- FTSE 100 closes 29 points higher.
- Hunt says low growth unsurprising as UK enters recession.
- MPC member rules out imminent base rate cuts.
4.45pm: FTSE shrugs off recession
At the close, the UK's main index was up 29 points to finish at 7,597, a 0.4% gain on the day.
“Global stocks remain resilient despite the news that both Japan and the UK fell into recession in Q4 of last year," commented IG's Chris Beauchamp.
"Today’s data has driven fresh hopes that rate cuts may be forthcoming in the UK, and with Germany also teetering on the brink of a recession, that the eurozone may see rate cuts sooner than anticipated.”
3.51pm: FTSE 100 rallies, Croda, Kingfisher, NatWest lead gains
The FTSE 100 rallied late on, adding 39 points to reach 7,608.
Among the big risers were Croda International PLC (LSE:CRDA), Kingfisher PLC (LSE:KGF) and NatWest Group PLC (LSE:NWG), which gained 3.9%, 3.5% and 3.2% respectively.
B&Q owner Kingfisher had been graced with an upgrade by Citi analysts earlier in the day.
Hiking the retailer’s ‘neutral’ rating to a ‘buy’, the bank highlighted optimism around the firm’s positioning for an anticipated recovery in the UK housing market.
NatWest’s gains came ahead of the lender’s full-year results on Friday meanwhile, which UBS tipped previously should bring pre-tax profits of £1.2 billion for the final quarter, down 24% and £6.25 billion for the full twelve months.
Rumours have also swirled over NatWest’s top role as the results approach, with Wednesday reports having said the lender was preparing to appoint interim chief executive Paul Thwaite permanently.
Imperial Brands PLC (LSE:IMB) sat among the index's biggest losers, shedding 3.2%, followed by oil firms BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL).
3.22pm: Nasdaq slips at the open, but S&P 500 and Dow Jones higher
The Nasdaq Composite slipped on Thursday’s opening bell, while the S&P 500 and Dow Jones enjoyed gains following the release of a heap of economic data.
Retail sales slipped 0.8% in January, against analysts' expectations of a 0.1% contraction, reviving hopes that the Federal Reserve could soon begin base rate cuts.
“Due to a string of strong economic reports, the Fed seemingly felt confident enough to keep rates elevated in hopes of further bringing down inflation,” eToro analyst Bret Kenwell explained.
“That argument strengthened with this week’s inflation report, but the weaker-than-expected retail sales data for January may have investors wondering how long the Fed can really wait before cutting rates.”
Some played down the figures though, arguing economic woes were unlikely to be as bad as the data suggested due to the likes of storms impacting trading over the winter.
Jobless claims figures, despite having been expected to creep up, revealed a decline in the number of people on benefits in early February, meanwhile.
The Nasdaq dipped 9 points to 15,849 on the news, with the S&P 500 ticking up 13 points to 5,013 and the Dow Jones adding 208 points to reach 38,632.
2.57pm: ‘Some time’ before base rates can be cut - MPC member
Monetary Policy Committee member Megan Greene has said there remains little prospect of base rate cuts anytime soon in the UK, despite a tip into recession late last year.
“Given recent developments in demand and inflation, it’s clear that monetary policy is restrictive in the UK,” she acknowledged while speaking at Fitch’s London headquarters.
“But in light of the persistence of UK wage and services price pressures which stand out in international comparisons, I think policy will need to remain restrictive for some time in order for inflation to sustainably return to target.”
Her comments come after the ONS confirmed on Thursday that the UK fell into a technical recession over the back end of last year.
According to the ONS, an increase in the number of economically inactive people in the UK was among reasons for the negative growth.
“If more people were in work, consuming, producing, etcetera, we would have higher GDP numbers,” ONS chief economist Grant Fitzner said.
Some 9.3 million people fit into the ‘economically inactive’ category in the UK currently, compared to 8.4 million prior to the pandemic.
A record 2.3 million of these are due to long-term illness, with this figure having also climbed since Covid-19 struck.
Discussing prospective rate cuts, Greene added: “I would need to see further evidence that inflation persistence is less embedded than previously before I would consider voting to loosen policy.”
2.31pm: Short seller Hindenburg takes aim at Temenos
Hindenburg Research has another target in its crosshairs with the infamous short-selling institution now eyeing up enterprise software firm Temenos AG.
New York-based Hindenburg laid down a litany of accusations against Geneva-listed Temenos in a detailed report published on Thursday, ranging from financial mishandling, poor product quality and insider selling.
Temenos scalped by Hindenburg, ‘major accounting irregularities’ alleged
Hindenburg accused Temenos of engaging in “roundtripping schemes”, such as making an undisclosed $20 million investment into fintech group Mbanq around the same time as Mbanq purchased $20 million in software and services from Temenos.
This accusation suggests Temenos was creating a false market for its software products by purchasing its own software via a convertible note investment in Mbanq.
2.11pm: British Gas' soaring profits won't be repeated - analysts
Centrica PLC (LSE:CNA) continued to sit among the FTSE 100's leading risers by Tuesday afternoon after the energy firm hiked its dividend and reported a leap in profits from its retail wing.
Such a tenfold increase in British Gas' pre-tax profit came after energy firms were allowed to charge consumers more through bills to regain losses.
However, the significant jump, which saw pre-tax profit go from £94 million to £799 million in the space of a year, is unlikely to be repeated in analysts’ views.
British Gas profits off higher bills should be one-off - analysts
“Operationally, we do not see any surprises in today’s results,” Liberum analysts wrote in a note.
“In retail, the 2023 one-off benefits from cost recovery in British Gas Energy have skewed the financials and will not be factored into outlook.”
Such cost recovery had seen regulator Ofgem allow energy suppliers to bill consumers more early on in 2023 in an attempt to reduce debt levels within the industry.
This was through the energy price cap, which determines household bills by setting a maximum suppliers can charge per kilowatt of electricity and gas, alongside daily rates for each.
“The majority of these tailwinds should have been accounted for now, and over the medium term,” Hargreaves Lansdown analyst Aarin Chiekrie added.
Centrica climbed 2.2% to 137.35p.
1.40pm: Here’s a recap of the risers and fallers on the market today
Centrica PLC (LSE:CNA)’s earnings were hit by lower commodity prices in 2023, with the British Gas owner’s adjusted operating profit falling 17% year on year to £2.75 billion.
However, this was largely expected, and news of a full-year dividend hike of 33% to 4p per share sent shares over 4% higher.
British Airways owner International Consolidated Airlines Group SA (LSE:IAG) and Rolls-Royce Holdings PLC (LSE:RR.) were also among the FTSE 100’s risers, with gains of 2.9% and 2.4% respectively.
FTSE 250-listed genetics company Genus PLC (LSE:GNS) (Genus PLC (LSE:GNS)) tanked by a fifth on Wednesday morning in response to a profit warning.
In a trading update, Genus said it had “performed resiliently amidst challenging market conditions”, but ABS volumes fell and demand for dairy genetics in China was impacted due to a double-digit decline in the dairy herd.
Renalytix dropped by more than a third as its latest interim results show more big losses and a shrinking cash pile.
Losses are inevitable for an early-stage company such as Renalytix, which is developing diagnostics tools for kidney illness sufferers, but the scale seemingly is raising some alarms.
Gattaca tumbled 14% as the tech recruitment specialist reported fee income was down 16% in its latest half year with permanent placements hit especially hard.
Permanent fee income is down 38% year-on-year, it said, with the market weakness exacerbated by the end of a large defence outsourcing contract.
12.57pm: EU warns Red Sea attacks could spark new inflation crisis
Conflict in the Middle East, including attacks by Houthi rebels on Red Sea vessels, risk pushing the world into another inflation crisis, the European Commission has warned.
Red Sea attacks, which have targeted cargo ships passing through the Suez Canal, “could bring renewed stress to supply chains, hampering production and adding price pressures,” the EU said in its Winter 2024 Economic Forecast.
“Protracted geopolitical tensions and the broadening of the Middle East conflict to the Red Sea tilt the balance of risks towards more adverse outcomes,” the commission added.
12.10pm: US stocks called higher at the open
The S&P 500 was called higher in the 5,000 points region ahead of Thursday’s opening bell, as analysts awaited a host of data on the likes of retail sales and industrial production.
Futures had the S&P 500 opening 0.1% higher at 5,024, with the Dow Jones and Nasdaq being called marginally higher at 38,535 and 17,900 respectively.
Retail sales, industrial production, jobless claims, and manufacturing indices from Philadelphia and New York, are all scheduled for release on Thursday.
According to City Index analyst Fawad Razaqzadal, markets will want to see figures weakening in the hope base rate cuts come sooner rather than later.
Indeed, consensus is for retail sales, alongside New York and Philadelphia manufacturing, to decline, while jobless claims are expected to tick up slightly.
On the equities side, Deere & Co, Applied Materials Inc (NASDAQ:AMAT, ETR:AP2), Coinbase Global Inc (NASDAQ:COIN), Liberty Global (NASDAQ:LBTYA) Ltd and Trade Desk Inc (NASDAQ:TTD) are all due to report.
11.39am: Barclays mulling takeover of SocGen’s UK private bank
Barclays is reportedly contemplating the acquisition of SocGen's UK private bank, Kleinwort Hambros.
According to Reuters, SocGen has initiated an auction process for its Kleinwort Hambros unit.
This is in addition to the sale of its Swiss private banking operations, signalling a potential shift in strategic direction.
London-based Kleinwort Hambros had more than £12 billion in assets under management in 2022 and could be worth up to £700 million in a sale, as per Reuters.
Lloyds, Rathbones, and Raymond James are also said to have been invited to participate in the bidding process.
Reuters added that sources stressed talks were only at a preliminary stage, with a sale far from guaranteed.
However, were the acquisition to go ahead by Barclays, it would follow the lender’s takeover of Tesco Bank, which marked a bid to diversify from the volatile investment market.
11.12am: Government blamed for recession as Hunt holds firm on inflation goal
Analysts have slammed Rishi Sunak’s government after confirmation came on Thursday that the UK slipped into a technical recession late last year.
TaxPayers’ Alliance chief executive John O’Connell said: “The evidence is clear that the government has been suffocating the economy with excessive regulation, dangerous levels of debt and a record high tax burden.”
Figures from the ONS showed UK GDP contracted 0.3% over the final three months of 2023, following a 0.1% fall in the previous quarter.
Commentators argued that GDP per capita, which declined 0.7% over the course of the year, was a more important metric though, given implications on living standards.
“If ministers hope to restore growth in the long term they need to rein in spending and provide the tax cuts that individuals, families and businesses desperately need,” O’Connell added.
Chancellor Jeremy Hunt said the UK’s lack of growth was unsurprising though, as he stuck to his guns on the government’s aim to cut inflation.
“High inflation is the single biggest barrier to growth which is why halving it has been our top priority,” he commented.
“While interest rates are high - so the Bank of England can bring inflation down - low growth is not a surprise.”
Hunt added that there were signs of the UK economy “turning a corner,” with data earlier this week showing wage increases above inflation and low unemployment.
Wednesday’s inflation reading of 4% for January, which was lower than market expectations, also raised hopes of base rate cuts in the coming months.
However, Hunt suggested imminent changes were unlikely.
“Although times are still tough for many families, we must stick to the plan,” he said.
10.40am: Centrica leads risers after dividend hike, surge in retail profits
Centrica PLC (LSE:CNA) led the FTSE 100’s risers by mid-morning on Tuesday, with a higher dividend from the British Gas owner appearing to have pleased investors.
Shares climbed 3.3% on the back of the energy firm’s full-year results, which showed group profits down 17% to £2.8 billion, but retail profits - from the British Gas wing - up tenfold to £0.8 billion.
British Airways owner International Consolidated Airlines Group SA (LSE:IAG) and Rolls-Royce Holdings PLC (LSE:RR.) were also among the FTSE 100’s risers, with gains of 2.9% and 2.4% respectively.
This was after manufacturer Airbus Group (EPA:AIR) reported strong results, buoyed by record orders in 2023, with news also coming from Jet2 PLC (AIM:JET2) of resilient winter travel demand.
The FTSE 100 receded following a boost earlier on in the morning meanwhile, to sit 4 points lower at 7,563.
9.57am: GSK acquires respiratory firm Aiolos Bio for US$1.4 billion
GSK PLC (LSE:GSK, NYSE:GSK) has announced the US$1.4 billion acquisition of respiratory biopharmaceuticals firm Aiolos Bio.
FTSE 100-listed GSK said the takeover, which will see US$1 billion paid upfront followed by a further US$400 million in performance-linked payments, would offer it access to Aiolos’ long-acting anti-thymic stromal lymphopoietin (TSLP) treatment.
“Adding AIO-001, a potentially best-in-class medicine targeting the TSLP pathway, could expand the reach of our current respiratory biologics portfolio,” chief executive Tony Wood said.
The monoclonal antibody treatment is ready to enter phase two clinical development for the treatment of adult patients with asthma, GSK added.
It also has the potential for additional indications, such as chronic rhinosinusitis with nasal polyps.
9.39am: Vodafone Italian merger in doubt as just one bidder remains
Vodafone’s plans to dispose of or merge its Italian business have been thrown into doubt as just one interested party reportedly remains interested in such a deal.
As per Reuters sources, a tie-up with Swisscom’s Fastweb business remains Vodafone’s sole option in rescuing its Italian division.
A merger offer by Iliad had been rejected in January, according to Vodafone, with the proposal having been set to value its Italian operations at just over €10 billion.
However, Vodafone warned that there could be “no certainty that any transaction will ultimately be agreed,” with Thursday’s reports suggesting any agreement was on its last legs.
Growing competition in Italy had previously been cited as the reason for Vodafone to sell or merge its business there, which has seen revenues decline and margins squeezed in recent years.
9.25am: Technical recession talk ‘arbitrary’ - analysts
NIESR Economist Paula Bejarano Carbo has described Thursday’s GDP reading, which showed the UK fell into a technical recession late last year, as “arbitrary”.
ONS data revealed that GDP fell by 0.3% in the final quarter of last year, following a 0.1% decline in the previous three months.
“By the standard metric, this means that the UK economy was in a shallow recession in the second half of last year,” Carbo acknowledged.
“However, this metric is both arbitrary and not greatly informative,” she said.
“The state of the UK economy is better described by the fact that GDP fell between the first quarter of 2022 and the final quarter of 2023.
“Further, GDP per head remains lower than pre-Covid. The broader picture of flatlining growth and its adverse implications for living standards in the long-term should dominate today’s headlines, rather than technicalities.”
Finalto's Neil Wilson echoed the sentiment, again arguing that wide reports of the UK now officially being in a "technical recession" were missing the point.
"Recession, recession everywhere, ne’er any drop to think," he said.
"Who cares whether the national GDP is up or down when GDP per capita is terminal – down 0.7% in 2023.
"Too few people are shouldering too much of the burden and we keep adding to the burden. The loss of per capita income is all that matters."
9.08am: Jet2 climbs after lifting guidance
Jet2 PLC (AIM:JET2) shares climbed 4% after the airline bumped up its full-year profit guidance on stubborn demand over the opening months of the year.
Pre-tax profit should come in between £510 million and £525 million, the airline updated on Thursday, compared to previous expectations of £480 million to £520 million.
Jet2 lifts guidance on resilient winter travel demand
This is after February and March bookings prove demand has stayed as strong as previous months, according to the airline, with February’s extra day and an earlier Easter also proving beneficial.
8.45am: The morning so far
The R word was front and centre this morning, with UK GDP data pointing to the second straight contraction in the final quarter of 2023, marking an official recession in the technical sense.
ONS director of economic statistics Liz McKeown said: “Our initial estimate shows the UK economy contracted in the fourth quarter of 2023. While it has now shrunk for two consecutive quarters, across 2023 as a whole the economy has been broadly flat.
“All the main sectors fell on the quarter, with manufacturing, construction and wholesale being the biggest drags on growth, partially offset by increases in hotels and rentals of vehicles and machinery.”
“There’s a fair chance the economy will turn positive again in the months ahead but that’s no real cause for celebration now. This news will put extra strain on households, businesses and their workers and the public finances,” said Ed Monk, associate director at Fidelity International.
But the FTSE 100 shrugged off the worrying news, with the lead index adding over 40 points to 7,609 in opening exchanges, though it has since retracted to 7,593.
On the company news front, Centrica PLC (LSE:CNA)’s earnings were hit by lower commodity prices in 2023, with the British Gas owner’s adjusted operating profit falling 17% year on year to £2.75 billion.
However, this was largely expected, and news of a full-year dividend hike of 33% to 4p per share sent shares over 4% higher.
Elsewhere, NatWest is reportedly set to appoint insider Paul Thwaite as chief executive following the departure of former boss Alison Rose over the Nigel Farage 'debanking' scandal.
Per Sky news reports, the lender’s board will meet on Thursday to discuss Thwaite’s appointment, alongside Friday’s annual results.
8.26am: ‘Bargain gas hurts British Gas’
This is what Adam Vettese, market analyst at eToro sais of British Gas owner Centrica’s results: "A dividend increase and a share buyback scheme are the noises shareholders want to hear and Centrica's share price this morning reflects that.
“However, digging a bit deeper, there are signs that the good times may be fading for the British Gas owner. Profit has slipped, margins are being squeezed and gas prices are a fraction of what they were in their 2022 pomp.
“Centrica has acknowledged that they do not expect to see the same one-off cost benefits they did last year going forward, and combined with gas prices now hovering near four-year lows, 2024 is shaping up to be a challenging year."
Shares rallied 6.4% in opening exchanges.
8.20am: Airbus earnings down
In Europe, Airbus’ reported annual earnings fell -14% year on year to €4.6 billion (£3.9 billion), with net income falling -11% to €3.8 billion.
Self-financed R&D expenses ticked 5.7% higher to €3.26 billion.
Gross commercial aircraft orders totalled 2,319 compared to 1,078 in 2022, with the order backlog amounting to 8,598 commercial aircraft at the end of 2023.
“In 2023 we recorded strong order intake across all our businesses and we delivered on our commitments. This was a significant achievement given the complexity of the operating environment,” said chief executive Guillaume Faury.
Shares were seen 1.45% lower at €148.
Back in London, the FTSE 100 remains in a strong position despite GDP figures pointing to a recession, with the lead index up 40 points to 7,607.
8.02: Centrica profits hit by lower commodity prices
As expected, Centrica PLC (LSE:CNA)’s earnings were hit by lower commodity prices in 2023, with the British Gas owner’s adjusted operating profit falling 17% year on year to £2.75 billion.
This adjusted result excludes the disposed Spirit Energy Norway assets in 2023, and the impact of unrealised hedging losses in 2022.
Retail profit rose to £800 million, driven by a return to profitability in British Gas Services & Solutions and cost recoveries in British Gas Energy.
However, profits from Optimisation and Infrastructure activities were affected by lower commodity prices and volatility, as well as the introduction of the Electricity Generator Levy in Nuclear operations.
Free cash flow stood at £2.2 billion, slightly down from £2.5 billion in the previous year, and the company ended the year with a robust balance sheet and adjusted net cash of £2.7 billion, up from £1.2 billion in 2022.
Chief executive Chris O’Shea commented: “We are pleased to report that this strong underlying operational performance has continued into early 2024. As you would expect, sharply lower commodity prices and reduced volatility will naturally lower earnings in comparison to 2023 as we return to a more normalised environment.
“Our performance over the past year has reinforced our confidence in delivering against our medium-term sustainable profit ambitions and continuing to create value for shareholders.”
O’Shea touted Centrica’s voluntary customer support policies: “At the start of the energy crisis we committed to contribute a material sum from British Gas Energy and Bord Gáis Energy profits to support our customers.
Whilst we are starting to see material commodity price falls, today we have committed another £40 million, bringing the total voluntary customer support to £140 million, more than any other supplier.”
Shares opened 0.3% higher at 134.76p
7.38am: ‘It’s now official, we’re in recession’
This is what Ed Monk, associate director at Fidelity International, said of today’s GDP result: “It’s now official, we’re in recession. And the fall in growth at the end of last year was worse than expected.
“There’s a fair chance the economy will turn positive again in the months ahead but that’s no real cause for celebration now. This news will put extra strain on households, businesses and their workers and the public finances.
"Falling growth means demand is ebbing out of the economy. That puts downward pressure on inflation but there’s little sign the Bank of England will cut rates yet.
“Inflation remains twice its official target level and wages are still rising strongly. That’s good for households in the short term but may mean we’re living with interest rates at these levels for many more months.
Monk told investors it is “probably best to tune out the noise”, with history showing that short-term economic ups and downs have little to do with performance in the stock market.
“Markets tend to be forward looking and investors will already be seeing past data on recent economic performance," he added.
7.31: Japan also falls into recession
As the market digests the news of the UK falling into a technical recession, Japan is facing its own economic contraction.
Asia’s second-largest economy behind China shrank 0.1%, while analysts were expecting a 0.3% expansion, with consumption declining for the third straight quarter.
In dollar terms its gross domestic product (GDP) stood at $4.2 trillion in 2023, meaning it has ceded its place as the world’s third-largest economy to Germany.
Japan is facing an ageing population crisis despite government attempts to stimulate the birth rate.
Back in the UK, the market was unfussed by the fall into a technical recession, with FTSE 100 futures pointing to a 43-point rise to 7,591 when markets open at 8am.
FTSE 100 futures have the lead index opening another 32 points higher at 7,579 today, after closing 56 points higher on Wednesday.
7.15am: UK GDP points to technical recession
FTSE 100 futures have the lead index opening another 32 points higher at 7,579 today, after closing 56 points higher on Wednesday.
The strong performance comes after a better-than-expected January inflation print that saw the headline rate sticking at 4% when the market expected a shift upwards.
Macro news is not so encouraging today; preliminary gross domestic product (GDP) contracted 0.3% in the fourth quarter of 2023 following a 0.1% fall in the previous quarter.
That puts the UK in a technical recession.
Commenting on today’s GDP figures, ONS director of economic statistics Liz McKeown said: “Our initial estimate shows the UK economy contracted in the fourth quarter of 2023. While it has now shrunk for two consecutive quarters, across 2023 as a whole the economy has been broadly flat.
“All the main sectors fell on the quarter, with manufacturing, construction and wholesale being the biggest drags on growth, partially offset by increases in hotels and rentals of vehicles and machinery.”
Health and education performed less well than initially estimated in both October and November, McKeown added.
On the company news front, full-year results from Centrica PLC (LSE:CNA) and RELX PLC (LSE:REL) are due this morning, with MJ Gleeson (LSE:GLE) plc posting its interims.