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London open: Stocks fall as UK GDP data disappoints
London stocks fell in early trade on Monday, taking their cue from a downbeat Asian session, as investors mulled disappointing UK GDP data.
At 0830 BST, the FTSE 100 was down 0.5% at 7,634.49.
Figures released earlier by the Office for National Statistics showed that economic growth slowed more than expected in February. GDP rose just 0.1% on the month, down from 0.8% in January and coming in below consensus expectations of 0.3% growth.
That left the economy 1.5% above its pre-coronavirus pandemic level in February 2020.
The services sector grew by 0.2% and was the main contributor to February’s GDP growth. This was partially offset by production, which fell by 0.6% and construction, which dipped 0.1%.
Darren Morgan, director of economic statistics at the ONS, said growth was also held back by a reduction in the NHS Test and Trace and vaccination programmes, which had contributed strongly to GDP at the start of the year.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “It’s little wonder the economy overall is showing signs of stalling from its remarkable pandemic recovery, given the sense of foreboding which arose from mid-February as troops amassed on the Ukraine border and then the commodity shock unleashed by the invasion hit sentiment.
“Despite worries about consumer and company resilience this snapshot is unlikely to push the Bank of England off its path of rate hikes this year. Attempting to tame increasingly wild inflation is still set to be the priority. However, this reading does indicate the UK economy is showing more signs of fragility than the US.
“The saving grace for now are the piles of lockdown savings which many consumers were able to build up during the pandemic and which are now a soft pillow to land on as the headwinds of higher prices whip up, but this cushion flatten as the year progresses. So policymakers are likely to hold off from mirroring the Federal Reserve’s much more aggressive stance in terms of tightening monetary policy.”
Investors were also digesting the latest data out of China, which showed that annual inflation rose to 1.5% in March from 0.9% the month before, hitting a three-month high and topping analysts’ expectations of 1.2%.
In equity markets, Wood Group rallied after it said underlying results for FY21 remain in line with the guidance provided on 13 January.
Information and data company Ascential rose after it confirmed it was considering a break-up of the group. The announcement came after a Sky News report, citing unnamed sources as saying that Ascential, which has a market capitalisation of £1.49bn, is working with investment bankers on plans to demerge its digital operations and list them separately in the US.
In broker note action, advertising giant WPP was weaker after a downgrade to ‘neutral’ at Goldman Sachs, while Irn-Bru maker AG Barr fizzed higher after an upgrade to ‘buy’ at Berenberg. Sainsburys was boosted by an upgrade to ‘buy’ at Jefferies.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Pearson Plc | +2.02% | +15.40 | 777.60 |
| 2 |  |
Lloyds Banking Group Plc | +1.86% | +0.83 | 45.42 |
| 3 |  |
Barclays Plc | +1.63% | +2.36 | 146.96 |
| 4 |  |
Sainsbury (j) Plc | +1.62% | +4.00 | 250.60 |
| 5 |  |
Legal & General Group Plc | +1.56% | +4.20 | 273.00 |
| 6 |  |
Smurfit Kappa Group Plc | +1.53% | +47.00 | 3,117.00 |
| 7 |  |
Flutter Entertainment Plc | +1.36% | +114.00 | 8,510.00 |
| 8 |  |
Mondi Plc | +1.17% | +16.50 | 1,429.50 |
| 9 |  |
Associated British Foods Plc | +1.14% | +19.00 | 1,681.00 |
| 10 |  |
Informa Plc | +1.11% | +6.80 | 618.00 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Sse Plc | -2.20% | -40.00 | 1,777.00 |
| 2 |  |
Anglo American Plc | -2.01% | -84.00 | 4,086.50 |
| 3 |  |
Hargreaves Lansdown Plc | -1.80% | -18.50 | 1,012.00 |
| 4 |  |
Scottish Mortgage Investment Trust Plc | -1.73% | -16.80 | 956.20 |
| 5 |  |
Bhp Group Limited | -1.62% | -48.50 | 2,952.50 |
| 6 |  |
Prudential Plc | -1.59% | -17.50 | 1,085.00 |
| 7 |  |
Halma Plc | -1.50% | -38.00 | 2,494.00 |
| 8 |  |
Severn Trent Plc | -1.41% | -44.00 | 3,087.00 |
| 9 |  |
United Utilities Group Plc | -1.24% | -14.50 | 1,152.00 |
| 10 |  |
Auto Trader Group Plc | -1.09% | -7.00 | 637.20 |
Europe open: Shares weaker as China bond yields fall below US benchmark
European shares opened lower on Monday on the back of weaker Asian markets as Chinese bond yields fell below their US counterpart for the first time in a decade.
The pan-European Stoxx 600 index was down 0.6% with all regional bourses lower as investors eyed the outcome of the first round of France’s presidential election race and UK GDP figures.
In Paris, President Emmanuel Macron emerged as the winner in the first ballot and will now face the extreme right anti-immigrant Marine Le Pen in a runoff next week.
Macron topped Sunday’s first round of the French presidential election with 27.6% of the vote, ahead of Le Pen’s 23.4%.
In the UK, economic growth slowed more than expected in February, according to figures released by the Office for National Statistics.
GDP rose 0.1% on the month in February, down from 0.8% in January and coming in below consensus expectations of 0.3% growth. That left the economy 1.5% above its pre-coronavirus level in February 2020.
Investors were also fretting over China’s annual inflation rate hitting 1.5% in March, a three-month high. Producer prices were also higher than expected, surging 8.3% year-on-year above estimates for 7.9% as raw material costs surge on the back of supply chain bottlenecks and the war in Ukraine.
“The market is being dragged down by the prospect of softer demand from China after Shanghai continues its Covid-19 lockdown as Beijing focuses on its aggressive zero tolerance policy to the detriment of its economy,” said Victoria Scholar, head of investments at Interactive Investor.
“There are fears that lockdowns and economic restrictions could deepen if cases spread to other cities. Meanwhile on the supply side, the US and other countries are starting to find ways to reduce their energy dependence on Russia, plugging the shortfall by adding to rig counts and by planning reserve releases.”
On the equities front, shares in Societe Generale gained as it agreed to sell its stake in Rosbank and the Russian lender’s insurance subsidiaries to Interros Capital.
Real estate investor Alstria Office shares soared 11.6% after an announcement post-market closed last Friday that it was returning €1bn to shareholders.
US close: Stocks mixed as major indices deliver losing week
Wall Street stocks delivered a mixed performance on Friday as major indices turned in a losing week on the back of fears regarding a more aggressive stance against inflation by the Federal Reserve.
At the close, the Dow Jones Industrial Average was up 0.40% at 34,721.12, while the S&P 500 was 0.27% weaker at 4,488.28 and the Nasdaq Composite saw out the session 1.34% softer at 13,711.00.
The Dow closed 137.55 points higher on Friday, building on gains recorded in the previous session.
Comments from the central bank at its March meeting were still in focus throughout the course of the day, with the minutes revealing that policymakers planned to cut their bond holdings by a consensus amount of about $95.0bn per month and also indicating potential interest rate hikes of 50 basis points in future meetings.
Also drawing an amount of investor attention was news that at least 30 people had been killed and more than 100 wounded following a rocket attack on a railway station in Kramatorsk, Ukraine, according to the state railway company. Ukrainian officials laid the blame on Russia for the attack, stating it took place as civilians were attempting to evacuate to safer parts of the country. Russia has denied any involvement in the strike.
On the macro front, US wholesale inventories increased 2.50% month-on-month in February to $818.2bn, according to the Census Bureau, while January’s print was revised to show a 1.2% increase to $798.6bn.
No major corporate earnings were released on Friday but traders were looking ahead to earnings season, which will kick off next week, with reports from JPMorgan, Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo all due to report before the week is out.
Monday newspaper round-up: Twitter, mortgages, Boots
Elon Musk, Twitter’s biggest shareholder, has decided not to join the social media company’s board, its chief executive Parag Agrawal has said. Musk, who disclosed a 9.2% stake in Twitter just a few days ago, was offered a board seat and his appointment was to become effective on Saturday. But Agrawal posted on Twitter that Musk had declined the offer. “Elon shared that same morning that he will no longer be joining the board,” Agrawal said on Sunday. – Guardian
Homebuyers wanting to take out a mortgage could soon struggle to get the size of loan they need, as banks begin taking into account the cost of living crisis when calculating how much they can lend. Mortgage brokers have said soaring energy bills, the national insurance rise and a big increase in the cost of household goods are set to prompt banks to tighten their mortgage affordability tests, making it harder for consumers to borrow as much as previously. – Guardian
The American owner of Boots risks losing billions after the one-time favourite to buy the chemist chain valued the retailer at a steep discount. Buyout funds CVC and Bain indicated that they were willing to pay just £4bn for the business, according to City sources. The consortium bowed out of the running last month. A spokesman for Boots said that the pair did not lodge a formal offer. – Telegraph
Thousands of civil service jobs created to tackle the pandemic and Brexit face the axe as the Treasury attempts to rein in soaring Whitehall headcounts. Plans to slash as many as 40,000 roles will focus on cutting pandemic-related staff in the Department of Health and workers no longer needed after Brexit, The Telegraph can reveal. – Telegraph
Thorntons, Toyota and AB InBev are among the companies who failed to file their gender pay gap reports before the statutory deadline as officials seek to clamp down on regulatory breaches. Other big employers in Britain to miss the deadline included Pirelli, the tyre company, ScotRail, Taylor Wessing, the law firm, and Lenovo, the technology company, The Times has found. – The Times
