Source - Alliance News

The UK's economy ground to a halt over the course of the first three months of 2022, preliminary data from the Office of National Statistics showed on Thursday.

For the first quarter of 2022, UK gross domestic product is estimated to have increased 0.8% versus the immediately previous quarter, which is behind market consensus - according to FXStreet - of 1.0% quarter-on-quarter expansion.

In the final quarter of 2021, the GDP grew by 1.0% on quarterly basis.

Darren Morgan, director of economic statistics at the Office for National Statistics, said: ‘The UK economy grew for the fourth consecutive quarter and is now clearly above pre-pandemic levels, although growth in the latest three months was the lowest for a year.’

The data, Capital Economics Chief UK Economist Paul Dales said, shows the UK economy has ‘less momentum’ than thought, especially considering the ‘full hit from the cost of living crisis has been felt’.

‘The risk of recession has just risen, although strong price pressures will probably mean the Bank of England will raise interest rates further,’ Dales continued.

Annually, GDP rose 8.7% in the first quarter, but this too was behind market forecasts of 9.0% growth.

The ONS noted that the economy was 0.7% bigger than its pre-coronavirus level, which covers the final three months of 2019.

However, economic performance deteriorated during the course of the first three months of this year. Monthly estimates show that GDP rose by 0.7% in January, followed by no growth in February 2022 and a fall of 0.1% in March 2022.

‘GDP would have been even weaker in March if not for the 1.7% month-on-month rebound in construction output after the drag from Storm Eunice in February faded,’ Dales added. ‘But the 1.8% month-on-month fall in consumer-facing services GDP - after a 0.7% month-on-month rise in February - is worrying. Most of it was driven by a 1.4% month-on-month fall in retail sales and a 15% month-on-month drop in motor vehicle sales.’

Turning to services and industrial production, the picture was not any brighter. In March, services output fell by 0.2% from the month before.

‘The largest negative contribution to growth was from wholesale & retail trade, which fell by 2.8%; however, this was offset by human health & social work activities, which grew by 1.5%,’ the ONS said.

In the first quarter, services output was up 0.4% sequentially, but this was sharply behind the 2.0% growth forecast.

On an annual basis, services output rose 9.9% in March, and is now 1.4% above pre-coronavirus pandemic levels.

Industrial production output fell by 0.2% from the month before, while it was forecast to grow by 0.1%. Manufacturing production was also down by 0.2% in March, when FXStreet cited consensus flat growth.

The pound was quoted at $1.2203 early Thursday, sinking to a level not seen since March 2020, and was down from $1.2323 at the London equities close on Wednesday.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: down 2.4% at 7,173.40

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Hang Seng: down 2.3% at 19,370.41

Nikkei 225: closed down 1.8% at 25,748.72

S&P/ASX 200: closed down 1.8% at 6,941.00

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DJIA: closed down 326.63 points, or 1.0%, at 31,834.11

S&P 500: closed down 65.87 points, or 1.7%, at 3,935.18

Nasdaq Composite: closed down 373.44 points, or 3.2%, at 11,364.24

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EUR: down at $1.0495 ($1.0540)

GBP: down at $1.2203 ($1.2323)

USD: down at JP¥128.94 (JP¥130.23)

Gold: up at $1,850.30 per ounce ($1,849.37)

Oil (Brent): down at $105.42 a barrel ($107.27)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Thursday's key economic events still to come

G7 foreign ministers meeting

Germany balance of payments

1100 BST Ireland consumer price index

0830 EDT US initial jobless claims

0830 EDT US producer price index

1030 EDT US EIA weekly natural gas storage report

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UK Prime Minister Boris Johnson has refused to rule out a windfall tax on the profits of energy companies to help relieve the pressure of the cost-of-living squeeze. Chancellor Rishi Sunak has reportedly told Treasury officials to examine plans for a levy on the soaring profits of the oil and gas giants. It follows an admission by BP Chief Executive Bernard Looney, who said his firm's investment plans would not be affected by a windfall tax. In an interview with LBC, Johnson said that, while he still does not like such taxes because of the impact on investment, it is something that will have to be considered. Pressed on Looney's comments, Johnson said: ‘Well, you know, then we'll have to look it.’ However, he added: ‘The disadvantage with those sorts of taxes is that they deter investment in the very things that they need to be investing in – new technology, in new energy supply.’

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Finnish President Sauli Niinisto and Prime Minister Sanna Marin on Thursday expressed their support for NATO membership. ‘NATO membership would strengthen Finland's security. As a member of NATO, Finland would strengthen the entire defence alliance. Finland must apply for NATO membership without delay,’ they said in a joint statement, adding that an official announcement on the issue would be made on Sunday.

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Ukraine wants a spot reserved for it in the EU, even if obtaining full membership could take time, Foreign Minister Dmytro Kuleba said Thursday in Berlin. ‘It is not about the fastest possible membership for Ukraine in the EU. But what is very important for us is for this spot to be reserved for Ukraine,’ he told German broadcaster ARD.

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BROKER RATING CHANGES

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Berenberg raises SSE to 'buy' (hold) - price target 2,200 (1,690) pence

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Deutsche Bank cuts Rio Tinto to 'hold' (buy) - price target 6,000 (6,100) pence

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RBC cuts Homeserve to 'sector perform' (outperform) - price target 1200 (1300) pence

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COMPANIES - FTSE 100

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Telecommunications firm BT Group said it delivered a ‘strong’ performance in financial 2022, and has set up a new joint venture with Warner Bros Discovery to show sport in the UK and Ireland. The 50-50 JV will see BT Sport and Eurosport combine. ‘By bringing together the sports content offering of both BT Sport and Eurosport UK, the JV will have one of the most extensive portfolios of premium sports rights including UEFA Champions League, UEFA Europa League, the Premier League, Premiership Rugby, UFC, the Olympic Games, tennis Grand Slams featuring the Australian Open and Roland-Garros, cycling Grand Tours including the Tour de France and Giro d'Italia and the winter sports World Cup season,’ BT explained. Once the deal closes, the production and operational assets of BT Sport will become a wholly owned subsidiary of Warner Bros. BT will get £93 million from Warner Bros and up to £540 million by way of an earn-out. Turning back to results, BT reported pretax profit in the financial year that ended March 31 of £1.96 billion, improved from £1.80 billion in the same period a year prior. Revenue fell to £20.85 billion from £21.33 billion. BT noted revenue growth from its Openreach business was offset by a fall in Enterprise and Global, while Consumer - its biggest unit - was flat.

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Soft drinks bottler Coca-Cola HBC reported strong growth in the first quarter, with organic revenue - minus its Russian and Ukrainian operations - surged 26%. In the three months to March 31, the bottling partner of Coca-Cola Co reported group revenue growth of 31% to €1.77 billion from €1.35 billion, with Established markets up 20%, Developing up 40% and Emerging up 36%. Coca-Cola Co suspended its business in Russia during the quarter and stopped taking orders for concentrate. As a result, Coca-Cola HBC said it will now have a ‘ much smaller presence’ in the country moving forward. ‘We are evaluating all options here and will share more in due course, alongside the financial implications of any decision made for both 2022 performance and the level of non-cash charges,’ it added. Group volume was up 23% in the first quarter to 605.5 million cases from 490.8 million the year prior.

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Jet engine maker Rolls-Royce said its performance year-to-date has been in line with expectation, and it has left its 2022 guidance unchanged. ‘We are well positioned for the anticipated growth in our end markets and continue to expect positive momentum in our financial performance in 2022 despite the ongoing risks around macroeconomic uncertainties,’ the company said. It noted its Civil Aerospace business saw large engine long-term service agreement flying hours for the first four months of 2022 jump 42% versus the prior year period. ‘Passenger demand is recovering on routes where travel restrictions have been lifted, such as in Europe and the Americas, but additional Covid-19 restrictions have resulted in fewer flights in China where the situation is still evolving,’ Rolls said.

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Property investor Land Securities said it has sold 32 to 50 Strand, in London, for £195 million to Singapore-headquartered real estate investor Sinarmas. ‘The disposal is in line with Landsec's strategy to accelerate growth through recycling capital into higher return opportunities,’ it explained.

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COMPANIES - GLOBAL

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Japan's SoftBank logged a record annual net loss after a bruising period that saw its assets hit by a US tech-share rout and a regulatory crackdown in China. The technology investor reported a net loss of JP¥1.708 trillion, about $13.17 billion, in the financial year that ended in March2 – a vertiginous plunge from a JP¥4.99 trillion net profit the previous year, when huge market rallies boosted results. Reporting an eye-watering investment loss of JP¥3.4 trillion, SoftBank said its tech-focused Vision Fund has suffered falls ‘due to a decline in the share prices of most listed portfolio companies’. The losses have been deepened by the many shares they hold on Chinese ride-hailing giant Didi Chuxing and e-commerce group Alibaba, which have been hit by a crackdown by Beijing on the country's private sector.

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Siemens said it will exit the Russian market as a result of the war in Ukraine. The Munich-based conglomerate said it has now started proceedings to wind down its industrial operations and all industrial business activities. ‘We condemn the war in Ukraine and have decided to carry out an orderly process to wind down our industrial business activities in Russia. This was not an easy decision, given our duty of care for our employees and long-standing customer relationships, in a market where we have been active for almost 170 years. We are evaluating the impact on our people and we will continue to support them to the best of our abilities,’ said Chief Executive Roland Busch. Siemens also reported second-quarter results, says net income rose by 9% to €1.32 billion from €1.22 billion a year ago.

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Thursday's shareholder meetings

Alfa Financial Software Holdings PLC - AGM

Anglo Pacific Group PLC - AGM

Baillie Gifford Shin Nippon PLC - AGM

Balfour Beatty PLC - AGM

BP PLC - AGM

Bridgepoint Group PLC - AGM

Cineworld Group PLC - AGM

Circassia Group PLC - AGM

ContourGlobal PLC - AGM

ConvaTec Group PLC - AGM

Empresaria Group PLC - AGM

Eurocell PLC - AGM

FBD Holdings PLC - AGM

Genel Energy PLC - AGM

Gresham House PLC - AGM

Gym Group PLC - AGM

Hiscox Ltd - AGM

Howden Joinery Group PLC - AGM

Lloyds Banking Group PLC - AGM

Logistics Development Group PLC - AGM

Luceco PLC - AGM

Michelmersh Brick Holdings PLC - AGM

OSB Group PLC - AGM

Quilter PLC - GM re capital return proposal

Quilter PLC - AGM

Quilter PLC - GM re B share return

Rolls-Royce Holdings PLC - AGM

Schiehallion Fund Ltd - AGM

Secure Trust Bank PLC - AGM

Serinus Energy PLC - AGM

Shefa Gems LTD - AGM

SIG PLC - AGM

Unbound Group PLC - AGM

Unite Group PLC - AGM

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