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LONDON MARKET MIDDAY: Stocks up as JD Sports surges, water firms down

28th Mar 2024 11:55

(Alliance News) - Stock prices in London were up at midday on Thursday, shaking off some hawkish words from a US central banker and fresh number reiterating the UK entered a recession at the end of 2023.

The FTSE 100 index was up 20.39 points, 0.3%, at 7,952.37. The FTSE 250 was up 52.23 points, 0.3%, at 19,862.89, and the AIM All-Share was up 1.29 points, 0.2%, at 743.40.

The Cboe UK 100 was up 0.2% at 794.61, the Cboe UK 250 was up 0.3% at 17,279.78, and the Cboe Small Companies was down 0.8% at 14,530.74.

In European equities on Thursday, the CAC 40 in Paris was up 0.4%, while the DAX 40 in Frankfurt was up 0.1%.

The UK slipped into a technical recession in the fourth quarter of 2023, numbers from the Office for National Statistics confirmed on Thursday.

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.

Hargreaves Lansdown analyst Susannah Streeter commented: "Confirmation that the UK entered recession at the end of last year hasn't soured the mood...The ONS snapshot also shows that savings remained relatively high and real household disposable incomes increased in the last quarter of the year, adding to hopes that consumers resilience has been rising and that the recession will have been a super-short one."

Sterling was quoted at USD1.2624 early Thursday, down from USD1.2630 at the London equities close on Wednesday. The euro traded at USD1.0794 early Thursday, lower than USD1.0823 late Wednesday. Against the yen, the dollar was quoted at JPY151.37, slightly higher versus JPY151.35.

Investors will also have an eye on the latest core personal consumption expenditures reading, the Fed's preferred inflation gauge, which is released on Friday. Financial markets across the globe, including in London and New York, will be closed that day for Good Friday, however.

According to FXStreet cited consensus, the rate of core PCE inflation is expected to have been unmoved at 2.8% in February. The headline rate is expected to have picked up to 2.5% in February, from 2.4% in January.

The US Federal Reserve should either scale back or delay its interest rate cuts in response to "disappointing" inflation data, a senior Federal Reserve official said on Wednesday.

"In my view, it is appropriate to reduce the overall number of rate cuts or push them further into the future in response to the recent data. Shorter-term inflation measures are now telling me that progress [in reducing inflation] has slowed and may have stalled. But we will need more data to know that," Fed Governor Christopher Waller told a conference in New York.

He continued: "I see economic output and the labour market showing continued strength, while progress in reducing inflation has slowed. Because of these signs, I see no rush in taking the step of beginning to ease monetary policy."

Still to come on Thursday's economic calendar, US gross domestic product and initial jobless claims figures are both out at 1230 GMT, while the Michigan consumer sentiment index is out at 1400 GMT.

AJ Bell said the GDP and consumer sentiment reads "are set to dominate the agenda".

"These releases will offer some insight into whether the US Federal Reserve is achieving a 'soft landing' for the economy as it moves towards interest rate cuts," said AJ Bell's Mould.

Stocks in New York were called muted, with the Dow Jones Industrial Average, the S&P 500 index and the Nasdaq Composite all hovering around the no-change mark.

In the FTSE 100, JD Sports was the top performing stock, rising 9.8%.

The retailer said it outperformed the sportswear market in the 53 weeks that ended February 3. It said like-for-like sales rose 4.2% on-year and up 8.4% organically on a constant currency basis, while total sales grew 3.6% to around GBP10.5 billion.

It expects pretax profit to be in line with its guided range of GBP915 million to GBP935 million, down from GBP991.4 million a year earlier.

"We made good strategic progress, opening 215 new JD stores, and focusing our effort on developing JD and enhancing EPS through taking full control of ISRG and MIG," said Chief Executive Officer Regis Schultz.

JD Sports outlined its initial financial 2025 profit forecast of GBP900 million to GBP980 million, while saying trading in the new financial year-to-date is in line with its expectations after seven weeks.

Severn Trent fell 1.8%, while United Utilities lost 1.5%. Troubled peer Thames Water has said its shareholders will not be injecting the first GBP500 million of funding that was agreed last summer into the group as industry regulations make its business plan "uninvestible".

Thames Water – the UK's biggest water supplier with 15 million households across London and the South East – said the funding plan drawn up last July was subject to conditions, including a business plan that is supported by "appropriate regulatory arrangements".

Aviva fell to a low of 492.30 pence per share after the open, before levelling out to a 0.4% fall at 494.47p.

Exane BNP cut its rating for Aviva to 'underperform' from 'neutral', setting a lowered target price of 420p from 445p. Exane BNP also cut Legal & General to 'neutral' from 'outperform', lowering its price target to 270p from 280p. L&G shares fell 0.4%.

Meanwhile, the UK Competition & Markets Authority decided not to refer the Aviva's planned acquisition of AIG's life-insurance and retirement-services division AIG Life to a phase 2 investigation.

The UK competition watchdog said this decision was based on the information currently available and that a further announcement on the decision will be made "as soon as is reasonably practicable".

In February, the CMA said it was investigating the deal, saying it could reduce competition in the UK services sector.

In the FTSE 250, AO World was the top performing stock, surging 16% and with its stock up more than 60% over the last 12 months.

The electricals retailer lifted its yearly outlook, with its move to focus on "profit and cash generation" paying off.

The electricals retailer expects adjusted pretax profit to be "at least" at the top end of a GBP28 million to GBP33 million range for the year ending March 31. It raised its outlook to that guidance range in November.

AO World expects revenue for the year to be around GBP1.04 billion, which would represent an 8.7% decline from GBP1.14 billion.

The company reports annual results on June 26.

Elsewhere in London, abrdn Property Income lost 9.1%, after the real estate trust's shareholders rejected a planned all-share merger with Custodian Property Income REIT, which itself surged 6.5%.

After the market close on Wednesday, API disclosed shareholders had failed to back the proposed merger with CREI in sufficient numbers.

API said the total votes in favour of implementing the merger were 61% of API shares voted at the court meeting, 61% of API shares voted at the general meeting, and 86% by number of API shareholders who voted at the court meeting.

This falls short of the 75% threshold required by value of API shares at both the court meeting and general meeting, and a majority in number of API shareholders voting at the court meeting, API said.

As a result, API intends to implement a managed wind-down as previously announced.

Brent oil was quoted at USD86.36 a barrel at midday on Thursday, up from USD85.41 late Wednesday.

Gold was quoted at USD2,212.74 an ounce at midday on Thursday, higher against USD2,190.33 at the close on Wednesday.

By Greg Rosenvinge, Alliance News senior reporter

Comments and questions to [email protected]

Copyright 2024 Alliance News Ltd. All Rights Reserved.

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