The FTSE 100 and European stocks opened lower on Wednesday after the British Chambers of Commerce (BCC) warned this morning that the UK economy is set to flatline for the next six months.
Although the UK will avoid a recession, the BCC said it will feel a lot like one for millions of households.
The BCC said it expects overall growth of 0.4% for the year and also slashed its forecast for the next two years. It expects the UK economy to grow by 0.3% in 2024, rising to 0.7% in 2025.
British construction firms also reported suffering a sharp drop in orders in August, adding to concerns about a slowing economy.
FTSE 100 and European stocks
The FTSE 100 (^FTSE) opened down 0.58% to 7,394.41 points, while the CAC 40 (^FCHI) in Paris fell 0.58% to 7,210.13 points. In Germany, the DAX (^GDAXI) declined by 0.36% to 15,714.78 points.
US and Asia
In the US, Wall Street is expected to open lower today, according to pre-market estimates, after all the main indices closed in the red.
Investors will be keeping across ISM services PMI data for August and a trade balance update later, as well as initial jobless claims for the week ending 2 September that will come through on Thursday.
The Dow Jones (^DJI) closed down 0.56% to 34,641.97 points on Tuesday. The S&P 500 (^GSPC) also fell, by 0.42% to 4,496.83 points, while the tech-heavy NASDAQ (^IXIC) declined 0.08% to close at 14,020.95.
In Asia, the markets have been mixed. Japan’s Nikkei 225 (^N225) rose 0.62% to 33,241.02 points, while the Hang Seng (^HSI) in Hong Kong lost 0.17% to 18,425.76. In mainland China, the Shanghai Composite (000001.SS) gained, by 0.14% to 3,158.75 points.
It comes as China’s services activity expanded, however, at the slowest pace in eight months in August as weak demand continues to impact the world’s second-largest economy. Moreover, stimulus efforts have failed to revive consumption.
Traders will be keeping across the next wave of economic data from China early hours Thursday morning with the release of the country’s latest trade balance for August.
Pound
In currencies, the pound to dollar exchange rate (GBPUSD=X) was at 1.25, meaning £1 will get you $1.25. Meanwhile, while the pound to euro exchange rate (GBPEUR=X) was at 1.16.
Oil prices
Investors will also be focusing on oil market moves today after Brent hit $90 a barrel last night for the first time since November last year and US crude came close after Saudi Arabia and Russia extended crude output cuts.
Saudi Arabia first implemented the 1 million barrel per day reduction in July and has since extended it on a monthly basis while Russia also pledged to reduce exports by 500,000 barrels per day in August and by 300,000 barrels per day in September.
Today, however, crude prices are lower, easing off slightly from yesterday. US crude oil, or West Texas Intermediate (CL=F), fell 0.22% to trade at $86.50 a barrel, while Brent crude (BZ=F) lost 0.26% and was at $89.81 a barrel.
Corporate highlights
Shares in UK home construction company, Barratt Developments (BDEV.L), fell 2.4% after it posted its latest financial results.
The company said forward sales stood at £2.44bn as of 27 August, down 36% year-on-year. It also forecast a reduction in margins but did not provide profit guidance.
Richard Hunter, head of markets at Interactive Investor, commented “The list of headwinds is well-documented and lengthy and is likely to spill over into the new financial year. Squeezed mortgage affordability and availability is resulting in waning customer demand, while broader concerns over general economic growth, consumer confidence and spending are all darkening the picture.
“At the same time, the removal of the Help to Buy scheme has removed an important plank from first-time buyers and legacy costs for remedial building work continue to come at a significant cost, totalling some £179 million in this period.”
He also noted that the spectre of inflation is an additional burden, with house price inflation failing to keep up with build cost inflation, which has been running between 9% and 10% over the year.
“There are, however, some signs of improvement on this front as some of these pressures show signs of easing, and Barratts is predicting a figure of nearer 5% over the coming year,” Hunter added.
Shares in retailer WH Smith (SMWH.L) also fell today, plunging nearly 6%, despite the company reporting that its revenue was up 28%, boosted by strong demand during a busy summer travel season. However, it fell short of a recently raised profit forecast.
AJ Bell investment director Russ Mould said its latest trading update reflects the growth in travel activity and the fact it is winning market share.
“Travel is the key driver for earnings, not the UK high street stores which are cash machines for the business but are arguably ex-growth. Here, it’s all about trimming costs and offering a functional place to buy stationery, books and snacks.”
Darktrace (DARK.L) shares had a bad start too, falling 4.28% off the back of its earnings report.
The British cyber security company reported a 52% rise in adjusted core earnings in the 12 months to end-June but said that changes to its sales commission would squeeze its earnings margin in the current year.
Darktrace said the decision to pay 100% of its sales commissions up front, rather than 50% with the remainder typically one year later, would result in an adjusted core earnings range of 17% to 19% for the year.
Meanwhile, fund manager Ashmore (ASHM.L) has reported a 6% fall in annual profit due to higher outflows.
However, the company said it would maintain its final ordinary dividend at 12.1 pence per share, to give total dividends per share of 16.9 pence.
Its stock was up 1.61% on Wednesday morning, following the update.
Halfords (HFD.L) stock got a boost today after the British retailer reported a 14% rise in revenue for the 20 weeks to the 18 August, up 16.6% on last year.
The company said motorists were looking for cheap repairs which helped autocentre sales, although cycling sales fell.
“It’s been a good start to the year for Halfords, and our ongoing focus on essential maintenance and servicing is driving a strong performance in our autocentre and retail motoring business,” Halford’s chief executive, Graham Stapleton, said.
The Restaurant Group plc (RTN.L), which own Wagamama, said it expects annual profit to be higher after posting an increase in first-half earnings helped by more people dining at its joints.
It reported a 15% rise in adjusted core profit to £36.3m for the half-year ended 2 July. Analysts, on average, had expected core profit to be about £77.5m for the year.
Economic data
British construction firms suffered a sharp drop in orders in August, adding to concerns about a slowing economy.
The S&P Global/CIPS UK Purchasing Managers’ Index fell to 50.8 in August, down from 51.7 in July.
Tim Moore, economics director at S&P Global Market Intelligence, said the decline in residential house-building was the steepest since early 2009 excluding the COVID-19 lockdown period, although August’s figure was slightly above a low struck in June.
Weaker economic conditions and new building project cutbacks, as well as local planning delays were factors cited as holding back house-building activity.
Watch: Goldman Sachs’ Jan Hatzius trims recession odds, says US headed for soft landing
Download the Yahoo Finance app, available for Apple and Android.
