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LONDON MARKET OPEN: Stocks uninspired as UK avoids recession in 2022

10th Feb 2023 09:22

(Alliance News) - Stock prices in London opened lower on Friday amid depressed global market sentiment, though economic data showed the UK has avoided recession for now.

The FTSE 100 index opened down 8.10 points, 0.1%, at 7,903.05. The FTSE 250 was down 104.77 points, 0.5%, at 20,172.57, and the AIM All-Share was down 1.98 points, 0.2%, at 878.86.

The Cboe UK 100 was down 0.1% at 791.24, the Cboe UK 250 was down 0.6% at 17,595.98, and the Cboe Small Companies was down 0.1% at 14,128.43.

The UK economy registered no growth in the final quarter of 2022, narrowly avoiding a recession.

According to a first estimate from the Office for National Statistics, gross domestic product in the fourth quarter saw no growth from the third quarter. This follows a revised contraction of 0.2% seen in the third quarter.

This means the UK avoided a technical recession, which is defined as two consecutive quarters of contraction.

On an annual basis, gross domestic product rose by 0.4% in the fourth quarter, slowing from 1.9% in the third quarter.

In December, GDP fell 0.5% from the month before, having grown by 0.1% in November.

In 2022 as a whole, GDP is estimated to have increased by 4.0%, slowing markedly from a 7.6% increase in 2021.

"Despite the typical seasonal boost to spending around the Christmas period, December suffered a sharp economic sharp contraction which meant that the UK economy logged zero growth during the final quarter of 2022. December's growth was negatively impacted by industrial action across the UK with postal strikes, a hit to public services, and lower school attendance," interactive investor's Victoria Scholar commented.

Other economic data issued on Friday was more straightforwardly bad for the UK. Its trade deficit widened in the final quarter and month of 2022, as imports rose and exports fell.

The fourth quarter total trade in goods and services deficit - excluding precious metals - widened by GBP2.4 billion to GBP26.8 billion. The deficit was driven by lower exports of goods and services, ONS said.

The goods deficit, excluding precious metals, widened by GBP1.0 billion to GBP64.0 billion, while the services surplus narrowed by GBP1.4 billion to GBP37.2 billion.

Sterling was quoted at USD1.2111 early Friday, lower than USD1.2154 at the London equities close on Thursday. The euro traded at USD1.0734, lower than USD1.0750.

Against the yen, the dollar was quoted at JPY130.37, down versus JPY131.10.

The Bank of Japan is set to appoint Kazuo Ueda as its next governor when Haruhiko Kuroda's second term ends in April, the Nikkei newspaper reported. Ueda is a former central bank policy board member.

"The potential appointment comes as a surprise and has pushed the Japanese yen higher by more than 1% against the US dollar and the Nikkei also higher, bucking broader weakness in Asia," said ii's Scholar.

The Nikkei 225 index closed up 0.3% in Tokyo. The S&P/ASX 200 in Sydney closed down 0.8%. The Shanghai Composite index fell 0.3%, while the Hang Seng in Hong Kong lost 2.0%.

New York ended in the red on Thursday, with the Dow Jones Industrial Average ending down 0.7%, the S&P 500 down 0.9%, and the Nasdaq Composite down 1.0%.

In European equities on Friday, the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was down 0.5%.

In Frankfurt, Adidas plunged 8.8%. The sportswear retailer said it is currently reviewing its options for its Yeezy inventory, a brand with which it cut in October, after its founder, Kanye West, made a series of antisemitic comments.

The Herzogenaurach, Germany-based company said that if it decides not to repurpose any of the existing Yeezy products, it would result in the write-off of the inventory. This would lower the company's operating profit by an additional EUR500 million this year.

Furthermore, Adidas expects one-off costs of up to EUR200 million in 2023.

In the case that all of this was to happen, Adidas expects to report an operating loss of EUR700 million in 2023. Full-year revenue is expected to be lowered by around EUR1.2 billion.

"This is the sportswear giant's fourth profit warning since July," noted ii's Scholar.

UK sportswear retailers were lower in London in a negative read-across. JD Sports Fashion was down 1.8%, while Sports Direct-owner Frasers was down 1.6%.

In the FTSE 100, Standard Chartered dropped 4.6%.

First Abu Dhabi Bank on Friday reiterated it has no plans for a possible takeover offer for the London-listed, Asia-focused lender, denying a press report on Thursday.

StanChart was the top FTSE 100 performing stock on Thursday, closing up 11% following a report from Bloomberg that Abu Dhabi's FAB is pressing ahead with a potential USD35 billion offer for the London-based lender.

Bloomberg said FAB's proposed acquisition of the London-based lender was still in play, after a move to put earlier takeover plans on hold "didn't halt its ambitions to become a global financial powerhouse".

But FAB on Friday said its stance had not changed since early last month, when it said it ended "very early stages" of evaluating a possible offer for StanChart.

"Although the share price has fallen back, it remains highly elevated, far above the level it was before rumours began swirling at the start of the year," Hargreaves Lansdown's Susannah Streeter noted.

Standard Chartered shares remain up 21%over the past six months.

In the FTSE 250, Asos fell 2.1%.

The online clothing retailer has hired Sean Glithero as interim chief financial officer, replacing Katy Mecklenburgh from May. He has already joined the firm to facilitate a "thorough" handover.

Glithero has led "large finance functions" at firms including Auto Trader Group, Funding Circle and Matches Fashion. Asos said it has filled 75% of the 12-person new leadership team announced back in October.

Among London's smallcaps, Saga gained 3.5%.

The firm confirmed it is in exclusive discussions with Australia's Open Insurance Technologies about a potential sale of Acromas Insurance, the underwriter of Saga's wider insurance business.

Sky News had reported that Open is raising capital to fund the potential deal. Late last month, Saga confirmed it was seeking buyers for the underwriting business, confirming a report by the Sunday Times.

On AIM, itim Group fell 28%.

The London-based click-and-collect software firm warned its annual earnings before interest, tax, depreciation and amortisation are expected to be GBP200,000, down from GBP2.2 million.

This is around GBP200,000 lower than market consensus.

"The board adopted a strategy that most [software-as-a-service] businesses use, which is to finance projects ourselves to drive growth by offering to do the transition onto our platform at no cost. Consequently, the group increased its cost base to allow for this," itim explained.

Gold was quoted at USD1,869.34 an ounce early Friday, lower than USD1,873.46 on Thursday. Brent oil was trading at USD84.35 a barrel, higher than USD83.73.

By Elizabeth Winter, Alliance News senior markets reporter

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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