Stocks in London Rise as U.S. Central Banker Sends Hawkish Signal, UK Enters Recession – Latest Updates

(Alliance News) – Stock prices in London rose midday Thursday after a U.S. central banker offered some hawkish words and new figures confirmed Britain would enter a recession at the end of 2023.

The FTSE 100 index rose 20.39 points, or 0.3%, to 7,952.37. The FTSE 250 rose 52.23 points, or 0.3%, to 19,862.89 and the AIM All-Share rose 1.29 points, or 0.2%, to 743.40.

The Cboe UK 100 rose 0.2% to 794.61, the Cboe UK 250 rose 0.3% to 17,279.78 and the Cboe Small Companies fell 0.8% to 14,530.74.

Among European stocks, the CAC 40 in Paris rose 0.4% on Thursday, while the DAX 40 in Frankfurt rose 0.1%.

The UK slipped into a technical recession in the fourth quarter of 2023, figures from the Office for National Statistics confirmed on Thursday.

Britain’s gross domestic product fell 0.3% quarter-on-quarter in the three months to December, unchanged from the first ONS figures in February. In the third quarter of 2023, the British economy fell by 0.1% compared to the previous quarter.

This means that at the end of last year the UK entered a technical recession, generally defined as two consecutive quarterly declines in gross domestic product.

Hargreaves Lansdown analyst Susannah Streeter commented: “Confirmation that the UK entered recession at the end of last year has not dampened sentiment… The ONS snapshot also shows that savings have remained relatively high and in real terms Household disposable income increased in the final quarter of the year, raising hopes that consumer resilience has increased and the recession was very short-lived.”

Sterling was trading at $1.2624 early Thursday, down from $1.2630 at the close in London on Wednesday. The euro was trading at $1.0794 early Thursday, down from $1.0823 late Wednesday. Against the yen, the dollar was trading at JPY 151.37, slightly higher than JPY 151.35.

Investors will also keep an eye on the latest core data on personal consumption expenditures, the Fed’s preferred indicator of inflation, due out on Friday. However, financial markets around the world, including London and New York, will remain closed on the day in observance of Good Friday.

According to the consensus cited by FXStreet, core PCE inflation is expected to have remained unchanged at 2.8% in February. Headline inflation is expected to have risen to 2.5% in February from 2.4% in January.

The Federal Reserve should either scale back or delay its interest rate cuts in response to “disappointing” inflation data, a senior Federal Reserve official said on Wednesday.

“In my opinion, it is appropriate to reduce the total number of rate cuts or push them further into the future in response to the recent data. The shorter-term inflation measures tell me that progress is improving [bei der Senkung der Inflation] has slowed down and possibly come to a standstill. But we need more data to know,” Fed Governor Christopher Waller said at a conference in New York.

He continued: “I see that economic performance and the labor market remain strong, while progress in reducing inflation has slowed. Based on these signs, I see no rush to move towards easing monetary policy.

On Thursday, US gross domestic product and initial jobless claims (both at 1230 GMT) and the Michigan consumer sentiment index (at 1400 GMT) are still on the economic calendar.

AJ Bell said GDP and consumer sentiment “will dominate the agenda.”

“These releases will provide insight into whether the Federal Reserve is reaching a ‘soft landing’ for the economy on the path to rate cuts,” said AJ Bell’s Mold.

Stocks in New York were described as subdued, with the Dow Jones Industrial Average, S&P 500 Index and Nasdaq Composite all hovering around zero.

In the FTSE 100, JD Sports was the best performer, rising 9.8%.

The retailer said it outperformed the activewear market for the 53 weeks ended Feb. 3. Like-for-like sales rose 4.2% year-on-year and 8.4% on a constant currency basis, while total sales grew 3.6% to around £10.5 billion.

The company expects pre-tax profit to be within the forecast range of £915m to £935m, up from £991.4m last year.

“We have made good strategic progress, opening 215 new JD stores and focusing our efforts on developing JD and increasing earnings per share by assuming full control of ISRG and MIG,” said Chief Executive Officer Regis Schultz.

JD Sports gave an initial 2025 profit forecast of between £900m and £980m and said trading in the new financial year was in line with expectations after seven weeks.

Severn Trent fell 1.8% while United Utilities lost 1.5%. Troubled Thames Water said its shareholders will not pay the first £500m of funding agreed last summer into the group because the company’s business plan is “uninvestable” due to industry regulations.

Thames Water – the UK’s largest water supplier, serving 15 million households in London and the south-east of the country – said the funding plan set out last July was subject to conditions, including a business plan supported by “appropriate regulatory arrangements”.

Aviva shares fell to a low of 492.30 pence per share in after-hours trading before settling down 0.4% to 494.47 pence.

Exane BNP downgraded Aviva from neutral to underperform and lowered its target price to 420p from 445p. Exane BNP also downgraded Legal & General to ‘neutral’ from ‘outperform’ and lowered its target price to 270p from 280p. L&G shares fell 0.4%.

Meanwhile, the UK Competition and Markets Authority has decided not to refer Aviva’s proposed takeover of AIG’s life insurance and pensions business AIG Life to a phase 2 investigation.

The UK Competition Authority said this decision was made based on the information currently available and that a further announcement on this decision will be made “as soon as possible”.

In February, the CMA said it was investigating the deal because it could harm competition in Britain’s services sector.

In the FTSE 250, AO World was the best performer, up 16% and up more than 60% in the last 12 months.

The electronics retailer raised its full-year forecast as its focus on “profit and cash generation” is paying off.

The electrical retailer expects adjusted pre-tax profit for the financial year ending March 31 to be “at least” at the top end of the £28m-33m range. The company raised its outlook to this range in November.

AO World expects annual sales to be around £1.04 billion, down 8.7% from £1.14 billion.

The company reports its annual results on June 26th.

Elsewhere in London, abrdn Property Income fell 9.1% after the property trust’s shareholders rejected a proposed merger with Custodian Property Income REIT, which itself rose 6.5%.

After the market closed on Wednesday, API announced that shareholders had not given sufficient support to its proposed merger with CREI.

API said that a total of 61% of API shares that voted at the court meeting, 61% of API shares that voted at the general meeting and 86% of API shareholders who voted at the court meeting for approved the implementation of the merger.

This is below the required threshold of 75%, measured by the value of API shares at the court meeting and the general meeting, and the majority of API shareholders who voted at the court meeting, API said.

As a result, API intends to conduct an orderly liquidation, as previously announced.

Brent oil was trading at $86.36 a barrel midday Thursday, up from $85.41 late Wednesday.

Gold was trading at USD2,212.74 an ounce at midday on Thursday, up from USD2,190.33 at Wednesday’s close.

By Greg Rosenvinge, Senior Reporter at Alliance News

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2024-03-29 04:32:56
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