- FTSE 100 loses 28 points by the close
- UK Q3 GDP revised downwards to fall of 0.3%
- Brexit not delivering for UK business - BCC
4.45pm: FTSE closes in the red
At the close, the UK's blue chip index has retreated 0.4% to 7,469 points as slowing UK GDP growth indicated that a recession is, perhaps, here already.
“The bears are back in charge today, as UK GDP data provided yet another warning that we may already be in a recession," IG's Joshua Mahoney noted.
"Notably, we have seen US indices lead to push lower despite an upward revision to the US Q3 growth rate. This likely reflects the growing feeling of concern that the Federal Reserve will continue pushing rates upwards in the absence of any major economic distress signal."
Mahoney added that the outperformance of the FTSE 100 would signal relative strength for UK plc. "However, despite the FTSE 100 being the only major western index to have avoided significant losses in 2022, the UK has suffered the worst Q3 growth of any G7 nation.”
3.50pm: FTSE concedes early gains; Abrdn CFO to step down - Bloomberg
It’s been a game of two halves in London today as early gains have been eroded as US markets plunged following disappointing results from Micron Corp. and as investors fretted once more about rising interest rates following strong US GDP numbers.
After being up over 30 points the FTSE 100 is now down 27 points while the FTSE 250 is 120 points lower.
It all started so well, despite a downward revision to third quarter GDP figures, with the lead index taking heart from overnight gains in the US and Asia.
Strong gains by the Hang Seng have helped keep Prudential PLC (LSE:PRU) in the green while a higher oil price has supported BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL).
But pub companies, J D Wetherspoon plc and Mitchells and Butler PLC, fell back on reports of weak trading in London’s pubs and restaurants as industrial action has taken its toll.
Abrdn PLC (LSE:ABDN) was another weak feature on reports that the chief financial officer of the asset manager, Stephanie Bruce, is planning to leave in the coming months.
According to Bloomberg, Bruce, who has been CFO since June 2019, is stepping down and the Edinburgh-based firm is searching for a replacement.
But retailer, Superdry PLC (LSE:SDRY), enjoyed better fortunes as news of strong trading and a new loan facility sent shares soaring.
3.18pm: Superdry agrees new loan facility
Like London buses you wait for one refinancing agreement and two come along.
Following on from Restaurant Group PLC (LSE:RTN), Superdry PLC (LSE:SDRY), the branded retailer famous for its hoodies, has secured a new £80mln loan facility helping push shares 9% higher.
In a trading update the group said the new facility, included a £30mln term loan, and covered a three-year period with an option to extend for one further year.
The deal, with specialist lender Bantry Bay Capital Limited (LSE:CAPD), replaces an existing £70mln facility which runs out at the end of January.
But it said, “given market conditions”, the interest rate will be higher than the previous agreement – at 7.5% above the sterling overnight interbank average rate.
The group said revenue in the 26 weeks to October 29 was up 3.6% year-on-year driven by strong performance in owned stores which contributed 14.4% year-on-year growth.
Julian Dunkerton, founder and chief executive officer, said: “it’s great to see store sales recovering well.”
“I am also encouraged with how we have started the second half, which has seen our biggest ever week for Ecommerce orders driven by a return to record levels of jacket sales over the Black Friday period and good momentum through the recent spell of colder weather.”
“That said we are under no illusions that consumer confidence is fragile and that the picture is unlikely to change quickly.”
2.55pm: Wagamama owner agrees new terms with lenders
Restaurant Group PLC (LSE:RTN), which owns Wagamama, Chiquito, and Frankie & Benny’s has negotiated new debt terms with lenders.
The revised £340mln package comprises a £220mln term loan facility and a £120mln revolving credit facility with its existing lenders.
This represents a c. £21mln early repayment of its previous facilities.
The company said it continues to have a strong liquidity position with over £140mln of cash headroom.
This provides the group with an additional two years of debt facilities with the maturities of the term loan and the RCF extended to April 2028 and March 2027, respectively.
2.40pm: Bye bye Santa rally, FTSE heads lower as US markets tumble
The festive cheer disappeared mid-afternoon as London's blue-chip index gave up its early gains to trade lower as US markets took a turn on Thursday as poor quarterly results from chipmaker Micron Technology soured the market mood.
This came after all three major US indexes added more than 1.5% on Wednesday, lifted temporarily by better-than-expected earnings from Nike and FedEx (NYSE:FDX).
Just after the market opened, the Dow Jones Industrial Average had shed 307 points or 0.9% at 33,070 points, the S&P 500 was down 46 points or 1.2% at 3,833 points, and the Nasdaq Composite had lost 171 points or 1.6% at 10,540 points.
Micron Technology was down about 3% after it reported a wider-than-anticipated 2Q loss and revealed a range of cost-cutting measures designed to offset further revenue losses, including a 10% reduction in its workforce.
The upward revision to third quarter GDP also unsettled investors renewing worries over rising interest rates.
Back in London and the FTSE 100 is now down 8 points
1.55pm: UK jobs market showing resilience - Indeed
Though the UK economy is starting to struggle, signs show the labour market remains strong according to research from jobs website, Indeed.
Real-time data from Indeed job postings continue to show resilience with UK job postings 50% above the 1 February 2020, pre-pandemic baseline as of 9 December 2022, a new post-pandemic high.
Postings have held up despite economic headwinds and amid the cost-of-living crisis this year, with many organisations still experiencing staffing gaps.
Disparities in regional job posting recoveries have widened over the course of 2022. The North East began the year in pole position in the regional rankings, indicating the strongest growth in job postings, and has increased its lead, now standing at 92% above the 1 February 2020 baseline.
Scotland and the West Midlands are in second and third positions respectively, having also gained momentum throughout the year.
Conversely, London has experienced the slowest growth, sitting at the bottom of the rankings at 28% above the 1 February 2020 baseline, a 6% decrease from the previous year.
Northern Ireland has the second-weakest recovery at 36% above the baseline, and has also lost ground since 2021.
1.35pm: US GDP revised upwards in Q3
Across the pond now and the US economy grew faster than previously predicted between July and September with growth in the third quarter now seen at 3.2% against an initial estimate of 2.9% and ahead of Street expectations.
Weekly jobless claims of 216,000 were broadly in line with forecasts.
- US Initial Jobless Claims Dec 17: 216K (est 222K; prevR 214K)
- US Continuing Claims Dec 17: 1672K (est 1678K; prevR 1678K)
— LiveSquawk (@LiveSquawk) December 22, 2022
- US GDP Annualised (Q/Q) Q3 T: 3.2% (est 2.9%; prev 2.9%)
- US Personal Consumption Q3 T: 2.3% (est 1.7%; prev 1.7%)
- US GDP Price Index Q3 T: 4.4% (est 4.3%; prev 4.3%)
- US Core PCE (Q/Q) Q3 T: 4.7% (est 4.6%; prev 4.6%)
— LiveSquawk (@LiveSquawk) December 22, 2022
12.42pm: Commuters hit with 5.9% increase in rail fares
Commuters, already facing disruption from strikes, will be stung with a 5.9% increase in regulated rail fares from next March, the Department for Transport has announced.
The rise, which impacts rail users in England, is being capped at a level well below inflation, "to help reduce the impact on passengers", the transport secretary Mark Harper said.
Regulated rail fares in England will rise by up to 5.9% from March, well below the level of inflation, the government says https://t.co/nAcedSTckE
— BBC Breaking News (@BBCBreaking) December 22, 2022
Even so today's hike is the biggest since the 6.2% rise in 2012.
"This is a fair balance between the passengers who use our trains and the taxpayers who help pay for them," Harper said.
The increase is 6.4 percentage points below July’s Retail Prices Index measure of inflation (which has previously been used to set the increases) and in line with average earnings growth that month.
The rise will come into force on March 5th, 2023.
Shares in FirstGroup PLC (LSE:FGP), which owns Avanti West Coast, Great Western Railway, South Western Railway and TransPennine Express, rose 1.8% while Trainline PLC (LSE:TRN) was also higher, up 1.8%.
12.00pm: US set for subdued start
US stocks look headed for a muted start on Thursday as the holidays come into view with a modest festive lift hoped for after some heartening economic data and company earnings.
Futures for the Dow Jones Industrial Average were down 0.1% in pre-market trading, while those for the broader S&P 500 index and the Nasdaq-100 also both eased 0.1%.
“Yesterday’s decidedly mixed economic data left pre-Christmas traders taking the glass half full view by all accounts,” noted James Hughes, chief market analyst at scopemarkets.com.
"Stocks rose for a second straight day on Wednesday, helped along by strong consumer confidence data for December which went some way to offset weak home sales numbers, building on the cheer still felt from decent earnings from the likes of FedEx (NYSE:FDX) and Nike.
“Housing sales have been clobbered by rising borrowing costs, although consumer confidence jumped by significantly more than had been expected, in what can only be seen as a more optimistic take when it comes to the longer term economic outlook,” added Hughes.
Today’s economic data are likely to pass by quietly as they mostly represent final readings on already released third-quarter figures, watering down their likely effect on the market, Hughes noted.
US third-quarter real gross domestic product and gross domestic income revisions are due at 8.30am ET on Thursday.
“Tomorrow’s income and spending readings both have the ability to offer more insight into how consumers are weathering the storm whilst the durable goods orders give the latest corporate view of life after the era of free money,” said Hughes.
For today, however, investors are hoping for a small festive run despite prevailing concerns about the outlook for the wider economy amid the prospect of pain from more interest rate increases from the Federal Reserve.
11.30am: City pubs empty as strikes keep drinkers away
There be some festive cheer in the markets but traders haven’t been emptying their pockets in the bars and restaurants in the square mile.
According to Bloomberg pubs and restaurants in the City have reported that sales were cut to almost half pre-pandemic levels during last week’s rail strikes.
The report quoted Kate Nicholls, chief executive officer of trade group UKHospitality, which said takings were 46% lower in real terms than during the same week in 2019 as four days of strikes caused chaos on train services and convinced many people to work from home.
Across London as a whole, revenue was down 37% last week compared with 2019 and adjusting for inflation, Nicholls said.
Hospitality businesses across the UK reported a 30% cancellation rate on bookings, as Christmas parties were called off.
10.50am: Oil price advances
FTSE 100 has held its gains and oil stocks are providing support following further gains in the oil price.
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown said: "The hoped-for Santa rally is running merrily through markets, but it may end up being a short-lived ride given the cost-of-living winds swirling, the confirmation that the UK is rolling into recession and worries about global economic growth.”
“The optimism shooting through markets has been prompted by stronger consumer confidence in the US and sturdier than expected corporate earnings.”
“Energy stocks again have a spring in their step, thanks to a rise in crude prices for the fourth straight session amid expectations of higher demand over the holiday period.”
Indeed, Brent crude was up 1.72% at US$83.62/barrel while the WTI price was 1.47% higher at US$79.44/barrel.
This helped push BP PLC (LSE:BP.) 0.9% higher while Shell PLC (LSE:SHEL, NYSE:SHEL) advanced 1.3%.
10.15am: Food and drink inflation the highest since 1977 - ONS
Overall inflation including housing costs fell from October to November 2022, but the cost of food and non-alcoholic drinks has continued to rise according to data from the Office for National Statistics (ONS).
The headline figure fell to 9.3% in November from 9.6% in October but food and non-alcoholic drink inflation rose by 16.5% in the 12 months to November 2022, the highest increase since September 1977 (17.6%).
Staple foods, such as breads and cereals, have seen the largest price increases in the last month, increasing by 1.9%, with the most vulnerable appearing to be the hardest hit, with 61% of those in the most deprived areas buying less food compared with last year, as opposed to 44% in the least deprived areas.
The inflation gap between low-income and high-income households is the largest it has been since March 2009 with annual inflation for low-income households 10.5% in the year to October 2022, while the figure for high-income households was 9.1%.
9.45am: Brexit not helping British business - BCC
More than three quarters (77%) of firms, for which the Brexit deal is applicable, say it is not helping them increase sales or grow their business according to a survey from the British Chambers of Commerce (BCC).
As a result “businesses feel they are banging their heads against a brick wall as nothing has been done to help them” according to Shevaun Haviland, director general of the BCC.
????️@BCCShevaun: "Businesses want political leaders on both sides to move on from the debates of the past and find ways to trade more freely. Otherwise the long-term competitiveness of the UK will be seriously damaged."
Read our analysis on Brexit trade ????https://t.co/GZwHYMxp8L
— BCC (@britishchambers) December 22, 2022
More than half (56%) of firms face difficulties adapting to the new rules for trading goods, the survey found while almost half (45%) face difficulties adapting to the new rules for trading services, and a similar number (44%) report difficulties obtaining visas for staff.
The report followed a survey of UK firms which showed they faced significant challenges trying to use the Trade and Co-operation Agreement (TCA) which was agreed on Christmas Eve in 2020 to allow tariff-free trade with the EU once Brexit took effect.
But a high proportion of businesses say they are still having major problems trying to use the deal to trade with Europe.
The BCC has sent the government a report setting out the main issues the TCA is causing with solutions to many of the problems.
Haviland said: “Businesses want political leaders on both sides to move on from the debates of the past and find ways to trade more freely.”
“This means an honest dialogue about how we can improve our trading relationship with the EU.”
“With a recession looming we must remove the shackles holding back our exporters so they can play their part in the UK’s economic recovery.”
“If we don’t do this now then the long-term competitiveness of the UK could be seriously damaged.”
9.09am: Festive cheer in London
The FTSE 100 is in festive mood, extending its gains, now up 37 points, shrugging aside the downward revision to quarter three GDP numbers.
Victoria Scholar, head of investment, interactive investor said: “Markets are attempting a last-ditch effort to achieve a Santa rally with Wall Street closing significantly higher last night.”
“Better-than-expected US corporate earnings helped to spur a pick-up in risk appetite which when combined with lighter-than-normal volumes around the holidays resulted in US averages posting their best session since November and the Hang Seng jumping over 2.5%.”
The gains in Hong Kong helped propel Prudential PLC (LSE:PRU) 1.3% higher while the results from Nike on Tuesday continued to support JD Sports Fashion PLC (LSE:JD.) which rose a further 1.4%.
Ocado Group PLC (LSE:OCDO) advanced 1% reflecting gains in Asia by online shopping and food delivery platform Meituan which surged 5.7% while further increases in the oil price supported oil majors and index heavyweights, Shell PLC (LSE:SHEL, NYSE:SHEL) and BP PLC (LSE:BP.).
But the end is nigh for made.com which has proposed that it enters into a members voluntary liquidation which will allow the company to wind up its operations with any residual value to be distributed to shareholders.
On November 9th, the company announced its intentions to appoint the administrators while agreeing to sell its brand, domain names and intellectual property to Next along with the suspension of shares from trading on the LSE.
8.15am: Upbeat start in London despite GDP numbers
FTSE 100 has opened higher, building on yesterday’s gains, and despite a downward revision to third quarter GDP figures.
A strong rally in the US has helped and at 8.15am London’s blue-chip index was up 25 points at 7,522 while the FTSE 250 was up 40 points at 18,903.
The latest figures from the Office for National Statistics showed the UK economy shrank by 0.3% between July and September, a downward revision from the previous estimate of a 0.2% decline.
Gabriella Dickens, senior economist at Pantheon Macroeconomics pointed out the figures confirmed “that the UK was the only G7 economy in which quarter three GDP still was below its pre-Covid level.”
“Indeed, GDP in the UK was 0.8% below its quarter four 2019 level, whereas it was 4.3% above in the U.S., 2.7% above in Canada, 1.8% in Italy, 1.1% in France, 0.9% in Japan and 0.3% in Germany” she noted.
“Looking ahead, the UK likely will continue to underperform; we expect Britain to suffer the deepest recession among major advanced economies in 2023, due to the severity of the headwinds from both monetary and fiscal policy” Dickens forecast.
“We expect a 2% peak-to-trough fall in GDP, leading a year-over-year decline of 1.5% in 2023.”
On a quiet day for corporate news as the markets wind down ahead of the holiday period, NWF Group PLC (AIM:NWF) rose 3.2% after it said trading in the first half has been strong with all three divisions trading ahead of the board's expectations.
The update came together with the £10mln acquisition of Sweetfuels Limited.
Discoverie Group PLC rose 2.2% after its US deal which is expected to be earnings accretive on completion.
Peel Hunt said “This is another attractive little deal from discoverIE and we see it as reassuring that M&A activity levels remain high, plus it is good to see further expansion of the footprint in the US.”
The broker has raised its fiscal year 2024 and 2025 EPS estimates by c.2%, to 34p and 35.3p, respectively.
7.51am: GBP leading on USD, though rough GDP figures could hit Cable sentiment
Sterling appears to be in the driver's seat this morning after seeing nearly one percent of losses in the GBP/USD pair come Wednesday’s session close.
Having opened at 1.207, GBP/USD added 30 pips to 1.210 in the opening Asia trading hours.
However, with gross domestic product (GBP) growth in the UK coming in considerably weaker than expected in this morning’s reading, we could expect to see a Cable contraction as investors capitulate on recession worries.
With the FTSE 100 expected to make further gains throughout the day, a Cable bet could be even riskier.
Yearly GDP growth in the year’s final read was 1.9% compared to the 2.4% forecast, while quarter-on-quarter GDP growth of -0.3% beat out expectations of -0.2%.
Will investors capitulate on the pound? – Source: capital.com
The US has its own GDP reading due later this afternoon, with QoQ growth of 2.9% forecast.
EUR/GBP was sitting at a five-week high after gaining 0.8% yesterday to close at 87.83p. Despite inching back to 87.81p this morning. The euro still appears to have the upper hand.
The euro has already recouped the 17 pips it ceded to the dollar in Wednesday's session, with the EUR/USB pair rising 0.3% to 1.063 so far this morning.
The US Dollar Index (DXY) currently sitting 0.3% lower at 103.57.
7.47am: discoverIE expands US operations
discoverIE Group PLC has bought Magnasphere, a US-based designer and manufacturer of magnetic sensors and switches for industrial electronic applications for £19.1mln.
The cash deal is on a debt free basis and will be funded from existing debt facilities.
The acquisition is expected to be completed by the end of the financial year and is forecast to be immediately accretive to underlying earnings and operating margins.
Nick Jefferies, group chief executive said: “The transaction brings another high quality business into discoverIE, which is accretive to both underlying earnings and margins, and strengthens our US footprint.”
7.15am UK GDP revised downwards in quarter three
UK gross domestic product (GDP) is estimated to have fallen by 0.3% between July to September, downwardly revised from a first estimate fall of 0.2%, according to figures from the Office for National Statistics.
GDP fell 0.3% in Quarter 3 (July to Sept 2022), revised down from a 0.2% fall, with:
▪️ services at 0.1% (revised up from 0.0%)
▪️ manufacturing at -2.8% (revised down from -2.3%)
▪️ construction at -0.2% (revised down from 0.6%)
— Office for National Statistics (ONS) (@ONS) December 22, 2022
In output terms, the services sector grew by 0.1% while the production sector fell by 2.5% in the quarter (including falls in all 13 manufacturing sub-sectors) as well as a fall in the construction sector of 0.2%.
The level of real GDP in quarter three 2022 is now estimated to be 0.8% below where it was pre-coronavirus at quarter four (October to December) 2019, downwardly revised from the previous estimate of 0.4%.
The implied GDP deflator rose by an upwardly revised 6.4% in the year to quarter three 2022, primarily driven by an 9.2% increase in the implied price of household consumption.
The household saving ratio increased strongly to 9.0% in quarter three 2022, from 6.7% in the previous quarter.
But real households' disposable income fell by 0.5% this quarter; the fourth consecutive quarter of negative growth.
7.00am: Further gains expected in London
FTSE 100 is expected to open higher extending yesterday’s gains following a strong rally in the US and gains in Asia.
Spread betting companies are calling the lead index up by around 22 points.
In the US, the Dow was 1.6% higher at 33,376, while the Nasdaq and the S&P 500 both posted gains of 1.5% to close at 10,709 and 3,878 points respectively.
Positive earnings from Nike and FedEx (NYSE:FDX), coupled with strong US consumer confidence number for December, helped push yields slightly lower as the major indices all closed well in the green.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 0.5%. In China, the Shanghai Composite was down 0.5%, while the Hang Seng index in Hong Kong was rallying strongly, up 2.3% in late trade. The S&P/ASX 200 in Sydney closed up 0.5%.
In the absence of any planned corporate updates the early focus in London will be on the final GDP figures for quarter three which should confirm the UK economy shrank between July to September.
The preliminary fall of 0.2% was slightly better than expected.