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LONDON MARKET MIDDAY: February data spurs end of UK recession hopes

12th Apr 2024 11:51

(Alliance News) - Stocks in London got a boost on Monday at midday, as investors were optimistic that the UK is heading out of its short lived recession.

The FTSE 100 index was up 96.05 points, 1.2%, at 8,019.85. The FTSE 250 was up 125.41 points, 0.6%, at 19,912.28, and the AIM All-Share was up 2.87 points, 0.4%, at 761.70.

The Cboe UK 100 was up 1.3% at 802.07, the Cboe UK 250 was up 0.6% at 17,316.45, and the Cboe Small Companies was up 0.3% at 14,817.00.

In European equities on Friday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both up 0.8%.

Markets were optimistic on Friday, with sentiment boosted by hopes that the UK is already out of recession.

According to the Office for National Statistics, UK gross domestic product rose by 0.1% in February from January, in line with FXStreet cited consensus. UK GDP had expanded 0.3% on-month in January, according to upwardly revised data.

Data in March showed that the UK slipped into a technical recession in the fourth quarter of 2023.

UK gross domestic product slumped 0.3% in the three months to December from a quarter earlier, unchanged from initial ONS numbers provided in February.

The UK economy had declined 0.1% quarter-on-quarter in the third-quarter of 2023. It means the UK has entered a technical recession at the end of last year, which is generally defined as two successive quarterly falls in gross domestic product.

"These figures reaffirm expectations that the economy returned to positive growth in Q1 after a mild recession late last year, and the outturn is likely to exceed the Bank of England's forecast for a 0.1%q/q increase," said Lloyds analyst.

Yet, it seems like the Bank of England is still not close to cutting interest rates.

It was only on Thursday that BoE rate setter Megan Greene said interest rate cuts "should still be a way off" in the UK, predicting that the "last mile" in getting inflation down "may prove the hardest".

Greene, one of the more hawkish members of the BoE's monetary policy committee, argued in the Financial Times that investors had underestimated the risk that inflation would remain high for longer in the UK than in other advanced economies.

The pound was quoted at USD1.2496 at midday on Friday in London, down compared to USD1.2513 at the equities close on Thursday. The euro stood at USD1.0661, lower against USD1.0705. Against the yen, the dollar was trading at JPY153.29, virtually unchanged compared to JPY153.30.

At the top of the FTSE 100 at midday Friday were miners Fresnillo, AntoFagasta, Anglo American and Glencore. They were up 5.2%, 4.3%, 4.1% and 3.7%, respectively.

"Miners also helped to give the FTSE 100 a lift as copper prices continued to climb thanks to the twin engines of supply fears and brighter demand prospects," explained AJ Bell's Russ Mould.

Housebuilders got a boost thanks to some broker upgrades. Taylor Wimpey, Persimmon and Barratt Developments were up 2.7%, 2.5% and 2.2%, respectively.

JPMorgan raised all of them to 'overweight' from 'neutral'. RBC also raised Taylor Wimpey to 'outperform'.

Oil majors BP and Shell also traded higher on Friday, driven by higher oil prices. They were up 3.2% and 2.5%, respectively.

Shares in BP jumped on Friday after reports that the state-owned, United Arab Emirates oil company was considering, but had ruled out, a bid for the London-based oil major. Reuters reported on Thursday evening that the Abu Dhabi National Oil (Adnoc) had decided that ultimately BP was not the right fit and would not match its strategy.

With tensions pushing ahead in the Middle East and price of oil headed over the USD90 a barrel mark. Brent oil was quoted at USD90.58 a barrel at midday in London on Friday, up from USD89.94 late Thursday.

Amongst London's small-caps, Petrofac plummeted 25%.

The energy infrastructure company said it is engaged in discussions in regard to restructuring its debt, with "all options" remaining under consideration.

Petrofac said its discussions revolve around restructuring debt in a way that would result in a significant proportion of the debt being exchanged for a stake in the company.

Further, it is in talks with investors and shareholders for a potential investment in the company, including a potential sale of non-core assets.

On AI, R&Q Insurance lost 46%, after it said it expects to make a "significant pretax loss" this year.

The Bermuda-based non-life speciality insurance company said an agreement has been reached for Obra Capital to acquire the entirety of R&Q and its affiliates 49% interest in the joint venture between the two companies, Sag Main Holdings.

Under the terms of the agreement, R&Q will handover its stake for a cash consideration of USD27 million alongside USD3 million in preference shares held by Obra in Randall & Quilter PS Holdings.

Stocks in New York were called to open mixed. The Dow Jones Industrial Average was called to open slightly higher. Meanwhile, the S&P 500 index are called down 0.2%, and the Nasdaq Composite down 0.4%.

Gold was quoted at USD2,399.10 an ounce, higher against USD2,338.05.

By Sophie Rose, Alliance News senior reporter

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