London open: Stocks weaker after UK GDP shows unexpected rise

London stocks were in the red at the open on Wednesday, as investors digested an economic growth surprise in the UK, and looked towards this afternoon’s consumer inflation print out of the US.

At 0845 BST, the FTSE 100 was down 0.83% at 7,149.94, and the FTSE 250 was off 0.32% at 18,793.75.

“A relatively rare economic bright spot came in the form of the UK GDP reading, showing that the economy grew by 0.5% in May after contractions in March and April, and better than the zero growth which had been expected,” said Interactive Investor head of markets Richard Hunter.

“Nonetheless, economic data points cannot be taken in isolation, such that the number does little to change the overall economic dial for prospects in the UK.

“With sterling under pressure in part due to the strength of the dollar, the FTSE 250 fought bravely to eke out a marginal gain at the open, although the index remains down by 20% in the year to date.”

Hunter noted that the top-flight FTSE 100 also stumbled in early trade, in line with global markets.

“Sentiment remains fragile given the current backdrop, and early features included general pressure on financial stocks, while a number of broker downgrades had stock specific impact.

“The UK’s premier index is now down by 3% in the year to date, representing an outperformance relative to many of its global peers.

“The UK as a whole is still seen as being undemanding in terms of valuation, and while international interest has cooled of late, the possibility for further cherry picking cannot be entirely ruled out as investors continue in their search for stability and of course returns.”

On the data front, official data released before the open showed the UK economy growing faster-than-expected in May.

According to the Office for National Statistics, GDP grew by 0.5% in May, following a decline of 0.2% in April, which was revised up from an earlier estimate for a 0.3% fall.

Analysts had forecast a rise of just 0.1% for May.

In the three months to May, GDP rose by 0.4%, and by 3.5% in the year to May.

Despite the well-documented cost-of-living crisis, with inflation now at a 40-year high of 9.1%, services, production and construction all reported growth during the month.

Services output grew by 0.4%, boosted by strong demand for human health and work activities, which rose 2.1% following a large rise in GP appointments.

Output in consumer-facing services eased 0.1%, however, after retail trade fell 0.5%.

“May’s GDP data have not changed our expectations for a contraction in the second quarter,” said Gabriella Dickens, senior UK economist at Pantheon Macroeconomics.

“We estimate that the additional bank holiday for the Queen’s Jubilee, which will be treated as a special event by the ONS and thus will depress the seasonally adjusted data, will cause GDP to fall by around 1.5% month-to-month in June.

“In addition, weak consumer confidence suggests that people probably didn’t borrow enough, or cut their savings by enough, to maintain their real spending while their real incomes dropped.”

Dickens said amid all that, a recession still remained unlikely.

Central banks were also in focus overnight, after policymakers in both South Korea and New Zealand sated market expectations with 50-basis point hikes.

The Bank of Korea confirmed its highest rate rise since its current framework began in 1999, taking its benchmark rate to 2.25%.

Further south, the Reserve Bank of New Zealand delivered its sixth consecutive hike to take the official cash rate to 2.5%, while sticking to its guns with regard to plans for further rises.

In equities, shipping services group Clarkson was soaring after it said it now expected to report unaudited underlying pre-tax profits of no less than £42.0m for the six months ended 30 June.

It added that its first-half performance had been "strong" across all divisions, with its broking unit performing "particularly well".

Property developer Countryside Partnerships was also in the green, after revealing that chairman John Martin had decided to resign from all his roles at the company with immediate effect.

Countryside said senior independent director Douglas Hurt will take over as chairman, while Amanda Burton will replace Hurt, effective immediately.

The FTSE 250-listed firm also reiterated its full-year financial adjusted operating profit guidance for the twelve months ending 30 September.

On the downside, commercial broadcaster ITV and telecoms behemoth BT Group were weaker after the competition watchdog launched a probe into potential cartel-like behaviour by a number of British sports broadcasters.

The Competition and Markets Authority said it believed there were "reasonable grounds" to suspect that ITV, as well as BT, Comcast-owned Sky, and Endeavour Group division IMG Media, may have broken competition rules with the purchase of freelance services in the UK.

“The investigation relates to the purchase by such companies of freelance services which support the production and broadcasting of sports content in the UK," said the CMA.

Elsewhere, technology services firm Computacenter was slightly weaker after announcing the acquisition of US value-added reseller Business IT Source for an undisclosed sum.

Computacenter said that BITS' existing leadership team would stay on to run the business as a separate operating unit within its US division, as part of an effort to maximise its growth opportunity.

JD Wetherspoon was also in negative territory, after it said sales in the first 11 weeks of its fourth quarter were 0.4% below the same pre-pandemic period in 2019 - an improvement compared to the prior quarter, when sales were down 4%.

The FTSE 250 pub operator said sales of spirits were up 4.4%, cocktails up 18.6%, food up 2.1%, hotel rooms up 8.4%, and fruit machines ahead 16.6%, while draught ales, lagers and ciders - historically the largest contributors to pub sales - were 8% below 2019.

Reporting by Josh White at Sharecast.com. Additional reporting by Iain Gilbert and Abigail Townsend.

Market Movers

FTSE 100 (UKX) 7,164.71 -0.63%
FTSE 250 (MCX) 18,810.45 -0.24%
techMARK (TASX) 4,288.48 -0.90%

FTSE 100 - Risers

Next (NXT) 6,408.00p 1.71%
JD Sports Fashion (JD.) 126.80p 1.28%
Diageo (DGE) 3,642.50p 1.25%
Halma (HLMA) 2,185.00p 1.11%
Howden Joinery Group (HWDN) 624.00p 1.00%
Associated British Foods (ABF) 1,601.50p 0.88%
SEGRO (SGRO) 1,023.00p 0.64%
Barratt Developments (BDEV) 468.90p 0.56%
Bunzl (BNZL) 2,901.00p 0.48%
United Utilities Group (UU.) 1,046.50p 0.48%

FTSE 100 - Fallers

Abrdn (ABDN) 156.35p -3.67%
Prudential (PRU) 982.80p -2.60%
Smith (DS) (SMDS) 280.40p -2.47%
BAE Systems (BA.) 803.40p -2.07%
Mondi (MNDI) 1,459.00p -2.05%
International Consolidated Airlines Group SA (CDI) (IAG) 108.16p -2.05%
GSK (GSK) 1,707.20p -2.03%
Endeavour Mining (EDV) 1,596.00p -2.03%
WPP (WPP) 779.20p -2.01%
Barclays (BARC) 149.66p -1.63%

FTSE 250 - Risers

Clarkson (CKN) 3,190.00p 7.95%
Trainline (TRN) 377.60p 6.37%
Johnson Matthey (JMAT) 1,946.00p 3.24%
TBC Bank Group (TBCG) 1,240.00p 2.82%
Watches of Switzerland Group (WOSG) 762.00p 2.08%
SSP Group (SSPG) 241.90p 1.98%
Darktrace (DARK) 328.40p 1.96%
Elementis (ELM) 103.10p 1.88%
ASOS (ASC) 966.50p 1.63%
Future (FUTR) 1,850.00p 1.54%

FTSE 250 - Fallers

Wetherspoon (J.D.) (JDW) 596.00p -5.40%
Aston Martin Lagonda Global Holdings (AML) 409.10p -4.97%
Lancashire Holdings Limited (LRE) 398.00p -2.55%
Beazley (BEZ) 483.20p -2.50%
TP Icap Group (TCAP) 101.40p -2.50%
Wizz Air Holdings (WIZZ) 1,830.50p -2.24%
Hiscox Limited (DI) (HSX) 908.60p -2.22%
Micro Focus International (MCRO) 272.70p -2.15%
IP Group (IPO) 69.80p -1.97%
Direct Line Insurance Group (DLG) 239.50p -1.84%