(Alliance News) - A less-than-stellar UK gross domestic product reading was not enough to sour the mood on Friday morning, the FTSE 100 is still set to open higher following Thursday's cooler-than-expected US inflation.
The US inflation data bolstered equities on Thursday, and that good feeling has extended to Friday. Also lifting the mood at the end of the week was an easing of Covid-19 curbs in China.
The country is the last major economy welded to a strategy of stamping out virus flare-ups as they occur, through a combination of snap lockdowns, mass testing and lengthy quarantines.
According to a notice, quarantines for inbound travellers will be cut from 10 days to eight, consisting of five days in a state isolation centre and three days at home, AFP reported. Inbound arrivals will still be required to undergo six nucleic acid tests and will not be allowed to freely set foot outside during those eight days, the notice says.
Travellers will only be required to show one negative Covid test within 48 hours of boarding flights to China, a reduction from the current two tests.
The pound spiked above the USD1.17 mark overnight. It was the first time cable topped that threshold since the September's infamous mini-budget.
Here is what you need to know ahead of the London market open:
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MARKETS
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FTSE 100: called up 0.3% at 7,398.34
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Hang Seng: up 7.6% at 17,300.92
Nikkei 225: up 3.0% at 28,263.57
S&P/ASX 200: up 2.8% at 7,158.00
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DJIA: closed up 1,201.43 points, 3.7%, at 33,715.37
S&P 500: closed up 207.80 points, 5.5%, at 3,956.37
Nasdaq Composite: closed up 760.97 points, 7.4%, at 11,114.15
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EUR: firm at USD1.0233 (USD1.0162)
GBP: firm at USD1.1727 (USD1.1661)
USD: lower at JPY141.22 (JPY141.78)
GOLD: higher at USD1,761.57 per ounce (USD1,745.45)
OIL (Brent): higher at USD96.03 a barrel (USD93.90)
(changes since previous London equities close)
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ECONOMICS
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Friday's key economic events still to come:
UK BoE MPC Member Silvana Tenreyro speaks
1500 GMT US University of Michigan survey of consumers
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UK gross domestic product declined at a slower pace than expected quarter-on-quarter in the three months to September. Though the number from the Office for National Statistics was not as bad as feared, it may suggest the UK is already in recession, as the Bank of England predicted. The long-standing definition for a technical recession is two successive quarterly GDP falls. The BoE has predicted the nation to enter recession in the fourth quarter of 2022. According to the ONS, UK GDP fell 0.2% quarter-on-quarter in the third quarter of 2022. GDP had increased 0.2% in the second quarter from the first. The third-quarter figure came in above FXStreet cited consensus of a chunkier 0.5% decline. Annually, UK GDP rose 2.4% in the third quarter, beating the FXStreet cited forecast of a 2.1% rise, but slowing from the second quarter's 4.4% increase. The BoE last week predicted a bruising and lengthy UK recession. "The UK economy is expected to remain in recession throughout 2023 and 2024 H1, and GDP is expected to recover only gradually thereafter," the BoE said at the time. It would be the longest recession since the 1920s.
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Former UK chancellor Kwasi Kwarteng has said he told Liz Truss to "slow down" her radical economic reforms or risk being out of No 10 within "two months". He also criticised the then-prime minister's "mad" decision to sack him as chancellor for implementing her tax-cutting agenda, in a bombshell first interview since his ousting. Kwarteng refused to apologise for the financial turmoil unleashed by his and Truss's disastrous mini-budget, but acknowledged "there was turbulence and I regret that". He said the "strategic goal was right", but "I think we should have had a much more measured approach". He said he bore "some responsibility" for the timetable of the mini-budget, but that Truss "was very much of the view that we needed to move things fast". "But I think it was too quick," he added. "Even after the mini budget we were going at breakneck speed. And I said, 'You know, we should slow down, slow down'." He continued: "She said, 'Well, I've only got two years' and I said, 'You will have two months if you carry on like this'. And I'm afraid that's what happened."
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BROKER RATING CHANGES
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JPMorgan cuts Young & Co's Brewery price target to 1,260 (1,500) pence - 'neutral'
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Barclays cuts DCC price target to 4,500 (5,550) pence - 'underweight'
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Jefferies starts M&G at 'buy' - price target 235 pence
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COMPANIES - FTSE 100
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Halma named Steve Gunning as its chief financial officer, succeeding Marc Ronchetti who will become the safety equipment maker's chief executive in April. Gunning joins Halma on January 16. Gunning was formerly CFO of British Airways owner International Consolidated Airlines Group, a role he left earlier this year. Soon-to-be-departing Halma CEO Andrew Williams said: "Steve is a proven FTSE 100 CFO and leader, with a focus on building world class finance teams, and is a fantastic addition to Halma. His appointment enables a seamless transition of both the CFO and CEO roles, ensuring that Halma is well positioned to deliver continued success."
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Scottish Mortgage Investment Trust posted a sharp decline in its first-half net asset value per share, and the tech-focused investor noted it has reduced "several Chinese holdings". These included its "long-standing investments in Alibaba and Tencent". Scottish Mortgage added: "The regulatory environment in China remains challenging, and we are concerned that ongoing uncertainty will harm the risk-tolerant culture that has driven the long-term success of China's private sector." Scottish Mortgage's net asset value per share fell 39% to 841.7 pence on September 30, from 1,381.1p a year earlier. The trust added: "Financing the development of long-term growth companies is not what interests most investors. To understand that, you need only observe the commentary of recent months, focused on 'risk off', deleveraging and the flight to safety. The market's focus has narrowed to a handful of economic variables. Stock prices react dramatically to each monthly update. This environment is off-putting, but it is not relevant to our investment decision-making. Instead, we must evaluate the ongoing position of our holdings, unpicking the growth engines of recent years and verifying that they're still functioning." It lifted its interim dividend by 5.3% to 1.60p from 1.52p.
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Munich Re said it will trim its stake in London-listed insurer Admiral. Munich will sell 7.4 million Admiral shares, cutting its stake to around 1.8%. "Munich Re has committed not to sell any further shares in Admiral for a period of 12 months. Munich Re continues to believe in Admiral's business model and management team and the sale is not expected to have any impact on the business relationship with Admiral," Munich Re said. At current prices, the 7.4 million shares are worth some GBP150 million.
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COMPANIES - FTSE 250
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Insurer Beazley's gross written premiums increased during the first nine months in 2022, and it backed combined ratio guidance. In addition, it earmarked a USD120 million, net of reinsurance, loss stemming from Hurricane Ian. Gross premiums written in the nine months to September 30 increased 22% to USD3.98 billion from USD3.27 billion. "We have had a strong underwriting performance over the quarter with all divisions continuing to grow. As expected overall rates have moderated, however we are seeing increased demand across many lines of business which supports our growth ambitions. Whilst mark to market losses have occurred due to rising yields in our fixed income portfolio, rising yields also mean we anticipate significant future investment returns," Chief Executive Officer Adrian Cox said. Beazley still expects a combined ratio in the "high 80s". A ratio below 100% indicates an insurer is making underwriting profit, so the lower, the better.
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OTHER COMPANIES
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Arts and crafts retailer TheWorks.co.uk hailed a "resilient trading performance" in its first-half ended October 30. Sales rose 2.1% year-on-year. "Store trading was positive, increasing by 3.5% on a life-for-like basis, whilst online sales declined by 16.9% (but were still 50% above pre-Covid levels)," the company said. "Sales in both channels were adversely affected during May by operational issues in the aftermath of the cyber security incident in March 2022. However, from June onwards, the store LFL performance was positive, with particularly strong growth in the summer, when the refreshed outdoor play range performed well, followed by a record 'Back to School' season." TheWorks backed annual guidance.
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FRP Advisory expects to report higher revenue and profit for the half-year to October 31. The business advisory firm expects to post revenue of GBP49.4 million, up 10% year-on-year, and underlying adjusted earnings before interest, tax, depreciation and amortisation of GBP11.6 million, up 5%. The outcomes will be in line with board expectations.
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By Eric Cunha; ericcunha@alliancenews.com
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