London pre-open: Stocks to rise; UK economy returns to growth

London stocks were set to rise at the open on Thursday following positive US and Asian sessions, as investors mulled the latest UK GDP and house price figures.

The FTSE 100 was called to open 32 points higher at 7,652.

CMC Markets analyst Michael Hewson said: "US markets finished the day modestly higher with the Fed minutes not adding too much extra colour to where rates might go, ahead of today’s US CPI report.

"As we look towards today, we look set for a positive start for European markets after the Chinese sovereign wealth fund bought shares in some of the country’s largest banks in a move that had all the hallmarks of a government inspired initiative to boost confidence."

On home shores, data released earlier by the Office for National Statistics showed the economy returned to growth in August.

GPD rose 0.2%, in line with consensus expectations, following a downwardly-revised 0.6% contraction in July. This was revised from a 0.5% fall.

The services sector grew 0.4%, but the production and construction sectors shrank 0.7% and 0.5%, respectively.

ONS director of economic statistics Darren Morgan said: "Our initial estimate suggests GDP grew a little in August, led by strong growth in services which was partially offset by falls in manufacturing and construction.

"Within services, education returned to normal levels, while computer programmers and engineers both had strong months.

"Across the last three months as a whole, the economy has grown modestly, led by car manufacturing and sales, and construction."

Investors were also digesting the latest UK Residential Market Survey from the Royal Institution of Chartered Surveyors, which showed that house prices continued to fall in September as higher interest rates and mortgage costs weighed on demand.

House prices remained on a "downward trajectory" in September with a net balance of -69%, compared to -68% a month earlier.

The net balance is the proportion of respondents reporting a rise minus those reporting fall.

Demand was also sluggish, with the new buyer enquiries balance at -39%, although that was an improvement on August’s -46%.

Agreed sales also remained in negative territory, at -37%, with respondents expecting sales to continue falling in the next quarter, with a net balance of -24%.

House prices were also expected to fall going forward, although at a slower pace than previously forecast. A net balance of -33% expect prices to continue falling over the next year.

Tarrant Parsons, senior economist at RICS, said: "With mortgage affordability still incredibly stretched, it is unsurprising that buyer activity across the housing market remained subdued in September.

"Although the decision to pause monetary tightening a few weeks ago provide a glimmer of relief for the market, interest rates are likely now set to remain on hold for a prolonged period.

"As such, it appears there is little prospect of trends deviating much from the recent picture in the immediate future."

RICS added that it supported Labour’s plans, announced earlier in the week, to build 1.5m new homes should it be elected.

"Suggestions of reform to local planning laws, making development more accessible, are also promising," it added. "Our survey once again shows clearly that housing supply for buyers and renters remains at critical levels."

In corporate news, UK regulators are looking into suspected "anti-competitive behaviour" in how TV producers and broadcasters use freelance services and employ staff, and are investigating a number of corporations including the BBC and ITV.

ITV confirmed in a statement that it has received a case initiation notice from the Competition and Markets Authority.

"ITV is committed to complying with competition law and to cooperating with the CMA's inquiries. ITV does not propose to comment further at this stage,” it said.

Elsewhere, Wise reported strong customer growth of 32% year-on-year to 7.2 million in its second quarter, propelling a volume of £29.2bn and revenue of £258.7m, reflecting 8% and 22% YoY increases, respectively.

Despite uncertainties in macroeconomic conditions, income jumped 51% to £345m, attributed to the steady rise in Wise Account adoptions and higher interest income on account balances, which grew 33% to £12.3bn. As a result, Wise upgraded its income growth guidance to between 33% and 38%, with profitability further buttressed by an unexpectedly high gross profit margin of 74% in the first half.