London close: Stocks turn green after US GDP release

Stocks in London had turned higher by the close on Thursday, as investors digested a better-than-expected GDP reading out of the United States.

The European Central Bank was also in focus, after rate-setters chose to stand pat on interest rates in their latest decision.

By the close, the FTSE 100 was up 0.03% at 7,529.73, while the FTSE 250 index fared slightly better with a 0.27% increase, closing at 19,223.10.

In currency markets, sterling was last down 0.18% on the dollar, trading at $1.2703, while it managed a slight uptick of 0.18% against the euro to change hands at €1.1712.

“The last few days have seen European markets seek to reverse the damage of the early part of last week, but there has been slow progress higher, with the FTSE 100 underperforming relative to its peers,” said CMC Markets chief market analyst Michael Hewson.

“We opened the session with a modest pullback on the gains of yesterday as markets took stock against a backdrop of disappointing economic numbers, and a reluctance on the part of central banks to consider the prospect of early rate cuts.

“Today’s ECB press conference may have seen a slight dovish shift in the prevailing narrative here of no early rate cut, although the ECB might seek to deny it.”

Hewson said the catalyst for the possible shift could have been Wednesday’s “awful” PMI numbers, or the German IFO survey which saw a further deterioration in economic activity in January and pointed to a further decline in optimism about the prospects for the German economy.

“Companies were more pessimistic about the outlook than they were at the end of last year with the reluctance of the ECB to consider an early rate cut most likely to have soured business optimism.

“This afternoon’s decision by the ECB didn’t contain any surprises with rates left on hold, with the accompanying press conference a broad word salad of jibber-jabber in parts as ECB president Lagarde tried to convince the markets that a rate cut before June was not a realistic possibility.”

Retail sales slump in January, US economy expands

In economic news, UK retail sales took a significant hit in January, experiencing their sharpest decline in three years.

The Confederation of British Industry's distributive trades survey revealed a sharp drop in the retail sales balance, falling from -32 in December to -50.

It marked the lowest level since December 2021 when the UK was grappling with lockdown measures.

“Looking ahead, demand conditions in the sector will remain challenging as higher interest rates continue to feed through to mortgage payments and household incomes,” said CBI principal economist Martin Sartorius.

Meanwhile, the European Central Bank opted to maintain its current policy stance at its latest meeting, reiterating its commitment to achieving a 2.0% inflation target in a timely manner.

The ECB’s policy statement emphasised that it believed current interest rates, if sustained for an extended period, would contribute significantly to achieving their inflation goal.

All of the ECB's policy rates, those for the main refinancing operations, on the marginal lending facility and the deposit facility were unchanged, at 4.5%, 4.75% and 4.0%, respectively.

“Clearly, the ECB is not happy with the idea of rate cuts in March or April,” said Claus Vistesen at Pantheon Macroeconomics.

“And based on the information it has today, it can comfortably maintain its position that market-based expectations remain too optimistic.

“It will be interesting in this respect to see whether Ms. Lagarde repeats her comment from Davos that a summer rate cut is a possibility.”

In the United States, gross domestic product (GDP) exceeded expectations for the last quarter of 2023, complicating the Federal Reserve's decision-making on interest rates.

Preliminary estimates from the Bureau of Economic Analysis revealed a year-on-year GDP growth rate of 3.3% in the fourth quarter.

While that marked a slowdown from the 4.9% expansion in the prior quarter, it surpassed the forecasts of many economists, who were anticipating just 2.0% growth.

“With data showing greater resilience than many were anticipating, and with inflation seen ticking back up last month, traders have scaled back their near-term rate-cut expectations,” said Manoj Ladwa, director of trading company ARJ Capital ahead of the data release.

“Indeed, recent Fed commentary has further pushed back against those looking for near-term cuts.

“With this in mind, the implications for today’s data are clear: an upside beat will be seen as further reason to delay easing," Ladwa said.

On the labour front in the US, initial claims for unemployment benefits rose higher than anticipated last week, according to data from the Department of Labor.

First-time jobless claims reached 214,000 in the week ending January 19, an increase of 25,000 from the revised figure of 189,000 the previous week.

Although this exceeded the consensus estimate of 200,000, the longer-term trend continues to show a decline, with the four-week moving average dropping to 202,250.

Meanwhile, continuing claims, representing those who previously filed initial claims, rose by 27,000 to 1.833 million.

St James’s Place and IG fall, Elementis jumps on potential KPS bid

On London’s equity markets, St James’s Place declined 4.38% after its fourth-quarter net inflows missed estimates.

Similarly, online trading platform IG Group Holdings dropped 7.52% after it cited softer market conditions as a factor in reduced interim revenues and profits.

Wizz Air Holdings descended 4.11%, driven by the airline's announcement of widened losses in the third quarter.

Industrial parts distributor RS Group fell 2.95% due to a 10% decline in third-quarter like-for-like sales, attributed to weaker-than-expected markets and slower unwinding of customer surplus inventory, particularly in electronics and associated products.

On the upside, Intermediate Capital Group rose 5.75% after it reported an increase in assets under management.

Bootmaker Dr Martens rallied with a 7.23% increase, despite a third-quarter revenue slump of one-fifth, driven by underperformance in the US and its wholesale channel.

Elementis surged 12.1%, following reports that KPS Capital Partners explored a bid for the specialty chemicals firm, with an offer valuing the company at about 160p per share, although the Elementis board aimed for around 180p.

Drinks company Britvic gained 3.51% after it posted impressive first-quarter revenue figures.

The company reported that trading was in line with management expectations, with group revenue up 8.1% to £443.5m at constant currency and volumes up 1.7% compared to the prior year.

Equipment rental firm Ashtead Group advanced by 6.83%, driven by solid fourth-quarter results from its US peer, United Rentals.

Additionally, WPP saw a 1.54% increase in its stock price following well-received results from French peer Publicis.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,529.73 0.03%
FTSE 250 (MCX) 19,223.10 0.27%
techMARK (TASX) 4,353.92 -0.15%

FTSE 100 - Risers

Intermediate Capital Group (ICP) 1,777.50p 8.58%
Ashtead Group (AHT) 5,196.00p 6.83%
Smurfit Kappa Group (CDI) (SKG) 3,088.00p 4.11%
Mondi (MNDI) 1,460.00p 2.13%
Marks & Spencer Group (MKS) 260.40p 1.80%
Rightmove (RMV) 553.00p 1.73%
WPP (WPP) 766.00p 1.54%
Sage Group (SGE) 1,169.50p 1.52%
Smith (DS) (SMDS) 289.10p 1.44%
CRH (CDI) (CRH) 5,520.00p 1.36%

FTSE 100 - Fallers

St James's Place (STJ) 646.40p -4.38%
Hikma Pharmaceuticals (HIK) 1,865.50p -4.24%
RS Group (RS1) 749.80p -2.95%
Standard Chartered (STAN) 592.60p -2.76%
Entain (ENT) 952.40p -2.32%
GSK (GSK) 1,521.20p -2.16%
Anglo American (AAL) 1,825.20p -1.91%
Melrose Industries (MRO) 581.00p -1.76%
Kingfisher (KGF) 221.80p -1.64%
Lloyds Banking Group (LLOY) 41.53p -1.49%

FTSE 250 - Risers

Elementis (ELM) 139.00p 12.10%
Dr. Martens (DOCS) 84.40p 12.01%
Mitie Group (MTO) 105.00p 5.11%
International Distributions Services (IDS) 286.60p 4.14%
Britvic (BVIC) 885.00p 3.51%
PPHE Hotel Group Ltd (PPH) 1,235.00p 3.35%
Tullow Oil (TLW) 34.50p 3.17%
easyJet (EZJ) 536.20p 3.08%
Moneysupermarket.com Group (MONY) 253.80p 3.00%
Abrdn Private Equity Opportunities Trust (APEO) 483.50p 2.65%

FTSE 250 - Fallers

IG Group Holdings (IGG) 716.00p -7.61%
Close Brothers Group (CBG) 550.00p -5.90%
NCC Group (NCC) 125.40p -4.27%
Wizz Air Holdings (WIZZ) 1,946.50p -4.11%
Pennon Group (PNN) 686.50p -3.24%
Senior (SNR) 155.00p -2.88%
Domino's Pizza Group (DOM) 346.40p -2.81%
Aston Martin Lagonda Global Holdings (AML) 188.00p -2.54%
Ferrexpo (FXPO) 84.95p -2.36%
Foresight Solar Fund Limited (FSFL) 97.00p -2.31%