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LONDON BRIEFING: UK economy unexpectedly grows by 0.5% in October

12th Dec 2022 07:57

(Alliance News) - Share prices in London are set to open lower on Monday as investors look ahead to an important week for central bank decisions.

The US Federal Reserve announces its next interest rate decision on Wednesday, followed by the Bank of England and the European Central Bank on Thursday.

Markets are expecting all three to raise rates by 50 basis points, half a percentage point.

The UK economy grew in October from September, according to surprising figures released early Monday, and is now bigger than its pre-pandemic size.

China said it will retire an app used to track Covid-19 contacts, a milestone in the country's rapid turn away from its zero-tolerance coronavirus strategy.

The state-run 'communications itinerary card', which tracks whether someone has been to a high-risk area based on their phone signal, will go offline on Tuesday, according to an official WeChat post, after more than two years in operation.

The decision comes just days after China announced an end to large-scale lockdowns and mandatory quarantine in central facilities, and a broad relaxation of testing measures, effectively throwing in the towel on its zero-Covid strategy.

In early company news, London Stock Exchange Group will buy Microsoft products for the next 10 years, and the US software company has taken a 4% stake in LSEG as part of the deal. Fevertree Drinks named a new chair, and CentralNic changed CEOs while also announcing a share buyback.

Here is what you need to know ahead of the London market open:

MARKETS

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FTSE 100: called down 18.83 points, or 0.3%, at 7,457.80

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Hang Seng: down 2.2% at 19,456.12

Nikkei 225: closed down 0.2% at 27,842.33

S&P/ASX 200: closed down 0.5% at 7,180.80

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DJIA: closed down 305.02 points, or 0.9%, at 33,476.46

S&P 500: closed down 29.13 points, or 0.7%, at 3,934.38

Nasdaq Composite: closed down 77.39 points, or 0.7%, at 11,004.62

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EUR: lower at USD1.0529 (USD1.0542)

GBP: lower at USD1.2233 (USD1.2301)

USD: higher at JPY136.79 (JPY136.37)

Gold: lower at USD1,789.76 per ounce (USD1,803.01)

(Brent): lower at USD76.47 a barrel (USD77.10)

(changes since previous London equities close)

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ECONOMICS

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Monday's key economic events still to come:

10:00 CET EU long-term interest rates statistics

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The UK economy grew in October, with the nation's economy now estimated to be 0.4% larger than its pre-pandemic size, according to figures from the Office of National Statistics. Monthly real gross domestic product is estimated to have grown by 0.5% in October from the month before, following a fall of 0.6% in September from August. Market consensus, as cited by FXStreet, had expected the UK economy to contract by 0.1% in October. The services sector grew by 0.6% in October from September, and was the main driver of GDP growth according to the ONS. Industrial production was flat in October, and the construction sector grew by 0.8%, its fourth consecutive increase. Quarter-on-quarter, GDP fell by 0.3%. October GDP was up 1.5% compared with the same month last year.

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US President Joe Biden has assured Ukraine of further support as Russian attacks on power grids continues, with many in the southern Odessa region now without electricity. Biden spoke with Ukrainian President Volodymyr Zelensky on Sunday to "underscore ongoing US support for Ukraine's defence as Russia continues its assaults on Ukraine's critical infrastructure," the White House said in a statement. The US would also continue to provide Ukraine with security, economic and humanitarian assistance, Biden is said to have told Zelensky. Holding Russia "accountable for its war crimes and atrocities, and imposing costs on Russia for its aggression," was also a priority, the White House said.

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BROKER RATING CHANGES

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Stifel raises IAG to 'hold' from 'sell'

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HSBC cuts International Distributions Services to 'hold' from 'buy' - price target 215 pence

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Jefferies cuts PPHE Hotel Group to 'hold' from 'buy' - price target 1,300 (2,100) pence

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COMPANIES - FTSE 100

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London Stock Exchange Group has launched a 10-year partnership with Microsoft for its data, analytics and cloud infrastructure. LSEG has committed to spend a minimum of USD2.8 billion over the term of the partnership. Microsoft will purchase a 4% stake in LSEG through an acquisition of shares from the Blackstone/Thomson Reuters ownership consortium. Total cash costs over 2023 to 2025 are expected to be in the range of GBP250 million to GBP300 million. LSEG Chief Executive David Schwimmer said: "This strategic partnership is a significant milestone on LSEG's journey towards becoming the leading global financial markets infrastructure and data business, and will transform the experience for our customers."

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COMPANIES - FTSE 250

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Polar Capital Technology Trust reported a drop in its net asset value as of October 31. The figure fell 9.1% to 2,095.24 pence per share at the end of October from 2,305.13p on April 30. This underperformed the company's benchmark index, the Dow Jones World Technology Index, which posted a NAV of 3,193.51p as at October 31. Polar Capital did not declare a dividend, unchanged from a year prior and added it had no intention of declaring a dividend for the financial year ending April 30. The company explained that the six months to October 31 had been a "testing time" due to volatile markets, rising inflation, the war in Ukraine, and steep central bank interest rate rises.

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OTHER COMPANIES

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Fevertree Drinks announced the promotion of Domenic de Lorenzo to non-executive chair from the end of the company's annual general meeting in May. De Lorenzo will work closely with the current chair, Bill Ronald, before assuming his role, Fevertree said. De Lorenzo has been a non-executive director at the company since May 2018.

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CentralNic announced a maiden share buyback, positive trading, and appointed a new chief executive The firm promoted its current chief financial officer, Michael Riedl, to chief executive with immediate effect. Riedl succeeds Ben Crawford who leaves from Monday. Riedl had been appointed CFO in February 2019. William Green, CentralNic's financial director, will replace Riedl as CFO. The web domain and internet services provider said its trading has remained robust since its last update in November and said that it now expects its full-year results to be at the upper end of market expectations. It placed market expectations for revenue between USD701.0 million and USD709.6 million. For earnings before interest, tax, depreciation and amortisation, it placed consensus between USD80.0 million and USD84.1 million. CentralNic also announced that it intends to launch a maiden share buyback before the end of the year.

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By Heather Rydings, Alliance News senior economics reporter

Comments and questions to [email protected]

Copyright 2022 Alliance News Ltd. All Rights Reserved.

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