London close: Stocks firmer despite surprise fall for US GDP

Thu 28 Apr 2022

LONDON (SHARECAST) - (Sharecast News) - London stocks closed in positive territory on Thursday, even after data from across the pond showed the US economy contracting, after investors made their way through a pile of earnings reports during the morning.

The FTSE 100 ended the session up 1.13% at 7,509.19, and the FTSE 250 was ahead 0.89% at 20,619.62.

Sterling was in negative territory, last trading down 0.79% on the dollar at $1.2446, and falling 0.3% against the euro to €1.1844.

"Equity markets in Europe and the US are showing modest gains this afternoon as the sentiment is relatively upbeat," said Equiti Capital market analyst David Madden.

"The poor US GDP reading took some of the wind out of the bull's sails - indices were much stronger this morning, but traders were encouraged to book some profit by the data.

"The fact that the US economy shrank in the first three months triggered mild concerns that the largest economy in the world could be on track for a recession."

Madden said the news came amid existing fears that Germany could also be about to enter a recession of its own.

"On Tuesday, European and US equities plunged to multi-week lows, and although we have rebounded in the past two sessions, the recovery could be running out of steam."

On the economic front, the US economy contracted unexpectedly in the first quarter as strong consumer and business spending was offset by a ballooning trade deficit, slower inventory build and a fall in public expenditure.

Gross domestic product contracted 1.4% year on year in the three months to March 31, down markedly from the 6.9% increase posted in the final quarter of 2021, according to the Commerce Department.

It was the first weakening of the economy since mid-2020 at the height of the Covid-19 pandemic and lockdowns.

The figure was hit by a growing trade deficit, which hit a record high in March as import volumes and prices spiralled.

"The first GDP contraction since the recession ended is sure to ignite fears that the economy is stalling out but on closer inspection, the report isn't as worrisome as it looks," said Lydia Boussour, lead US economist at Oxford Economics.

"Beneath the weak headline print, the details of the report point to an economy with solid underlying strength and that demonstrated resilience in the face of Omicron, lingering supply constraints and high inflation.

"Net trade represented a massive 3.2 percentage point drag on GDP growth amid a weakening global backdrop while inventories imposed a 0.8 percentage point drag ... as supply chain challenges intensified."

Staying stateside, US initial jobless claims dropped 180,000 in the week ended 23 April, as expected by analysts, down from an upwardly-revised print of 185,000 a week earlier.

On a non-seasonally adjusted basis, initial claims increased by 5,005 from the previous week to 202,983, according to the Labor Department, with notable increases in New York and Massachusetts.

The four-week moving average, which aims to smooth out week-to-week volatility, was 179,750, an increase of 2,250 from the previous week's revised average

On home shores, industry data showed UK car production tumbling in the first quarter, as global supply chain issues weighed heavily.

According to the Society for Motor Manufacturers and Traders, car manufacturing declined by 32.4% year-on-year in the three months to March end, to 207,347 units.

The SMMT said production had been constrained by the ongoing global shortage of semiconductors and other components.

Surging demand since the start of the pandemic for electronic items meant factories struggled to produce enough semiconductors, which are widely used in the production of modern cars.

Rolling lockdowns in China exacerbated the global semiconductor shortage, while the war in Ukraine and soaring costs further impeded the supply of parts.

"Two years after the start of the pandemic, automotive production is still suffering badly, with nearly 100,000 units lost in the first quarter," said Mike Hawes, SMMT chief executive.

"Recovery has not yet begun, and with a backdrop of an increasingly difficult economic environment, including escalating energy costs, urgent action is needed to protect the competitiveness of UK manufacturing."

In equities, kitchen supplier Howden Joinery closed up 0.96% after it said overall revenues had grown 21.8% year-on-year in the 16 weeks ended 16 April, while same depot revenues were up 20.1%, driven by increases in both prices and volume.

Unilever was ahead 2.73% after warning about rising costs, as the consumer goods group reported higher first-quarter sales driven by price increases.

Asia-focused bank Standard Chartered rocketed 14.15%, after reporting a better-than-expected 6% rise in first-quarter profit, boosted by rising global interest rates.

Pharmaceuticals firm Indivior was 2.35% firmer after first quarter net revenue came in at $207m (£165.07m), up 15% year-on-year, as it maintained its guidance for the full year.

Premier Inn owner Whitbread gained 4.28% on its swing to a full-year profit and beating estimates as revenues improved, although it raised guidance on cost inflation as the economic squeeze continued.

Glencore managed gains of 0.78% after the miner said its trading business boomed in the first quarter, as the war in Ukraine caused shortages of some commodities and volatile markets.

Barclays jumped 3.09%, even after it delayed its £1bn share buyback further as a £523m conduct charge caused the bank's first-quarter profit to fall.

Pre-tax profit dropped 7% to £2.23bn in the three months to the end of March from a year earlier as income rose 10% to £6.5bn.

The decline was caused by the conduct charge which covered over-issuance of securities in the US and customer compensation costs for a separate matter.

St. James's Place reversed early losses to eke out gains of 0.31%, after it reiterated its expectations for full-year new business growth and over the medium-term, despite the "significant" impact of the war in Ukraine during the first quarter.

On the downside, supermarket giant J Sainsbury slid 4.31% after it warned of lower profits this fiscal year as the cost-of-living crisis and inflation hit the economy.

The company forecast underlying pre-tax profit of £630m - £690m in full-year 2022/23 as it posted a £730m profit last year, up 104% on the prior 12 months driven by grocery and fuel sales.

Schroders was in the red by 3.31%, after it reported total assets under management of £752.7bn at the end of its first quarter, rising from £731.6bn at the end of December.

Elsewhere, Weir Group fell 3.73% after the company said it was exiting Russia and would take a hit to underlying earnings of up to £20m.

Market Movers

FTSE 100 (UKX) 7,509.19 1.13%
FTSE 250 (MCX) 20,619.62 0.89%
techMARK (TASX) 4,360.29 1.71%

FTSE 100 - Risers

Standard Chartered (STAN) 547.60p 14.15%
Aveva Group (AVV) 2,054.00p 6.76%
Whitbread (WTB) 2,875.00p 4.28%
Airtel Africa (AAF) 149.10p 4.12%
Electrocomponents (ECM) 1,041.00p 3.89%
Melrose Industries (MRO) 116.45p 3.47%
Sage Group (SGE) 737.60p 3.45%
Smith & Nephew (SN.) 1,312.00p 3.43%
Barclays (BARC) 146.30p 3.09%
International Consolidated Airlines Group SA (CDI) (IAG) 144.54p 2.95%

FTSE 100 - Fallers

Sainsbury (J) (SBRY) 228.70p -4.31%
Fresnillo (FRES) 765.00p -3.63%
St James's Place (STJ) 1,278.50p -2.78%
Ocado Group (OCDO) 911.00p -1.98%
Pershing Square Holdings Ltd NPV (PSH) 2,755.00p -1.61%
Anglo American (AAL) 3,453.50p -1.51%
BT Group (BT.A) 179.30p -1.16%
London Stock Exchange Group (LSEG) 7,872.00p -1.11%
Land Securities Group (LAND) 745.00p -1.01%
Schroders (SDR) 2,842.00p -0.91%

FTSE 250 - Risers

Spectris (SXS) 2,912.00p 9.15%
Network International Holdings (NETW) 267.40p 6.96%
Telecom Plus (TEP) 1,642.00p 6.93%
Inchcape (INCH) 708.50p 6.38%
Lancashire Holdings Limited (LRE) 423.60p 6.27%
Synthomer (SYNT) 301.40p 5.38%
IMI (IMI) 1,350.00p 4.41%
Moonpig Group (MOON) 198.90p 4.35%
Renishaw (RSW) 4,138.00p 4.18%
Currys (CURY) 96.65p 3.81%

FTSE 250 - Fallers

Tyman (TYMN) 273.50p -4.37%
Playtech (PTEC) 510.00p -4.14%
Weir Group (WEIR) 1,550.00p -3.73%
Morgan Sindall Group (MGNS) 2,190.00p -3.31%
Polymetal International (POLY) 257.00p -2.73%
Sequoia Economic Infrastructure Income Fund Limited (SEQI) 98.60p -2.18%
Drax Group (DRX) 809.50p -2.12%
BH Macro Ltd. GBP Shares (BHMG) 4,270.00p -1.95%
Babcock International Group (BAB) 304.60p -1.87%
Hochschild Mining (HOC) 114.80p -1.71%
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