23rd Dec 2024 07:59
(Alliance News) - Stocks in London were called to open down on Monday morning, as investors digest some unwelcome UK economic news at the start of a holiday-shortened week.
The UK economy showed no growth at all in the third quarter, the Office for National Statistics said on Monday in a revised estimate of gross domestic product.
The ONS said that in the three months ended September 30, real GDP growth is estimated to have stayed flat compared to the second quarter, revised down from the first estimate increase of 0.1% growth. It added that there was no growth in the services sector in the latest quarter, while a 0.7% increase in construction was offset by a 0.4% production decrease.
In other downbeat news, a "January spending squeeze [is] on the horizon", according to the British Retail Consortium.
"Public confidence in the state of the economy took a nosedive, falling [eight points] to -27," said BRC Chief Executive Helen Dickinson. "This created a widening gap between expectations of the economy and of people's own finances, which remained unchanged...The public's spending intentions – both in retail and beyond – dropped 6pts, with expectations of spending in nearly every retail category falling. If these expectations are realised, retailers could find themselves facing a New Year spending squeeze just as they unveil their January sales."
In corporate news, Aviva will be buying Direct Line after the pair agreed on an offer valuing Direct Line at around GBP3.7 billion.
Meanwhile, retailer Frasers "takes note" of investee boohoo's refusal to appoint its chosen candidates, including founder Mike Ashley, to the fast-fashion retailer's board.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 11.9 points, 0.2%, at 8,072.71
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Hang Seng: up 1.0% at 19,926.52
Nikkei 225: closed up 1.2% at 29,161.34
S&P/ASX 200: closed up 1.7% at 8,201.60
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DJIA: closed up 498.02 points, 1.2%, at 42,840.26
S&P 500: closed up 1.1% at 5,930.85
Nasdaq Composite: closed up 1.0% at 19,572.60
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EUR: higher at USD1.0417 (USD1.0399)
GBP: higher at USD1.2562 (USD1.2549
USD: higher at JPY156.72 (JPY156.58)
Gold: higher at USD2,631.18 per ounce (USD2,627.90)
(Brent): higher at USD73.19 a barrel (USD72.71)
(changes since previous London equities close)
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ECONOMICS
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Monday's key economic events still to come:
1100 GMT Ireland wholesale prices
1330 GMT Canada GDP
1330 GMT Canada PPI
1330 GMT US Chicago Fed national activity index
1500 GMT US consumer confidence
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The UK economy showed no growth at all in the third quarter, the Office for National Statistics said on Monday in a revised estimate of gross domestic product. The ONS said that in the three months ended September 30, real GDP growth is estimated to have stayed flat compared to the second quarter, revised down from the first estimate increase of 0.1% growth. Compared with the same quarter a year ago, the ONS said, real GDP is estimated to have increased by 0.9%. "Early estimates show that real GDP per head fell by 0.2% in quarter three 2024, and is 0.2% lower compared with the same quarter a year ago," the ONS said. The official statistics agency added that there was no growth in the services sector in the latest quarter, while a 0.7% increase in construction was offset by a 0.4% production decrease.
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Confidence in the UK economy among UK consumers fell sharply this month, foretelling a "spending squeeze" to start 2025, the British Retail Consortium warned on Monday. The BRC consumer spending monitor for December showed a drop in public confidence in the state of the UK economy, while plans for personal spending also fell. The personal financial situation index remained in negative territory, though steady, at minus 3 points, BRC said. However, the index for the state of the economy fell to negative 27 points in December from negative 19 in November, and the overall personal spending index fell to negative 3 points from positive 3. "The weak spending intentions could pave the way for a challenging year for retailers, who face being buffeted by low consumer demand and GBP7 billion of new costs from the [UK government] budget set to hit the industry in 2025," commented BRC Chief Executive Helen Dickinson.
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UK businesses have issued a stark warning to Rachel Reeves that the economy is "headed for the worst of all worlds" with activity expected to fall sharply in the first three months of 2025. A survey by the Confederation of British Industry found firms expected to reduce both output and hiring. The Chancellor's hike to employers' national insurance, set to rake in around GBP25 billion a year, was highlighted as one of the reasons. Alpesh Paleja, the CBI's interim deputy chief economist, said: "There is little festive cheer in our latest surveys, which suggest that the economy is headed for the worst of all worlds – firms expect to reduce both output and hiring, and price growth expectations are getting firmer." The CBI's growth indicator survey, based on responses from 899 companies between November 25 and December 12, found expectations for growth are now at their weakest since November 2022 in the aftermath of Liz Truss's chaotic tenure as prime minister.
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US President Joe Biden signed a funding bill on Saturday, averting a Christmastime government shutdown after negotiations in Congress went down to the wire overnight. Last-minute legislative wrangling was brought about by incoming president Donald Trump, who along with influential billionaire Elon Musk, pressured Republicans to abandon an earlier bipartisan funding compromise. Lawmakers then spent several days trying to hammer out another deal, with massive halts to government services hanging in the balance. With the Friday midnight deadline already expired by minutes, senators dropped normal procedure to fast-track the new package to a vote, funding the government to mid-March.
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China said it "firmly opposed" US President Biden's approval of USD571.3 million in defence assistance for Taiwan. The White House said Friday that Biden had authorised the drawdown "of up to USD571.3 million in defense articles and services of the Department of Defense, and military education and training, to provide assistance to Taiwan". The White House statement did not provide details of the military assistance package, which comes less than three months after one worth USD567 million was authorised. "This move gravely infringes on China's sovereignty and security interests," Beijing's foreign ministry said in a statement, adding it "firmly opposes this action". China "has lodged stern representations with the US at the earliest opportunity", it said.
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Donald Trump on Saturday slammed what he called unfair fees for US ships passing through the Panama Canal and threatened to demand control of the waterway be returned to Washington. He also hinted at China's growing influence around the canal, a worrying trend for American interests as US businesses depend on the channel to move goods between the Atlantic and Pacific oceans. "It was solely for Panama to manage, not China, or anyone else," Trump said. "We would and will NEVER let it fall into the wrong hands!" He continued that if Panama could not ensure "the secure, efficient and reliable operation" of the channel, "then we will demand that the Panama Canal be returned to us, in full, and without question." The Panama Canal, which was completed by the US in 1914, was returned to the Central American country under a 1977 deal signed by Democratic president Jimmy Carter. Panama took full control in 1999.
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BROKER RATING CHANGES
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UBS cuts Spirax price target to 7,500 (9,300) pence - 'neutral'
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RBC cuts Hollywood Bowl price target to 420 (425) pence - 'outperform'
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COMPANIES - FTSE 100
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Aviva and Direct Line announced that they have reached agreement on the terms of a recommended cash and share offer for Direct Line. "The acquisition builds on Aviva's strong performance over the last four years, with Aviva having been transformed into a high-performing business with a clear strategy. The acquisition will accelerate Aviva's momentum and will offer customers and shareholders a number of benefits," Aviva said. Each Direct Line shareholder will be entitled to receive 0.2867 of a new Aviva share, 129.7 pence in cash, and up to 5p total in dividend payments due before the deal completes. This values each Direct Line share at 275p and values the entire diluted share capital of Direct Line at approximately GBP3.7 billion.
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AstraZeneca said that Tagrisso (osimertinib) has been approved in the European Union for the treatment of adult patients with locally advanced, unresectable non-small cell lung cancer whose tumours have epidermal growth factor receptor exon 19 deletions or exon 21 substitution mutations and whose disease has not progressed during or following platinum-based chemoradiation therapy. The approval by the European Commission follows the positive opinion of the Committee for Medicinal Products for Human Use and is based on results from the Laura phase 3 trial, Astra said.
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COMPANIES - FTSE 250
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Renewi has extended its deadline for Macquarie Asset Management to make a takeover offer to January 23. In late November, Renewi said it would recommend a new takeover proposal worth around GBP700.9 million from Macquarie Asset Management should a firm offer materialise. The offer comes over a year after the suitor walked away, following previous approaches being rebuffed. Renewi said the offer "is at a value that the board would be minded to recommend" to shareholders. Macquarie Asset Management, part of Sydney-listed Macquarie Group, said the final possible offer of 870 pence per share followed several approaches to Renewi. Macquarie said it had the support of shareholders owning roughly 15% of Renewi.
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OTHER COMPANIES
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Sports Direct owner Frasers said it "takes note" of the results of retailer boohoo's general meeting on Friday, saying it "respects the views of the independent shareholders". boohoo on Friday said its shareholders "overwhelmingly" voted against the resolutions put forward by FTSE 100-listed Frasers in its much anticipated general meeting. The owner of PrettyLittleThing and Debenhams said for the first resolution, that Frasers founder Mike Ashley be appointed as a director of the company, 63.77% of votes were cast against the proposal. For the appointment of insolvency expert Mike Lennon, shareholders were matched in their opposition, with 63.76% of votes cast against the resolution. Frasers has a 27.04% holding in boohoo. "Frasers takes note of boohoo's invitation to propose a board candidate other than Mr Ashley or Mr Lennon. We will put forward a highly qualified candidate in due course," Frasers said on Monday.
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By Emma Curzon, Alliance News reporter
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