London share prices started lower on Tuesday, following market declines in the US and Asia and a dispiriting forecast that the UK economy will underperform all its peers this year.
The two-day US Federal Open Market Committee policy meeting begins on Tuesday. The Federal Reserve will announce its latest interest rate decision on Wednesday. The Bank of England and the European Central Bank will follow with policy decisions on Thursday.
The FTSE 100 index opened down 38.90 points, 0.5%, at 7,745.97. The FTSE 250 was down 64.24 points, 0.3%, at 19,872.96, and the AIM All-Share was down 2.07 points, 0.2%, at 867.09.
The Cboe UK 100 was down 0.5% at 775.13, and the Cboe UK 250 was down 0.3% at 17,363.75. The Cboe Small Companies was flat at 14,124.20.
The IMF warned that the UK’s economy will shrink this year, meaning the UK will see the worst performance of all advanced nations.
In its latest World Economic Outlook update, the IMF downgraded its UK gross domestic product forecast once again, predicting a contraction of 0.6% against the 0.3% growth pencilled in last October as Britain looks set to suffer more than most from soaring inflation and higher interest rates.
But it nudged up its outlook for UK growth in 2024 to 0.9% from the 0.6% expansion previously forecast.
Among the other G7 nations, the IMF’s 2023 GDP predictions show growth of 1.4% in the US, 0.1% in Germany, 0.7% in France, 0.6% in Italy, 1.8% in Japan and 1.5% in Canada.
In European equities on Tuesday, the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was down 0.5%.
Growth in the French economy slowed in the final quarter of 2022, according to preliminary data on Tuesday, but avoided contraction.
According to Insee - France’s national statistics body - gross domestic product in the fourth quarter grew by 0.1% from the third quarter. In the third quarter, it had grown by 0.2% from the second.
On an annual basis, French GDP grew by 0.5% in the fourth quarter, slowing from 1.0% in the third quarter. For 2022 as a whole, GDP annual growth averaged 2.6%, slowing markedly from 6.8% in 2021.
Sterling was quoted at $1.2310 early Tuesday, lower than $1.2375 at the London equities close on Monday.
The euro traded at $1.0810 early Tuesday, down from $1.0867 late Monday. Against the yen, the dollar was quoted at JP¥130.30, little changed from JP¥130.35.
In the FTSE 100, British American Tobacco shares lost 0.2%.
The maker of cigarettes and vaping products said it plans a number of senior management changes and a new regional structure to both streamline, and accelerate, the transformation of its business.
The company’s new structure will consist of three regions: US, Americas & Europe, and Asia Pacific, Middle East & Africa. Previously the company was split into four regions. Further the number of business units have been cut to 12 from 16.
‘The new structure will increase the efficiency of BAT’s geographical footprint, optimise market prioritisation and will be based on fewer, larger business units, enabling even greater collaboration and accelerated decision-making across BAT,’ the company said.
In addition, two new management board roles will be created in order to ensure clarity of ownership, accountability and focus: a chief transformation officer and a director for Combustibles. The company named Regional Director of Europe Johan Vandermeulen as the CTO, and appointed Luciano Comin as director of Combustibles.
Johnson Matthey gained 1.3%.
The London-based speciality chemicals company said it has inked a long-term strategic partnership with Plug Power for hydrogen power.
The partnership brings together its own hydrogen technologies with Plug’s fuel cell and electrolyser solutions. It will last until at least 2030.
Chief Executive Liam Condon said: ‘For the rapidly developing hydrogen economy, this is a game-changer. By bringing together one of the largest fuel cell and green hydrogen companies in the world with JM’s technology and manufacturing capabilities, we’re creating volume and scale for green hydrogen that hasn’t existed until now.’
In the FTSE 250 index, Pets at Home was the best performer, gaining 8.5% in early trade.
The pet supplies retailer said that consumer revenue in its financial third quarter to January 5 was up 9% year-on-year with growth underpinned by a record number of consumers and volume growth. Total revenue increased by 8.8% in the quarter to £347.5 million, with like-for-like revenue up 8.3%.
It said gross margin was in line with management expectations in the third quarter.
Looking ahead, the pet supplies retailer now expects pretax profit to be at the upper end of the current market consensus range of between £126 million and £136 million. Previously, the company had guided pretax profit of around £131 million. In financial year 2021, Pets at Home reported pretax profit of £130.1 million.
The worst mid-cap performer was Synthomer.
The Essex, England-based chemicals company reported 2022 revenue of £2.6 billion and underlying earnings before interest, tax, depreciation and amortisation in the range of £262 million and £268 million. This is in line with company’s expectations, it said.
In 2021, Synthomer posted revenue of £2.3 billion and underlying Ebitda of £522.2 million.
‘The deterioration in macroeconomic conditions through the second half of 2022 reduced demand in Synthomer’s construction and coatings end markets,’ the company explained.
Synthomer will report its full-year results on March 28.
Elsewhere in London, Morses Club shares doubled to 1.19 pence from 0.55p in early trade.
The Nottingham-based doorstep lender said its current facility of £25 million remains in place until March 31 and its funders have now agreed to extend the term-out clause to March 2023.
Earlier this month, Morses Club announced it is set to wave goodbye to London’s junior AIM market. At the time it said it believes its ‘most likely’ source of future funds will come from private capital.
However, a day later JO Hambro Capital Management sold its entire stake in the company, putting the deslisting in doubt.
JO Hambro had owned 8.8 million shares and had committed to support the company’s proposed delisting from AIM. This meant shareholder support for the delisting had fallen to just under 45% from 51%. It needs the support of 75% of shareholders.
Morses said a general meeting on the cancellation of its shares and re-listing as a private company will take place on February 3.
Wall Street ended lower on Monday, as investors looked nervously ahead to the Fed interest rate decision, which will be announced on Wednesday during US market hours. The Dow Jones Industrial Average ended down 0.8% on Monday, the S&P 500 down 1.3% and the Nasdaq Composite down 2.0%.
‘After putting in a very strong start to 2023, markets lost a fair bit of ground yesterday as investors grew a little concerned about the sustainability of the current rally,’ said Deutsche Bank, noting renewed investor concern about persistent inflation.
Asian equities followed New York into the red, despite new data showing China’s factory activity returned to growth.
In Tokyo on Tuesday, the Nikkei 225 index closed down 0.4%. In China, the Shanghai Composite closed down 0.4%, and the Hang Seng index in Hong Kong was down 1.0%. The S&P/ASX 200 in Sydney closed down 0.1%.
China’s factory activity expanded in January after months of contraction, official data showed, as the world’s second-largest economy stirs back to life after Beijing ended strict Covid curbs.
Pandemic prevention measures have ‘entered a new stage’ that is allowing ‘a gradual return’ to normal life, National Bureau of Statistics statistician Zhao Qinghe said in a statement.
The official manufacturing purchasing managers’ index rose to 50.1 points this month from 47.0 in December - the first time since September the index has been above the 50 point mark that indicates growth.
The non-manufacturing PMI, which includes the services and construction sector, rose to 54.4 in January, well above the 52 points forecast by economists surveyed by Bloomberg.
‘Today’s Chinese PMIs suggested that the economy started the year with firm growth, as the relaxation of zero-Covid policy restrictions allowed a rebound in activity while the peak in the reopening wave of the coronavirus was reached in late December,’ commented Daiwa Capital Markets. ‘The improvement was most striking in the services sector.’
Gold was quoted at $1,907.53 an ounce early Tuesday in London, lower than $1,923.73 on Monday.
Brent oil was trading at $83.72 a barrel early Tuesday, down from $85.93 late Monday. An OPEC meeting is scheduled for Wednesday.
In the economic calendar, there will be a flash GDP print for the EU at 1000 GMT.
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