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London open: Stocks fall as IMF downgrades UK growth forecast
London stocks edged lower in early trade on Tuesday following downbeat sessions in the US and Asia, and after the International Monetary Fund downgraded its UK growth forecast.
At 0820 GMT, the FTSE 100 was down 0.3% at 7,763.38.
The IMF said UK GDP was set to shrink 0.6% this year, down 0.9 percentage point from October’s forecast and the worst outlook for any G7 country this year.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “This is a direct contrast to other major economies who have seen their outlooks upgraded because of resilient consumer demand. The UK is facing some specific problems, including its over-exposure to high energy retail prices, which are weighing on household budgets.
“The UK also has a significant labour problem, which was initially caused by Brexit but has been made worse by a shrinking workforce since the pandemic. Mortgage rates are also prohibitively high in the UK which adds further pressure to the economy because it limits how much money people will spend on non-essentials.
“Ultimately, the UK has a productivity and demand problem, which when put together creates a very difficult environment. There’s a chance the UK could muster a better performance than the IMF is predicting, given upgrades to expectations from other bodies in recent months. The market will remain very sensitive to interest rate and inflation readings until we have a clear path out of the stagnation.”
Market participants were also mulling better-than-expected data out of China, which showed that economic activity expanded in January after four months of contraction as the economy reopened from strict zero-Covid curbs.
The official purchasing managers’ index for manufacturing, which measures factory activity, jumped to 50.1 in January from 47 in December, according to the National Bureau of Statistics.
This marked the first time the gauge has crossed the 50 mark that separates contraction from expansion since September.
There was a bigger-than-expected jump in the non-manufacturing PMI, which came in at 54.4 in January, higher than the consensus of 52.0, and sharply up from the 41.6 reading in December.
In equity markets, Pets at Home surged as it lifted its full-year profit guidance following record third-quarter consumer revenues. The pet retailer now expects FY23 group underlying pre-tax profit to be towards the upper end of the consensus range of £126m to £136m, up from previous guidance of around £131m.
Irn-Bru and Rubicon maker AG Barr fizzed higher after saying it was set to deliver full-year profit “slightly ahead” of current market expectations following a strong second-half sales performance.
Johnson Matthey gained after inking a long-term strategic partnership to supply Plug Power with the advanced materials necessary for its fuel cells and electrolysers from 2023.
In broker note action, caterer Compass Group was boosted by an upgrade to ‘buy’ at HSBC, while advertising giant WPP rose after an upgrade to ‘overweight’ at Barclays.
On the downside, JD Wetherspoon was knocked lower by a downgrade to ‘hold’ at HSBC.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Compass Group Plc | +1.60% | +30.50 | 1,937.00 |
| 2 |  |
Diageo Plc | +1.36% | +46.50 | 3,457.00 |
| 3 |  |
Phoenix Group Holdings Plc | +0.66% | +4.20 | 639.40 |
| 4 |  |
Centrica Plc | +0.60% | +0.60 | 101.05 |
| 5 |  |
Gsk Plc | +0.50% | +7.00 | 1,420.00 |
| 6 |  |
Coca-cola Hbc Ag | +0.44% | +8.50 | 1,950.00 |
| 7 |  |
Bae Systems Plc | +0.37% | +3.20 | 859.00 |
| 8 |  |
Auto Trader Group Plc | +0.32% | +2.00 | 623.20 |
| 9 |  |
Imperial Brands Plc | +0.30% | +6.00 | 2,028.00 |
| 10 |  |
Admiral Group Plc | +0.09% | +2.00 | 2,205.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Fresnillo Plc | -2.92% | -24.40 | 812.00 |
| 2 |  |
Carnival Plc | -2.70% | -21.20 | 762.60 |
| 3 |  |
Ocado Group Plc | -2.52% | -17.20 | 665.20 |
| 4 |  |
Anglo American Plc | -1.95% | -68.50 | 3,452.00 |
| 5 |  |
Mondi Plc | -1.85% | -28.50 | 1,512.00 |
| 6 |  |
Rolls-royce Holdings Plc | -1.83% | -2.00 | 107.12 |
| 7 |  |
Berkeley Group Holdings (the) Plc | -1.79% | -75.00 | 4,106.00 |
| 8 |  |
Smurfit Kappa Group Plc | -1.77% | -60.00 | 3,334.00 |
| 9 |  |
Easyjet Plc | -1.68% | -8.40 | 490.30 |
| 10 |  |
Scottish Mortgage Investment Trust Plc | -1.62% | -12.20 | 740.20 |
US close: Stocks head south ahead of FOMC policy meeting
Major US indices were in the red at the end of trading on Monday as market participants gear up for a busy week of earnings season and await the Federal Reserve’s latest policy decision.
At the close, the Dow Jones Industrial Average was down 0.77% at 33,717.09, while the S&P 500 slipped 1.30% to 4,017.77 and the Nasdaq Composite saw out the session 1.96% weaker at 11,393.81.
The Dow closed 260.99 points lower on Monday, easily reversing gains recorded in the previous session after the Bureau of Economic Analysis revealed that the personal consumption expenditures price index rose 0.1% month-on-month in December.
Wall Street’s year-to-date rally will be put to the test this week, with the likes of McDonald’s, General Motors, Apple, Meta Platforms, Amazon, and Alphabet all reporting over the next five days.
Investors will also look to the Federal Open Market Committee, which meets on Tuesday and Wednesday, with the central bank expected to raise interest rates by 0.25%. Traders will also look for hints as to just how much longer the Fed intends to hike rates in order to fight off inflation.
On the macro front, the Dallas Federal Reserve‘s manufacturing index rose 11.6 points to -8.4 in January, with the production index, a key measure of state manufacturing conditions, falling from 9.1 to 0.2.
Tuesday newspaper round-up: TikTok, Arrival, Twitter
As the US legislative battle over TikTok continues to escalate, Shou Zi Chew, the chief executive of the video-sharing app, will make his first appearance before Congress to testify next month. Chew will testify before the House energy and commerce committee on 23 March, Republican representative Cathy McMorris Rodgers confirmed in a statement on Monday, as scrutiny of the Chinese-owned app over data privacy concerns grows. – Guardian
The British electric vans startup Arrival is cutting 800 jobs, about half its remaining workforce, to reduce costs as it seeks extra funding and plans US expansion to take advantage of green energy subsidies. The troubled electric vehicle maker said “approximately 50%” of the company’s 1,600-strong global workforce would leave the company. Arrival told investors that the job cuts, and other measures to trim spending, would results in a halving of its operating costs to “approximately $30m (£24m) per quarter” following a review of its operations. – Guardian
Elon Musk is going head to head with his old company PayPal as Twitter gears up to become an online payments business. The social media company has been applying for payments processing licences across the US as well as hiring people to start building a payments system. – Telegraph
Britain’s electric car market risks being left behind as the EU ramps up a transatlantic subsidies war with the US, Chancellor Jeremy Hunt has been warned. Brussels is preparing to unveil a package of measures on Wednesday aimed at supporting renewable energy, electric vehicles and other green technologies, in response to similar measures in Joe Biden’s $430bn Inflation Reduction Act. – Telegraph
The UK is on course to be the world’s worst-performing big economy this year, according to the International Monetary Fund. In an update to its growth outlook, the IMF delivered a hefty blow to Britain’s prospects despite brightening global conditions, with a 0.9 percentage point downgrade to the UK’s annual growth projection year. – The Times
