00 | 5,264.00 |
| 7 |  |
Flutter Entertainment Plc | +1.22% | +160.00 | 13,260.00 |
| 8 |  |
Relx Plc | +1.20% | +38.00 | 3,197.00 |
| 9 |  |
Persimmon Plc | +1.16% | +15.00 | 1,303.50 |
| 10 |  |
Associated British Foods Plc | +1.15% | +28.00 | 2,472.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Vodafone Group Plc | -2.15% | -1.44 | 65.67 |
| 2 |  |
Rightmove Plc | -1.61% | -9.60 | 585.20 |
| 3 |  |
Tui Ag | -1.20% | -7.50 | 615.00 |
| 4 |  |
Bt Group Plc | -1.19% | -1.50 | 124.70 |
| 5 |  |
Wpp Plc | -0.90% | -6.60 | 730.40 |
| 6 |  |
Bp Plc | -0.69% | -3.20 | 457.75 |
| 7 |  |
Shell Plc | -0.68% | -17.00 | 2,482.00 |
| 8 |  |
Legal & General Group Plc | -0.65% | -1.60 | 243.10 |
| 9 |  |
Glencore Plc | -0.57% | -2.50 | 433.80 |
| 10 |  |
Rolls-royce Holdings Plc | -0.56% | -1.70 | 303.00 |
US close: Stocks higher following CPI data
Wall Street stocks were higher at the close of trading on Tuesday as market participants digested key inflation data from the Bureau of Labor Statistics.
At the close, the Dow Jones Industrial Average was up 0.48% at 36,577.94, while the S&P 500 advanced 0.46% to 4,643.70 and the Nasdaq Composite picked up 0.70% to 14,533.40.
The Dow closed 173.01 points higher on Tuesday, reversing earlier losses and extending gains recorded in the previous session.
Tuesday’s primary focus was on news that the cost of living in the US had drifted a tad lower in November amid another decline in energy prices. According to the Department of Labor, in seasonally adjusted terms, the country’s consumer price index edged up by 0.1% month-on-month. In annual terms, on the other hand, the rate of change ticked lower by one-tenth of a percentage point to 3.1%. Annual core CPI, which excludes food and energy, was steady in comparison to the prior month at 4.0%.
The data also comes just ahead of the Federal Reserve‘s final monetary policy announcement of 2023, due on Wednesday, where it will mull over its policy decisions and present its economic forecast.
“The slightly stronger 0.28% m/m rise in core consumer prices in November suggests the Fed may be able to hang onto its tightening bias for a little longer, but sharper declines in inflation are still likely to result in rates being cut aggressively next year,” said Andrew Hunter, deputy chief US economist at Capital Economics.
Elsewhere on the macro front, the National Federation of Independent Business‘ small business optimism index fell for a fourth month in a row to hit 90.6 in November, its lowest level since May and down from 90.7 in October and short of forecasts for a reading of 90.7
Owners expecting business conditions to improve over the next six months increased one point to -42%. However, 40% of all owners reported job openings they could not fill in the current period, down three points month-on-month, while the net percentage of owners raising average selling prices decreased five points from October to 25% in November.
In the corporate space, tech firm Oracle traded lower after revealing second-quarter revenues had fallen short of expectations on the Street, while toymaker Hasbro also headed south on the back of news that it was laying off roughly 1,100 staff members.
Wednesday newspaper round-up: Sainsbury’s, Boots, IDS, Purplebricks
Regulators should take action to curb a sharp rise in the price of infant formula, pregnancy campaigners have said, after a UK survey found more than half of women felt anxious about the cost of feeding their babies, with the number who expressed concerned rising by a quarter in two years. The British Pregnancy Advisory Service (BPAS) found 65% of mothers were worried about the price of feeding their babies, and the same number said it had a negative impact on their family’s finances. A third of women felt it was “better” for babies to be fed the more expensive milk, despite there being no nutritional benefits. – Guardian
The chief executive of Sainsbury’s has defended its decision to sell data on the shopping habits of his customers to TV and consumer goods manufacturers looking to target their advertising. Simon Roberts has said the supermarket group protects personal data “incredibly carefully” and that its strategy had made adverts more “relevant” for shoppers. – Guardian
The US owner of Boots is weighing a £7bn UK listing of the high street pharmacy chain in plans that could provide a much-needed boost for London’s ailing stock market. Walgreens Boots Alliance is understood to be looking at options for Boots, two years after it abandoned a sale of the 174-year-old UK company. Boots’ management is said to be pushing Walgreens toward an initial public offering (IPO) which would mark a return of the company to the London Stock Exchange (LSE) following a 16-year hiatus. – Telegraph
The Royal Mail owner International Distributions Services (IDS) is mulling a bid of up to €500 million for Packeta, a Czech parcels business. The group, which operates in Slovakia, Poland, Hungary, Romania and Germany as well as the Czech Republic, was put up for sale in May this year. The latest round of bids are due to be tabled by Friday. – The Times
Homeowners can now sell their houses for nothing through Purplebricks as the online estate agent tries to claw back market share it lost over the past couple of chaotic years. The agent, which unlike its more traditional rivals has no high street presence, will value a home, list it on Zoopla and handle the negotiation process free of charge. – The Times
