Stock prices in London were up on Thursday afternoon, although the FTSE 100 pared its initial progress and traded only a hair higher.
The UK economy slipped into recession in the final quarter of 2023, according to the latest data, buoying hopes of speedier interest rate cuts from the Bank of England.
But for the FTSE 100, gains were hard to come by as the equity trading session dragged on, with share price falls for oil majors keeping a lid on progress for the index.
The FTSE 100 index traded just 1.49 points higher at 7,569.89 in early afternoon dealings.
The FTSE 250 was up 48.26 points, 0.3%, at 19,052.15, and the AIM All-Share was up 1.42 points, 0.2%, at 751.87.
The Cboe UK 100 was up 0.1% at 756.96, the Cboe UK 250 edged slightly higher to 16,466.48, and the Cboe Small Companies was up 0.2% at 14,426.29.
The pound was quoted at $1.2547 early Thursday afternoon, up from $1.2542 at the London equities close on Wednesday, but off the $1.2573 it bought in the early hours of the morning.
The UK economy suffered a sharper than expected decline in the final quarter of last year, entering a technical recession, according to numbers from the Office for National Statistics on Thursday.
UK gross domestic product slumped 0.3% in the three months to December from a quarter earlier, underperforming the expected 0.1% fall, according to consensus cited by FXStreet.
The UK economy had declined 0.1% quarter-on-quarter in the third-quarter of 2023.
It means the UK has entered a technical recession, which is generally defined as two successive quarterly falls in gross domestic product.
‘As expected, the UK economy slipped into a technical recession,’ Deutsche Bank analyst Sanjay Raja commented.
‘For the [Bank of England’s Monetary Policy Committee], this is a meaningful miss on GDP. There’s clearly more spare capacity in the economy than assumed in their recent projections. While the Bank of England’s focus will likely remain on price data, the bigger drop in output and the politics of being in a technical recession will no doubt become uncomfortable especially with bank rate at highly restrictive levels.’
Data from Japan showed the nation has also entered into recession. Japan’s economy contracted 0.1% in the three months to December, from a quarter earlier, according to the preliminary data released by the Cabinet Office, missing market expectations of growth of 0.3%, according to FXStreet.
It was the second straight quarterly drop in output after a revised 0.8% contraction in the July-September quarter, the data showed.
Societe Generale analyst Kit Juckes commented: ‘So far, [fourth quarter] GDP data releases cold barely paint a starker picture: 3.3% annualised growth in the US, flat for the Eurozone, down 1.2% annualised for the UK and down 0.4% annualised for Japan. If growth is all that matters, the UK and eurozone need to get on with rate cuts sharpish, and the [US Federal Reserve] has no reason to hurry, perhaps no reason to cut at all if the data go on as they have been.
‘The Bank of Japan still has every reason to get itself out of the current yield curve control and negative interest rate policies, but no reason to do more. It all screams ’strong dollar’ and laughs in the face of [foreign exchange] forecasts – notably ours, which are the only ones I care about. Should we stick to our view that a very expensive dollar needs a daily diet of better-than-expected data just to keep it where it is, and will eventual fall, or should we just embrace American exceptionalism?’
The euro stood at $1.0735 early Thursday afternoon, up from $1.0720 late Wednesday. Against the yen, the dollar was trading at JP¥150.02, down from JP¥150.62. The Japanese currency was supported by the lingering possibility of foreign exchange intervention by officials in Japan.
In London, Shell and BP shares fell 2.5% and 2.9%, on a weaker oil price, as US Crude stockpiles built up.
US Crude oil inventories surged by 12.0 million barrels for the week ended February 9 to 439.4 million barrels, the US Energy Information Administration reported on Wednesday. When oil inventories rise, traders can take this as a signal that demand is lacking.
Brent oil was quoted at $81.00 a barrel midday Thursday, down from $82.63 late Wednesday.
Also putting pressure on the FTSE 100, tobacco company Imperial Brands fell 3.9%. Its stock went ex-dividend on Thursday, meaning new buyers do not qualify for the latest payout.
Elsewhere, Close Brothers slumped 26%, the worst FTSE 250 performer after axing its dividend.
Close Brothers cautioned on a ‘potential financial impact’ stemming from the UK Financial Conduct Authority’s probe of historical motor finance commission arrangements.
The UK financial services watchdog in January explained it is probing whether compensation could be due for people who were potentially overcharged for car loans.
Travel stocks were on the rise. International Consolidated Airlines Group was among the best FTSE 100 performers, up 3.2% in a positive read across after Jet2 lifted guidance.
The airline and package holiday operator said forward bookings were strong during the 2023/2024 winter season, citing a 21% increase in on sale seat capacity, as well as passenger sectors booked currently up by 17%.
It also said average pricing for both flight-only and package holiday products was ‘robust’.
The firm expects a pretax profit before foreign exchange revaluation outcome between £510 million and £525 million for the year to March 31, above its previous £480 million to £520 million outlook.
Jet2 rose 2.9%.
In mainland Europe, eyes were on shares in the automotive space. Renault added 6.1% in Paris, while Stellantis revved 4.8% higher in Milan.
Boulogne-Billancourt-based Renault, whose stable includes the low-cost Dacia and sporty Alpine brands, earned a group share net profit of €2.20 billion last year after suffering a heavy hit in 2022 from writing off its Russian assets. It swung from a net loss of €354 million in 2022.
Sales revenue rose by 13% to €52.38 billion from €46.33 billion, as the company was able to raise prices and sold more high-end vehicles.
Stellantis unveiled a new share buyback amid record annual revenue and profit.
The Hoofddorp, Netherlands-based carmaker which owns Citroen, Peugeot and Fiat brands said net profit grew 11% in 2023 to €18.63 billion from €16.78 billion the year prior.
Stellantis said net revenue increased around 5.5% to €189.54 billion from €179.59 in 2022, with consolidated shipment volumes increasing 7%.
It launched a new €3.0 billion share buyback programme and increased the annual dividend by 15% to €1.55 from €1.34.
The CAC 40 in Paris traded 0.8% higher, while the DAX 40 in Frankfurt climbed 0.6%.
Gold was quoted at $1.997.62 an ounce midday Thursday, up from $1,988.99 at the time of the European equities close on Wednesday.
Still to come on Thursday is the latest US initial jobless claims reading and retail sales at 1330 GMT.
Ahead of the data, major equity market benchmarks in New York are called to open higher. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite are all called 0.1% higher.
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