Stock prices were rising in London on the final day of the half-year, as investors weighed miniscule economic growth in the UK and a weaker-than-expected recovery in China against signs that the US may yet achieve a hoped-for soft landing rather than recession.
The FTSE 100 index opened up 27.81 points, 0.4%, at 7,499.50 on Friday. The FTSE 250 was up 53.88 points, 0.3%, at 18,324.61. The AIM All-Share was down just 0.11 of a point at 750.62.
The highly international FTSE 100 is down 0.7% in the first half of 2023, while the more domestically focused FTSE 250 index has shed 4.2%.
‘The UK has not been able to keep its crown following last year’s decent showing. In the first six months of 2023, it’s done zilch for investors’ portfolios excluding dividends,’ said AJ Bell investment director Russ Mould.
The Cboe UK 100 was up 0.3% on Friday at 748.02, the Cboe UK 250 was up 0.4% at 15,995.81, and the Cboe Small Companies was up 0.2% at 13,735.22.
In European equities, the CAC 40 index in Paris was up 0.6%, while the DAX 40 in Frankfurt was up 0.5%.
In China, the Shanghai Composite closed up 0.6%, while the Hang Seng index in Hong Kong was up 0.1%, as weak Chinese economic data strengthened hopes of government stimulus.
Activity in China’s factory sector contracted for a third straight month in June, official data from the National Bureau of Statistics showed, signalling a patchy recovery in the world’s number-two economy as global demand and raw material prices slumped.
Purchasing managers’ indices showed a continuing contraction in Chinese manufacturing, while non-manufacturing sectors of services and construction saw a slowing in growth.
Despite the weak demand outlook from China, Brent oil was quoted slightly higher, at $74.53 a barrel early Friday in London, up from $73.70 late Thursday.
In contrast to China, stocks in New York were boosted on Thursday by stronger-than-expected US data, with first-quarter economic growth revised upward and a robust weekly labour report.
The Dow Jones Industrial Average closed up 0.8%, the S&P 500 up 0.5%, and the Nasdaq Composite flat.
The figures followed Wednesday’s trio of good news when new housing sales, durable goods orders, and consumer confidence figures were all stronger-than-expected in the US.
However, the stronger picture for the US economy will give the Federal Reserve more leeway for further interest rate hikes in the coming months, with the prospect of a ’soft landing’ appearing to still be on the table.
The dollar was mixed in early exchanges in Europe.
Sterling was quoted at $1.2640 early Friday, higher than $1.2611 at the London equities close on Thursday. The euro traded at $1.0868, lower than $1.0886.
Investors will have their eyes on the release of the US core personal consumption expenditures price index at 1330 BST on Friday, given it is the Fed’s preferred measure of inflation.
Against the yen, the dollar was quoted at JP¥144.66, unchanged from JP¥144.70.
The Nikkei 225 index in Tokyo closed down 0.1%, and has rocketed 29% over the first half of 2023.
In Australia, Sydney’s S&P/ASX 200 closed up 0.1%.
In the UK, there was no upside surprise to GDP figures as seen in the US, with the final reading confirming a ‘fragile’ start to 2023.
The Office for National Statistics confirmed the UK gross domestic product grew 0.1% in the first three months of 2023 from the final quarter of last year. GDP also had grown 0.1% in the fourth quarter of 2022 from the third. Year-on-year, first-quarter gross domestic product grew 0.2%, ONS confirmed. It had expanded 0.6% year-on-year in the fourth quarter of 2022.
‘There’s nothing particularly surprising to be learnt from this set of figures. The UK has limped through the first few months of the year thanks to a surprisingly resilient consumer market and what is likely to have been a rush by businesses to make the most of generous tax breaks on investment before they came to an end,’ said AJ Bell’s Danni Hewson.
‘But warning signs are already flashing madly,’ she warned. ‘With hundreds of thousands of mortgage holders about to be clobbered by increased monthly payments there’s little doubt the service sector is in for a rough ride.’
The threat of looming interest rate hikes continues to hang over the UK housing market, mortgage lender Nationwide concurred, predicting the rising borrowing costs to be a ‘significant drag’ in the near term.
However, shares in housebuilders rose in early trading, as figures from Nationwide showed a shallow-than-expected decline in UK house prices.
The building society said UK house prices fell 3.5% annually in June, keeping pace with the 3.4% decline seen in May. However, market consensus had been expecting a more severe 4.0% fall, according to FXStreet.
Persimmon rose by 0.7%, and Taylor Wimpey by 0.4%.
Barratt Developments added 0.5%, with the housebuilder also announcing an agreed future sale of 604 homes to Lloyds Banking subsidiary Citra Living Properties for £168.4 million in cash. Lloyds was up 1.2%.
Among London’s small-caps, Pendragon rose 1.8%.
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The automotive retailer Pendragon announced its chair, Ian Filby, will ‘step down to pursue other interests’, after less than two years in the role. The announcement follows a Sky News report from late Thursday, which reported Filby would step down amid pressure from an activist investor.
Palliser, a fund which has built up a 4% stake in firm, has pushed for a boardroom shake-up at the firm. The firm will begin a process to appoint Filby’s successor shortly, and has the support of external consultants, Pendragon said.
On AIM, Renalytix surged 45%.
The kidney health-focused diagnostics company said the US Food & Drug Administration has granted de novo marketing authorisation to its KidneyIntelX.dkd prognostic test.
‘This affirms KidneyIntelX as a first-in-class, artificial intelligence enabled prognostic testing platform to guide care management for adults with type 2 diabetes and early-stage chronic (diabetic) kidney disease,’ it explained.
The FDA authorisation should lead to increasing test adoption, informing clinical guidelines, an expansion in insurance coverage as well as further regulatory approvals elsewhere, the firm said.
Gold was quoted at $1,906.33 an ounce early Friday in London, lower than $1,911.17 late on Thursday.
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