London share prices were attempting a pre-holiday rally early Thursday, despite another dismal reading on the health of the UK economy.
The FTSE 100 index opened up 29.43 points, 0.4%, at 7,526.75. The FTSE 250 was up 42.87 points, 0.2%, at 18,906.52 , and the AIM All-Share was up 15.45 points, 0.4%, at 4,110.87.
The Cboe UK 100 was up 0.4% at 752.84, the Cboe UK 250 was up 0.3% at 16,363.82, and the Cboe Small Companies was up 0.3% at 12,961.71
Shares in New York rallied on Wednesday. The Dow Jones Industrial Average ended up 1.6%, and the S&P 500 and the Nasdaq Composite both added 1.5%
It will be the last full day of trading in London before Christmas, before an early finish at 1230 GMT on Friday.
UK gross domestic product shrank by more than initially expected in the third quarter, according to the latest figures from the Office for National Statistics on Thursday.
The UK economy is now estimated to have contracted by 0.3% between July to September. This was downwardly revised from a previous estimate of a 0.2% decline. This mainly reflects revisions to production and construction output estimates, ONS said.
Meanwhile, annual real UK GDP was revised upwards to 7.6% growth in 2020 to 2021 from a previous estimate of 7.5%.
‘Despite an upward revision to annual growth in 2021, downward revisions across the quarters of 2022 mean that real GDP is now estimated to be 0.8% below its pre-coronavirus pandemic level, revised from the previous estimate of being 0.4% below,’ ONS commented.
The estimates were adjusted due to the additional bank holiday in September for the state funeral of Queen Elizabeth II, which saw businesses close or reduce their operations.
‘The national accounts confirm that the UK was the only G7 economy in which Q3 GDP still was below its pre-Covid level. Indeed, GDP in the UK was 0.8% below its Q4 2019 level, whereas it was 4.3% above in the US, 2.7% above in Canada, 1.8% in Italy, 1.1% in France, 0.9% in Japan and 0.3% in Germany,’ Pantheon Macroeconomics senior UK economist Gabriella Dickens noted.
Separately, ONS released figures on the UK’s current account, which measures its balance of payments with the rest of the world.
In the third quarter, the underlying deficit, excluding precious metals, narrowed to £32.5 billion. The figure represents 5.2% of GDP in the period, and a change of £900 million from the previous quarter.
‘The...large current account deficit means that sterling will remain very sensitive to any changes in risk sentiment among foreign investors,’ Pantheon’s Dickens said.
Sterling was quoted at $1.2141 early Thursday, higher than $1.2093 at the London equities close on Wednesday. The euro traded at $1.0650, higher than $1.0612. Against the yen, the dollar was quoted at JP¥131.89, down versus JP¥132.08.
In European equities on Thursday, the CAC 40 in Paris was up 0.5%, while the DAX 40 in Frankfurt was up 0.4%.
In the FTSE 100, JD Sports was the top performer, up 1.5%, extending Wednesday’s gains following positive results from Nike.
Housebuilders were trading higher, with Taylor Wimpey and Barratt Developments both up 0.7%, as new data showed UK house prices are around £17,500 higher on average than at the start of 2022.
Zoopla said property values have increased by 7.2% across the year, but it added that there has been a sharp fall in demand since the summer. The average UK house price is £258,100.
In the FTSE 250, LondonMetric Property fell 1.0%, as Citigroup cut the real estate investment trust to ’neutral’ from ’buy’.
The top mid-cap performer in London early Thursday was discoverIE, up 3.7%.
The specialised electronic components firm has acquired Magnasphere, a US-based company that designs and manufactures magnetic sensors and switches for industrial electronic purposes. It will pay out $22 million on a debt-free, cash-free basis before expenses, funded from existing debt facilities.
The acquisition will be immediately accretive to underlying earnings and underlying operating margin, discoverIE said.
‘This acquisition of Magnasphere continues our strategy of building a differentiated, international, growth-focused electronics group with strong operating margin,’ said discoverIE CEO Nick Jefferies.
Vendor shareholder approvals are expected during the final quarter.
Shore Capital said the acquisition of a high-margin business was done at an attractive multiple, and the broker raised its revenue forecast for financial 2023 as a result. It has a ’hold’ rating on discoverIE shares.
‘We see scope for upgrades through further value accretive acquisitions, which management has an excellent track record of executing in its highly fragmented market,’ Shore said.
On AIM, Journeo added 10%.
The transport technical services firm has agreed to buy UK rail passenger information equipment provider IGL for £8.7 million.
To finance the acquisition, Journeo has raised around £7 million in a placing and subscription of 6.7 million shares at 105p each.
It also proposes a retail offer to existing shareholders via the Bookbuild platform to raise a further £350,000 at the same price.
Meanwhile, Katoro Gold shares sunk 32%.
The precious minerals explorer and developer said it is finalising the appointment of a new nominated adviser. However, should this not pan out, its shares will be suspended from trading. If within one month a new Nomad is not appointed, its AIM listing will be cancelled.
Katoro also said it would need to raise funds to progress its interests and for working capital. Katoro noted that further development is required to move along the TNMM iron ore project in Namibia.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 0.5%. In China, the Shanghai Composite fell 0.5%, but the Hang Seng index in Hong Kong surged 2.6%. The S&P/ASX 200 in Sydney closed up 0.5%.
Gold was quoted at $1,816.70 an ounce early Thursday, a touch higher than $1,815.20 on Wednesday. Brent oil fetched US82.44 a barrel, higher than $81.68.
Still to come on Thursday’s economic calendar, there is an Irish wholesale price index reading at 1100 GMT. The US will publish its weekly unemployment insurance claims at 1330 GMT.
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