Yahoo Finance FTSE 100 Live: UK on recession brink as GDP contracts, shares get US boost
GDP contracted by a smaller-than-expected 0.2% in the third quarter, a performance expected to mark the beginning of a UK recession.
A big fall in manufacturing output and flat performance in the services industry drove the weakness, which followed growth of 0.2% the previous quarter.
Despite the weakening outlook, stock markets have continued to rally after yesterday’s lower-than-expected US inflation figure boosted hopes that interest rates are near their peak.
FTSE 100 closes down 49 points to 7,326: evening wrap
16:54 , Simon Hunt
The FTSE 100 closed down 49 points to 7,326 on the day it was reported that the UK’s GDP fell 0.6% in September.
The underlying decline is likely to mark the start of recession as the fourth quarter is set to feel the cumulative impact of high inflation and rising interest rates.
The pound went up 0.7% against the dollar today to reach its highest level since mid-August, on the back of US inflation data out yesterday that came in low than analysts expected.
Raw materials stocks made the most gains today, up 3.2%, while healthcare stocks fell an average of 4.5%.
That’s all folks. Monday: results from S4C
17:49 , Simon Hunt
That concludes our coverage for today, after UK GDP fell 0.2% in the third quarter, a smaller-than expected contraction.
China’s easing of stringent Covid curbs has given a further boost to risk appetite as the market resurgence for technology and cyclical stocks continues.
But Mortgage Investment Trust, one of the oldest funds in the City, today admitted its assets have plunged by 15% is just the last six months in the latest sign that stock pickers are finding it difficult to deal with wider economic turmoil.
The Evening Standard City desk will be back at 7am on Monday, when quarterly results from S 4 Capital will shed light on wether the UK’s advertising industry will be able to withstand economic downturn.
London’s house price growth rate beaten by the home counties
16:58 , Simon Hunt
House prices are often the talk of town across London, which is home to some of the highest average valuations in the country, but new research shows that prices in areas outside the capital have been rising faster, for longer.
Saxo, the investment platform, has crunched the numbers on average house price data going back to 2010 and found that the increases in the home counties are outpacing those within London itself. Buckinghamshire ‘s average house price was up 70% over the last 12 years, taking it to over £491,000. Over the same period, London’s rose 34%, but remained higher at almost £533,000.
There were increases of over 50% across much of the stockbroker belt -- within easy reach of central London but outside the M25 -- including West Sussex, Surrey and Hertfordshire. The trend, revealed by analysis of government house price index data, implies that the so-called “race for space” seen since the pandemic, with people leaving the city for more distant properties with gardens and more room, has deeper roots.
Wall Street stocks gain on hopes for smaller Fed rate rises
14:52 , Michael Hunter
After one of the strongest daily rallies on months, New York stocks rose further on sustained hopes that the Federal Reserve would ease the extent of its rate rises.
They came after inflation data released before the previous session was softer than expected, a sign that the central bank’s efforts to tame rising prices were paying off.
The S&P 500 was up 9 points at 3965.80, a rise of 0.2% adding to the gain of almost 6% notched up on Thursday.
Rally for New York stocks set to carry on after gains across Europe and Asia
13:21 , Michael Hunter
Wall Street stocks looked set to make further gains at the start of New York trade, extending one of the strongest rallies for months, which came over the previous session after a drop in US inflation cheered the mood among investors.
There were gains for equities markets across Europe and Asia, on hopes that the Federal Reserve’s fight against inflation was working, pointing to the prospect of smaller rate rises from the central bank.
After a rally of almost 6%, futures traded expected the S&P 500 to rise 0.5%, or 18 points, taking it to 3979.25.
James Hughes, analyst at Scope Markets said: “That softer than expected US inflation print is continuing to bolster sentiment for equity markets, but the session may be somewhat subdued with bond markets closed for the Veterans Day holiday.”
Pound holds the $1.17 level after UK economy shrinks by less than feared in the third quarter
11:54 , Michael Hunter
Sterling held above $1.17, finding support after official data showed a smaller than expected decline in the third quarter, helping it extend gains made during the previous session.
The pound was up 0.4% at $1.1763 on Friday, adding to a rally of about 3% over the previous session, when the dollar was in broad retreat after a fall in US inflation pointed to smaller rate rises in the Federal Reserve’s fight against rising prices.
News of a 0.2% contraction in the size of the UK economy, smaller than the 0.5% expected, gave sterling a further boost in early trade against the dollar, which it kept throughout the morning. The pound had been lower overall ahead of the GDP reading and turned positive after the numbers were published.
It took the pound to its highest level since August against the US currency. But it was weaker against the euro, with a unit of the share currency costing 0.5% more at £0.8752.
Tech stocks boosted as risk appetite improves, FTSE 250 up 1.7%
10:18 , Graeme Evans
China’s easing of stringent Covid curbs has given a further boost to risk appetite as the market resurgence for technology and cyclical stocks continues.
Hong Kong’s Hang Seng index closed 7% higher and London-listed Prudential and mining giant Anglo American rallied sharply after China reduced quarantine time limits and changed other rules for visitors.
Brent crude futures rose by 3% to $96 as hopes for a demand recovery by the world’s second largest economy were accompanied by a wider improvement in sentiment after Wall Street’s best session since March 2020.
Last night’s 5% bounce for the S&P 500 index came after an inflation reading of 7.7% brought an end to policy tightening by the US Federal Reserve into view. The biggest gains were in technology, which is most vulnerable to rising interest rates, and in consumer cyclicals.
The relief rally for investors continued in London today as Cazoo and Trustpilot investor Molten Ventures surged 11% and Auction Technology Group jumped 9%. Hopes that inflation pressures are easing helped heavily-sold consumer-focused stocks ASOS and Currys to rebound 53.5p to 748.5p and 5.3p to 83.4p respectively.
Their momentum and support of a stronger pound ensured the FTSE 250 index continued its turnaround by adding 1.7% or 326.36 points to 19,703.60. This was in contrast to the FTSE 100 index, where dollar exposure and a reliance on defensive stocks left the top flight 20.28 points weaker at 7355.06.
Falls of more than 3% were posted by tobacco giants Imperial Brands and BAT, but there were some spectacular gains elsewhere. These were led by grocery technology stock Ocado, which jumped 9% or 61.8p to 775p and has now almost doubled in value since a multi-year low of 393p on 12 October.
Shares in Asia-focused insurer Prudential rose 80.4p for their highest level since June at 1010p, while luxury goods group Burberry improved 58.5p to 2034p.
The Works shares fall 9% amid online sales downturn
09:40 , Simon Hunt
Shares in TheWorks fell 9% today after its online sales slumped over the past six months and the retailer warned of softening demand in recent weeks.
The Birmingham-based business reported a 17% downturn in online sales in the half year to October, offset by strong post pandemic growth in in-store revenue, leading to an overall 0.6% rise in like-for-like turnover over the period.
The firm said: “We remain cautious with regard to how consumer spending might be affected by external factors such as higher inflation and interest rates during the key Christmas season.”
But despite slowing sales growth, the firm reaffirmed its full-year expectations and said cost-of-living pressures would attract families in search of an ‘affordable’ Christmas.
Investec analyst Kate Calvert said: “TheWorks has delivered another resilient trading performance showing the strength of its value proposition and the positive impact its ‘Better, not just bigger’ strategy is having on the appeal of that proposition.
“With plenty of self-help still to go after and a strong net cash balance sheet, WRKS is well positioned to ride out the downturn.”
Strong selling book titles have included Diary of a Wimpy Kid: Diper Överlöde by Jeff Kinney, The Bullet That Missed by Richard Osman and It Starts With Us by Colleen Hoover
The stock fell 9% to 31p. Shares in The Works are down 41% since the start of the year.
In April the company was forced to disable all internal and external access to its systems, including employee email accounts, after it was hit by a cyber-attack. The firm said the incident halted replenishment deliveries to stores and delayed the fulfilment of online orders.
Hurricane Ian hits Beazley
09:23 , Simon English
BEAZLEY revealed today it would take a $120 million hit from Hurricane Ian, the deadly storm that struck Florida in September and October.
That’s out of total predicted damage of $60 billion. Around 150 people were killed.
Beazley also said investment returns are down 3.6% on the year, compared to a 1.4% rise last year.
Adrian Cox, the CEO of the Lloyds of London insurer, said: “Whilst mark to market losses have occurred due to rising yields in our fixed income portfolio, rising yields also mean we anticipate significant future investment returns.”
In the nine months to September, premiums written rose 22% to $3.98 billion.
The Lloyd’s of London insurer has warned of a $120 million hit from Hurricane Ian as it posted third-quarter results. Gross premiums written rose 22 per cent over the quarter to $3.98 billion.
Cox added: “We have had a strong underwriting performance over the quarter with all divisions continuing to grow. As expected overall rates have moderated, however we are seeing increased demand across many lines of business which supports our growth ambitions.”
Tesla investor Scottish Mortgage plunges
09:14 , Simon English
SCOTTISH Mortgage Investment Trust, one of the oldest funds in the City, today admitted its assets have plunged by 15% is just the last six months in the latest sign that stock pickers are finding it difficult to deal with wider economic turmoil.
The £12 billion fund made a name for itself as an early investor in Tesla, which is still a large holding at 7%.
Over ten years, it is up 528%, making fortunes for the tens of thousands of small investors who backed long term fund manager Tom Slater.
He is now under some pressure since that 15% fall is double the 7% loss in the FTSE All-World Index.
SMIT shares are down 45% this year, but rose 22p to 822p today.
The fund was set up following the market panic of 1909 to offer capital to start up businesses. Its note to investors today said: “It is important at times of stress to remember this founding story: corporate potential has little to do with the cycles of greed and fear in the stock markets.”
It added: “We are redoubling our efforts to find new investments that can adapt to difficult economic conditions.”
Moderna is the fund’s biggest holding. It also has stakes in Netflix, Ferrari and HelloFresh.
Nearly all large fund houses have struggled of late, with Jupiter and Schroders among those seeing assets plunge and clients depart.
This has left many individual stock pickers struggling to justify their value in a world where much cheaper index trackers have outperformed active funds.
Stock market rally continues, Prudential sharply higher
08:54 , Graeme Evans
Gains for technology and growth stocks are continuing after yesterday’s boost to stock market sentiment from softer-than-expected inflation figures in the United States.
Ocado and JD Sports Fashion were among this morning’s big risers, lifting 30.6p to 743.8p and 2.75p to 119p respectively, as the FTSE 100 index climbed 26.42 points to 7401.76.
It follows Wall Street’s best session since March 2020 as interest rate sensitive stocks such as Apple benefited from hopes that Federal Reserve will soon be able to slacken the pace of monetary policy tightening.
Blue-chip stocks Prudential and Burberry also rose 63.4p to 993p and 75.5p to 2051p after China moved to relax Covid-related travel restrictions.
The FTSE 250 index, which has benefited from a stronger pound against the US dollar, improved by more than 1% or 218.76 points to 19,596. Cazoo and Trustpilot investor Molten Ventures led the way, surging 27.8p to 443.2p.
UK on recession brink as rates continue to rise
08:07 , Graeme Evans
Economists estimate that at least half of today’s 0.6% decline in output in September was caused by the additional bank holiday for the Queen’s funeral.
Excluding this, the underlying decline is likely to mark the start of recession as the fourth quarter is set to feel the cumulative impact of high inflation and rising interest rates.
Paul Dales, chief UK economist at Capital Economics, said: “We think these effects will mean that GDP continues to fall for about a year, resulting in a peak-to-trough decline in GDP of around 2%.
“None of this will stop the Chancellor from tightening fiscal policy next Thursday or prevent the Bank of England from raising rates above 3%. We still think rates may need to rise to 5%, although tighter fiscal policy may reduce the need for rates to rise quite that far.”
Heathrow’s October traffic heads back toward pre-pandemic levels on half term getaways
08:04 , Michael Hunter
Passenger traffic at Heathrow airport reached 84% of pre-pandemic levels in October, helped by demand for half term getaways.
The west London hub -- which brought in a daly cap on passenger numbers throughout the summer to limit short-notice cancellations -- said the month included its busiest day since July. It said around 16,000 people had been recruited in the last year by the companies that staff the airport, helping it meet demand and keeping it on track to return to pre-pandemic staffing levels before the 2023 summer travel peak.
It also said its plans for the Christmas travel period did not include any cap on capacity.
Almost 6 million travellers used the airport in October, which also featured what Heathrow called the “gradual return of business travellers”. Overall traffic reached 84% of pre-pandemic levels.
It claimed the increase was higher than any other European airport.
Pound higher after UK economy shrinks by less than expected
07:49 , Michael Hunter
Sterling moved higher after the UK’s economy shrank by less than feared in the third quarter, leaving it nonetheless the brink of recession.
But after the extent of the contraction came in at 0.2%, short of the 0.5% predicted by City experts, the pound bounced up to trade higher overall against the dollar, up 0.3% overall to $1.1734. It had been under $1.17 before the GDP data came out.
Apple shares lead US markets rally
07:42 , Graeme Evans
Shares have rallied sharply after a weaker-than-expected inflation print of 7.7% for October boosted hopes that the US is near its peak for interest rates.
The S&P 500 index last night gained 5.5% and the tech-led Nasdaq Composite, whose performance is closely tied to moves in government bond yields, surged more than 7%. Big risers included Apple, which improved 9%.
Deutsche Bank strategist Jim Reid said: “If ever we needed proof that the market is absolutely desperate for some good news on inflation, yesterday proved it in spades with the market moves up there with the most remarkable since the pandemic began.”
He said the 0.2% misses in both headline and core inflation were last matched in July, but beyond that Wall Street has to go back to August 2014 for a similar performance.
The inflation reading has lifted hopes that US interest rates are near their peak, causing the dollar to fall back in the process. Sterling today stood above $1.17, with yesterday’s rally proving particularly beneficial for the UK-focused FTSE 250 index after a rise of 3.9%.
The FTSE 100 index rallied by 1.1%, with CMC Markets expecting London’s top flight to add another 45 points to 7420 after Asia markets were lifted by reports that China is set to relax Covid flight restrictions.
Retail and manufacturing weakness sends GDP 0.2% lower
07:24 , Graeme Evans
The GDP decline of 0.2% in the third quarter compared with City and Bank of England forecasts for a fall of around 0.5%. It follows growth of 0.2% in the previous three months.
The performance is likely to represent the first leg of the UK’s entry into recession, which is defined as two successive quarters of contraction.
The Office for National Statistics said output showed a significant fall of 0.6% in September, partly due to the effects of the additional bank holiday for the Queen’s funeral.
The quarterly fall of 0.2% was driven by manufacturing, which saw widespread declines across most industries. Services were flat overall, but this masked a poor quarter for consumer-facing industries and retail in particular.
