London midday: Stocks extend gains as investors eye US earnings

London stocks had risen a little further by midday on Tuesday as investors mulled news that the eurozone has narrowly avoided a recession, and ahead of a raft of key US earnings.

The FTSE 100 was up 0.5% at 7,671.85.

Russ Mould, investment director at AJ Bell, said: "The next two days will test investor sentiment thanks to the publication of financial results from two of the biggest names on the global stock market and the Federal Reserve’s next interest rate decision.

"Microsoft and Alphabet release numbers after the US market close tonight and investors will be hoping for some stellar results to help sustain positive momentum among equities. The S&P 500 and Nasdaq have been on a roll since early January and a successful showing from these two tech giants could easily keep the market rally going. However, positive results are not a given, and multiple stocks in the so-called Magnificent Seven group of mega-cap tech names have shown cracks in recent months.

"Microsoft is seen as an unstoppable beast and investors will be hoping for proof that AI investments are now translating into financial gains. The focus for Alphabet will be on the pace of growth in its cloud computing arm and how much advertising income it is generating from Google and YouTube. Alphabet’s cloud division disappointed last time round, so a repeat of this situation would go down like a lead balloon.

"The Fed is expected to keep rates unchanged at 5.5% so as long as there are no shocks in the accompanying commentary, markets could easily treat the status quo as a winner."

Investors were digesting the latest flash eurozone GDP data, which showed the bloc managed to avoid a technical recession after the economy flatlined in the last three months of 2023.

The reading of zero GDP growth compares with a 0.1% contraction in the third quarter, EU statistics agency Eurostat said. A technical recession is measured by two negative quarters in a row.

On home shores, a trio of leading consumer lending indicators for December came in much lower than expected, with consumer credit, lending and mortgage approvals falling shy of analysts' forecasts, driven by above-average savings levels.

Net consumer credit borrowing declined to £1.2bn last month from £2.1bn in November, as borrowing through credit cards dropped to just £0.3 from £1.0bn. Other forms of credit also decreased, such as car finance and personal loans, slipping to £0.9bn from £1.1bn. Analysts had pencilled in a smaller decline to £1.35bn in December while the average of the previous six months had been £1.6bn.

A net £0.8bn of mortgage debt was repaid last month, compared with a net zero result in November, but gross mortgage lending picked up to £17.1bn from £16.4bn, albeit remaining well below the £19.2bn average over the past year.

Net mortgage approvals for house purchases rose to 50,500 from 49,300 the month before, but undershot the market forecast of 53,000. This also came in under the average of 66,400 seen between 2015 and 2019, as pointed out by analysts at Pantheon Macroeconomics.

At the same time, the measure of total liquid assets - households' deposits with banks and building societies as well as flows into National Savings and Investment accounts - increased by £6.0bn, well above the £4.2bn average monthly rate over the past six months.

"Households managed their finances cautiously towards the end of 2023, but they likely will be willing to borrow more this year, now that mortgage rates have fallen and the outlook for growth in real disposable income has improved," said Samuel Tombs, chief UK economist at Pantheon.

Industry data out earlier showed that shop price inflation slowed notably at the start of the year, as price growth reached its lowest level since May 2022.

In equity markets, 3i Group gained as Barclays reiterated its ‘overweight’ rating on the shares and lifted the price target, while Ashtead pushed up as JPMorgan reiterated its ‘overweight’ stance on the shares.

Kainos surged as Berenberg re-initiated coverage of the shares with a ‘buy’ recommendation.

WPP rose as the advertising group backed its full-year guidance and set out its targets for 2024.

Art and antique online marketplace operator Auction Technology racked up strong gains after saying it expects annual results to be in line with expectations after an 11% increase in revenue for the first three months of the year.

HSBC was in focus as the bank was fined £57.4m by the Bank of England after admitting serious failings in protecting customer deposits.

Travel food outlet operator SSP Group ticked up as it held full-year guidance after a strong rise in first-quarter sales as rail and air passenger numbers continued to recover after the Covid pandemic.

Saga shot higher after saying it expects full-year underlying pre-tax profit to more than double on the previous year as it hailed an "outstanding" year for the cruise and travel businesses.

Diageo fizzed lower as the drinks group said first-half profits fell by more than a tenth as weakness in the Latin American and Caribbean (LAC) regions persisted, but pointed to improving trading conditions in the latter part of the financial year.

Pets at Home slumped as it cut its full-year profit outlook after a weaker-than-expected performance at its retail business in the third quarter.

Deliveroo was under the cosh after Delivery Hero sold its entire 4.5% stake in the company, while media group Future was knocked lower by a downgrade to ‘hold’ from ‘buy’ at Berenberg.

Market Movers

FTSE 100 (UKX) 7,671.85 0.51%
FTSE 250 (MCX) 19,350.90 0.21%
techMARK (TASX) 4,397.90 0.54%

FTSE 100 - Risers

Rolls-Royce Holdings (RR.) 312.30p 2.73%
3i Group (III) 2,497.00p 2.63%
Auto Trader Group (AUTO) 736.40p 2.19%
Rentokil Initial (RTO) 414.90p 1.69%
Flutter Entertainment (DI) (FLTR) 16,440.00p 1.64%
IMI (IMI) 1,688.00p 1.63%
Experian (EXPN) 3,309.00p 1.60%
Convatec Group (CTEC) 243.80p 1.58%
F&C Investment Trust (FCIT) 980.00p 1.45%
Centrica (CNA) 140.10p 1.45%

FTSE 100 - Fallers

Diageo (DGE) 2,756.00p -3.01%
Airtel Africa (AAF) 117.20p -2.74%
Mondi (MNDI) 1,432.40p -2.68%
Entain (ENT) 962.00p -1.90%
Burberry Group (BRBY) 1,323.50p -1.45%
Barratt Developments (BDEV) 532.60p -1.33%
B&M European Value Retail S.A. (DI) (BME) 527.00p -1.31%
International Consolidated Airlines Group SA (CDI) (IAG) 150.70p -1.18%
Fresnillo (FRES) 542.80p -1.06%
BT Group (BT.A) 113.30p -1.00%

FTSE 250 - Risers

Auction Technology Group (ATG) 538.00p 17.85%
Kainos Group (KNOS) 1,160.00p 6.32%
Baltic Classifieds Group (BCG) 242.50p 3.85%
Carnival (CCL) 1,184.00p 2.42%
Softcat (SCT) 1,448.00p 1.97%
Hill and Smith (HILS) 1,864.00p 1.86%
Syncona Limited NPV (SYNC) 119.20p 1.53%
Ferrexpo (FXPO) 85.00p 1.49%
WH Smith (SMWH) 1,224.00p 1.49%
Computacenter (CCC) 2,888.00p 1.48%

FTSE 250 - Fallers

SThree (STEM) 386.00p -3.02%
Future (FUTR) 704.00p -2.76%
Pets at Home Group (PETS) 287.00p -2.05%
Abrdn Private Equity Opportunities Trust (APEO) 486.00p -1.92%
Helios Towers (HTWS) 80.00p -1.84%
Watches of Switzerland Group (WOSG) 369.20p -1.81%
Direct Line Insurance Group (DLG) 167.55p -1.76%
Ithaca Energy (ITH) 140.30p -1.75%
RHI Magnesita N.V. (DI) (RHIM) 3,368.00p -1.69%
Bakkavor Group (BAKK) 93.80p -1.68%