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London open: Stocks steady ahead of services data
London stocks were little changed in early trade on Monday as investors digested a grim outlook from the Confederation of British Industry and eyed the latest reading on the UK services sector.
At 0825 GMT, the FTSE 100 was flat at 7,554.96.
Investors were mulling the latest data out of China, which showed that activity in the services sector shrank further in November, hitting a six-month low amid Covid restrictions.
The Caixin services purchasing managers’ index fell to 46.7 from 48.4 in October, coming in below consensus expectations of 48.0 and marking the third contraction in a row.
Wang Zhe, senior economist at Caixin Insight Group, said: “Since October, the impact of Covid outbreaks has taken a heavy toll on the economy, and the challenge of how to balance Covid controls and economic growth has once again become a core issue.
“The market is in urgent need of policies to promote employment and stabilise domestic demand. Beijing should further coordinate fiscal and monetary policies to expand domestic demand and boost incomes of the poorer parts of the population.”
On home shores, meanwhile, the CBI said in its latest economic forecast that the UK economy is likely to have fallen into recession in the third quarter of 2022, when GDP shrank by 0.2%.
The CBI also said it now expects UK GDP to shrink by 0.4% in 2023, down from a previous forecast of 1% growth.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Predictions of chronic stagflation for the UK, even once the economy edges out of recession, is a background downbeat tune indices in London will be moving to.
“There is set to be a lacklustre start for the FTSE 100 as investors digest uncertainty on Wall Street and the more positive trading sessions in Asia. Predictions from the Confederation of British Industry will also weigh on minds.
“Although their forecast for a 0.4% contraction in output next year is more optimistic than the Bank of England’s bleak prediction, it is the outlook for the decade ahead which makes for difficult reading. The CBI warns that companies will face significant challenges through a long period of elevated inflation and stagnant growth, unless fresh investment can be unlocked.
“Finding the key to do that is proving a big challenge, with the UK government hesitant about bringing in further tax incentives, while some companies appear to be battening down the hatches amid global uncertainty.”
Looking ahead to the rest of the day, the S&P Global/CIPS services purchasing managers’ index for the UK for November is due at 0930 GMT.
In equity markets, Asia-focused Prudential was the top gainer on the FTSE 100, likely boosted by the further easing of some Covid restrictions in China.
Miners – which are heavily dependent on demand from China – were also on the front foot – with Rio Tinto, Glencore, Anglo American and Antofagasta all up.
Vodafone rallied as it said that chief executive Nick Read would step down at the end of the year. Chief financial officer Margherita Della Valle has been appointed interim CEO and “will accelerate the execution of the company’s strategy to improve operational performance and deliver shareholder value”, the company said.
Streeter said: “Investors will be hoping that a change at the top at Vodafone might inject a new longer-term lease of life in the company’s share price.”
On the downside, housebuilder Persimmon was hit by a downgrade to ‘hold’ from ‘buy’ at Jefferies.
Top 10 FTSE 100 Risers
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Prudential Plc | +5.29% | +54.50 | 1,085.00 |
| 2 |  |
Rio Tinto Plc | +2.81% | +157.00 | 5,741.00 |
| 3 |  |
Anglo American Plc | +2.56% | +84.50 | 3,380.50 |
| 4 |  |
Glencore Plc | +2.24% | +12.50 | 570.80 |
| 5 |  |
Carnival Plc | +2.10% | +14.60 | 711.20 |
| 6 |  |
Fresnillo Plc | +1.94% | +17.40 | 913.00 |
| 7 |  |
Antofagasta Plc | +1.81% | +26.00 | 1,460.50 |
| 8 |  |
Bhp Group Limited | +1.77% | +45.50 | 2,616.50 |
| 9 |  |
Ferguson Plc | +1.47% | +138.00 | 9,550.00 |
| 10 |  |
Ocado Group Plc | +1.31% | +8.80 | 679.20 |
Top 10 FTSE 100 Fallers
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Gsk Plc | -1.35% | -19.20 | 1,404.80 |
| 2 |  |
Melrose Industries Plc | -1.32% | -1.70 | 126.80 |
| 3 |  |
Coca-cola Hbc Ag | -1.13% | -23.00 | 2,006.00 |
| 4 |  |
Persimmon Plc | -1.08% | -14.00 | 1,281.50 |
| 5 |  |
Spirax-sarco Engineering Plc | -1.05% | -120.00 | 11,360.00 |
| 6 |  |
Compass Group Plc | -1.01% | -19.00 | 1,856.00 |
| 7 |  |
Halma Plc | -0.98% | -22.00 | 2,227.00 |
| 8 |  |
Sage Group Plc | -0.90% | -7.20 | 794.60 |
| 9 |  |
Smith & Nephew Plc | -0.87% | -9.50 | 1,080.00 |
| 10 |  |
Relx Plc | -0.86% | -20.00 | 2,317.00 |
Monday newspaper round-up: RMT, Christmas cost, Smith & Nephew
The RMT has rejected an offer from rail employers aimed at heading off more strikes. The Rail Delivery Group (RDG) offered the union a pay rise of 8% over two years with a guarantee of no compulsory redundancies to April 2024, in an attempt to resolve a long-running dispute over jobs, pay and conditions. The RMT’s general secretary, Mick Lynch, said: “We have rejected this offer as it does not meet any of our criteria for securing a settlement on long-term job security, a decent pay rise and protecting working conditions. – Guardian
The cost of the items that make up a traditional Christmas dinner has risen three times faster than wages this year, according to research from the Trades Union Congress (TUC). In a series of calculations to back its calls for more government action on the cost of living crisis, the trade union body said Christmas staples such as a turkey, pigs in blankets, carrots and roast potatoes had risen in price by an average of 18% in the space of a year, while wages had gone up by only 5.7%. – Guardian
British Gas has applied to shut down dozens of its business customers this year over unpaid bills as the energy crisis leaves companies battling to meet soaring costs. The supplier, which is owned by Centrica, has issued 37 winding-up petitions so far this year, 13 of which have led to the business being wound-up, according to analysis of court records by The Telegraph. – Telegraph
The Opec cartel has warned it could take immediate action on adjusting oil output as the group of producing nations braces for the fallout of fresh Western sanctions on Russia. Opec, which comprises 23 nations including Saudi Arabia, said it was maintaining its policy of reducing production by two million barrels per day which came into force last month and will run to the end of next year. – Telegraph
The government has no plan for growth and must take urgent steps to rectify a chronic lack of investment, the CBI warns today, as it slashes its forecasts for the economy. Predicting that the economy will shrink by 0.4 per cent next year, a “significant downgrade” on June’s estimate of a 1 per cent rise in GDP, the business lobby group called on the prime minister and chancellor to “use levers of growth to ensure this downturn is as short and shallow as possible”. – The Times
Ministers committed more than £12 million of public money to a new Smith & Nephew research and development and manufacturing facility in Britain amid fears the company would relocate overseas. The FTSE 100 medical equipment maker announced in June that it was investing more than $100 million on the new site on the outskirts of Hull, securing the company’s future close to the city where it was founded in 1856. – The Times
