12th Dec 2022 12:20
(Alliance News) - Stock prices in London were in the red at midday on Monday after a positive reading on the health of the UK economy failed to alleviate worry about impending recession.
"October's bounce back was expected, and the fact the growth was a little more enthusiastic than economists had anticipated is welcome. But this is just an aside. The story is unchanged. The economy is still shrinking, and recession feels inevitable," said Danni Hewson, financial analyst at AJ Bell.
The FTSE 100 index was down 7.44 points, or 0.1%, at 7,469.19. The FTSE 250 was down 146.67 points, or 0.8%, at 18,769.33. The AIM All-Share was down just 0.19 of a point at 834.40.
The Cboe UK 100 was down 0.1% at 746.91. The Cboe UK 250 was down 0.8% at 16,215.90 and the Cboe Small Companies down 0.2% at 13,063.49.
The UK economy grew in October and is now estimated to be 0.4% larger than its pre-pandemic size, according to figures from the Office for 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.
Quarter-on-quarter, GDP shrank by 0.3%. October GDP was up 1.5% compared with the same month last year.
"Despite a month-on-month increase in GDP in October from September, the quarter on quarter figure fell, moving the UK towards a largely expected recession. This faltering growth runs alongside an inflationary environment which moved to a multi-decade high of 11.1% in October, which seems likely to give the central bank little option but to continue its hiking cycle," said Richard Hunter at interactive investor.
The Bank of England will announce its latest interest rate decision on Thursday, alongside the European Central Bank. The day prior, the US Federal Reserve will reveal its decision.
In London on Monday, London Stock Exchange was the best blue-chip performer at midday, up 3.1%.
The stock exchange operator launched a 10-year partnership with Microsoft for its data, analytics and cloud infrastructure.
LSEG committed to spend a minimum of USD2.8 billion over the term of the partnership, which will see Microsoft purchase a 4% stake in the firm through an acquisition of shares from the Blackstone/Thomson Reuters ownership consortium.
"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," said Chief Executive David Schwimmer.
In the FTSE 250, International Distributions Services fell 4.1% to 203.80 pence, after HSBC cuts the shares of the Royal Mail owner to 'hold' from 'buy' with a price target of 215p.
Also hitting IDS was repeated strikes by its UK staff over jobs, pay and conditions.
"Investors are increasingly getting tired of waiting for a resolution and are voting with their feet...The arrival of snow across parts of the UK will only add to the company's problems as deliveries might be delayed," said Russ Mould at AJ Bell.
Home REIT fell 4.4% after it responded to further allegations against it by a short seller.
The investor in accommodation for homeless people reiterated that all allegations against it are "without substance". It said that the report and subsequent allegations have caused the company "unnecessary and significant disruption and losses".
Home REIT is in an ongoing dispute with Viceroy Research. Viceroy published a report on November 23 that included a number of claims against Home REIT, such as the firm's properties being run by "bad actors".
Law firm Harcus Parker last week said it will be leading a court case to establish whether Home REIT had misled shareholders.
Home REIT declared an interim dividend of 1.38p per share, which takes the total dividend for its financial year 2022 to August 31 to its targeted 5.5p, more than doubled from 2.5p in financial year 2021.
Meanwhile, the company said it hired additional senior level investment professionals and will recruit a non-executive director focused on governance matters, following the allegations made by Viceroy.
Elsewhere, Metro Bank was up 5.3% despite the UK Financial Conduct Authority fining the firm and two of its former directors for publishing incorrect information to investors.
The retail bank said it cooperated fully with the investigation and accepted the fine of GBP10.0 million.
Metro Bank published incorrect information in its risk weighted assets figure in its third quarter trading update in October 2018, the FCA said.
The regulator charged that Metro Bank was aware at the time that this figure was wrong and failed to explain that it was subject to an ongoing review and would therefore require a substantial correction.
The FCA also decided to individually fine former Metro Bank chief executive Craig Donaldson and former chief financial officer David Arden GBP223,100 and GBP134,600, respectively, for being knowingly concerned in the breach.
Metro Bank won't appeal, but Donaldson and Arden will, the FCA said.
On AIM, Velocys jumped 18%. The eco-fuel technology company said it won two separate grants from the UK government.
The first grant is for up to GBP27 million from the UK Department for Transport's Advanced Fuels Fund for the company's Altalto Immingham Sustainable Aviation Fuel project.
The project, jointly developed by Velocys and British Airways, aims to deliver a commercial waste-to-sustainable aviation fuel plant in Immingham, England.
The second grant is for GBP2.5 million from the same fund to contribute to Velocys's e-fuels project in the UK, known as 'e-Alto'.
In European equities on Monday, the CAC 40 in Paris was down just 1.38 points, while the DAX 40 in Frankfurt was down 0.1%.
Stocks in New York were called higher. The Dow Jones Industrial Average was pointed up 0.2% and the S&P 500 index and Nasdaq Composite both up 0.3%.
The pound was quoted at USD1.2285 at midday on Monday in London, lower compared to USD1.2301 at the stock-market close on Friday. The euro stood at USD1.0572, higher against USD1.0542. Against the yen, the dollar was trading at JPY136.77, higher compared to JPY136.37.
Brent oil was quoted at USD75.43 a barrel at midday in London on Monday, down from USD77.10 late Friday. Gold was priced at USD1,794.99 an ounce, significantly lower against USD1,803.01.
By Heather Rydings, Alliance News senior economics reporter
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