JD Sports sale sign
JD Sports was the top performing stock, rising 7.1% / Image source: Adobe

London’s FTSE 100 traded higher after the opening bell on Thursday, despite some share price pressure on water utilities as woes at Thames Water deepened, while JD Sports led the way among the large-caps.

The FTSE 100 index opened up 24.70 points, 0.3%, at 7,956.68. London listed mid-caps, however, lost ground. The FTSE 250 was down 25.52 points, 0.1%, at 19,785.14.

The AIM All-Share was down just 0.24 of a point at 741.87.

The Cboe UK 100 was up 0.3% at 795.41, the Cboe UK 250 was down 0.1% at 17,216.26, and the Cboe Small Companies was marginally up at 14,644.71.

In European equities on Thursday, the CAC 40 in Paris was up 0.2%, while the DAX 40 in Frankfurt was marginally higher.

The UK slipped into a technical recession in the fourth quarter of 2023, numbers from the Office for National Statistics confirmed on Thursday.

UK gross domestic product slumped 0.3% in the three months to December from a quarter earlier, unchanged from initial ONS numbers provided in February. The UK economy had declined 0.1% quarter-on-quarter in the third-quarter of 2023.

It means the UK has entered a technical recession at the end of last year, which is generally defined as two successive quarterly falls in gross domestic product.

‘The ONS’ second bite at estimating [the fourth quarter of] 2023 GDP left last year’s minor recession intact, though it got slightly smaller with the statisticians reducing slightly the cumulative fall in output across [the third and fourth quarters] to 0.4% from 0.5% previously. There were few notable revisions to the expenditure components either,’ said Pantheon Macroeconomics analyst Rob Wood.

‘The recession was driven by consumers saving more in response to higher interest rates and fears about the impact on the economy. Two consecutive quarters of falling GDP matches the technical definition of recession, but it was minor as currently estimated and after further revisions to the data in the coming months—which tend to raise growth—we could see [the fourth quarter]’s fall in GDP revised away. In any case, the economy has already started growing again in [the first quarter].’

Sterling was quoted at $1.2608 early Thursday, down from $1.2630 at the London equities close on Wednesday. The euro traded at $1.0793 early Thursday, lower than $1.0823 late Wednesday. Against the yen, the dollar was quoted at JP¥151.36, slightly higher versus JP¥151.35.

Investors will also have an eye on the latest core personal consumption expenditures reading, the Fed’s preferred inflation gauge, which is released on Friday. Financial markets across the globe, including in London and New York, will be closed that day for Good Friday, however.

According to FXStreet cited consensus, the rate of core PCE inflation is expected to have been unmoved at 2.8% in February. The headline rate is expected to have picked up to 2.5% in February, from 2.4% in January.

The US Federal Reserve should either scale back or delay its interest rate cuts in response to ‘disappointing’ inflation data, a senior Federal Reserve official said on Wednesday.

‘In my view, it is appropriate to reduce the overall number of rate cuts or push them further into the future in response to the recent data. Shorter-term inflation measures are now telling me that progress [in reducing inflation] has slowed and may have stalled. But we will need more data to know that,’ Fed Governor Christopher Waller told a conference in New York.

He continued: ‘I see economic output and the labour market showing continued strength, while progress in reducing inflation has slowed. Because of these signs, I see no rush in taking the step of beginning to ease monetary policy.’

In the US on Wednesday, Wall Street ended higher, with the Dow Jones Industrial Average up 1.2%, the S&P 500 up 0.9% and the Nasdaq Composite up 0.5%.

In the FTSE 100, JD Sports was the top performing stock, rising 7.1%.

The retailer said it outperformed the sportswear market in the 53 weeks that ended February 3. It said like-for-like sales rose 4.2% on-year and up 8.4% organically on a constant currency basis, while total sales grew 3.6% to around £10.5 billion.

It expects pretax profit to be in line with its guided range of £915 million to £935 million, down from £991.4 million a year earlier.

‘We made good strategic progress, opening 215 new JD stores, and focusing our effort on developing JD and enhancing EPS through taking full control of ISRG and MIG,’ said Chief Executive Officer Regis Schultz.

JD Sports outlined its initial financial 2025 profit forecast of £900 million to £980 million, while saying trading in the new financial year-to-date is in line with its expectations after seven weeks.

Severn Trent fell 1.4%, while United Utilities lost 1.2%. Troubled peer Thames Water has said its shareholders will not be injecting the first £500 million of funding that was agreed last summer into the group as industry regulations make its business plan ‘uninvestible’.

Thames Water – the UK’s biggest water supplier with 15 million households across London and the South East – said the funding plan drawn up last July was subject to conditions, including a business plan that is supported by ‘appropriate regulatory arrangements’.

Aviva fell to a low of 492.30 pence per share after the open, before levelling out to a 0.1% fall at 495.50p.

Exane BNP cut its rating for Aviva to ’underperform’ from ’neutral’, setting a lowered target price of 420p from 445p. Exane BNP also cut Legal & General to ’neutral’ from ’outperform’, lowering its price target to 270p from 280p. L&G shares fell 0.4%.

Meanwhile, the UK Competition & Markets Authority decided not to refer the Aviva’s planned acquisition of AIG’s life-insurance and retirement-services division AIG Life to a phase 2 investigation.

The UK competition watchdog said this decision was based on the information currently available and that a further announcement on the decision will be made ‘as soon as is reasonably practicable’.

In February, the CMA said it was investigating the deal, saying it could reduce competition in the UK services sector.

In the FTSE 250, Spirent was the top performing stock, surging 11%.

The automated test and assurance solutions provider said it agreed to a £1.16 billion takeover from Keysight Technologies, saying the offer was superior to Viavi’s existing £1.01 billion bid.

The latest offer rates Spirent at 201.5p per share, 199.0p in cash and 2.5p in the form of a special dividend.

Spirent Chair Bill Thomas commented: ‘The board of Spirent is pleased to recommend Keysight’s cash offer for Spirent, which is an increase of 15% to the Viavi proposal.’

Elsewhere in London, Capricorn Energy rose 2.7%.

The Egypt-focused upstream energy company said pretax loss in 2023 narrowed to $102.1 million from $148.5 million a year earlier, despite revenue falling 12% to $201.0 million from $229.6 million.

The loss narrowed due to falling costs, including general exploration costs down 45% to £26.9 million from £48.7 million and unsuccessful exploration well costs falling 65% to £20.5 million from £57.8 million.

Capricorn Energy also proposed a $50 million special dividend to be paid in the second quarter of 2024, subject to shareholder approval.

In Asia on Thursday, the Nikkei 225 index in Tokyo lost 1.5%. In China, the Shanghai Composite improved 0.6%, while the Hang Seng index in Hong Kong rose 0.9%. The S&P/ASX 200 in Sydney closed up 1.0%

Brent oil was quoted at $85.80 a barrel early Thursday, up from $85.41 late Wednesday.

Gold was quoted at $2,195.83 an ounce early Thursday, higher against $2,190.33 at the close on Wednesday.

Still to come on Thursday’s economic calendar, US gross domestic product and initial jobless claims figures are both out at 1230 GMT.

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Issue Date: 28 Mar 2024