(Alliance News) - Stocks in London are set to begin the new week on a sour note with risk-off sentiment pervading ahead of a key week for central banks.
Further denting the mood was an underwhelming UK GDP reading.
The economy contracted by 0.3% in April on a month before, the Office for National Statistics showed, badly missing the FXStreet-cited market consensus of 0.2% growth. The reading also marked a deterioration from March's 0.1% fall.
Services activity fell by 0.3% in April, reflecting a large decrease in human health and social work, where there was a "significant reduction" in NHS Test & Trace activity. Production activity shrank by 0.6%, driven by a fall in manufacturing, and construction fell 0.4%.
"This is the first time that all main sectors have contributed negatively to a monthly GDP estimate since January 2021," the ONS noted.
Meanwhile, a leading UK business group has downgraded its outlook for economic growth amid calls for government action to avoid a recession.
The CBI downgraded its growth outlook for the UK to 3.7% for this year from 5.1% previously, and to just 1% in 2023 from 3%.
The CBI said inflation is expected to remain high into the Autumn, rising to 8.7% in October, leading to a "historic squeeze" in household incomes, which will hit consumer spending.
On Thursday this week, the Bank of England reveals its latest policy decision.
Sterling was quoted at USD1.2264 early Monday, slumping from USD1.2321 at the London equities close on Friday.
IG says futures indicate the FTSE 100 index of large-caps to open down 71.92 points, or 1.0%, at 7,245.60 on Monday. The FTSE 100 closed down 158.69 points, or 2.1%, at 7,317.52 on Friday.
Stocks in London appear set to extend losses as concerns over inflation, global growth and central bank tightening persist into the new week.
"In the space of a few days, markets have gone from optimism that inflation might be on the cusp of plateauing, to rising apprehension that we could not only see higher prices, but that prices might well remain higher for a lot longer than originally thought," said Michael Hewson, chief market analyst at CMC Markets.
Traders were spooked by Friday's hotter-than-expected US inflation print, the annual rate coming in at 8.6% in May, accelerating from April's 8.3% growth.
This US data came ahead of this week's US Federal Reserve decision.
"Prior to Friday the case for a 50bps rate hike by the Fed was a nailed-on certainty and it remains so; however in some parts there has been a shift in thinking towards a 75bps move, hence Friday's sharp moves," added Hewson.
In early UK company news, Countryside Partnerships said it will consider being bought out should a bidder be "prepared to offer a value that the board considers compelling".
The housebuilder and urban regeneration firm said it has received feedback from significant shareholders over the past fortnight since Countryside revealed it had received and rejected two takeover proposals from San Francisco-based investor Inclusive Capital Partners. A "meaningful" number of shareholders believe the firm would be in a better position as a privately-owned company, or as part of a larger business.
Talks with any interested third parties will take place within the context of a formal sale process, Countryside said, but bidders will not be required to be publicly identified and will not be subject to a 28 day deadline while they are taking part in the process.
Inclusive Capital has indicated it will take part in the formal sale process. Countryside said it is not currently in discussions with any other potential offerer.
"In light of the present circumstances, the board has determined that it would be inappropriate to continue the share buy-back programme that has previously been announced, and the board intends to suspend the share buy-back programme until the formal sale process is completed or terminated," it added.
Ferrexpo said it will lower production for a period of time as the war in Ukraine blocks its export routes.
The iron ore miner in Ukraine said it had produced 4.4 million tonnes of iron ore pellets so far in 2022 as of the end of May, down 8% from the same point in 2021.
Ferrexpo has seen a total 400,000 tonne increase in iron ore inventories across the months of March, April and May, which it will seek to reduce as logistics constraints ease.
"The group continues to receive deliveries of key consumables sufficient for the planned level of pellet output. However, as a result of the damage to infrastructure and increase in inventories of iron ore pellets referenced above, the group will lower production for a period of time, until an alternative logistics route is agreed, damaged infrastructure is reopened and/or Ukraine's Black Sea ports resume activities," said Ferrexpo.
Chief Executive Jim North said the company will look to increase production when it has "greater clarity" on logistics.
"It is a credit to our operators and marketing team that our year to date production in the first five months of 2022 was only 8% below the same level seen in 2021, demonstrating Ferrexpo's collective flexibility despite exceptional circumstances," he added.
Sirius Real Estate lifted its annual payout as its rent roll surged.
Annualised rent roll increased 73% to EUR167.0 million for the financial year ended March 31 from EUR96.5 million a year before. Like-for-like annualised rent roll in Germany increased by 6.4%, while in the UK it rose 7.6%.
"This strong operating performance was underpinned by continued demand and asset management led rental growth across both our German and UK platforms," said Chief Executive Andrew Coombs.
Sirius's total dividend for the year amounted to 4.41 cents, up 16% on the 3.80 cents paid out the year before.
Since the year-end, the operator of business parks, offices and industrial complexes said it has traded in line with market expectations, supported by continued strong occupier demand, "transformative" investment and ongoing on-shoring of production and supply chains by German and UK manufacturers.
The euro traded at USD1.0487 early Monday, down from USD1.0518 late Friday. Against the yen, the dollar was quoted at JPY134.66, up versus JPY134.13, having earlier Monday topped JPY135.
In the US on Friday, Wall Street ended lower, with the Dow Jones Industrial Average ending down 2.7%, the S&P 500 down 2.9% and the Nasdaq Composite down 3.5%
In Asia on Monday, the Japanese Nikkei 225 index ended down 3.0%. In China, the Shanghai Composite was down 1.3%, while the Hang Seng index in Hong Kong was down 3.4%. Financial markets in Australia were shut on Monday for a holiday.
Gold was quoted at USD1,865.08 an ounce early Monday, higher than USD1,862.37 on Friday. Brent oil was trading at USD119.90 a barrel, softening from USD120.90 late Friday.
By Lucy Heming; lucyheming@alliancenews.com
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