Shares in London opened higher on Thursday, though the FTSE 100 underperformed its smaller-cap peers, as some index heavyweights went ex-dividend.
Shares in lender Lloyds fell 3.3%, packaging firm Smurfit declined 2.5% and student accommodation provider Unite lost 2.4%. All three are trading without the rights to the latest payout.
The FTSE 100’s European peers fared better, though the mood in global equities was somewhat downbeat. A US recession warning from the Federal Reserve, as well as a less-than-stellar reading of the UK economy, hurt sentiment.
The FTSE 100 index opened up just 3.12 points at 7,827.96. The FTSE 250 was up 52.00 points, 0.3%, at 19,054.73, and the AIM All-Share was up 2.38 points, 0.3%, at 822.09.
The Cboe UK 100 was up 0.1% at 782.90, the Cboe UK 250 was up 0.4% at 16,608.65, and the Cboe Small Companies rose 0.2% at 13,274.68.
In the US on Wednesday, Wall Street ended lower, with the Dow Jones Industrial Average ending down 0.1%, the S&P 500 down 0.4% and the Nasdaq Composite down 0.9%.
According to the minutes of the Federal Open Market Committee’s March 21-22 meeting, events in the banking sector are likely to push the US economy into recession later this year.
Investors were also perturbed by sticky core US inflation figures for March, which edged up to 5.6% from 5.5%. This offset the positive development of a faster-than-expected fall in the headline rate to 5.0% in March, from 6.0% in February. Market consensus had been expecting a 5.2% reading.
In European equities, the DAX 40 in Frankfurt was up 0.3%, while the CAC 40 in Paris was outperforming, up 1.0%.
This was thanks in part to luxury retailer LVMH, which jumped 4.6%.
Late Wednesday, the firm posted revenue of €21.04 billion in the first quarter of 2023, up 17% from €18.00 billion the previous year. It boasted an ‘excellent start to the year’ despite geopolitical and economic uncertainty.
London-listed Burberry rose 1.6% in a positive read-across.
Meanwhile, the dollar weakened in early exchanges, as the pound crossed over the $1.25 mark.
Sterling was quoted at $1.2505 early Thursday, higher than $1.2460 at the London equities close on Wednesday. The euro traded at $1.0994 early Thursday, higher than $1.0978 late Wednesday. Against the yen, the dollar was quoted at JP¥133.08, down versus JP¥133.14.
The pound was on the up despite the UK economy registered no growth in February, as a contraction in services and production offset strong growth in construction, according to the Office for National Statistics on Thursday.
ONS estimated that in February, real GDP registered no growth from the previous month. This compared with the upwardly revised 0.4% growth seen in January. January was initially estimated at 0.3% growth. February’s reading was below the 0.1% market consensus, as cited by FXStreet.
ONS explained that falls in services and production were offset by growth in construction.
‘Public sector strikes left economic growth flatlining in February, with industrial action by teachers and civil servants denting activity. There were strikes in the NHS and rail networks too, all of which had a knock on effect on businesses, with one in nine businesses saying they were either directly or indirectly impacted by industrial action,’ said AJ Bell head of investment analysis Laith Khalaf.
‘The UK economy has been surprisingly resilient in the face of doom-laden projections from economic forecasters. The economy is by no means hitting it out of the park, but it has so far defied expectations and avoided recession,’ Khalaf added.
Trading was mixed in Asia, with positive Chinese export data failing to lift the mood.
Total exports in China soared 15% year-on-year in March, customs data showed, a sharp rise from last March when strict virus lockdowns crippled normal economic activity.
The first jump since September upended the expectations of analysts, with FXStreet-cited market consensus of a 7% decline.
‘The positive surprise may be partly due to a low base effect - the Covid outbreaks in March last year forced many factories to shut down,’ said Zhiwei Zhang, of Pinpoint Asset Management.
The Nikkei 225 index closed up 0.3%. The S&P/ASX 200 in Sydney closed down 0.3%. In China, the Shanghai Composite and the Hong Kong were both down 0.1%.
Alibaba closed down 1.9%, after the Financial Times reported that Japanese tech investment firm SoftBank has decided to sell nearly all of its stake in the firm to limit exposure to China.
SoftBank was an early investor in the Chinese internet company founded by Jack Ma but began to offload its shares last year. According to the report, SoftBank, which once owned 34% of Alibaba, has sold more than $7 billion of its shares since the start of the year through prepaid forward contracts.
Gold was quoted at $2,022.04 an ounce early Thursday, higher than $2,008.47 on Wednesday. Brent oil was trading at $87.07 a barrel, up from $86.99.
In the FTSE 100, Barratt Developments and Taylor Wimpey both rose 2.9%, as HSBC raised the stocks to ’buy’ from ’hold’. Persimmon was also raised to ’buy’, but its shares fell 1.5% as the stock went ex-dividend, meaning new buyers will not qualify for the latest payout.
Midcap housebuilders also rose, with Redrow up 4.4%, Bellway up 3.5% and Crest Nicholson up 4.0%, as HSBC bumped the stocks up to ’buy’.
Tesco rose 1.6%.
The grocery chain said annual group sales in the year to February 25, excluding value-added tax and fuel, rose 5.3% year-on-year to £57.66 billion from £54.77 billion. Total annual revenue rose to £65.76 billion from £61.34 billion. The revenue figure excludes VAT, but does include fuel.
However, pretax profit fell 51% year-on-year to £1.00 billion from £2.03 billion.
The grocer proposed a final dividend of 7.05 pence, taking the full year total to 10.90p - unchanged from the prior year.
Looking ahead to financial 2024, Tesco expects to deliver a ‘broadly flat’ level of retail adjusted operating profit, which was £2.49 billion in financial 2023.
Imperial Brands fell 1.6%.
The tobacco company reiterated previous guidance that first-half group adjusted operating profit is expected to be ‘at a similar level’ to the previous year on a constant currency basis. The Rizla-producer ended its first half on March 31.
‘Tobacco & [next generation products] adjusted operating profit has been impacted by the planned increase in NGP investment, the impact of our exit from Russia, and the continued unwind of Covid-19,’ the firm said. However, growth in Distribution adjusted operating profit has helped to offset these headwinds somewhat.
‘We are on track to deliver full-year results in line with expectations and our guidance of low single-digit constant currency net revenue growth,’ Imperial said.
In the FTSE 250, Oxford Instruments was the top performer, up 4.8%.
The scientific and industry product and services provider said it expects adjusted operating profit to be ahead of its previous expectations for the year to March 31.
It also named TT Electronics Chief Executive Richard Tyson as its new CEO, succeeding Ian Barkshire who will retire after seven years in the role and more than 25 years with the company.
‘We are working with Richard and TT Electronics to agree the date he will commence in the role, and will make a further announcement in due course,’ Oxford Instruments said.
Shares in TT Electronics fell 2.1%.
Still to come on Thursday’s economic calendar, is a US PPI print at 1330 BST.
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