- FTSE 100 closes down 2 points at 7,526
- UK economy contracts more than expected in July
- Aviva sales raises hopes of shareholder returns
4:40pm: FTSE 100 ebbs and flows and closes little changed
The FTSE 100 closed little changed following weaker-than-expected economic growth figures which raised the likelihood that interest rates were close to peaking.
At the close, London's lead index was down 1.54 points at 7,525.99 while the FTSE 250 rose 19.20, 0.1%, at 18,561.50.
Bank of America said the GDP figures cuts the "upside risks to our call for only one more 25bp rate hike, and modestly raises the risk of a September pause."
Aviva PLC (LSE:AV.) led the risers, up 4.4%, after its £0.8 billion disposal which rased hopes of return to shareholders while predictions of a lower peak in interest rates boosted housebuilders - Persimmon rose 4.2%, Taylor Wimpey rose 3.9% and Taylor Wimpey rose 2.6%.
HSBC was boosted by an upgrade to buy from Goldman Sachs (NYSE:GS), while positive comments from JP Morgan supported Pearson.
But BP slipped 2.7% after the resignation of its chief executive Bernard Looney.
3:55pm: Weak GDP figures "modestly raise" chance of rate pause
Bank of America thinks today’s weak GDP figures in the UK “modestly raises” the risk of a September pause in interest rate rises.
Today's news suggests risks skew to weaker third quarter GDP growth than the Bank of England's 0.4% quarterly forecast.
Rate hikes may be biting more, consumer resilience to squeezed income may have weakened, and/or global trends may be dragging more, BofA said in a research note.
“In our view, this cuts upside risks to our call for only one more 25bp rate hike, and modestly raises the risk of a September pause,” it said.
BofA noted the BoE currently focuses most on 'late cycle' indicators like wages and inflation rather than growth, as it looks for signs of persistence.
“That makes next week's inflation data key for the rate decision, with the other two parts of the BoE's guidance - labour market slack and wages - pointing in different directions.”
“With wage growth well above BoE forecasts we expect the BoE to hike 25bp,” BofA said.
“But signs of weaker growth make that a closer call,” it added.
3:25pm: Leadership gap could leave BP exposed to takeover
Barclays thinks the leadership gap at BP could prompt an opportunistic takeover attempt, although it thinks any such move would be resisted by the government.
“While we see increased risk of corporate interest until a new CEO is appointed, it's mitigated by our expectation that the UK government would block any foreign takeover attempt under the national security investment act if such interest arose,” analysts at Barclays said.
“That said, we note the risk that a "rudderless bp" might be seen as an opportunity by companies that are already listed in the UK, or that might want to list in the UK,” Barclays added.
The bank sees the resignation of Bernard Looney as a chance to re-set.
It said BP could look at all options of value creation from bringing in an external candidate, to looking at whether a US listing might make sense.
It suggested one option could be for the Chair of the board, Helge Lund, to return to active management; another option could perhaps be a younger candidate with oil and gas and transition expertise.
“We can think of a number of people who would fit this bill, both internally and externally, and change can create an opportunity to reset,” it said.
“Yet this process will take time and leaves BP in a vulnerable positioning for activists,” Barclays thinks.
2:52pm: US stocks shrug aside strong inflation figures
US stocks climbed on Wednesday, shrugging off stronger-than-expected inflation figures which economists believe won't change the mindset at the Federal Reserve.
Shortly after the opening bell, the Dow Jones Industrial Average was up 93.39 points, 0.3%, at 34,739.38, the S&P 500 was up 11.59 points, 0.3%, at 4,473.49 while the Nasdaq Composite was up 44.45 points, 0.3%, at 13,818.06.
Andrew Hunter, deputy chief US Economist at Capital Economics thinks the Fed will "look through" the 0.6% m/m jump in headline CPI in August "as it was driven by the recent rally in energy prices."
"Although core prices also rose by a slightly stronger 0.3% m/m, there is little in the report to convince Fed officials that they need to raise interest rates further," he felt.
Apple Inc (NASDAQ:AAPL) was in the spotlight following the iPhone 15 launch event and as China Wednesday that it hasn't released official regulations to stop using foreign electronic devices.
"China hasn't issued any laws, regulations or policy documents banning purchase or use of foreign phones including Apple's iPhones," said Mao Ning, spokeswoman at China's foreign ministry, at a daily briefing.
The Wall Street Journal previously reported that some staff at government agencies were given instructions to stop using iPhones and other foreign-branded devices for work or bring them into the office, according to people familiar with the matter.
Shares eased 0.2%.
Citigroup Inc (NYSE:C) shares rose 0.8% as CEO Jane Fraser announced a corporate reorganisation, saying the move would cut down management layers and accelerate decisions.
Fraser said in a release that Citigroup would be divided into five main business lines that report directly to her.
Previously, the firm had two main divisions catering to consumers and large institutional clients.
2:22pm: CVS falls overdone says RBC
RBC Capital has pointed out CVS Group (AIM:CVSG) shares are off almost 30% and Pets At Home is down 8% on last week's news of the CMA market review into the vet practice market.
While CVS is more exposed to potential remedies than Pets At Home, RBC expects these to only be "behavioural at this stage, and think that CVS' exposure is mitigated by its existing online pharmacy, its Healthy Pet Club, and the likely significantly lower margin at its independent competitors that could limit the potential for more harsh changes."
It has lowered its price target by 15% to 1,900p from 2,2000p to account for the sentiment overhang and 'unknown unknowns' that could result from the review.
But it has upgraded the stock to outperform from sector perform as it thinks the shares have fallen too far.
RBC remains remain cautious on Pets At Home, however, as we continue to see downside risk to consensus for the retail division, and think that sentiment may also be challenged by the CMA review.
Shares in CVS are up 0.3% at 1,478p.
1:52pm: FTSE shrugs aside strong US inflation print
The FTSE 100 has pushed back towards opening levels despite slightly stronger-than-expected US inflation figures, now just 3 points lower at 7,525.
The US inflation rate was stronger than expected in August, according to new data posing a fresh dilemma for the Federal Reserve ahead of next week’s policy meeting.
Consumer prices rose 3.7% year on year, according to the Bureau of Labor Statistics, up from 3.2% in July and higher than consensus forecasts of 3.6%. On a monthly basis, prices increased 0.6%.
More than half of the monthly increase was driven by a jump in petrol prices.
Core inflation, which strips out volatile food and energy costs, was a touch above expectations with a month-on-month gain of 0.3% (consensus 0.2%) bringing the annualised rate down to 4.3% (consensus 4.3%) from 4.7% in July.
Neil Wilson at markets.com said the month-on-month rise in core inflation was "a tad hotter than expected and the Fed would have preferred a third +0.2% reading in a row."
"The implication may be that the Fed will be more minded to keep a rate hike on the table for this year even though I still think it will stand pat next week," he added.
John Leiper at Titan Asset Management said the figures contained "mixed messages," in part due to rising gasoline prices which bolstered the headline number.
"However it is reassuring to see core inflation for the year excluding energy and food coming in-line with expectations and 40 base points lower than the prior reading," he said.
He thinks it’s tempting to read too much into the month-on-month data in this "hyper data dependent central bank age but on balance I think this doesn’t move the needle too much."
"We still expect the Fed to hold on rates at the next meeting," he said.
1:22pm: A look at today's biggest rises and fallers
Risers
On the Beach Group (LSE:OTB) shares jumped 13.5% to 118p as it said full-year profit will be at the top end of expectations, reflecting strong growth in bookings.
Fallers
Shares in IOG PLC (AIM:IOG) tanked 36% to 1.08p after the company said its “financial position remains challenging” following a fall in the gas rate from its Blythe H2 well in the North Sea.
Medical technology company Belluscura PLC (AIM:BELL) slumped more than 16% lower to 41.5p after it reported a widening of losses in its interim results.
1:00pm: Producton cut by Saudi Arabia and Russia will mean market shortfall
Rising energy prices have been a theme of the past few weeks and the extension of oil output cuts by Saudi Arabia and Russia to the end of the year will mean a “substantial market deficit” through the fourth quarter, according to the International Energy Agency.
The Paris-based intergovernmental organisation said in its September report that so far this year, output from Opec+ countries (the oil cartel Opec led by Saudi Arabia plus Russia) has fallen by 2 million barrels per day although this has been tempered by sharply higher flows from Iran.
Opec and its allies began limiting supplies last year to shore up the market.
Oil supply cuts by Saudi Arabia and Russia will create a "significant supply shortfall," the International Energy Agency warns https://t.co/1bkIItkysH
— Bloomberg (@business) September 13, 2023
The IEA said: “The loss of OPEC+ production, led by Saudi Arabia, will drive a significant supply shortfall through the fourth quarter.”
“Unwinding cuts at the start of 2024 would shift the balance to a surplus.”
“However, oil stocks will be at uncomfortably low levels, increasing the risk of another surge in volatility that would be in the interest of neither producers nor consumers, given the fragile economic environment,” it added.
12:45pm: Aviva sale raises hopes of return to shareholders
The City has given the thumbs up to Aviva’s £800,000 sale of its stake in offloaded its 25.9% stake in Singapore Life Holdings, plus two debt instruments, to Sumitomo Life Insurance for £0.8 billion cash as it continues to streamline its operations.
Amanda Blanc, chief executive officer said: “This is a good outcome for Aviva.”
“The transaction further simplifies the business and we are in a very strong position to build on our trading momentum in the UK, Ireland and Canada,” she added.
UBS agree that the deal further simplifies Aviva's business, and given management's track record of returning excess capital to shareholders, believes “expectations for further capital returns will develop.”
It pointed out in November 2020 the valuation of Aviva Singapore was £1.6 billion, with Aviva's remaining stake valued at c.£0.4 billion.
The equity stake sale today is worth £0.5 billion, so £0.1 billion higher than the valuation achieved in 2020, it noted.
Shares in Aviva are 2.3% higher at 384.70p.
12:20pm: Eurozone industrial production falls more than expected
Not helping the FTSE is news that industrial production in the eurozone fell more than expected in July.
Industrial output fell by 1.1% in the currency bloc in July compared with June, according to Eurostat, the EU’s statistical office.
Euro area #IndustrialProduction -1.1% in July 2023 over June, -2.2% over July 2022 https://t.co/O48BejXiYe pic.twitter.com/YJ3eBxxV2B
— EU_Eurostat (@EU_Eurostat) September 13, 2023
Economists polled by Reuters had predicted a fall of 0.7%.
On an annualised basis, the fall was 2.2%, Eurostat said. A Reuters poll had forecast a contraction of just 0.3%.
Bradley Saunders of Capital Economics said the outlook for eurozone industry was bleak and that output would fall further this year, “helping to push the eurozone into a recession”.
Melanie Debono at Pantheon Macroeconomics said the figures suggest "industrial production will have fallen by 0.8% this quarter, marking the fourth straight quarterly decline in EZ industrial output."
"We suspect production fell in August, and probably will also fall in September, given the continued weakness in the manufacturing output PMI," she added.
12:05pm: US futures ease a touch but it's all about inflation
A big day in the US, and one which is likely to provide direction for UK equities as we march on into the afternoon.
At the moment US futures are pointing to a weak start on Wall Street but could all change with the latest inflation print due amid worries rising oil prices might spark a fresh wave of pricing pressures.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.2% lower, while those for the S&P 500 fell 0.2%, and contracts for the Nasdaq 100 futures were down 0.2%.
“All eyes are on US inflation numbers set to be released later today as this data is crucial to the Federal Reserve’s decision-making on whether to keep raising interest rates or not,” said Russ Mould, investment director at AJ Bell.
Economists expect headline US inflation to have risen to 3.6% in August, compared with 3.2% in July.
The annualised rate of core inflation, which strips out volatile food and energy costs, is forecast to have fallen to 4.3% from 4.7% the previous month.
Henk Potts, market strategist at Barclays Private Bank said that after moderating at a rapid pace in recent months, August’s US consumer price index data may show a nudge up in price pressures, due to rising energy prices (US retail gasoline prices rose by 6.7% last month).
“Within the core measure, which excludes volatile inflation components like food and energy, we expect that while a decline in used-car prices to push core goods into deeper deflation, firmer airfares and hotel prices could help to drive services inflation higher,” he added.
Mould said if the CPI rises as expected it “greatly diminishes the chances of the Fed taking its foot off the pedal with rates.”
“The idea that the Fed will soon give clear guidance with regards to when the peak of rate hikes will occur is looking less likely by the day,” he thinks.
Elsewhere, chief executives of tech groups including OpenAI, Microsoft, Alphabet, and Tesla will meet lawmakers on Capitol Hill to discuss artificial intelligence in a closed-door meeting.
Apple will be in the spotlight after the launch of the iPhone 15 and other products.
Dan Ives at Wedbush said the launch “was overall an impressive event which in our opinion lays the groundwork for a major upgrade cycle over the next year that will surprise the Street to the upside.”
He has raised his price target to $240 from $230 and reiterates an ‘outperform’ rating given confidence in the success of this iPhone 15 upgrade cycle.
Moderna will be another stock to watch as the biotech company hosts its investor day, two days after the US federal drug regulator approved its updated Covid-19 booster.
11:28am: Pearson higher as JP Morgan highlights value
JP Morgan has highlighted Relx PLC and Pearson PLC (LSE:PSON) as two of its key picks for the second half in the European media sector.
The bank said its sector view has not changed since the start of the year, retaining “a quality/defensive bias given slowing macro momentum.”
It thinks Relx, rated overweight with a price target of 3.170p, is a European mega-cap offering compounding, quality growth.
Importantly it is compounding at a faster rate as data driven analytics becomes a bigger part of the mix.
“We believe the 23% discount to US peers can be closed by faster growth and the eventual sale of Exhibitions,” JPM said.
On Pearson, rated overweight with a 1,210p price target, the bank thinks the current valuation does not reflect “the quality of student assessment; the growth of VUE, ELT & virtual schools; a turnaround in USHE; Workforce optionality; & cost savings.”
It expects USHE to return to growth driven by secondary market recapture, the rollout of new digital/AI products and a normalisation of enrolments as Covid cohorts drop out.
Higher unemployment could drive enrolment upside, it suggested.
Pearson has a strong balance sheet, resilient, recuring or counter cyclical revenues and a buy back from September, it pointed out.
Strategists at JP Morgan have put Pearson on positive catalyst watch and shares in the firm rose 0.8%.
10:58am: City takes BP departure in its stride
The City has taken bews of the resignation of BP's chief executive Bernard Looney in its stride with shares down around 0.8%.
UBS said it expects a small negative reaction to this unexpected announcement given his track record and the uncertainty.
"This is mitigated in our view by the fact that CFO Auchincloss, who has been in his role since 2020 as well, has been an integral part of the elaboration of the strategy, providing continuity," it said.
But the Swiss bank pointed out Looney's departure was not related to performance or the strategy and he leaves the company in a "strong financial position and with a clear strategic direction."
The bank highlighted Auchincloss and chairman Helge Lund as likely leading internal candidates for the role.
Barclays said the news could actually see shares go higher.
"We have seen this before with bp and, as when Lord Browne resigned in 2007, the potential for value realisation to be accelerated is set to come into focus," it said.
"As such we think the share price reaction could be positive."
Russ Mould at AJ Bell believes that "assuming this is largely the end of the matter, even if an investigation by legal counsel remains ongoing, and chief financial officer Murray Auchincloss can lead the company through the transition to a new leader, then little harm may be done to the business."
But he cautioned: "The nagging worry is that this is the tip of an iceberg and is reflective of wider problems with BP’s workplace culture."
"Given this uncertainty, it may be a few weeks before shareholders are sitting comfortably again," he felt.
10:30am: Housebuilders jump on hopes for lower peak in rates
Housebuilders have jumped following today's weak GDP figures which investors believe could see interest rates peaking at a lower level than previously expected.
Rising mortgage rates have dented activity in the housing market prompting sharp falls in housing sales.
Redrow was the latest builder to highlight the tough market reporting the sales market over the summer has been “challenging,” which resulted in sales per outlet per week for the first 10 weeks of the new financial year of 0.34, down from 0.61 the year before.
Matthew Pratt, chief executive said: “Cost of living and mortgage affordability continue to have a negative impact on the market.”
Housebuilders are pinning their hopes that a stabilisation in interest rates and mortgage rates will bring some confidence back to the depressed market.
The City certainly seems to think so - today at least.
In the FTSE 100, Persimmon PLC (LSE:PSN) is the top riser, up 2.7%, closely followed by Taylor Wimpey PLC (LSE:TW.), Barratt Developments Group PLC and Berkeley Group PLC.
Over in the FTSE 250, Redrow was 3.9% higher despite warning profit could halve in the coming year while Bellway was 2.2% to the good.
10:03am: Pound falls after weak growth figures
The pound has fallen a touch after the GDP figures as stategists forecast continued slow growth in the UK.
Societe General's Kit Juckes notes the fall in GDP comes on the yesterday’s employment data which showed that public sector employment is rising while private sector employment is falling.
"The public finances won’t be able to sustain the rise in public sector employment for long, so weaker growth is here to stay," he thinks.
"Pessimism about the UK economy, and indeed about sterling, is nothing new, but this time around, the headwinds seem more serious because interest rate trends and (unusually) positioning are unhelpful," he explained.
"Today’s data do nothing to suggest that’s changing," he added, pointing out the market prices almost 2 25bp rate hikes by the BoE in the remainder of this year, compared to one by the ECB and none by the Fed.
9:42am: Oil price extends gains
The oil price has continued to gain traction with Brent crude up a further 0.5% to $92.46 today, creeping ever close to $100.
Fiona Cincotta, senior financial markets analyst, City Index said the gains were boosted by tight supply and OPEC forecasting an expected supply shortfall in the coming quarters.
She noted according to the latest data published by OPEC, global oil markets face a shortfall of over 3 million barrels per day in the coming quarter, which could potentially be the largest deficit in more than a decade.
She noted high oil prices threaten to bring renewed inflationary pressures to the global economy with prices rising and American Airlines warning of increased costs.
However, the rise in crude oil prices could be limited as investors looked ahead to US inflation data and amid signs of a build in inventories, she suggested.
“Data from the API showed that crude oil inventories rose 1.2 million barrels in the week to Sept 8, missing forecasts of a 2 million barrel decline,” she explained.
The data also showed a 4 million build in gasoline stockpiles as the US summer driving season comes to an end, she added.
9:12am: On The Beach soars after record summer
A strong trading update has sent shares in On the Beach Group (LSE:OTB) PLC up 13% as it said full-year profits would be at the top- end of expectations reflecting strong growth in bookings.
Shaun Morton, chief executive said: “We continue to leverage the benefits of the investments we have made in our proprietary technology platform, brand and proposition and I am pleased to see that this has driven growth in both the top and bottom lines during the second half of the year as planned.”
“Alongside access to greater seat and bed capacity, this has resulted in our most successful summer, sending more passengers on their holidays than ever before,” he added.
In a trading update, the travel operator said total transaction value (TTV) in the year to September 30 rose 26% to £1.1 billion, a record, driven by growth in volumes and average booking values.
As a result, group Ebitda is expected in line with market expectations and adjusted pre-tax profit at the top end of forecasts, benefitting from higher than anticipated interest income.
On The Beach expects Summer 23 passenger numbers to be 11% ahead of Summer 22, with Winter 23 currently 26% ahead of the prior year.
Bookings for Summer 24 are also significantly ahead of the prior year, it said.
8:47am: FTSE pushes higher, oil price jumps again
The FTSE 100 has shrugged of its early losses despite the slump in economic activity in July.
London’s lead index is now up 7 points at 7,534, while BP, another early faller is also in the green as investors digest the news its chief executive has resigned.
That have to do with another rise in the oil price which is creeping ever closer to $100/barrel – Brent crude up a further 0.75% to $92.76 this morning.
Analysts at Berenberg explained that given the “unexpected nature of his departure, there is no clear succession plan immediately in place.”
“As the search for a new CEO begins, it is thus uncertain whether the next leadership team will stick with the existing plans or change tack, and until there is greater clarity on the management team and strategy, this uncertainty could weigh on the stock,” the broker suggested.
Leading the risers in the FTSE 100 is Aviva after its £0.8 billion disposal which continues its plans to streamline the business.
The insurer has offloaded its 25.9% stake in Singapore Life Holdings to Sumitomo Life Insurance which
Amanda Blanc, chief executive officer described as “a good outcome for Aviva.”
“The transaction further simplifies the business and we are in a very strong position to build on our trading momentum in the UK, Ireland and Canada,” she added.
Pearson rose 1.2% as JP Morgan included it as one of its top sector picks, alongside Relx, amongst others
8:15am: FTSE 100 dips as UK economy contracts in July
The FTSE 100 has edged lower at the open following the news that the UK economy contracted by more than expected in July adding further fuel to the debate over whether the Bank of England should continue to raise interest rates.
At 8:15am, London’s lead index was down 13.26 points, 0.2%, at 7,514.27 while the FTSE 250 fell 44.11 points, 0.2%, to 18,498.19.
Gross domestic output dropped by 0.5% between June and July, after growing the previous month, a larger drop than the 0.2% fall forecast by economists.
Services output was down 0.5% in July, with health sector strikes contributing to the fall.
Martin Beck, chief economic advisor to the EY ITEM Club, said: “The role of erratic factors in July's weakness means the economy probably saw some bounce back in August.”
“But it's now looking less clear that GDP will expand meaningfully in Q3.”
“Any growth is on course to be very modest, continuing the trend of near stagnation which has characterised the UK economy over the last 12 months.”
Shares in BP PLC (LSE:BP.) have fallen 1.6% after the resignation of its chief executive.
Sophie Lund-Yates at Hargreaves Lansdown said: “BP is one of the biggest players in British business, missteps of this magnitude aren’t what investors expect from one of the country’s most influential C-suites.”
“Strong governance and conduct controls are rightly non-negotiables, and the emergence of a second round of allegations relating to Looney’s improper disclosure of relationships has proved a bridge too far,” she said.
Redrow has also eased 1.6% after forecasting profits could halve in the coming year and challenging trading during the Summer.
Liberum said the new guidance was “in line with consensus,” while Peel Hunt said its “profit forecasts are slightly above consensus so we will trim our estimates mainly on the margin front.”
Elsewhere, Primark owner AB Foods gave back some of Tuesday’s strong gains, down 0.4%, as Deutsche Bank downgraded the stock to hold from buy.
7:53am: Strikes and poor weather hit economic growth
A bit more on the GDP figures.
Darren Morgan, the ONS’s director of economic statistics, said: “In July, industrial action by healthcare workers and teachers negatively impacted services and it was a weaker month for construction and retail due to the poor weather.”
“Manufacturing also fell back following its rebound from the effect of May’s extra Bank Holiday,” he added.
By contrast, a busy schedule of sporting events and a rise in theme park visits provided a slight boost to the economy, the ONS said.
The drop of 0.5% was worse than the 0.2% fall predicted by economists.
But Samuel Tombs at Pantheon Macroeconomics doesn't think July’s drop "marks the start of a falling trend, given that it can be uncontroversially attributed to one-off developments."
He noted sharp falls in output in the health and education sector, which collectively subtracted 0.24pp from month-to-month growth in GDP, were the result of strikes.
Meanwhile, the 0.4% month-to-month declines in output in both the distribution and food & accommodation services sectors likely merely reflect the boost to demand from unusually warm weather in June petering out, he said.
"We expect output to start rising again in both these consumer-facing sectors in July, in line with real wages," Tombs added.
"We think that households’ real expenditure will continue to increase, ensuring that the wider economy avoids a recession."
7:45am: Redrow to slash dividend as predicts profit could halve
Starting to sound like a broken record but more dismal news from the housebuilding sector.
Redrow PLC (LSE:RDW) plans to slash the dividend as it predicted profits could halve in the coming financial year as rising mortgage rates take their toll on the housing market.
The housebuilder forecast revenue in the new financial year of £1.65-1.7 billion, pre-tax profit of £180-200 million and a dividend of 14p per share.
The firm said it was basing this guidance on a sales rate in line with financial year 2023 of 0.46 per outlet per week.
Redrow said the sales market over the summer has been “challenging,” which resulted in sales per outlet per week for the first 10 weeks of the new financial year of 0.34, down from 0.61 the year before.
Matthew Pratt, chief executive said: “Cost of living and mortgage affordability continue to have a negative impact on the market.”
The news came as the FTSE 250-listed firm reported results for the year to July 2, 2023.
Revenue was flat at £2.13 billion compared to £2.14 billion the year before, while pre-tax profit rose £395 million from £246 million.
A final dividend of 20p was paid, taking the total payout to 30p, down from 32p the year prior.
Redrow said: “Reflecting the macro-economic picture and the tougher sales market, our average private reservation rate per week for the year was 0.46 compared to 0.68 in 2022.”
7:25am: Aviva sells stake in Singapore Life Holdings for £0.8 billion
It's a busy morning with resignations, economic news and now a sizeable sale from one of the UK's top businesses.
Aviva PLC (LSE:AV.) has offloaded its 25.9% stake in Singapore Life Holdings to Sumitomo Life Insurance for £0.8 billion cash as it continues to streamline its operations.
Amanda Blanc, chief executive officer said: “This is a good outcome for Aviva.”
“The transaction further simplifies the business and we are in a very strong position to build on our trading momentum in the UK, Ireland and Canada,” she added.
Sumitomo Life will pay £0.5 billion for Aviva's equity stake and £0.3 billion for two debt instruments that are also included in the sale.
Aviva said the transaction would have increased its solvency II shareholder surplus as at June 30 2023 by £0.4 billion and the solvency II shareholder ratio by c.8 percentage points.
The insurer said the deal “represents a further step in the simplification of Aviva's footprint following the international disposal programme completed in 2021.”
The proceeds will be considered alongside Aviva's existing capital management framework which makes any surplus capital available for reinvestment in the business, bolt-on M&A, and/or additional returns to shareholders, Aviva said.
The deal should close in the fourth quarter.
7:10am: UK economy contracts in July
The economy resumed its downward path in July hit by a drop in the services sector in further evidence that interest rate rises are slowing down the engines of growth in the UK.
Figures from the Office for National Statistics showed gross domestic product (GDP) fell by 0.5%, with falls in all three main sectors, following growth of 0.5% in June.
But for the three months to July, GDP increased by 0.2% with growth in all three main sectors.
Services output was down 0.5% after growth of 0.2% in June, and was the main contributor to the fall in GDP in July.
Our initial estimates show GDP fell 0.5% in July 2023:
▪️ services fell 0.5%
▪️ production fell 0.7%
▪️ construction fell 0.5%
— Office for National Statistics (ONS) (@ONS) September 13, 2023
Output in consumer-facing services showed no growth in July, following growth of 0.5% in June.
Production output fell by 0.7% in July after growth of 1.8% in June while the construction sector fell by 0.5% after growth of 1.6% in June.
7:00am: BP Chief executive resigns with immediate effect
Good morning and while the FTSE 100 is expected to open lower on Wednesday the early spotlight will be on BP PLC (LSE:BP.) following the resignation of chief executive Bernard Looney on Wednesday.
Spread betting firms are calling London’s lead index down by around 27 points after closing up 30.66 points, 0.4%, at 7,527.53.
In a statement released on Wednesday evening, oil major BP said Looney had resigned after admitting that he had not been "fully transparent" about historical relationships with colleagues.
"Bernard Looney has notified the company that he has resigned as chief executive officer with immediate effect," the company said, adding that finance chief Murray Auchincloss would act as interim CEO.
Looney, 53, is leaving the energy firm after less than four years in the role.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown said: “BP is one of the biggest players in British business, missteps of this magnitude aren’t what investors expect from one of the country’s most influential C-suites.”
“Strong governance and conduct controls are rightly non-negotiables,” she added.
Elsewhere, and the early focus in London will be a GDP reading while US inflation figures will take centre stage later in the session.