LONDON MARKET OPEN: UK GDP figures disappoint; Biden, Xi lift spirits

Fri, 10th Sep 2021 08:51

(Alliance News) - London's FTSE 100 made decent strides early Friday, despite troubling UK gross domestic product figures which suggest the domestic economy remains a "work in progress".

The Office for National Statistics said the UK economy inched up 0.1% monthly in July, with growth slowing considerably from June's 1.0% climb. A GDP hike of 0.6% was expected, according to FXStreet cited consensus.

The UK economy grew at a considerably slower pace than expected in July and still sits more than 2% below pre-pandemic levels.

"As such, the UK economy remains a work in progress, with news of tax hikes earlier in the week playing against previous investor optimism with its threat of crimping both corporate profits and consumer sentiment," Interactive Investor analyst Richard Hunter commented.

Elsewhere, Asia had a strong session on news that US President Joe Biden talked with his Chinese counterpart Xi Jinping for the first time in seven months Thursday, sparking hopes that relations between the world's largest economies will thaw.

The FTSE 100 index was up 20.89 points, 0.3%, at 7,045.10. The mid-cap FTSE 250 index was up 44.97 points, 0.2%, at 23,844.91. The AIM All-Share index was up 2.04 points, 0.2%, at 1,297.89.

The Cboe UK 100 index was up 0.3% at 700.88. The Cboe 250 was up 0.1% at 21,606.21, and the Cboe Small Companies was flat at 15,423.66.

The "measly" monthly GDP hike will bring with it fears of stagflation if figures next week Wednesday show inflation is heating up, Capital Economics analyst Paul Dales commented.

Stagflation is slowing economic growth coupled with accelerating inflation.

Dales added on the July GDP data: "More timely evidence suggests August may not have been much better."

A shortage of HGV, or heavy goods vehicle, drivers led to a spate of economic concerns in July, from component shortages to fears of empty shelves in supermarkets. Labour shortages due to the "pingdemic" also hit the UK economy in July.

Nonetheless, the pound was quoted at USD1.3871 early Friday in London, up from USD1.3840 at the London equities close on Thursday.

In mainland Europe, the CAC 40 stock index in Paris and the DAX 30 in Frankfurt were both up 0.3%. In contrast to the FTSE, they both managed to reverse morning losses on Thursday to close higher, on the back of the latest monetary policy decision from the European Central Bank.

The euro rose to USD1.1843 on Friday morning from USD1.1815 at the European equities close on Thursday. Against the yen, the dollar was trading at JPY109.97, up from JPY109.78.

Boosting sentiment on Friday, US President Joe Biden talked with his Chinese counterpart Xi Jinping for the first time in seven months Thursday, urging they ensure that "competition" between the two powers does not become "conflict," the White House said.

Stock markets in Asia had a stronger session as a result. In China, the Shanghai Composite closed up 0.3%, the Hang Seng in Hong Kong was 1.8% higher in late trade, while the Nikkei 225 closed up 1.3%. In Sydney, the S&P/ASX 200 rose 0.5%.

During the call, Biden's message was that the US wants to ensure "the dynamic remains competitive and that we don't have any situation in the future where we veer into unintended conflict," a senior US administration official told reporters.

In Beijing, state broadcaster CCTV reported that the phone call was "candid, in-depth" and covered "extensive strategic communication and exchanges on China-US relations and issues of mutual concern," and that US policy on China has caused "serious difficulties."

Luxury retailers were higher early Friday. The sector would struggle if relations with China, a key market for the luxury goods, and the West were to heat up.

Burberry shares were up 1.6% in London, while LVMH and Kering rose 2.0% and 1.1% in Paris.

Miners, who had a difficult session on Thursday, were also among those higher early Friday. BHP rose 0.9% and Anglo American was up 0.8%.

Among mid-caps, Spire Healthcare was 0.6% higher after Barclays raised the stock to Overweight from Equal Weight.

Insulation and roofing products provider SIG climbed 3.0% as Liberum raised the stock to Buy from Hold.

AIM-listed Fulham Shore rose 4.7%, after the Franco Manca and Real Greek owner said revenue in the three weeks following its August 17 update have surged, sitting 27% higher than pre-pandemic times.

"This represents a marked acceleration from the 8% average increase for the eight weeks ended 15 August 2021 announced in the final results. The group's 17 restaurants that are located in the West End of London and city centre office locations, although still down on 2019 levels, have, in these three weeks, continued to see a week-by-week improvement in footfall and revenues as tourists and office workers have started to return," the company said.

It has opened two Franco Manca sites and a new Real Greek unit so far this financial year.

Fitting out works are also underway for two more Franco Manca sites in London.

Fulham Shore added: "15 more potential sites are in solicitors' hands for both Franco Manca and The Real Greek."

Brent oil was quoted at USD72.34 a barrel early Friday in London, down from USD72.91 late Thursday. Gold was quoted at USD1,801.04 an ounce, up from USD1,791.00.

Still to come on Friday are US producer price figures at 1330 BST.

By Eric Cunha; ericcunha@alliancenews.com