London open: Stocks flat but Sainsbury's rallies as Bestway takes stake
London stocks were steady in early trade on Friday as investors continued to mull a better-than-expected US GDP reading a day earlier, with Sainsbury's surging on news that Bestway has bought a stake in the supermarket giant.
At 0825 GMT, the FTSE 100 was flat at 7,761.33.
Richard Hunter, head of markets at Interactive Investor, said: "US GDP for the fourth quarter grew 2.9% on an annualised basis, versus expectations of 2.8%. The number was boosted by consumer spending, but represents a slight slip from the third quarter reading. Indeed, with there being a time lag between interest rate hikes and the effect on the economy, it remains difficult to predict how much of the Federal Reserve’s actions so far are having the desired dampening effect.
"As such, more pessimistic investors are suggesting that the latest quarter of growth could be the last before previous hikes take full effect, potentially pushing the economy towards recession this Spring. The severity of the recession remains the key element of investor nervousness and, while one economic reading cannot in isolation predict a trend, the GDP number was enough to suggest that a mild recession could be on the cards, sending stocks higher for now."
On the macro front later, investors will eye the release of the latest US personal consumption index - the Federal Reserve’s preferred measure of inflation - at 1330 GMT
In equity markets, Rolls Royce was the worst performer on the FTSE 100 after the company’s new boss reportedly told staff that it was a "burning platform". In a global address to staff, parts of which were shared with the Financial Times, Tufan Erginbilgic, said that "given everything I know talking to investors, this is our last chance". He described the company's performance as unsustainable, adding that the situation had nothing to do with Covid-19.
Sainsbury’s rallied, however, after convenience store retailer Bestway said it had purchased or agreed to buy a 3.45% stake in the company, but was not considering an offer for the chain.
"Bestway Group intends to hold its shares in Sainsbury's for investment purposes and looks forward to supporting the executive management team," it said. "Bestway Group may look to make further market purchases of Sainsbury's shares from time to time, subject to availability and price."
Paragon Banking Group was trading up after it lifted its guidance for net interest margins for the 2023 fiscal year, saying that it had begun "well", with loan book growth and net interest margins both running ahead of expectations.
Insurer Direct Line ticked a touch higher as it announced that chief executive Penny James has agreed with the board to step down with immediate effect. The news comes just two weeks after the company scrapped its dividend, sending the stock plummeting.
Outside the FTSE 350, Amigo Holdings tumbled after saying it had received a number of expressions of interest in its capital raise, but that this remains below the guarantor lender’s £45m target. If the capital raise does not go ahead, the business will likely be wound down.
Fashion brand Superdry also slid after it cut its full-year profit outlook to breakeven, citing underperformance of its wholesale segment and increasing uncertainty over the fourth quarter.
In broker note action, 888 was upgraded to ‘overweight’ at JPMorgan, while Flutter was cut to ‘neutral’.
Peel Hunt downgraded Antofagasta to ‘reduce’ and Close Brothers to ‘hold’.
Market Movers
FTSE 100 (UKX) 7,761.33 0.00%
FTSE 250 (MCX) 19,938.12 0.11%
techMARK (TASX) 4,425.08 -0.11%
FTSE 100 - Risers
Sainsbury (J) (SBRY) 251.80p 5.18%
BP (BP.) 492.00p 1.61%
Shell (SHEL) 2,374.00p 1.39%
SEGRO (SGRO) 838.20p 1.28%
Tesco (TSCO) 248.60p 1.22%
Unite Group (UTG) 1,004.00p 1.21%
Ocado Group (OCDO) 690.40p 1.08%
Scottish Mortgage Inv Trust (SMT) 760.60p 0.72%
Beazley (BEZ) 667.00p 0.68%
British Land Company (BLND) 441.80p 0.61%
FTSE 100 - Fallers
Rolls-Royce Holdings (RR.) 111.18p -2.03%
Antofagasta (ANTO) 1,776.00p -1.61%
Diageo (DGE) 3,433.50p -1.11%
Smith & Nephew (SN.) 1,123.00p -1.10%
Rio Tinto (RIO) 6,312.00p -1.02%
Smurfit Kappa Group (CDI) (SKG) 3,426.00p -0.98%
HSBC Holdings (HSBA) 598.20p -0.94%
Anglo American (AAL) 3,565.50p -0.82%
BAE Systems (BA.) 851.00p -0.77%
Standard Chartered (STAN) 714.00p -0.75%
FTSE 250 - Risers
Big Yellow Group (BYG) 1,235.00p 2.75%
Molten Ventures (GROW) 375.00p 2.57%
Workspace Group (WKP) 518.00p 2.47%
Essentra (ESNT) 222.50p 2.30%
888 Holdings (DI) (888) 104.70p 2.15%
Paragon Banking Group (PAG) 595.00p 1.71%
RHI Magnesita N.V. (DI) (RHIM) 2,744.00p 1.70%
Wizz Air Holdings (WIZZ) 2,842.00p 1.65%
Derwent London (DLN) 2,592.00p 1.49%
Primary Health Properties (PHP) 113.90p 1.42%
FTSE 250 - Fallers
Mitchells & Butlers (MAB) 158.90p -2.52%
Tate & Lyle (TATE) 752.80p -1.90%
Close Brothers Group (CBG) 951.50p -1.40%
Clarkson (CKN) 2,960.00p -1.33%
Crest Nicholson Holdings (CRST) 242.00p -1.22%
Darktrace (DARK) 249.60p -1.19%
Petershill Partners (PHLL) 168.00p -1.18%
PureTech Health (PRTC) 257.00p -1.15%
Senior (SNR) 147.60p -1.07%
Travis Perkins (TPK) 1,003.00p -0.94%