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(Alliance News) - Stocks in London were called to open lower on Thursday, amid the continued political scrap over raising the US government debt limit and after news that Germany has entered a technical recession.
Destatis said Germany's gross domestic product contracted by 0.3% in the first quarter from the fourth quarter of 2022. In the fourth quarter, GDP had contracted by 0.5% from the third.
In late April, the statistics agency had predicted the economy had remained flat during the first quarter of this year. The negative reading instead means Europe's largest economy has fallen into a technical recession - defined as two consecutive quarters of negative GDP growth.
In the UK, regulator Ofgem is lowering its energy price cap from the current GBP3,280 per year to GBP2,074 for the average household in England, Wales and Scotland, effective from July 1.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 0.1% at 7,619.8
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Hang Seng: down 2.2% at 18,697.44
Nikkei 225: closed up 0.4% at 30,801.13
S&P/ASX 200: closed down 1.1% at 7,138.20
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DJIA: closed down 255.59 points, or 0.8%, at 32,799.92
S&P 500: closed down 30.34 points, 0.7%, at 4,115.24
Nasdaq Composite: closed down 76.08 points, 0.6%, at 12,484.16
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EUR: down at USD1.0738 (USD1.0762)
GBP: down at USD1.2355 (USD1.2367)
USD: up at JPY139.53 (JPY139.12)
Gold: down at USD1,957.66 per ounce (USD1,969.75)
(Brent): flat at USD78.06 a barrel (USD78.07)
(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 BST UK CBI distributive trades survey
17:30 BST UK BoE member Jonathan Haskel speaks at Peterson Institute for International Economics event
08:30 EDT US Chicago Fed national activity index
08:30 EDT US unemployment insurance claims report
08:30 EDT US gross domestic product
10:30 EDT US Fed Boston President Susan Collins speaks at Community College of Rhode Island event
16:30 EDT US federal discount window borrowings
16:30 EDT US foreign central bank holdings
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Germany's economy contracted at the start of 2023 amid a slump in household spending, marking two quarters in a row of decline, revised figures from its federal statistics office showed on Thursday. Destatis said that Germany's gross domestic product contracted by 0.3% in the first quarter from the fourth quarter of 2022. In the fourth quarter, GDP had contracted by 0.5% from the third. In late April, the statistics agency had predicted the economy had remained flat during the first quarter of this year. The negative reading instead means Europe's largest economy has fallen into a technical recession - defined as two consecutive quarters of negative GDP growth. "The persistence of high price increases continued to be a burden on the German economy at the start of the year. This was particularly reflected in household final consumption expenditure, which was down 1.2% in the first quarter of 2023 after adjustment for price, seasonal and calendar variations," Destatis explained.
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Ofgem is lowering its energy price cap from the current GBP3,280 per year to GBP2,074 for the average household in England, Wales and Scotland, effective from July 1, it has announced. Ofgem said the GBP1,206 reduction to the cap reflected recent falls in wholesale energy prices. The lower cap will replace the UK government's Energy Price Guarantee, which currently limits the typical household energy bill to around GBP2,500. It means the average household will see their annual bill drop by GBP426. The cut to the cap marks the first time consumers on default tariffs have seen their prices fall since the global gas crisis took hold more than 18 months ago, Ofgem said.
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BROKER RATING CHANGES
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Berenberg cuts Aviva price target to 532 (546) pence - 'buy'
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Goldman Sachs raises Sage price target to 970 (900) pence - 'neutral'
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SocGen raises Marks & Spencer price target to 190 (140) pence - 'hold'
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COMPANIES - FTSE 100
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Johnson Matthey said its annual results were in line with expectations, despite being below the prior year. Revenue in the financial year that ended March 31 fell by 7% to GBP14.93 billion from GBP16.03 billion. Underlying pretax profit fell by 18% to GBP404 million from GBP493 million. Johnson Matthey declared a final divided of 55.0p, bringing its full-year dividend of 77.0p per share, unchanged. Looking ahead, the company expects "at least" mid-single digit growth in operating performance at constant precious metal prices and constant currency. "We have navigated global macroeconomic challenges to report full year results in line with market expectations, with a stronger second half as we indicated back in November. We have also been delivering against our strategic milestones with important customer wins, which will drive growth," said CEO Liam Condon.
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United Utilities said revenue in the financial year that ended March 31 fell by 2.1% to GBP1.82 billion from GBP1.86 billion. Pretax profit plummeted by 42% to GBP256.3 million from GBP439.9 million. It said this largely reflected lower consumption and the inflationary impact on operating costs, in particular procurement of electricity and chemicals. United Utilities said it will recommend a final dividend of 30.34p, to bring the full year dividend to 45.51p, up 4.6% and in line with its policy. In the year ahead, it is targetting dividend growth in line with UK CPIH inflation.
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COMPANIES - FTSE 250
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Hill & Smith said it has delivered a "record trading performance" in the four month period to April 30. It said constant currency revenue growth is up 18%, and there has been "strong" profit growth against a relatively soft 2022 comparator. Looking ahead, the company said that it expects full-year operating profit to be modestly ahead of the top end of analyst expectations. The current company compiled analyst consensus expectation for financial 2023 is for underlying operating profit of GBP107.0 million with a range of GBP105.2 million to GBP110.2 million. Separately, Hill & Smith said Alan Giddins will continue as executive chair for another 12 to 18 months. He has been in the role on an interim basis since July 2022, while the company searched for a new CEO. "The board has undertaken an extensive search process that has identified many strong candidates who have been excited by the group's prospects," Hill & Smith said. "However, the board was not able to find a candidate that met its criteria at the current time."
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OTHER COMPANIES
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Emis said revenue rose by 4% to GBP175.4 million in 2022 from GBP168.2 million in 2021. Recurring revenue rose 6.3% to GBP143.3 million from GBP134.8 million. Pretax profit increased to GBP38.9 million from GBP36.1 million. Emis explained this reflects an exceptional fair value gain of GBP10.7 million on the revaluation of the previously held interest in a joint venture resulting from the Healthcare Gateway acquisition. Emis declared a final dividend of 21.1p, up 20% annually to 17.6p. This brings the company's full-year dividend to 38.7p from 35.2p.
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Gamma Communications named Martin Hellawell as its new chair, with effect from July 1. He will replace Richard Last, who will step down on the same date, having served as chair for nine years. Hellawell is currently non-executive chair of Softcat, a position from which he will step down on July 31. He also is non-executive chair of Raspberry Pi and AIM-listed musicMagpie. In his most recent executive role, Hellawell was CEO of Softcat from 2006 through to 2018. "The board is delighted to have attracted a candidate with the qualities and experience of Martin. His commercial track record and industry background means he will provide outstanding direction and support for the board and management team as Gamma focuses on its next stage of growth," said Senior Independent Director Henrietta Marsh.
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By Sophie Rose, Alliance News reporter
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