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London open: Stocks nudge down ahead of inflation readings
London stocks ticked lower in early trade on Thursday as investors eyed key eurozone and US inflation readings.
At 0820 BST, the FTSE 100 was down 0.1% at 7,463.93.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Any signs of more stubborn inflation are still very much guiding market sentiment, so key data from the US and the eurozone will be pored over today.
“In the States the Fed’s preferred measure – the US personal consumption data – is out later and the preliminary eurozone CPI data will also be closely watched given that a snapshot out yesterday showed inflation in Germany and Spain not cooling as fast as hoped.
“Inflationary pressures are still staying stubborn even though the downturn is intensifying especially in Germany. That’s posing a big headache for the European Central Bank and if the eurozone wide inflation reading comes in hotter than expected, it is set to increase the chances of a rate hike in September, despite the risks of recession.”
Investors were also mulling the latest data released by China’s National Bureau of Statistics, which showed that factory activity contracted in August for the fifth month in a row.
The official manufacturing purchasing managers’ index rose to 49.7 from 49.3 in July, remaining below the 50.0 mark that separates contraction from expansion. Economists were expecting a reading of 49.2.
Meanwhile, the non-manufacturing PMI declined to 51.0 in August from 51.5 in July, versus consensus expectations of 51.2.
Sheana Yue, China economist at Capital Economics, said: “The PMI surveys suggest a slight improvement in economic activity in August. Downward pressure on manufacturing appears to have eased, while construction activity accelerated. These have more than offset a further softening in services activity.
“But overall economic momentum remains weak and more policy support is needed to avoid a renewed slowdown later this year.”
In equity markets, Glencore, Croda, Endeavour Mining, Genuit and Redde Northgate all fell as they traded without entitlement to the dividend.
Building materials supplier Grafton lost ground as it reported a 29% fall in half-year profits amid a challenging market, but still lifted its dividend and announced a new £50m share buyback. Pre-tax profits came in at £93.6m for the six months to June 30, compared with £132m a year earlier. The dividend was lifted 8.1% to 10p a share.
Grafton said it expected full year adjusted operating profit of around £202.6m and a range of £194.6m – £209.4m, in line with its own compiled forecasts of analysts.
Belfast-based IT services group Kainos edged up as it announced that full-year results are still expected to meet consensus forecasts despite an “uncertain” trading environment.
In a brief trading update for the first half ending 30 September, the company said customers have maintained their investments in digital projects and trading during the period was “good”.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Easyjet Plc | +2.20% | +9.20 | 427.30 |
| 2 |  |
Rolls-royce Holdings Plc | +2.08% | +4.50 | 221.30 |
| 3 |  |
British Land Company Plc | +1.99% | +6.40 | 328.40 |
| 4 |  |
Direct Line Insurance Group Plc | +1.86% | +2.95 | 161.55 |
| 5 |  |
Marks And Spencer Group Plc | +1.78% | +4.00 | 228.20 |
| 6 |  |
Ocado Group Plc | +1.74% | +13.80 | 807.20 |
| 7 |  |
Flutter Entertainment Plc | +1.65% | +235.00 | 14,445.00 |
| 8 |  |
International Consolidated Airlines Group S.a. | +1.61% | +2.60 | 163.80 |
| 9 |  |
Ferguson Plc | +1.50% | +190.00 | 12,870.00 |
| 10 |  |
Land Securities Group Plc | +1.13% | +6.80 | 606.20 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Glencore Plc | -4.55% | -19.95 | 418.70 |
| 2 |  |
Prudential Plc | -2.70% | -27.00 | 972.80 |
| 3 |  |
Diageo Plc | -1.43% | -47.50 | 3,273.00 |
| 4 |  |
Melrose Industries Plc | -1.11% | -5.80 | 516.20 |
| 5 |  |
Hargreaves Lansdown Plc | -0.99% | -7.60 | 762.60 |
| 6 |  |
Burberry Group Plc | -0.81% | -18.00 | 2,205.00 |
| 7 |  |
Croda International Plc | -0.72% | -40.00 | 5,532.00 |
| 8 |  |
Intercontinental Hotels Group Plc | -0.53% | -32.00 | 5,962.00 |
| 9 |  |
Carnival Plc | -0.49% | -5.50 | 1,118.50 |
| 10 |  |
Sage Group Plc | -0.47% | -4.60 | 973.40 |
US close: Stocks manage small gains despite GDP downgrade
Wall Street managed to close with modest gains on Wednesday, even as investors weighed the implications of less-than-stellar economic indicators.
Market participants were closely monitoring economic data to gauge its impact on the Federal Reserve’s future monetary policy.
At the close, the Dow Jones Industrial Average was up 0.11% at 34,890.24, while the broader S&P 500 rose by 0.38% to end at 4,514.87 points.
The tech-heavy Nasdaq Composite increased 0.54% to close at 14,019.31 points.
On the currency front, the dollar was last up 0.03% on sterling at 78.63p, while it weakened 0.03% against the common currency to trade at 91.52 euro cents.
Meanwhile, the greenback dropped 0.07% against the yen, changing hands at JPY 146.14.
“August could well go out with a whimper, but investors won’t be sad to see the month go,” quipped IG chief market analyst Chris Beauchamp.
“The trouble is that September isn’t often much better.
“After the solid gains of the year so far some more consolidation looks likely, especially in potentially-overstretched markets like the Nasdaq and the Nikkei, both of which have been among the big winners in 2023.”
Slowing economic indicators mark concern for US economy
On the economic front, fresh data released earlier indicated that the US economy was losing steam, with economic growth and job creation falling short of expectations for the second quarter and August respectively.
Official revisions from the Bureau of Economic Analysis (BEA) suggested that US GDP grew at a rate of 2.1% from April to June, lower than the previously projected growth rate of 2.4%.
That was, however, a minor uptick compared to the revised growth of 2% in the first quarter of 2023.
“The updated estimates [for the second quarter] primarily reflected downward revisions to private inventory investment and non-residential fixed investment,” a statement from the BEA said.
Current-dollar personal income increased $232.1bn in the second quarter, down $3.9bn from the initial estimate, while disposable personal income was revised up by $36.3bn to $284.5bn.
Elsewhere, job growth in the private sector also lagged behind expectations, signalling a potential cooling in labour market dynamics.
According to a report from the ADP Research Institute, only 177,000 new jobs were generated in August, a decline from 324,000 in July and 455,000 in June.
The job market underperformed against economists’ anticipations, which had pegged expected job gains closer to the 200,000 mark.
A significant deceleration in the leisure and hospitality sector was noted, contributing to the reduced job growth.
That sector managed to add just 30,000 jobs in August, a steep drop from the 201,000 jobs created in July.
“This month’s numbers are consistent with the pace of job creation before the pandemic,” said ADP chief economist Nela Richardson.
“After two years of exceptional gains tied to the recovery, we’re moving toward more sustainable growth in pay and employment as the economic effects of the pandemic recede.”
Meanwhile, the annual increase in pay for people in the same job slowed from 6.2% in July to 5.9% – its lowest since October 2021 – while earnings growth for job-changers also decelerated from 10.2% to 9.5%.
“For the first time, all 50 states and Washington, D.C., experienced a slowdown in pay growth,” the report said.
HP, Texas Instruments drop while Lyft soars
In equities, computing behemoth HP saw its shares tumble after revealing third-quarter revenue that disappointed the market.
The company posted revenue of $13.2bn, falling short of the $13.4bn that analysts had anticipated.
Texas Instruments did not fare much better, as its shares fell by 0.86%.
The decline came on the heels of a downgrade from analysts at Bernstein, who shifted their rating on the semiconductor company from ‘market perform’ to ‘underperform.’
Cloud storage company Box saw one of the day’s most significant declines, with its shares plummeting by 12.31%.
The freefall followed the company’s less-than-stellar guidance for the entire fiscal year.
On the upside was Lyft, whose shares jumped 8.45% after Sean Aggarwal, an independent director, purchased $1m worth of shares.
That move came not long after CEO David Risher also invested a similar amount in the company earlier in the month.
Thursday newspaper round-up: Airlines, Country Garden, car production
Airlines have urged reform of compensation rules after the “staggering” revelation that a single wrongly input flight plan to UK air traffic control disrupted hundreds of thousands of passengers’ flights. Nats, which controls UK airspace, said “an unusual piece of data” had caused the unprecedented system failure on Monday, which led to more than 1,600 flights being axed and many more delayed. – Guardian
Embattled Chinese developer Country Garden reported a 48.9bn yuan ($6.7bn) loss for the first half of the year in a stock exchange filing on Wednesday, adding to worries of a potentially catastrophic default. Its tenuous state has sparked fears of a collapse that could have far-reaching consequences for the Chinese financial system two years after the fall of Evergrande. – Guardian
More electric vehicles are being made by manufacturers than drivers want, one of Britain’s biggest car dealerships has said. Vertu Motors, which trades under brands including Bristol Street Motors, said supply of new and used electric models is outstripping demand, forcing manufacturers to slash prices in an effort to shift stock. – Telegraph
The bucolic setting of Bletchley Park, the home of British codebreaking operations during the Second World War, is a fitting backdrop to Rishi Sunak’s ambitions to address a new threat: AI. In two months, the Buckinghamshire country estate will host the Prime Minister’s AI Safety Summit, a first of its kind international effort to ensure that the risks of rapidly improving artificial intelligence are addressed. – Telegraph
Car production increased by almost a third last month compared with a year ago, new figures show. The number of cars coming off British assembly lines in July rose 31 per cent, taking factory output in the first seven months of the year to 526,000, up 14 per cent year-on-year. – The Times
