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(Alliance News) - Stock prices in London opened slightly lower on Friday, as investors digest the implications of a better-than-expected US GDP reading on Wednesday.
The FTSE 100 index opened down 7.38 points, 0.1%, at 7,753.73. The FTSE 250 was down 31.30 points, 0.2%, at 19,884.21, and the AIM All-Share was down 0.49 points, 0.1%, at 864.92.
The Cboe UK 100 was up 0.2% at 777.08, the Cboe UK 250 flat at 17,364.06, and the Cboe Small Companies down 0.3% 14,132.05.
New York ended higher on Thursday, after a US GDP reading marginally beat market expectations. The Dow Jones Industrial Average ending up 0.6%, the S&P 500 up 1.1%, and the Nasdaq Composite up 1.8%.
The US economy continued to grow in the final three months of 2022, at a pace slightly above expectations, according to the US Bureau of Economic Analysis on Thursday.
The bureau's first estimate of fourth-quarter gross domestic product showed 2.9% annual growth. Economists had expected an annualised growth rate of 2.8% in the last quarter of 2022, according to market consensus cited by FXStreet.
The data may suggest a soft landing ahead for the world's largest economy.
"If there are any concerns that the US economy is on the brink of a recession it's certainly not being reflected in the economic data, which still looks solid, as we look towards next week's Federal Reserve rate meeting," said Michael Hewson, chief market analyst at CMC Markets.
Richard Hunter, head of markets at interactive investor, was less positive: "More pessimistic investors are suggesting that the latest quarter of growth could be the last before previous hikes take full effect, potentially pushing the economy towards recession this Spring. The severity of the recession remains the key element of investor nervousness and, while one economic reading cannot in isolation predict a trend, the GDP number was enough to suggest that a mild recession could be on the cards, sending stocks higher for now."
A two-day Federal Open Market Committee policy-setting meeting will start on Tuesday next week.
Markets are expecting the US Federal Reserve to downshift to a 25 basis point hike from the 50 and 75 point hikes it made at meetings last year.
"While yesterday's GDP numbers increasingly appear to support the prospect of a soft landing, the labour market data also suggests that the Fed has the headroom to continue to be much more aggressive," said CMC's Hewson.
"Today's PCE core deflator inflation data is expected to confirm another modest slowdown from 4.7% to 4.4%, and the lowest reading since October 2021. It would also support the case for a more modest 25 [basis points rate hike] next week; however as we get nearer to the end of the Fed's rate hiking cycle, there is some divergence with respect to what might come next.
In European equities on Friday, the CAC 40 in Paris was down 0.2%, while the DAX 40 in Frankfurt was up 0.1%.
Sterling was quoted at USD1.2364 early Friday, unchanged from USD1.2363 at the London equities close on Thursday.
The euro traded at USD1.0870 early Friday, higher than USD1.0862 late Thursday. Against the yen, the dollar was quoted at JPY129.89, lower than JPY130.40.
In the FTSE 100, J Sainsbury was the top performer in early London trade, gaining 4.9%.
Bestway Group said it has bought or agreed to buy 80.8 million shares in Sainsbury. This represents a 3.45% stake.
Bestway is a London-based conglomerate, with operations across the UK, Pakistan and the Middle East. It was first established as a chain of convenience stores in 1963, but now has interests across the wholesale, pharmacy, real estate, cement and banking sectors.
"Bestway Group intends to hold its shares in Sainsbury's for investment purposes and looks forward to supporting the executive management team," it said.
Bestway said it may look to make further purchases in the future and confirmed that it is not considering a takeover offer for Sainsbury's.
The supermarket chain noted the announcement and said it will "engage" with Bestway "in line with our normal interactions with shareholders".
In the FTSE 250x, Direct Line was up 0.8%, after it said its chief executive will leave following the motor insurer's recent profit warning.
The Bromley, England-based insurance company said Penny James has agreed to step down, and it is now looking for a new CEO.
Until then, Direct Line has appointed Chief Commercial Officer Jon Greenwood as acting CEO.
Chair Danuta Gray said: "During her time as CEO, Penny has overseen significant strategic progress, transforming the technology and capability across the business, accelerating the digitalisation of customer journeys and helping to set the company up for the future."
Earlier this month, Direct Line shares dropped by a quarter in one day after saying it won't pay a final dividend due a big increase in weather related claims, pushing the insurer into a loss on underwriting.
Among London small caps, Superdry plunged 16% in early morning trade.
The Cheltenham, England-based firm reported that it has swung to an interim loss amid an underperformance from its Wholesale segment which has continued to blight the business post-period end.
In the six months ended October 29, the clothing retailer swung to a pretax loss of GBP17.7 million from a profit of GBP4.0 million a year before. Revenue rose by 3.6% to GBP287.2 million from GBP277.2 million, though within this, Wholesale revenue declined by 5.2%, due to a lagged recovery after Covid-19 and shipment timings. Superdry said this underperformance hurt its interim performance.
Superdry said it now expects to be broadly breakeven in financial 2023 at the adjusted pretax level. Previously, the firm had expected adjusted pretax profit between GBP10 million to GBP20 million.
AIM-listed YouGov lost 0.8%. The London-based research and data analytics company said it has performed well during the six months ending January 31, with growth across most divisions.
YouGov explained that growth has been driven by clients spending on strategic market research, which has accelerated its panel-based Custom Research work, with increasing opportunities for multi-year contracts and trackers. Geographically, the US remains a major growth driver with large market opportunities, whilst demand in the UK has picked up despite recessionary market conditions.
Looking ahead, YouGov said it remains confident of achieving top-line revenue growth for the full year in line with current market expectations of GBP264 million. In the financial year to July 31, the company brought in GBP221.1 million of revenue.
In Tokyo on Friday, the Nikkei 225 index was up 0.1%.
In China, the Hang Seng index in Hong Kong was up 0.4%.
Stock markets in China have been shut most of the week to mark Lunar New Year. Hong Kong re-opened on Thursday, while Shanghai will remain closed until Monday.
In Sydney, the S&P/ASX 200 closed up 0.3%. Australian annual producer price inflation eased to 5.8% in the fourth quarter from 6.4% in the third quarter, according to the Australian Bureau of Statistics.
Gold was quoted at USD1,924.72 an ounce early Friday, lower than USD1,925,42 late on Thursday in London. Brent oil was trading at USD87.54 a barrel early Friday, higher than USD87.35 late Thursday.
In Friday's economic calendar, the retail sales index for Ireland is out at 1100 GMT.
By Sophie Rose, Alliance News reporter
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