London shares were lower at midday on Monday, with the UK domestic-focused FTSE 250 index underperforming the FTSE 100, after a positive surprise from data on the UK economy was not enough to remove concern about a coming recession.
‘October’s bounce back was expected, and the fact the growth was a little more enthusiastic than economists had anticipated is welcome. But this is just an aside. The story is unchanged. The economy is still shrinking, and recession feels inevitable,’ said Danni Hewson, financial analyst at AJ Bell.
The FTSE 100 index was down 7.44 points, or 0.1%, at 7,469.19. The FTSE 250 was down 146.67 points, or 0.8%, at 18,769.33. The AIM All-Share was down just 0.19 of a point at 834.40.
The Cboe UK 100 was down 0.1% at 746.91. The Cboe UK 250 was down 0.8% at 16,215.90 and the Cboe Small Companies down 0.2% at 13,063.49.
The UK economy grew in October and is 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.
Quarter-on-quarter, GDP shrank by 0.3%. October GDP was up 1.5% compared with the same month last year.
‘While the October upside surprise probably means Q4 will be less bad than previously expected, the further weakening of [purchasing managers’ index readings] and housing market surveys for November suggests that the question remains how bad the unfolding recession will be, rather than whether the UK can avoid one altogether,’ said Kallum Pickering, senior economist at Berenberg.
In London on Monday, London Stock Exchange was the best blue-chip performer at midday, up 3.1%.
The stock exchange operator launched a 10-year partnership with Microsoft for its data, analytics and cloud infrastructure.
LSEG committed to spend a minimum of $2.8 billion over the term of the partnership, which will see Microsoft purchase a 4% stake in the firm 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 Chief Executive David Schwimmer.
In the FTSE 250, International Distributions Services fell 4.1% to 203.80 pence, after HSBC cuts the shares of the Royal Mail owner to ’hold’ from ’buy’ with a price target of 215p.
Also hitting IDS was repeated strikes by its UK staff over jobs, pay and conditions.
‘Investors are increasingly getting tired of waiting for a resolution and are voting with their feet...The arrival of snow across parts of the UK will only add to the company’s problems as deliveries might be delayed,’ said Russ Mould at AJ Bell.
Home REIT fell 4.4% after 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.
Home REIT declared an interim dividend of 1.38p per share, which takes the total dividend for its financial year 2022 to August 31 to its targeted 5.5p, more than doubled from 2.5p in financial year 2021.
Meanwhile, the company said it hired additional senior level investment professionals and will recruit a non-executive director focused on governance matters, following the allegations made by Viceroy.
Elsewhere, Metro Bank was up 5.3% despite the UK Financial Conduct Authority fining the firm and two of its former directors for publishing incorrect information to investors.
The retail bank said it cooperated fully with the investigation and accepted the fine of £10.0 million.
Metro Bank published incorrect information in its risk weighted assets figure in its third quarter trading update in October 2018, the FCA said.
The regulator charged that Metro Bank was aware at the time that this figure was wrong and failed to explain that it was subject to an ongoing review and would therefore require a substantial correction.
The FCA also decided to individually fine former Metro Bank chief executive Craig Donaldson and former chief financial officer David Arden £223,100 and £134,600, respectively, for being knowingly concerned in the breach.
Metro Bank won’t appeal, but Donaldson and Arden will, the FCA said.
On AIM, Velocys jumped 18%. The eco-fuel technology company said it won two separate grants from the UK government.
The first grant is for up to £27 million from the UK Department for Transport’s Advanced Fuels Fund for the company’s Altalto Immingham Sustainable Aviation Fuel project.
The project, jointly developed by Velocys and British Airways, aims to deliver a commercial waste-to-sustainable aviation fuel plant in Immingham, England.
The second grant is for £2.5 million from the same fund to contribute to Velocys’s e-fuels project in the UK, known as ’e-Alto’.
In European equities on Monday, the CAC 40 in Paris was down just 1.38 points, while the DAX 40 in Frankfurt was down 0.1%.
Stocks in New York were called higher. The Dow Jones Industrial Average was pointed up 0.2% and the S&P 500 index and Nasdaq Composite both up 0.3%.
The pound was quoted at $1.2285 at midday on Monday in London, lower compared to $1.2301 at the stock-market close on Friday. The euro stood at $1.0572, higher against $1.0542. Against the yen, the dollar was trading at JP¥136.77, higher compared to JP¥136.37.
Brent oil was quoted at $75.43 a barrel at midday in London on Monday, down from $77.10 late Friday. Gold was priced at $1,794.99 an ounce, significantly lower against $1,803.01.
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