London close: Stocks rise as US inflation comes in cooler
London's stock markets ended the day on a positive note on Friday, with both of the bourse’s main indices showing gains.
The FTSE 100 finished the day up 0.15% at 7,631.74, while the FTSE 250 was ahead 0.11% at 18,928.30.
Sentiment began the day with a boost, after the UK's fourth quarter GDP data was revised upwards, indicating that the country had avoided a recession in the second half.
Slower-than-expected inflation data in the United States was also released later in the day, adding to hopes of a pause in interest rate hikes from the Federal Reserve.
In currencies, sterling was last down 0.11% on the dollar at $1.2372, while it strengthened 0.21% against the euro to trade at €1.1383.
“Equities seem set to round off the quarter on a very solid note,” said IG chief market analyst Chris Beauchamp.
“The lower PCE figure in the US was just what the doctor ordered, and provided investors with reason to take a sunnier view of the outlook as they peer into the second quarter.
“Having escaped without any more bank failures this week, hopes will rise that the crisis of March is now behind us.”
Beauchamp quipped that price tends to lead sentiment, so there should be more flows back into stocks in the second quarter, reversing March’s sharp outflow.
“Uncertainty about the Fed’s next move will prevent sentiment from becoming too bullish, but it looks like the upside surprise in stocks could be the story of 2023.”
UK GDP revised up as business confidence strengthens
In economic news, new figures from the Office for National Statistics (ONS) showed that the UK economy grew slightly in the final quarter of 2022.
The GDP figure was revised up from an initial estimate of zero growth to 0.1% growth, following a 0.1% contraction in the third quarter.
It meant that the UK avoided a technical recession in the second half of the year.
GDP for 2022 as a whole was now estimated to have risen by 4.1%, up from a previous estimate of 4%.
“The economy performed a little more strongly in the latter half of last year than previously estimated, with later data showing telecommunications, construction and manufacturing all faring better than initially thought in the latest quarter,” said Darren Morgan, director of economic statistics at the ONS.
“Households saved more in the last quarter, with their finances boosted by the government's energy bill support scheme.
“Meanwhile, the UK's balance of payments deficit with the rest of the World narrowed, driven by increased foreign earnings by UK companies, particularly in the energy sector.”
While the UK economy saw growth, the housing market experienced a decline in March.
According to lender Nationwide, house prices fell 3.1% year-on-year - the fastest annual pace since July 2009.
Prices were down 0.8% on the month, marking the seventh consecutive monthly decline and leaving prices 4.6% below their August peak.
The data showed that house price growth slowed across all regions of the UK.
“The housing market reached a turning point last year as a result of the financial market turbulence which followed the mini-Budget,” said Nationwide chief economist Robert Gardner.
“Since then, activity has remained subdued - the number of mortgages approved for house purchase remained weak at 43,500 cases in February, almost 40% below the level prevailing a year ago.
“It will be hard for the market to regain much momentum in the near term since consumer confidence remains weak and household budgets remain under pressure from high inflation.”
On a more positive note, UK business confidence rose in March to its highest level since May 2022, according to the latest Lloyds Bank business barometer.
The barometer rose 11 points to 32%, with overall economic optimism higher. However, pricing expectations cooled, reaching a six-month low.
“Business confidence has seen a surge this month with economic optimism and trading prospects bolstering firms,” commented Hann-Ju Ho, senior economist at Lloyds Commercial Banking.
“With hiring intentions improving, we may see employment growth picking up in the coming months.
“Tentative signs of easing wage pressures suggest that businesses’ difficulties in finding staff may have started to ease.”
Inflation eases in Europe and comes in below expectations for the US
On the continent, Eurostat released a flash estimate showing that eurozone inflation eased more than expected in March due to a fall in energy prices.
Annual consumer price inflation slowed to 6.9% from 8.5% in February, lower than the anticipated 7.1%.
However, underlying inflation ticked up.
In Germany, official data showed that retail sales fell unexpectedly in February, dropping by 1.3% in real terms compared to the previous month.
Retail sales were down 7.1% on an annual basis and 1.6% below pre-pandemic February 2020 levels.
Across the pond, meanwhile, data from the US Commerce Department showed that inflation fell in February, with the price deflator for personal consumption expenditures (PCE) rising 0.3% on the month, below the expected 0.5%.
The core PCE, which is the Federal Reserve's preferred gauge of inflation, also fell to 4.6% on the year from 4.7%.
Meanwhile, consumer spending ticked up 0.2% on the month, and the personal savings rate increased from 4.4% to 4.6%.
“Fed officials will be slightly encouraged by the 0.3% month-on-month increase in the core PCE deflator, with January’s gain trimmed to 0.5%, from 0.6%,” said Paul Ashworth, chief North America economist at Capital Economics.
“Nevertheless, inflation remains too high, with the annual and three-month-annualised rates both above 4.5%.”
The University of Michigan's closely followed consumer confidence index meanwhile revealed that Americans were less confident in March than in the prior month due to concerns about a possible recession, with the index dipping from 67.0 in February to 62.0 in March.
Finally, China's latest official PMIs showed that the country's economic recovery continued in March, with the manufacturing purchasing managers' index falling to 51.9 from 52.6 in February, and the non-manufacturing PMI rising to 58.2 from 56.3, marking the highest reading since 2011.
Airlines and insurers boosted by brokers, NCC crumbles
In equity markets, shares in British Airways parent International Consolidated Airlines (IAG) rose 1.66%, following rating upgrades at Barclays and Deutsche Bank.
EasyJet and Wizz Air Holdings also posted gains, with increases of 3.06% and 4.06% respectively.
Insurers Beazley and Hiscox also performed well, with Beazley seeing a 2.91% rise after a double upgrade to 'buy' from 'sell' at UBS, and Hiscox up 1.5%.
The bank said Beazley’s balance sheet was in a stronger position than it expected, with consensus earnings now reset, and the shares close to a 10-year low on price-to-earnings.
“There is sufficient upside for us to double upgrade the stock to buy rating, though we maintain our preference for Hiscox and Lancashire in the well-liked London Market peer group,” UBS noted.
Elsewhere, Rio Tinto Group rose 0.86% after agreeing to sell a majority stake in its La Granja copper project in Peru to Canada's First Quantum Minerals for $105m.
Among the other risers on Friday were Computacenter, up 2.11%, Ocado Group, ahead, 2.12%, and Vanquis Banking Group, which added 2.75%.
Computacenter gained after delivering flat annual profit and reporting strong revenue in the current year, while Ocado Group traded up after successfully defending a patent infringement suit brought by Norwegian warehouse robotics group AutoStore.
Vanquis also reported a strong performance in its preliminary results.
On the downside, Rolls-Royce Holdings saw a 0.99% drop in its share price after announcing the appointment of BP's Helen McCabe as its new chief financial officer.
Meanwhile, cyber security firm NCC Group's shares tumbled 33.56% after it warned on profits.
Reporting by Josh White for Sharecast.com.
FTSE 100 - Risers
M&G (MNG) 198.00p 3.88%
Pearson (PSON) 844.40p 3.51%
DCC (CDI) (DCC) 4,728.00p 2.34%
Beazley (BEZ) 597.50p 2.14%
Unite Group (UTG) 959.50p 1.97%
InterContinental Hotels Group (IHG) 5,312.00p 1.96%
Auto Trader Group (AUTO) 616.20p 1.88%
Burberry Group (BRBY) 2,586.00p 1.77%
Smith & Nephew (SN.) 1,122.00p 1.77%
Rentokil Initial (RTO) 591.60p 1.75%
FTSE 100 - Fallers
Imperial Brands (IMB) 1,864.00p -2.31%
Melrose Industries (MRO) 166.45p -1.48%
Barratt Developments (BDEV) 465.80p -1.40%
Airtel Africa (AAF) 106.50p -1.30%
Prudential (PRU) 1,102.00p -1.12%
Persimmon (PSN) 1,256.00p -1.10%
HSBC Holdings (HSBA) 549.70p -1.01%
Legal & General Group (LGEN) 239.70p -0.87%
Rolls-Royce Holdings (RR.) 149.02p -0.79%
NATWEST GROUP (NWG) 263.60p -0.68%
FTSE 250 - Risers
Hammerson (HMSO) 26.09p 7.15%
Sirius Real Estate Ltd. (SRE) 76.60p 5.22%
Molten Ventures (GROW) 273.60p 4.35%
Petershill Partners (PHLL) 169.20p 3.93%
Wizz Air Holdings (WIZZ) 2,973.00p 3.52%
easyJet (EZJ) 518.40p 3.47%
TI Fluid Systems (TIFS) 107.40p 3.27%
Warehouse Reit (WHR) 102.20p 3.02%
HGCapital Trust (HGT) 343.00p 2.85%
BBGI Global Infrastructure S.A. NPV (DI) (BBGI) 151.00p 2.72%
FTSE 250 - Fallers
NCC Group (NCC) 102.20p -33.29%
TUI AG Reg Shs (DI) (TUI) 619.40p -5.64%
Digital 9 Infrastructure NPV (DGI9) 61.10p -4.08%
4Imprint Group (FOUR) 4,825.00p -3.11%
Helios Towers (HTWS) 104.40p -2.97%
Wood Group (John) (WG.) 200.00p -2.87%
TBC Bank Group (TBCG) 2,240.00p -2.82%
Man Group (EMG) 235.30p -2.77%
Darktrace (DARK) 257.70p -2.75%
FDM Group (Holdings) (FDM) 725.00p -2.68%