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(Alliance News) - Stocks in London are expected to edge into the green on Thursday, following the latest set of UK economic data, as the pound strengthened to a 15-month high against the dollar.
The UK economy saw a milder-than-expected contraction in May, according to figures from the Office for National Statistics on Thursday, while industrial production declined and its goods deficit widened.
According to the ONS, real gross domestic product is estimated to have fallen by 0.1% in May from the previous month, after growing 0.2% in April. May's reading was higher than FXStreet-cited consensus of 0.3% decline.
Elsewhere, markets were cheering a cooler-than-expected US inflation reading, which lowered expectations of further rate hikes from the Federal Reserve, beyond its upcoming meeting.
The news helped drive the pound to a 15-month high above USD1.30.
It also gave a boost to Asian markets, which rallied despite weak Chinese export data.
In company news, Barratt Developments said it expected to meet market expectations for annual profit. John Wood Group and Gym Group both reported double-digit rises in revenue during the first half.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 3.1 points at 7,419.21
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Hang Seng: up 2.6% at 19,355.52
Nikkei 225: closed up 1.5% at 32,419.33
S&P/ASX 200: closed up 1.6% at 7,246.90
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DJIA: closed up 86.01 points, 0.3%, at 34,347.43
S&P 500: closed up 0.7% at 4,472.16
Nasdaq Composite: closed up 1.2% at 13,918.96
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EUR: up at USD1.1137 (USD1.1119)
GBP: up at USD1.3013 (USD1.2994)
USD: up at JPY138.73 (JPY138.38)
Gold: up at USD1,956.79 per ounce (USD1,954.01)
Oil (Brent): up at USD80.29 a barrel (USD79.93)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
11:00 IST Ireland CPI
11:00 CEST EU industrial production
13:30 CEST EU ECB meeting minutes
09:30 BST UK BoE credit conditions survey
09:30 BST UK BoE's bank liabilities survey
08:30 EDT US PPI
08:30 EDT US unemployment insurance weekly claims report
16:30 EDT US federal discount window borrowings
16:30 EDT US foreign central bank holdings
18:15 EDT US Federal Reserve Board Governor Christopher Waller speaks at Money Marketeers event
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The ONS reported that the UK's industrial production continued to contract in May. On a monthly basis, industrial production in May fell 0.6%, worsening from a 0.2% decline in April, and undershooting market forecasts of a 0.4% decline. Annually, industrial production fell 2.3% in May, in line with forecasts, and declining further from a 1.6% fall in April. April's figures were revised from a 0.3% monthly fall, and 1.9% annual fall. The monthly decline in May was due to a fall in three of the four production sectors. Electricity and gas production fell 2.0%, with water supply and sewerage down 1.7%, and manufacturing down 0.2%. These were partially offset by a 0.3% rise in mining and quarrying.
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The ONS also updated on UK trade data for May. The value of goods imports rose 4.2% from the previous month to GBP50.5 billion, or by 5.9% when removing the effect of inflation. Meanwhile, good exports fell 4.4% month-on-month to GBP30.7 billion, or by 3.2% excluding inflation. This resulted in a total trade deficit in goods of GBP19.8 billion, which widened by GBP3.5 billion from the previous month. The total trade in goods and services deficit narrowed by GBP5.9 billion to GBP18.2 billion in the three months to May 2023 compared with the three months to February, the ONS said.
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UK house hunter inquiries, sales and property prices slipped back further in June as mortgage rates increased, according to surveyors. But the upward pressure on rental prices continues as demand from renters rises but instructions from landlords fall, according to the report from the Royal Institution of Chartered Surveyors. An overall net balance of 45% of property professionals reported buyer inquiries falling rather than rising, deteriorating from a balance of 20% seeing this in May.
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UK Chancellor Jeremy Hunt appeared to discourage workers from asking for pay rises far above the target rate for inflation as he stressed the government's "responsible" approach to public sector wages. Speaking on ITV1's Peston, Hunt said: "We will take a responsible attitude when it comes to the element of pay that we directly control, which is public sector pay, and we'll make sure that any awards we give don't themselves fuel inflation." He urged workers to "understand this is a difficult period" and that if ministers "show discipline" they will avoid "having the same discussion in a year's time".
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BROKER RATING CHANGES
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Berenberg raises Hunting to 'buy' (hold) - price target 345 (325) pence
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Citigroup cuts Computacenter to 'neutral' - price target 2,350 pence
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JPMorgan places St James's Place on 'negative catalyst watch'
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COMPANIES - FTSE 100
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Barratt Developments said it expects adjusted pretax profit in the financial year ended June 30 to be in line with market expectations. The housebuilder cited consensus estimates at GBP800.6 million. Over the year, it said total home completions fell to 17,206 from 17,908 year-on-year. Its net private reservation rate for the year per active outlet per week fell 32% to 0.55 from 0.81. Looking ahead to financial 2024, it expects total home completions will be in a range of 13,250 to 14,250. It expects total build cost inflation to abate to around 5%, from the 9% to 10% seen in financial 2023.
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Late Wednesday, gambling company Entain said its subsidiary Entain Holdings (CEE) received antitrust approval from Poland's Office of Competition & Consumer Protection for its acquisition of Katowice, a Poland-based sports betting operator STS Holding. Entain said the antitrust condition to the tender offer has therefore been satisfied. The remaining condition is to receive acceptances representing at least 50% of the shares in STS. The acceptance period will commence on Friday and close in mid-August; the transaction should close shortly afterwards.
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COMPANIES - FTSE 250
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John Wood Group reported "good trading" in the first half of the year, as revenue rose around 15% annually to USD2.9 billion. The engineering and consulting business said it expects its annual performance to be in line with its medium-term targets, which are adjusted Ebitda growth at mid-to-high single digit compound annual growth rate. "We are making good progress in delivering on the growth strategy we outlined last November. Trading shows continued good growth and margins in line with our expectations," said CEO Ken Gilmartin.
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OTHER COMPANIES
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Gym Group said positive trading trends have continued into the first half of 2023. Revenue is up 19% year-on-year to GBP99.8 million, as memberships rise to 867,000 at the end of June, from 790,000 a year before. On a like-for-like basis, revenue was up 7% from the prior year, with comparable sites running at 97% compared with 2019. "After a positive first half, we remain on track with our plans and are well set to meet full-year market expectations. We have continued to grow our membership and yield, whilst controlling our costs and generating cash," said Chair John Treharne.
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By Elizabeth Winter, Alliance News senior markets reporter
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