Stock prices in London rose on Friday morning after stronger-than-expected UK economic growth data provided cause for optimism, ahead of US banking earnings and producer price inflation data.
The FTSE 100 index opened up 58.08 points, 0.8%, at 7,634.67. The FTSE 250 was up 178.66 points, 0.9%, at 19,286.59, and the AIM All-Share was up 4.34 points, 0.6%, at 749.06.
The Cboe UK 100 was up 0.7% at 763.05, the Cboe UK 250 was up 1.0% at 16,726.07, and the Cboe Small Companies was up 0.2% at 16,726.07.
The Office for National Statistics said the UK’s gross domestic product grew 0.3% on a monthly basis in November, having contracted by 0.3% in October. The market had been expecting 0.2% growth, according to FXStreet-cited consensus.
The ONS explained that growth in services was the main contributor to the monthly growth in GDP.
The FTSE 100 saw a broad-based rally, with top performers including Endeavour Mining, up 3.1%, Rightmove, up 2.3%, and NatWest, up 2.2%.
However, there were a handful of exceptions.
Notably, Burberry plunged 7.7%.
The fashion firm cut its forecast for adjusted operating profit for the financial year ending March 30 to be in the range of £410 million to £460 million. The latest guidance would at worst represent a decrease of over a third from the £634 million achieved in financial 2023.
Back in November, it had guided for profit towards the lower end of the consensus range at that time of £552 million to £668 million.
The luxury fashion brand blamed the slowdown in demand within the luxury sector. It also said it expects a currency headwind of around £120 million to revenue and around £60 million to adjusted operating profit.
In the FTSE 250, Vistry rose 2.4%.
The housebuilder said it expects its adjusted pretax profit for 2023 to be in line with 2022’s £418.4 million, which was an improvement from prior guidance. Completions fell ‘only’ 5.4% over the year to 16,124 units from 17,038 in 2022, which Vistry said represents a significant outperformance to its peers, and reflects ‘the resilience of [its] Partnerships model’.
Vistry also said Non-Executive Chair Ralph Findlay will step down at its annual general meeting in May, with CEO Greg Fitzgerald to succeed him, taking on the roles of chair & CEO.
In European equities on Friday, the CAC 40 in Paris was up 0.8%, while the DAX 40 in Frankfurt was up 0.9%.
Across equity markets, sentiment seemed to recover following the hotter-than-expected US inflation print on Thursday, which had pushed European indices into the red, but elicited a more subdued response in US and Asian markets.
According to the Bureau of Labor Statistics, the US yearly inflation rate picked up to 3.4% in December, from 3.1% in November. The reading was hotter than expected. According to FXStreet cited consensus, the annual inflation rate was forecast to only slightly heat up to 3.2%.
Annual core inflation also came in above forecast at 3.9%, against expectations of 3.8%, according to FXStreet. The measure, which excludes food and energy, eased from 4.0% in November.
‘With renewed concerns on the supply side, especially oil prices, due to geopolitical events amid the prospect of rising asset prices re-fueling inflation pressure, they have likely left some investors apprehensive about the potential for another year of persistently elevated prices,’ said SPI Asset Management managing partner Stephen Innes.
‘Something tells me the final mile to reach 2% inflation nirvana will be a torturously bumpy one for risk-takers. While not the best outlook for investors, it would certainly be music to traders’ ears,’ Innes added.
According to CME’s FedWatch tool, the market is still pricing in the first 25 basis point rate cut at the Fed’s March meeting.
The dollar softened overnight against major currencies.
Sterling was quoted at $1.2770 early Friday, sharply higher than $1.2703 at the London equities close on Thursday. The euro traded at $1.0975 early Friday, rising from $1.0945 late Thursday. Against the yen, the dollar was quoted at JP¥144.93, down versus JP¥146.07.
In the US on Thursday, Wall Street saw a muted close, with the Dow Jones Industrial Average closing marginally higher, the S&P 500 up 0.1%, and the Nasdaq Composite little changed.
Tensions continued to rise in the Middle East, after US and British air strikes pounded targets in rebel-held Yemen. This follows weeks of disruptive attacks on Red Sea shipping by Iran-backed Huthi forces acting in solidarity with Hamas.
The Huthis said there was ‘no justification’ for the air strikes and warned that attacks on Israel-linked shipping would continue.
‘Concerns about the risk of miscalculation are growing, as rational actors may unintentionally become entangled in an escalatory spiral. Given the inherent complexity of Middle East conflicts, achieving a stable outcome in the region appears challenging, signalling the potential for continued instability with broad global repercussions,’ SPI’s Innes said.
‘Examining the potential implications of an escalation in growth and markets, the most significant impacts are expected to stem from energy supply disruptions.’
Brent oil was trading at $79.14 a barrel, higher than $78.92 late Thursday.
The shipping disruption has already prompted US electric vehicle maker Tesla to shut down most operations at its German factory, citing a shortage of parts created by supply chain gaps.
Investors were also considering the latest economic data from Asia’s largest economy. Official figures from China revealed deflation continued for the third month in a row, while imports and exports struggled in 2023.
The consumer price index fell 0.3% on-year last month, according to the National Bureau of Statistics. Analysts surveyed by Bloomberg expected a drop of 0.4% last month, having sunk 0.5% in November.
Meanwhile, December also saw an on-year increase of 2.3% in exports, but the data compared with the low base of 2022 when the impact of zero-Covid policies was being felt the most. Exports rose 0.5% in November for the first time since April. Imports rose 0.2% in December from the prior year, after falling 0.6% in November.
Overall, exports fell 4.6% in 2023, the first annual drop since 2016. The report also showed imports dropped 5.5% last year.
In China, the Shanghai Composite closed down 0.2%, while the Hang Seng index in Hong Kong was down 0.4%.
In Japan on Friday, the Nikkei 225 index in Tokyo closed up 1.5%, reaching another multi-decade high. The S&P/ASX 200 in Sydney closed down 0.1%.
Gold was quoted at $2,038.60 an ounce early Friday, higher than $2,017.55 on Thursday.
Still to come in Friday’s economic calendar, there will be US producer price inflation data at 1330 GMT.
Investors are gearing up for the start of the US earnings season with some of the big names in banking reporting results on Friday. There will be results from Citigroup, JPMorgan Chase, Bank of America and Wells Fargo, and asset manager Blackrock.
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