Positive news about the UK economy was not enough to lift London share prices early Monday, as investors remained wary of a string of key central bank decisions later in the week.
The US Federal Reserve announces its next interest rate decision on Wednesday, followed by the Bank of England and the European Central Bank on Thursday.
Ahead of the Federal Open Market Committee decision, the US consumer price index for November will be released on Tuesday, with controlling inflation the key goal of Fed policy-makers.
‘The Fed’s FOMC policy announcement on Wednesday looks relatively straightforward, with Chair Powell among other Committee members having strongly hinted at a slowing in the pace of tightening this month to 50bps, which will take the fed funds rate target range to 4.25 to 4.50%,’ commented Daiwa Capital Markets.
‘But the Fed will continue to signal more tightening to come, and so there will be great interest in the FOMC’s updated economic forecasts and dot-plot charts.’
The FTSE 100 index opened down 22.65 points, or 0.3%, at 7,453.98. The FTSE 250 was down 98.23 points, or 0.5%, at 18,817.77, and the AIM All-Share was down just 0.24 of a point at 834.35.
The Cboe UK 100 was down 0.2% at 834.35, the Cboe UK 250 was down 0.4% at 16,285.68, and the Cboe Small Companies was down 0.3% at 13,055.59.
The UK economy grew in October, with the nation’s economy now estimated to be 0.4% larger than its pre-pandemic size, according to figures from the Office for National Statistics.
Monthly real gross domestic product is estimated to have grown by 0.5% in October from the month before, following a fall of 0.6% in September from August. Market consensus, as cited by FXStreet, had expected the UK economy to contract by 0.1% in October.
The services sector grew by 0.6% in October from September, and was the main driver of GDP growth according to the ONS.
Industrial production was flat in October, and the construction sector grew by 0.8%, its fourth consecutive increase.
Quarter-on-quarter, GDP fell by 0.3%. October GDP was up 1.5% compared with the same month last year.
The pound was slightly higher than earlier in the morning following the GDP print, but the dollar remained stronger overall in response to the risk-off sentiment ahead of central bank announcements.
The pound was quoted at $1.2238 at early on Monday in London, lower compared to $1.2301 at the close on Friday - before the GDP print the pound traded at $1.2222.
The euro stood at $1.0531, lower against $1.0542. Against the yen, the dollar was trading at JP¥136.94, higher compared to JP¥136.37.
In European equities early Monday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both down 0.5%.
In Asia on Monday, the Japanese Nikkei 225 index closed down 0.2%. In China, the Shanghai Composite finished down 0.9%, while the Hang Seng index in Hong Kong closed down 2.2%. The S&P/ASX 200 in Sydney closed down 0.5%.
China said Monday it would retire an app used to track Covid-19 contacts, a milestone in the country’s rapid turn away from its zero-tolerance coronavirus strategy.
The state-run ’communications itinerary card’, which tracks whether someone has been to a high-risk area based on their phone signal, will go offline at 12 am Tuesday, according to an official WeChat post, after more than two years in operation.
The itinerary card was a central part of China’s zero-Covid policy, with millions of people required to key in their phone numbers to produce its signature green arrow in order to travel between provinces or enter events.
The decision comes just days after China announced an end to large-scale lockdowns, mandatory quarantine in central facilities, and a broad relaxation of testing measures, effectively throwing in the towel on its zero-Covid strategy.
In London, London Stock Exchange Group was up 4.1% after it launched a 10-year partnership with Microsoft for its data, analytics and cloud infrastructure.
The stock exchange operator committed to spend a minimum of $2.8 billion over the term of the partnership, which will see Microsoft purchase a 4% stake in LSEG through an acquisition of shares from the Blackstone/Thomson Reuters ownership consortium.
‘This strategic partnership is a significant milestone on LSEG’s journey towards becoming the leading global financial markets infrastructure and data business, and will transform the experience for our customers,’ said LSEG Chief Executive David Schwimmer.
Microsoft shares finished 0.8% lower in New York on Friday.
In the FTSE 250, International Distributions Services fell 4.5% after HSBC cuts the Royal Mail owner to ’hold’ from ’buy’ with a price target of 215 pence.
John Wood Group rose 5.1% to 133.25p. Jefferies raised the engineering and consulting firm to ’buy’ from ’hold’ with a price target of 190 pence.
Home REIT rose fell 2.8% as it responded to further allegations against it by a short seller.
The investor in accommodation for homeless people reiterated that all allegations against it are ‘without substance’. It said that the report and subsequent allegations have caused the company ‘unnecessary and significant disruption and losses’.
Home REIT is in an ongoing dispute with Viceroy Research. Viceroy published a report on November 23 that included a number of claims against Home REIT, such as the firm’s properties being run by ‘bad actors’.
Law firm Harcus Parker last week said it will be leading a court case to establish whether Home REIT had misled shareholders.
Elsewhere in London, CentralNic was up 2.7% as it announced a maiden share buyback, positive trading, and appointed a new chief executive.
The firm promoted its current chief financial officer, Michael Riedl, to chief executive with immediate effect. William Green, CentralNic’s financial director, will replace Riedl as CFO.
The web domain and internet services provider said its trading has remained robust since its last update in November and said that it now expects its full-year results to be at the upper end of market expectations.
It placed market expectations for revenue between $701.0 million and $709.6 million. For earnings before interest, tax, depreciation and amortisation, it placed consensus between $80.0 million and $84.1 million.
CentralNic also announced that it intends to launch a maiden share buyback before the end of the year.
Gold was quoted at $1,789.60 an ounce early in London on Monday, sharply lower against $1,803.01 late Friday. Brent oil was quoted at $75.65 a barrel, down from $77.10.
The EU on Monday enforced an embargo on Russian crude shipments, the bloc’s latest sanction in retaliation for Moscow’s invasion of Ukraine.
The EU embargo on Russia’s oil and an international cap on the price of the country’s crude is disrupting the maritime transport sector.
This week also saw the start of a $60 cap on a barrel of Russian crude, agreed by Western nations.
By Heather Rydings, Alliance News senior economics reporter
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