New figures today showed the UK economy barely grew in February amid weaker car production and the reduction of Covid-19 testing and vaccination programmes.
The GDP print of 0.1% higher was weaker than City forecasts for an increase of 0.3% and represents a sharp slowdown from 0.8% growth seen in January. The Office for National Statistics notes that the UK economy is 1.5% above its pre-pandemic level.
The release sets a downbeat tone at the start of a big week for economic updates, with US inflation set to top 8% on Tuesday and the UK equivalent likely to be near 7% on Wednesday.
Slow start for London’s IPO market this year
09:50 , Rhiannon Curry
Flotations on the London Stock Exchange so far this year have raised less than a tenth of the previous year’s total as appetite for initial public offerings (IPOs) continues to wane.
12 IPOs on the main market raised £308 million between January and March, while seven admissions to the Alternative Investment Market (AIM) raised £89 million, data from consultancy EY showed.
In contrast, there were 12 IPOs on the main market and two on AIM in the same period in 2021, which raised a combined total of £5.6 billion – 14 times higher than this year’s opening quarter.
Scott McCubbin, UK and Ireland IPO leader at EY, said the London market had experienced a difficult start to the year.
China-focused stocks fall, Wood Group surges 11%
09:04 , Graeme Evans
China-focused stocks came under pressure today after a bigger than-expected inflation figure added to concerns over the country’s ongoing battle against Covid-19.
Shares in Hong Kong-based Prudential fell 2% and mining stocks including Anglo American also declined amid fears about the economic impact of tighter measures to curb the pandemic, particularly in Shanghai.
Scottish Mortgage Investment Trust, which has stakes in tech-focused China stocks including Alibaba, also fell 2%.
The FTSE 100 index declined 14.75 points to 7654.81, with the resilient performance assisted by gains of more than 1.5% for banking stocks Lloyds, Barclays and NatWest.
The FTSE 250 index improved 17.21 points to 21,191.53, led by Wood Group as it said that delayed annual results will be released next week with no change in the carrying value of its Aegis Poland contract. Shares jumped 11% or 17.65p to 172.5p.
Elon Musk reverses decision to join Twitter board
08:38 , Simon Hunt
Tesla CEO Elon Musk will not be joining the board of Twitter, the social media giant has announced, reversing a move announced just last week.
In a statement posted to Twitter, the company’s CEO Parag Agrawal said: “Elon’s appointment to the board was to become officially effective on 4/9, but Elon shared that same morning that he will no longer be joining the board.
“We have and will always value input from our shareholders whether they are on our Board or not. Elon is our biggest shareholder and we will remain open to his input.”
Musk announced last week that he would join the board after buying a 9.2% stake in Twitter for $2.89 billion (£2.2 billion), sending shares soaring 26%. No reason was given for the reversal of the decision.
Economy fears grow after weak February
08:17 , Graeme Evans
The weaker-than-expected 0.1% growth in the UK economy came despite a boost for tour operators and travel-related activities due to the easing of Covid-19 restrictions.
Susannah Streeter, senior investment analyst at Hargreaves Lansdown, said the underlying health of the UK economy may be much weaker because increased healthcare activity has been the crutch supporting the economy during the pandemic.
She said: “We still need to see a shift upwards in overall productivity levels but with the labour crunch intensifying, borrowing costs rising and business investment flagging that is proving elusive.”
Despite worries about consumer and company resilience, she said today’s update is unlikely to push the Bank of England off its path of rate hikes this year as inflation heads above 7%.
Streeter added: “Attempting to tame increasingly wild inflation is still set to be the priority. However, this reading does indicate the UK economy is showing more signs of fragility than the US.”
Inflation and bank earnings in focus
07:47 , Graeme Evans
The FTSE 100 index is set for a downbeat session, having closed on Friday at its highest level since mid-February after a fifth successive weekly advance.
The downbeat session comes as attention turns to the start of the first quarter earnings season, with a number of major American banks due to report figures later this week.
As well as expected sharp falls in net income for the first three months of 2022, Wall Street will be interested in outlook guidance for a year when interest rates are set to rise sharply.
Today’s stock market nerves also reflect tomorrow’s release of US inflation figures, which are forecast to show the consumer prices index up to 8.3% for March. The following day sees the release of the UK figure, with economists expecting a figure close to 7%.
China’s annual inflation rate today rose to 1.5% from 0.9% the previous month and higher than the 1.2% forecast. Producer price inflation of 8.3% for the month also reflected supply chain disruption and the rising cost of oil after Russia’s invasion of Ukraine, with today’s figure higher than the 7.9% forecast.
Oil prices peaked at near to $140 a barrel during the month, but the price is today back at close to $100 to reflect the recent global release of strategic reserves and potential demand impact of China’s continued lockdown restrictions.
China’s higher-than-expected inflation figure meant the Shanghai Composite fell 2.2% this morning, with European markets also set for a weak session.
CMC Markets sees a decline of 38 points for the Paris-based Cac40 to 6510 following the first weekend of French polling, while the FTSE 100 is set to fall 42 points to 7627.