LONDON MARKET MIDDAY: Stocks extend gains after US inflation slowdown

(Alliance News) - Stock prices in London were higher at midday on Thursday, with equity markets continuing to celebrate an easing of US inflation, though less-than-stellar data from China and the UK tempered the mood slightly.

The FTSE 100 index was up 20.53 points, 0.3%, at 7,436.64. The FTSE 250 was up 38.73 points, 0.2%, at 18,618.27, and the AIM All-Share was up 1.53 points, 0.2%, at 18,618.07.

The Cboe UK 100 was up 0.2% at 741.90, the Cboe UK 250 was up 0.2% at 16,333.33, and the Cboe Small Companies was down 0.2% at 13,564.63.

The UK economy saw a milder-than-expected contraction in May, according to figures from the Office for National Statistics.

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 came in ahead of FXStreet cited consensus, which had pencilled in a 0.3% decline.

GDP in May 2023 was 0.4% lower than May 2022, falling well short of the 0.5% annual growth registered in April 2023.

"It could have been much worse. Those three lovely, long bank holidays might have been a delight for many of us, but we knew it would come at the expense of economic growth. Factories, GP surgeries and schools all shut up shop as the country celebrated the Coronation of King Charles with an extra day off, which delivered a feel-good boost but curtailed sectors from manufacturing to services," AJ Bell analyst Danni Hewson commented.

"The fact the contraction came in at just 0.1% demonstrates the resilience of the UK economy, which has been battered by inflation, interest rate hikes and strike action."

Data from China also added a tinge of disappointment. Chinese exports tumbled 12% year-on-year in June, official data showed Thursday, marking the second successive decline and the latest sign the country's economic recovery is flagging.

Imports also fell 6.8% over the same period, according to China's General Administration of Customs.

Exports are a key pillar of growth in the world's second-largest economy, but apart from a brief rebound in March and April, they have declined since October 2022.

Still to come on Thursday, the minutes from the European Central Bank's latest meeting are released at 1230 BST. There is a US producer price index reading and the latest jobless claims data at 1330 BST.

The PPI reading comes after numbers on Wednesday showed the US annual consumer inflation rate eased slightly more than anticipated in June.

The consumer price index rose 3.0% on an annual basis in June, cooling from a 4.0% rise in May, and undershooting market consensus of a 3.1% rise.

The pound rose to a 15-month high against the dollar. The pound was quoted at USD1.3065 at midday on Thursday in London, up markedly from USD1.2994 at the equities close on Wednesday.

The euro stood at USD1.1165, higher against USD1.1119. Against the yen, the dollar was trading at JPY138.57, higher compared to JPY138.38.

Stocks in New York were called higher ahead of the US data. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 index 0.3% higher, and the Nasdaq Composite up 0.7%.

On the FTSE 100, housebuilders were lower after Barratt Developments forecast a sharp decline in home completions next year.

Barratt fell 4.2%, with Taylor Wimpey falling 2.7%, Persimmon down 2.1% and Berkeley Group down 1.7% in a negative read across.

The Leicestershire, England-based Barratt expects adjusted pretax profit in the financial year ended June 30 to be in line with market expectations, citing consensus of GBP800.6 million. This will be down 16% from GBP1.05 billion a year prior, however.

Over the financial year, it said total home completions fell by 14% to 17,206 from 17,908 year-on-year.

Barratt added that first time buyer reservations were hurt by the end of the help to buy scheme, as well as rising mortgage rates.

In June, the Bank of England lifted rates by 50 basis points, taking bank rate to 5.00% from 4.50% previously. It was a move that came as somewhat of a surprise to markets, though a red-hot UK inflation reading forced Threadneedle Street's hand. The BoE has hiked for 13 meetings in succession.

Housebuilding stocks also took a hit from a report from the Royal Institution of Chartered Surveyors. UK house hunter inquiries, sales and property prices slipped back further in June as mortgage rates increased, the surveyors said.

Elsewhere in London, Watches of Switzerland jumped to 14%.

In the financial year that ended April 30, the Leicester, England-based watch retailer reported pretax profit of GBP154.8 million, up 23% from GBP126.2 million in financial 2022, as revenue jumped 25% to GBP1.54 billion from GBP1.24 billion.

Watches of Switzerland said its guidance remains unchanged for the new financial year.

The company expects revenue to be between GBP1.65 billion and GBP1.70 billion, up 8% to 11% at constant currency. It expects its adjusted earnings before interest and tax margin to be in line with financial 2023, when it was 10.7%.

"Watches of Switzerland has reported the kind of revenue, profit and free cash flow growth that most companies can only dream of. The fact it has achieved stellar growth in a cost-of-living crisis shows that not everyone is short of money," said AJ Bell's Hewson.

Seraphim Space Investment surged 26%, on news of a share buyback.

The SpaceTech fund has appointed JPMorgan Securities to act as broker on a share repurchase programme.

It noted that it has authority to repurchase up to 35.9 million shares, or 15% of its share capital, but will not fully utilise this authority. The company added that no maximum consideration payable has been decided, but it will not be able to buy shares back at a premium to its net asset value.

Gym Group jumped by 9.0%.

The Croydon, England-based operator of low-cost gyms reported that revenue rose by 19% in the first six months of the year to GBP99.8 million from GBP84.2 million a year before, with like-for-like revenue growth of 7%.

In European equities on Thursday, the CAC 40 in Paris was up 0.6%, while the DAX 40 in Frankfurt was up 0.5%.

Brent oil was quoted at USD80.28 a barrel at midday in London on Thursday, up from USD79.93 late Wednesday. Gold was quoted at USD1,958.51 an ounce, higher against USD1,954.01.

By Sophie Rose, Alliance News reporter

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