GDP figures for January today raised hopes that the UK is on its way out of recession.
The latest print underpinned another decent session for London shares after yesterday’s 1% bounce by the FTSE 100 index.
Today’s corporate developments included results by Metro Bank and Gym Group, with the latter’s revenues above £200 million for the first time.
On Wall Street, shares have slipped back after record highs yesterday, with 2024’s centre of attention Nvidia among the fallers.
FTSE 100 Live Wednesday
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UK on course for recession exit
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Zara owner’s profits soar
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UK-Texas trade deal unveiled
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Gym Group revenues top £200m
Deliveroo profitability in focus tomorrow
16:53 , Daniel O’Boyle
Tomorrow, attention will turn to Deliveroo, as it aims to turn its first full-year profit.
Results
John Lewis, Savills, Vistry, Deliveroo, Bridgepoint, OSB
Trading updates
Moonpig, Trainline, IG, Halma
Economics
US jobless claims
IEA oil market report
FTSE closes at another nine-month high
16:36 , Daniel O’Boyle
The FTSE 100 closed at 7772.2 today , up 03x%, as it continues its strong week.
It’s the highest close for London’s top flight since May 2023.
Miners Antofagasta and Glencore led the risers amid a commodities surge.
Fallers included Vodafone and JD Sports.
Hunt says plan to scrap national insurance will not happen in next Parliament
16:20 , Daniel O’Boyle
Jeremy Hunt has said his ambition to scrap national insurance contributions will not happen in the next Parliament.
The Chancellor used his Budget earlier this month to set out a 2p cut in national insurance from April with a vague promise to deliver a simpler tax system by eventually getting rid of it altogether.
Giving evidence to the Treasury Committee on Wednesday, the Chancellor said: “It won’t happen in one Parliament, but it’s a long-term ambition.
Would a second Trump term mean a dollar crash?
15:57 , Daniel O’Boyle
Commenting on the US Dollar under Trump, Philippe Miller, Senior Associate at Validus Risk Management, said: “ What will a second Trump term look like? On the surface, his policies appear more populist and nationalist than in 2016. Key proposals include adding a 10% tariff on all imports coming into the US, adopting a 4-year plan to fully phase out all Chinese imports of essential goods, and stopping the flow of illegal immigrants into the US.
“Over a longer-term horizon, the risks are greater to the downside for the Greenback. With Trump’s plans to increase the debt deficit to fund his agenda, market participants could lose confidence in the USD and its status as global reserve currency.”
Read more on the American election here
Google starts rollout of restrictions on AI as key global election year looms
15:18 , Daniel O’Boyle
Google has started the rollout of restrictions on what kind of election-related questions its AI chatbot Gemini will answer as it tries to prevent the spread of fake news during a year when billions of people will vote worldwide.
The technology giant said that users in India will be restricted as to what they can ask Gemini, or at least what types of questions it will provide responses to.
It is part of the company’s efforts to ensure that misinformation and disinformation is limited in a year when according to the Centre for American Progress more than two billion people in 50 countries will head to the polls.
Market snapshot: FTSE builds on yesterday’s gains
15:10 , Daniel O’Boyle
The FTSE 100 has found more positive momentum today, building on its big Tuesday gains.
Take a look at our full market snapshot:
Shell to reveal latest pay package for CEO in looming annual report
14:52 , Daniel O’Boyle
Shell is on the brink of revealing the latest pay package for its CEO, at a time of public concern over sky-high returns for investors and industry executives after high energy prices stoked the cost-of-living crisis.
The UK’s biggest energy firm and the second most valuable member of the FTSE 100 is due to publish its annual report tomorrow. It will include details on the remuneration of Wael Sawan, who became chief executive at the start of last year on an annual salary of £1.4 million.
There has been speculation among campaign groups that Sawan’s total pay package could amount to between £8 million and £10 million.
Commodity surge powers FTSE gains, but will it spell trouble for Bank?
14:12 , Daniel O’Boyle
Miners are among the top risers on the FTSE 100 today, thanks to a surge in the price of a number of key metals.
But Adam Vettese, analyst at investment platform eToro, says that there is a risk the higher prices lead to stickier inflation, forcing interest rates to stay higher for longer.
He says: “The FTSE 100 was little changed in afternoon trading on Wednesday, despite advances for several major commodity-related components. Glencore, one of the world’s biggest marketers of oil, led the index, rising 3%, as the oil price pushed higher. Copper miner Antofagasta improved by more than 2%, while Anglo American, the world’s largest platinum producer, rose 1.5%, alongside a rebound in the price of platinum.
“Firmer commodity prices in conjunction with yesterday’s hotter-than-expected US inflation data could put a further bump in the road for central bankers. Both the Fed and the BoE make monetary policy decisions next week and although neither are expected to cut rates yet, the incoming data does not yet make much of a case for a cut in May either.”
S&P eases from record highs, Nasdaq down 0.7%
14:04 , Daniel O’Boyle
US stocks have eased off their record highs today in early trading on Wall Street.
The S&P 500 is down 0..1% at 5168, though that leaves it up 9% for the year.
Megacap index the Dow Jones is approaching record territory again, however, up 0.2% to 39,071.23. But the tech-focused Nasdaq is down 0.7% at 16,148.15.
Big risers on Wall Street include 3M,, Estee Lauder and Haliburton. Fallers include Nvidia, Tesla and McDonald’s.
Market snapshot: Bitcoin at another new high
13:30 , Daniel O’Boyle
Take a look at today’s market snapshot as Bitcoin’s surge goes on
US stocks expected to hold steady near record highs
13:14 , Daniel O’Boyle
The US’ main stock index is expected to hover near record levels when trading opens on Wall Street this morning.
S&P 500 futures are steady at 5,189.75, after traders shrugged off hot inflation figures yesterday.
Dow Jones futures are up 0.1% at 39,238.00 while Nasdaq futures are down 0.3% at 18,241.25 with Tesla and Nvidia among those taking a step back.
Nothing Phone 2a sales top 100,000 day after launch
12:57 , Daniel O’Boyle
Sales of the new Nothing Phone 2a have already topped 100,000 just hours after it went on sale in signs the London-based smartphone designer has gained a major foothold in the market.
The device, which retails at £319, was launched yesterday as a cheaper alternative to the higher-spec Nothing Phone 2 and aims to lure customers away from mid-market rivals and dominant industry players like Samsung in search of lower prices.
Morrisons posts £1bn loss amid pressure from debt pile
12:49 , Daniel O’Boyle
Supermarket chain Morrisons made a loss of more than £1 billion last year, driven by soaring debt financing costs.
The Bradford-based retailer, which was bought for £7 billion by US private equity firm Clayton, Dubilier & Rice (CD&R) in 2021, reported the heavy loss for the year to October 29 in freshly filed Companies House accounts.
The £1.09 billion pre-tax loss came after the company recorded a £1.52 billion loss in the previous year.
First interest rate cut most likely to be in June, City traders bet, as UK returns to growth
12:19 , Daniel O’Boyle
City expectations on the timing of the first rate cut from the Bank of England were hardening around June today after latest GDP data showed the sickly UK economy only slowly recovering from recession at the start of the year.
Most analysts believe that the Bank’s Monetary Policy Committee (MPC) will not sanction the start of the rate cutting before then because of the risk of stoking up prices and wages again before inflation is fully conquered.
However, leaving it much later would threaten to undermine the UK’s revival from recession. The Bank’s rate has been at 5.25% since last August when the last of 14 consecutive hikes was ordered by the MPC to rein in an inflation boom triggered by severe post-pandemic supply constraints and the energy price explosion caused by the war in Ukraine.
Mind the gap on pensions, says FCA chief
11:42 , Michael Hunter
The head of the City’s main market watchdog warned this morning that workers may still not be saving enough for retirement.
Nikhil Rathi, CEO of the Financial Conduct Authority, said there were “significant gaps” in pension provision and some pots may not “deliver the value and returns needed for an adequate retirement”.
Even after the “success” of auto-enrolment into workplace pensions, Rathi said:
“Most of us are still not saving enough or engaging early enough with our pensions’ investments.
“Whatever the route to improving this and this is challenging as we come through of a cost-of-living squeeze, addressing the adequacy of savings is vital. “
One way of doing that is combining any proliferation of pension savings into one “pot for life”, as flagged in Chancellor Jeremy Hunt’s recent Budget
The FCA is consulting on ways to make sure pensions providers are transparent on costs and returns.
“The aim is to protect consumers from having their pension savings eroded by languishing in underperforming schemes,” Rathi said.
City Comment: HSBC Innovation Banking needs to reaffirm its roots
11:35 , Daniel O’Boyle
At 7am a year ago today, HSBC swooped in and rescued Silicon Valley Bank UK following the dramatic collapse of its US parent, buying it for £1.
It was the culmination of days of horror for Britain’s tech sector. Scores of startups and scaleups suddenly faced losing their bank accounts – their only bank accounts, for many. One founder told me his family were in tears as he geared up to shut the business he spent years building – he didn’t have the funds to pay his own staff, let alone suppliers and contractors.
And so it was a huge sigh of relief when HSBC saved the day. And it reflected well on the government that Chancellor Jeremy Hunt worked through the weekend and into the wee small hours of Monday morning to get a deal over the line. The tech community felt valued.
But SVB UK still had questions to answer.
Direct Line shares plunge as it quashes bid hopes
10:47 , Daniel O’Boyle
Shares in Direct Line are down almost 10% as it said it rejected a takeover bid from Belgian firm Ageas.
The board also quashed hopes that a future offer could be rejected, saying they were happy as a standalone business.
Ageas, which had already made a previous approach, followed up with the insurer over a 237p-per-share offer.
The firm said: “The Board considered the latest proposal with its advisers and continues to believe the latest proposal is uncertain, unattractive, and that it significantly undervalues Direct Line Group and its future prospects while also being highly opportunistic in nature. Accordingly, the Board unanimously rejected the latest proposal.
“The board is confident in Direct Line Group’s standalone prospects.”
Direct Line shares are down 10% to 204.2p today.
Glencore upgrade boosts shares, Balfour Beatty jumps 8%
10:23 , Graeme Evans
The FTSE 100 index is up 14.11 points to 7761.92, led by Glencore after Deutsche Bank restored its “buy” stance with a 540p target price.
Shares rose 7.6p to 407.55p as the bank said there’s a good chance Glencore will again become the leading cash generator in the mining sector, with a potential $2-3 billion top-up shareholder cash return possible in the next year.
Glencore’s performance bucked an otherwise poor session for mining stocks as Rio Tinto lost 51.5p to 4862.5p and silver firm Fresnillo reversed 9.4p to 454.9p.
The FTSE 250 index improved 39.5 points to 19,604.71, with infrastructure projects specialist Balfour Beatty the standout performer.
The Hinkley Point C tunnelling firm advanced 8% or 27.4p to 367.2p after annual profits of £261 million came in slightly ahead of City forecasts.
It also announced a £100 million shares buyback and sounded an optimistic tone on the market outlook.
Analysts at Peel Hunt described the shares as “materially undervalued” after reiterating their “buy” stance and 460p target price in the wake of the results.
Among other mid-caps, promotional products firm 4imprint fell 23p to 5827p after reporting a 36% rise in annual profits and a steady start to 2024 trading.
Keywords Studios shares surge on hopes of entertainment rebound
10:13 , Daniel O’Boyle
Keywords Studios, the London-listed firm that offers services to video game and film studios, saw shares climb this morning on hope that it could take advantage of the entertainment sector’s rebound after a “difficult” 2023.
The business saw profits fall by almost 50% to €34 million as film production was slowed by Hollywood strikes while the game sector struggled with a sales slowdown that prompted many studios to slash jobs. One highlight for the firm in an otherwise tough year was the acquisition of movie marketing firm Digital Media Management, which led the campaign to promote the smash-hit Barbie film online.
Investors looked past the short-term challenges and were encouraged by CEO Bertrand Bodson’s long-term revenue target of €1 billion (£854 million).
Bodson said that Keywords would benefit as both Hollywood and gaming recover, and could take advantage of the “convergence” between the two sectors.
The shares jumped by 13.1% to 1549.5p, but that still leaves them down 46% over the past year.
UK to seal trade co-operation agreement with Texas
09:41 , Daniel O’Boyle
The UK is set to sign an agreement on closer trade co-operation with Texas as the Government continues to pursue state-level deals in the absence of a wider free trade agreement with the US.
Trade Secretary Kemi Badenoch and Texas Governor Greg Abbott are expected to formally sign the agreement in Westminster on Wednesday.
The agreement is not a trade deal, because individual US states do not have the power to sign these, but is similar to a memorandum of understanding designed to improve co-operation between businesses in Britain and Texas and tackle regulatory barriers to trade.
Market snapshot: FTSE flat near nine-month highs
08:50 , Daniel O’Boyle
The FTSE 100 is flat this morning, hovering near the nine-month high it hit yesterday.
Take a look at our market snapshot.
Flutter backing boosts shares in FTSE 100, Balfour Beatty surges
08:40 , Graeme Evans
Flutter Entertainment is the best performing FTSE 100 stock after analysts at JP Morgan backed the gambling group with a much higher target price.
Shares in the Paddy Power and Betfair firm rose 2% or 335p to 17,550p after the City bank’s upgrade to 21,300p from a previous estimate of 16,300p.
In contrast, rival Entain fell 11p to 751.4p as JP Morgan reduced its target price to 910p alongside a new “neutral” recommendation.
The FTSE 100 index was unchanged at 7747 after yesterday’s 1% rise, with other risers including Glencore after Deutsche Bank restored its “buy” stance. Shares in the mining giant rose 4.85p to 404.8p.
In the FTSE 250 index, Balfour Beatty shares jumped 9% or 31.4p to 371.2p after results came in ahead of expectations and the infrastructure firm also announced plans for a £100 million buyback of shares.
UK economy still lacks forward momentum
08:37 , Daniel O’Boyle
The Office for National Statistics (ONS) on Wednesday said that the dominant services sector led the economy out of the mild recession of the second half of last year.
The figure was in line with City expectations and is unlikely to impact forecasts that the first interest rate cut from the Bank of England will come in June.
Although welcome it was only second increase in GDP in the past seven months underlining how the UK economy is struggling to gain any forward momentum. Services output, which accounts for around 80% of the total, grew by 0.2% in the month. A bounce back on the high street was a major contributor with retail sales growing 3.4% after a dismal Christmas.
Read more on the rise in GDP here
Zara owner’s profits soar
08:00 , Daniel O’Boyle
Zara owner Inditex saw profits soar to almost €7 billion as the Spanish-founded chain continues to dominate while many rivals in the fast-fashion sector struggle.
The business reported sales just short of €36 billion, figures that keep Inditex on top of the low-cost fashion world, as it fends off the challenge of cheaper Chinese rival Shein – which has been looking at a possible blockbuster London stock listing.
Businesses such as H&M and the UK’s ASOS and Boohoo have struggled to keep up the same momentum against Shein’s rise.
CEO Oscar Garcia Maceiras said: Inditex’s performance in 2023 has been excellent.”
The firm upped its dividend by 28%.
Metro Bank stands by its branches and returns to annual profit for first time in 5 years, but more cost cuts are ahead
07:56 , Michael Hunter
Metro Bank has underlined its commitment to its branch network as it returned to annual profit for the first time in five years.
But it will also reduce costs by “a further £30 million” on an annualised basis by the end of 2024.
It took on established banks when it launched in 2010 as the the first new high street lender in 100 years. But it teetered on the brink of collapse last year, before a £925 million rescue deal from its existing backers.
Today, it said its capital position was “secured” with maturities on its debt extended “to 2028 or beyond”.
It reported an annual profit for the first time since 2018, of £30.5 million.
It also said it was on course to “deliver £50 million of annualised cost savings in Q1 2024”. Around 1,000 jobs have already been lost, over a fifth of its staff, with the departures due “before mid-April”.
But it also said today that it remained committed to its branches, saying it would be “opening new stores in the North of England”.
The Gym Group revenues top £200 million as cost-of-living pressures help low cost operator triumph
07:27 , Simon Hunt
The Gym Group revenues topped £200 million for the first time in 2023, the firm revealed today, as cost-of-living pressures helped the low-cost operator attract more members.
Sales climbed 18% on the previous year as membership numbers rose to 909,000 by the end of February, up 9% on the end of 2023.
The Gym Gym said it was eyeing further expansion, opening another 10-12 sites by the end of the year.
Losses fell from £19.4 million to £5.5 million.
CEO Will Orr said: “Over the next three years, we aim to strengthen the performance of our core business and accelerate The Gym Group site rollout. There continues to be substantial headroom for low cost gyms in the UK.”
‘UK may already have moved out of recession’
07:26 , Daniel O’Boyle
Ruth Gregory, Deputy Chief UK Economist at Capital Economics, says the latest GDP figures suggest the UK may already be out of recession. We won’t find for certain until the official first-quarter GDP numbers come out May, however.
She said: “The news that the economy expanded by 0.2% m/m in January (consensus and CE forecast 0.2% m/m) suggests the UK economy may already have moved out of recession and implies there is some upside to our 2024 GDP growth forecast of 0.0%.
However, she added that the recovery in January was not broad-based. Retail and housebuilding performed extremely well, enough to push the entire economy into growth, but other sectors struggled.
She added: “We already knew that the retail sector had expanded strongly in January. That helped to drive a 0.2% m/m rise in services output. But construction output also rebounded by 1.1% m/m after a weak December. That said, elsewhere the figures were more disappointing. Output in the industrial sector fell by 0.2% m/m (mainly due to a fall in mining and quarrying activity). And further strike action (in total 203,000 working days were lost to strikes in January versus 108,000 in December) dampened output in the transport, health and film/TV production sectors.”
‘Case for rate cuts by the summer is growing’
07:20 , Daniel O’Boyle
What does the latest GDP reading mean for interest rates? Suren Thiru, Economics Director at ICAEW, says it continues to bolster the case for a summer rate cut.
Thiru said: “While these figures suggest the UK is on track to exit recession this quarter, the squeeze from high interest rates and persistent labour shortages may mean that the recovery is more downbeat than the OBR is predicting.
“This data won’t alter the expectation that interest rates will remain on hold this month. With the economy struggling and inflation slowing, the case for loosening policy by the summer is growing.”
FTSE 100 holds firm after US tech rally, Asia markets mixed
07:11 , Graeme Evans
The FTSE 100 index is poised for a solid session after rising 1% yesterday as global markets rallied in the face of hot US inflation figures.
The reading of 3.2% failed to dent Wall Street expectations that the US Federal Reserve is on course to cut interest rates by June.
The S&P 500 index rose 1.1% to set a new record high, a performance powered by Magnificent Seven stocks as chip heavyweight Nvidia rallied by 7%.
Asia markets failed to build on the momentum as the Hang Seng index followed yesterday’s 3% surge with a flat performance and the Nikkei 225 drifted 0.3%.
According to IG Index, futures markets show that the FTSE 100 index will open about ten points higher at 7757.
Housebuilder rebound helps drive GDP growth
07:07 , Daniel O’Boyle
Retail and housebuilding, two sectors that struggled in December, helped lead the rebound in January.
ONS Director of Economics Statistics Liz McKeown said: “The economy picked up in January with strong growth in retail and wholesaling. Construction also performed well with housebuilders having a good month, having been subdued for much of the last year.
“These were partially offset by falls in TV and film production, lawyers and the often-erratic pharmaceutical industry.
“Over the last three months as a whole, the economy contracted slightly.”
‘Economy will continue to brighten’
07:05 , Daniel O’Boyle
After the rise in GDP, Jeremy Batstone-Carr, European strategist at Raymond James Investment Services, said there are signs that the recovery will continue. If the economy doesn’t reverse course in the next two months, the UK will be out of recession.
He said: “This economic revival has been brought by a rebound in retail sales, and forward-looking indicators confirm that the economy will continue to brighten in the months to come.
“The retail sector’s bounce back has proved sufficient to offset stagnation in other parts of the economy, notably industrial production and manufacturing output. The retail sector has also counteracted strikes by junior doctors and rail workers which dampened activity in the transport and healthcare sectors”
UK GDP up 0.2%
07:02 , Daniel O’Boyle
UK GDP rose by 0.2%, in a sign that the UK appears to be on its way out of a very short and shallow recession.
The rise in GDP was in line with market expectations.
Recap: Yesterday’s top stories
06:47 , Simon Hunt
Good morning from the Standard City desk.
Slowly, painfully slowly, the heat is coming out of the labour market.
But will it cool off enough in time for the string of pre-election interest rate cuts that Rishi Sunak and Jeremy Hunt are counting on to shore up what is left of the Tory vote? Probably not.
Working on the assumption of an October polling day (Tory strategists are unlikely to want to be boxed into December of January, and November clashes awkwardly with the US Presidential election) that leaves five Monetary Policy Committee meetings until we all troop to the ballot boxes.
March is way too early, May is in the mix, but more likely it will be June before rate setters make their move, after almost a year of the cost of borrowing stuck at 5.25%.
There are then further MPC meetings in August and September. Making the generous assumption of a quarter point cut at each one, that would trim rates to 4.5% by polling day.
Enough to move the dial? It seems unlikely.
Here’s a summary of our top stories from yesterday:
