London open: Stocks nudge down ahead of Fed; UK economy returns to growth

London stocks nudged lower in early trade on Wednesday as investors eyed a policy announcement from the US Federal Reserve, and digested the latest UK GDP reading.

At 0825 BST, the FTSE 100 was down 0.1% at 7,587.48.

CMC Markets analyst Michael Hewson said: "Having seen US CPI for May come in at a two year low of 4%, in numbers released yesterday, market expectations are for the US central bank to take a pause today with a view to looking at a hike in July.

"Of course, this will be predicated on how the economic data plays out over the next 6-7 weeks but nonetheless the idea that you would commit to a hike in July begs the question why not hike now and keep your options open regarding July, ensuring that financial conditions don’t loosen too much."

On home shores, figures from the Office for National Statistics showed the economy returned to growth in April.

Gross domestic product rose 0.2%, in line with expectations, following a 0.3% contraction in March.

The services sector was the main contributor, growing by 0.3% in April after shrinking by 0.5% the month before.

The data showed that production output fell 0.3% in April following growth of 0.7% in March, while the construction sector declined by 0.6% following 0.2% growth.

In the three months to April, the economy grew by just 0.1%.

Darren Morgan, director of economic statistics at the ONS, said: "GDP (gross domestic product) bounced back after a weak March.

"Bars and pubs had a comparatively strong April while car sales rebounded and education partially recovered from the effect of the previous month's strikes.

"These were partially offset by falls in health, which was affected by the junior doctors' strikes, along with falls in computer manufacturing and the often-erratic pharmaceuticals industry.

"Housebuilders and estate agents also had a poor month.

"Over the last three months as a whole the economy grew a little, driven largely by the construction industries.

"The services sector dragged growth downwards, partly due to the impact of public sector strikes."

Ruth Gregory, deputy chief UK economist at Capital Economics, said: "The overall sense is that the economy is still proving fairly resilient to the drag from high interest rates. This resilience will further increase hopes that a recession is no longer likely. We are not convinced.

"We estimate that by the end of Q2 2023 less than 40% of the drag will have been felt and that more than 60% lies ahead. And we think interest rates need to rise further to quash inflation, from 4.50% now to a peak of 5.25%. That’s why we still think a recession is on its way in the second half of this year."

In equity markets, Games Workshop rallied after saying it expects to post increased annual profit of at least £170m, up from £157m a year ago, driven by a strong rise in revenue and licensing income.

Victrex tumbled, however, as it warned annual profits would be sharply lower as group volumes continued to fall due to industrial headwinds.

Recruiters PageGroup and Hays were also under the cosh after Robert Walters cautioned that profit for the full year ending 31 December 2023 will be "significantly" lower than current market expectations.

Ladbrokes owner Entain tanked after it raised around £600m in a discounted placing to help fund the acquisition of Polish sports betting operator STS Holdings.

Market Movers

FTSE 100 (UKX) 7,587.48 -0.10%
FTSE 250 (MCX) 19,210.89 0.12%
techMARK (TASX) 4,580.74 -0.01%

FTSE 100 - Risers

Smith & Nephew (SN.) 1,205.00p 1.35%
Ashtead Group (AHT) 5,456.00p 0.81%
Prudential (PRU) 1,124.50p 0.81%
Pershing Square Holdings Ltd NPV (PSH) 2,790.00p 0.72%
Ocado Group (OCDO) 405.50p 0.62%
F&C Investment Trust (FCIT) 902.00p 0.56%
Mondi (MNDI) 1,251.50p 0.52%
Persimmon (PSN) 1,173.00p 0.51%
Unite Group (UTG) 891.00p 0.51%
Legal & General Group (LGEN) 236.80p 0.47%

FTSE 100 - Fallers

Endeavour Mining (EDV) 2,036.00p -1.55%
BT Group (BT.A) 138.60p -1.46%
Burberry Group (BRBY) 2,236.00p -1.15%
RS Group (RS1) 799.00p -1.04%
Melrose Industries (MRO) 521.60p -0.84%
Schroders (SDR) 450.70p -0.84%
Fresnillo (FRES) 655.00p -0.82%
DCC (CDI) (DCC) 4,681.00p -0.74%
Halma (HLMA) 2,435.00p -0.69%
Sage Group (SGE) 867.00p -0.69%

FTSE 250 - Risers

Games Workshop Group (GAW) 10,240.00p 6.17%
Discoverie Group (DSCV) 958.00p 4.13%
Jupiter Fund Management (JUP) 113.30p 3.94%
CMC Markets (CMCX) 171.20p 3.51%
Wizz Air Holdings (WIZZ) 2,909.00p 2.79%
Kainos Group (KNOS) 1,384.00p 2.75%
Aston Martin Lagonda Global Holdings (AML) 286.20p 2.65%
Tullow Oil (TLW) 25.94p 2.61%
Molten Ventures (GROW) 315.60p 2.60%
Redrow (RDW) 494.00p 2.28%

FTSE 250 - Fallers

Pagegroup (PAGE) 414.80p -6.20%
Hays (HAS) 103.80p -4.77%
Savills (SVS) 874.50p -2.35%
OSB Group (OSB) 518.00p -1.80%
Bridgepoint Group (Reg S) (BPT) 221.40p -1.60%
Bytes Technology Group (BYIT) 521.00p -1.51%
Henderson Smaller Companies Inv Trust (HSL) 792.00p -1.00%
Bellway (BWY) 2,154.00p -0.83%
Serco Group (SRP) 140.70p -0.78%
Hikma Pharmaceuticals (HIK) 1,872.50p -0.72%