Yahoo Finance FTSE 100 Live 10 May: Index at another record as UK exits recession
A forecast and recession beating GDP figure of 0.6% today showed the UK’s strongest expansion in over two years.
The Q1 estimate provided another boost to stock market confidence after the FTSE 100 index closed at a record last night.
On the corporate front, British Airways owner IAG and the property portal Rightmove have reported figures today.
FTSE 100 Live Friday
Recession over after strong Q1 GDP
BA owner “well placed” for summer
Rightmove warns over affordability pressure
'Finally a good news story for the UK' as GDP grows at fastest pace in more than two years
12:18 , Daniel O'Boyle
The City was basking in a rare glow of “genuinely strong” economic news today as Britain powered out of recession at a far quicker pace than expected.
The gloom of last year’s slump and cost of living crisis was forgotten as news of the 0.6% advance in GDP in the first quarter helped send the FTSE 100 to yet another all-time high. It was the fastest growth since the fourth quarter of 2021 when Britain was emerging from the pandemic.
The City had only been expecting 0.4% quarterly growth but crucially the strong data does not seem to have dampened hopes of an interest rate cut as early as June, or August at the latest.
City Voices: It’s time to end the pity party on London company valuations
11:02 , Daniel O'Boyle
UK companies need to wake up from their status quo bias.
We have had two years now of the best of British business either being snapped up by private equity or choosing to list in the US or elsewhere. In the past few weeks, Darktrace has agreed a buyout, Flutter has moved its main listing to New York and now there is talk of Shell following suit.
It certainly paints a bleak picture of things to come. Throughout this period, there have been repeated calls for the government or regulator to step in and ‘revitalise’ public markets. And yet no one seems to want to address the elephant in the room. That the City and companies themselves might be the ones that need to change (as well). Listed companies need to stop blaming the government or Brexit for low valuations and instead look at their own practices with a clear, unbiased eye.
Another FTSE 100 milestone, Vodafone and JD Sports among risers
09:40 , Graeme Evans
The FTSE 100 index today peaked at 8431, representing the latest milestone in a week of record highs.
This year’s rise of 9% has been led by the likes of NatWest and BAE Systems, although today’s session saw demand for some of the weaker performers.
Vodafone neared the top of the risers board with a gain of 2% or 1.5p to 69.5p, while luxury goods group Burberry added 20p to 1181p and JD Sports Fashion lifted 1.7p to 121.9p.
A strong session for mining stocks including Glencore also bolstered the FTSE 100 index, which settled 47.66 points higher at 8429.01.
Today’s forecast beating GDP reading helped lift the FTSE 250 index by 72.61 points to 20,603.91, still a long way off its September 2021 record level.
Beneficiaries of UK optimism included construction products firm Marshalls, up 9.5p to 302p, and Mappin & Webb owner Watches of Switzerland after a gain of 4% or 13.2p to 350p.
Interest rates could be cut later this year in 'massive relief for families with mortgages,' says Jeremy Hunt
09:37 , Daniel O'Boyle
Interest rates could be cut later this year in a “massive relief for families with mortgages,” Jeremy Hunt said on Friday.
The Chancellor made the prediction as official figures showed the economy surging out of recession.
Asked on LBC Radio is he could foresee the Bank of England’s Monetary Policy Committee cutting interest rates this year, he said: “Yes...the Bank of England...”
Pressed by presenter Nick Ferrari whether it could be this summer, he added: “I would not like to predict an exact time but the Bank of England governor says he is optimistic that we are on the right track.”
Britain's recession is officially over as economy grows faster than expected in first quarter
09:16 , Daniel O'Boyle
Britain’s economy has returned to growth after one of its shortest recessions on record, official figures reveal today.
GDP advanced by a stronger than expected 0.6% in the first quarter after robust 0.4% growth in March in a boost to Rishi Sunak and Jeremy Hunt, according to data from the Office for National Statistics (ONS).
That means that the recession that lasted through the second half of last year is now officially over after growth of 0.3% in January and 0.2% in February. Recession is defined by economists as two consecutive quarters of falling output.
FTSE 100 at new record as housebuilders and miners rally
08:34 , Graeme Evans
The advance of the FTSE 100 index continued today as London’s leading benchmark rose 0.5% or 47 points to a fresh record of 8428.
Mining stocks dominated the risers board after the dollar weakened on optimism that US interest rates could be cut in September.
Glencore and copper specialist Antofagasta added 1.5%, alongside rises of 1.5p to 69.5p for Vodafone and 88p to 7880p for hotels group IHG.
Housebuilders also benefited from the outlook for lower mortgage costs as Berkeley Group lifted 60p to 5225p and Persimmon rose by 19.5p to 1426p.
Rightmove shares fell 3% or 15.2p to 557.6p after its trading update, while the first quarter performance of British Airways owner IAG left its shares 1.6p higher at 184.4p.
The FTSE 250 index rose by 64.56 points to 20,595.86, extending gains for the past month to 4%.
'Caution should be taken' in interpreting GDP figures
08:02 , Daniel O'Boyle
James Smith, developed markets economist at ING, says the UK’s GDP figures were extremely impressive, but cautioned that growth may not be quite as strong as it looks.
Smith said: “The UK economy powered out of its technical recession in the first quarter, judging by the initial GDP figures released today. The economy expanded by a whapping 0.6% quarter-on-quarter.
“Admittedly the data underlying that number has been pretty volatile. Some of that bounce – and the 0.3% contraction that came before it in the fourth quarter – is linked to a suspiciously large fall in retail activity at the end of last year which was fully recouped in January. Likewise, GDP increased by 0.4% in March alone, and some of the drivers of that (like hospitality and administration) look more like noise than signal.
“Some caution should therefore be taken when interpreting these figures, just like the weaker numbers at the end of last year. Still, it tallies with other economic indicators which suggest the economy is entering a period of stronger growth. The purchasing managers indices are the most obvious example, and these are consistent with continued momentum in the second quarter. Even here though, there is some debate over whether the numbers are being artificially boosted by “residual seasonality” (i.e., not properly adjusting for seasonal trends after the pandemic).”
Rightmove reveals rise of almost a fifth in 2024 housing market sales but warns average buyers remain 'stretched'
07:51 , Michael Hunter
Rightmove, the UK’s biggest property portal, pointed to signs of life in the housing market today, with sales rising and conditions in the rental sector staying “very busy”.
Its website is often the first place many buyers enter the housing market. It said today that sales agreed between January and April were up 17%.
That came “with both sellers and buyers now increasingly looking to transact”, it added.
But the FTSE 100 constituent also warned that “higher mortgage rates continue to stretch affordability for the average buyer, and the market is operating at different speeds across its many segments and areas”.
Rightmove continues to expect “total sales transactions of 1.1 million in 2024”.
The rental market remains under-supplied. Rightmove said its latest “Rental Tracker” showed “an estimated 50,000 properties [are] needed “to return the supply of rental properties to pre-pandemic levels.”
Rental listings in the first four months of the year were also up by about a fifth, at 18%.
Nonetheless, rental agents “ received an average of 14 leads per available property, and average rents were 7.6% higher” year-on-year.
Bank of England 'in no rush to cut'
07:42 , Daniel O'Boyle
Ruth Gregory, deputy chief UK economist at Capital Economics, says the UK is in no rush to cut interest rates given the strong GDP figures. However, inflation and wages will remain the key figures in deciding when it makes its move.
She said: “Admittedly, the increase in GDP in Q1 followed contraction of 0.3% q/q in Q4. And Q1 GDP was only 0.2% higher than a year ago. So the economy is still fairly weak. Even so, all the early indicators suggest that GDP growth rose robustly in April as well. At the margin, this may mean the Bank of England doesn’t need to rush to cut interest rates.
“But the timing of the first interest rate cut will ultimately be determined by the next inflation and labour market releases.”
British Airways parent IAG 'well-positioned' for summer after first quarter revenue soars helped by strong Easter
07:36 , Michael Hunter
British Airways is ready for the peak summer travel season, its parent company said today as it reported a sharp ascent in first-quarter revenue.
IAG, which also owns the Iberia and Aer Lingus airlines, reported operating profit for the period of €68 million, up sharply from €9 million in the same part of last year.
Luis Gallego, IAG’s chief executive officer, said “high demand for travel is a continuing trend”, adding: "We are well-positioned for the summer. “
The company said its non-fuel costs were as expected including the “annualised impact of 2023 pay deals” and it did not expect that to change.
“They reflect planned investment to deliver customer benefits and operational efficiency”, it said.
“Employee numbers also rose as the airlines increase their flying activity and prepare for increased flying schedules for the summer period,” IAG added.
S4 Capital sees ad revenue fall again
07:22 , Simon English
Strife in the ad markets continues to blight Sir Martin Sorrell's S4 Capital with 1st quarter revenues down near 15%. He blames "volatile global macroeconomic conditions," and client caution among big tech firms.
Revenues fell from £261 million a year ago to £210 million for the three months to March.
The former WPP man said: “We continue to develop our larger, scaled relationships with leading enterprise clients and are increasing our focus on margin improvement through greater efficiency, utilisation, billability and pricing.”Yesterday ITV noted some improvement in the ad market and hoped this summer’s Euro football championships would see that trend continue.
S4 is more reliant on big tech giants that have lately been less optimistic.
'This could be the year stagnation subsides'
07:21 , Daniel O'Boyle
Richard Carter, head of fixed interest research at Quilter Cheviot, says this could be the year that the UK’s stagnation ends and the economy returns to steady growth.
He said: “With interest rate cuts seemingly pencilled in for the summer, the good news continues to flow for the UK as today’s data shows the UK is out of recession. The first quarter saw GDP grow by 0.6%, better than expected, as inflation has eased and the worst of the cost-of-living crisis is behind us. The increase in GDP has primarily been driven by the UK’s strong services sector, which it has come to rely on in recent years to help push the economy forward.
“While growth remains fairly lacklustre compared to the likes of the US, this data shows this should be the year that economic stagnation subsides in the UK and the economy returns to consistent, if unspectacular, growth.
FTSE 100 set for new record on rate cut hopes, pound above $1.25
07:17 , Graeme Evans
Another strong week for the London stock market is set to finish with the FTSE 100 index at a fresh record.
The top flight rose 0.3% yesterday and is forecast by IG Index to open up about 0.5% or 39 points at 8420 following a robust session on Wall Street.
The Dow Jones Industrial Average extended its positive run to a seventh session by adding another 0.9% and the S&P 500 index improved by 0.5%.
The US gains came after a weak jobs market report raised hopes that US interest rates could be cut earlier than expected.
Traders in the UK are positioned for a potential rate cut as soon as June, as long as April’s inflation and wage figures are favourable.
Revised bets that the US Federal Reserve may follow a couple of months later helped the pound, which traded above $1.25 this morning.
Recovery broad-based as only construction struggles
07:10 , Daniel O'Boyle
ONS Director of Economic Statistics Liz McKeown said: “After two quarters of contraction, the UK economy returned to positive growth in the first three months of this year.
“There was broad-based strength across the service industries with retail, public transport and haulage, and health all performing well. Car manufacturers also had a good quarter. These were only a little offset by another weak quarter for construction.
“In the month of March the economy grew robustly led, again, by services with wholesalers, the health sector and hospitality all doing well.”
Recession over as GDP grows faster than expected
07:06 , Daniel O'Boyle
The UK escaped recession more emphatically than expected, with Q1 GDP up 0.6%.
That follows two consecutive quarters of decline, which is the technical definition of a recession.
Economists had expected GDP growth of 0.4%.
March GDP was up 0.4%, well ahead of the expected 0.1% growth.
The end-of-2023 recession was one of the shortest and shallowest in history.
Recap: Yesterday's top headines
06:43 , Simon Hunt
Good morning from the Standard City desk.
The City’s watchdog the FCA has faced abuse from ministers including chancellor Jeremy Hunt over its plan to “name and shame” companies under investigation for malfeasance.
For a start, this is none of his business. Even if it were, he is wrong-headed.
The FCA, which doesn’t have a great track record of stopping frauds early, just wants to alert the market sooner than usual that it is concerned about some practices, or some companies.
Hunt fears this could hurt the UK stock market, which would make sense if the UK stock market were a picture of health while Wall Street were struggling.
The opposite is true. The FTSE might be hitting new highs, but they are low highs and are more to do with currency movements (big UK companies make a lot of money in dollars) than renewed optimism about UK plc.
What Hunt and others are arguing for is less transparency, for sweeping things under the regulatory carpet in the hope they are never found.
It would be so much better if the City and investors saw tough regulation from the FCA as a strength, as a reason to do business in London rather than a hindrance.
The watchdog has this right and should stick to its guns.
~
Here’s a summary of our top headlines from yesterday:
Is London finally closing the gap with the US? The FTSE 100 hit another record high, while US tech exuberance appears to be cooling as Arm results disappointed
Bank of England holds rates again but MPC vote changes raising hopes of a June rate cut.
ITV sees ad revenue up 3% in the first quarter in sign of a recovery in the ad market. Hit show Mr Bates v The Post Office is one of the winners. Total revenue down 7% to £382m due to ITV studios arm.
Blackstone wins bidding war for Hipgnosis Songs Fund as Concord won't submit higher bid, finally putting an end to the music rights owner's saga in the public eye and ensuring Merck Mercuriadis stays on
Balfour Beatty points to Rolls-Royce nuclear submarine deal as it stands by profit forecasts for the year
Engineering firm John Wood Group says profits will grow faster than target next year, as it attempts to fend off latest bid - it rejected £1.3bn offer from Dubai-based company yesterday
Watches of Switzerland buys the Italian jewellery maker Roberto Coin for $130 million, which is the sixth biggest bling brand in the US
