January rebound in GDP lifts sterling / Image Source: Adobe

London’s FTSE 100 underwhelmed on Wednesday, achieving only the most fractional of gains, while peers in Paris and Frankfurt hit record highs.

Favourable gross domestic product data lifted sterling above the $1.28 mark and helped strengthen the idea that a UK recession will only be brief.

Elsewhere, Direct Line shares fell as Belgian insurer Ageas came knocking again as it looks to buy the insurer. Balfour Beatty rose as it announced a buyback, and investor Seraphim Space climbed as it said the lofty heights of space technology investments helped it weather the challenges that come from geopolitical tensions back down on earth.

The FTSE 100 index was up just 0.42 of a point to 7,748.23. The FTSE 250 climbed only 3.10 points,

at 19,568.31, though the AIM All-Share added 3.56 points, 0.5%, at 741.60.

The Cboe UK 100 was flat at 775.92, the Cboe UK 250 fell 0.2% to 16,941.50, and the Cboe Small Companies lost 0.1% to 14,719.27.

In European equities on Wednesday, the CAC 40 in Paris added 0.8%, and DAX 40 in Frankfurt rose 0.1%. The DAX spiked above 18,000 points for the first time earlier Wednesday, but traded below that threshold in the early afternoon. The CAC 40 traded around at a record level.

Helping push the DAX higher, E.ON climbed 6.1% as the electric utility pledged to increase investment by 27% over the next five years and reported sizeable growth in revenue and profit in 2023. Retailer Zalando jumped 13% as it set out growth goals of its own.

In Paris, BNP Paribas added 2.8% as it plans to return a total of about €20 billion to shareholders from 2024 to 2026.

The pound climbed to $1.2803 early Wednesday afternoon in London, from $1.2783 at the time of the London equities close on Tuesday. The euro rose to $1.0944 from $1.0916. Against the yen, the dollar traded at JP¥147.93, rising from JP¥147.76.

According to the Office for National Statistics, UK gross domestic product expanded 0.2% on-month in January, in line with FXStreet cited consensus. UK GDP had shrunk 0.1% in December from November.

Numbers last month had showed the UK economy slipped into recession in the three months to December.

UK gross domestic product slumped 0.3% in the fourth quarter of 2023 from the third quarter, according to figures from the ONS. The UK economy already had declined 0.1% in the third quarter from the second.

Deutsche Bank analyst Sanjay Raja commented: ‘Big picture: the economy is starting to turn a corner. The technical recession that the UK slipped into late last year will be short-lived. And we should see growth gradually return to its trend rate over the course of the year, as sentiment continues its uptrend and fiscal and monetary policy loosen through 2024.’

The next Bank of England decision is due a week on Thursday.

In New York on Tuesday, the Dow Jones Industrial Average ended up 0.6%, the S&P 500 surged 1.1% and the Nasdaq Composite jumped 1.5%.

The major benchmarks are set for a mixed open on Wednesday, however. The Dow is called up 0.1%, the S&P down 0.1% and the Nasdaq 0.3% lower.

AJ Bell analyst Russ Mould commented: ‘Oracle enjoyed a bumper day on the US market yesterday after its quarterly results were well-received and it teased a joint announcement with AI chips giant Nvidia, expected to follow next week. Nvidia’s shares also pressed ahead, rising more than 7% which itself should keep a lot of people happy. It continues to be the poster child for AI and that theme is still red hot as far as investors are concerned.’

In London, Direct Line shares fell 4.7% as it rebuffed another takeover tilt from Belgian insurer Ageas.

Ageas Chief Executive Hans De Cuyper said the improved possible offer ‘delivers substantial cash proceeds to Direct Line shareholders, whilst ensuring they benefit from the material value creation that we believe the combination of the UK businesses of Ageas and Direct Line will deliver’.

But the Bromley, England-based motor and home insurer rejected the modestly improved terms calling them ‘unattractive’.

Direct Line said the latest proposal, received on Saturday, comprised 120 pence in cash and one new Ageas share for every 28.4 Direct Line share.

At the closing share price last Friday, the day before the proposal was received, this implied a value of 237p per Direct Line share. The offer would value all of Direct Line around £3.07 billion.

Ageas traded 0.6% higher in Brussels.

Ferrexpo fell 4.4% as it announced after the equities close Tuesday it will need more time to finalise annual results.

The iron pellet producer said this is due to the ‘potential proceedings in Ukraine’ concerning its subsidiary Ferrexpo Poltava Mining.

Publishing results Wednesday, however, and to rave reviews, infrastructure firm Balfour Beatty rose 8.6%.

It reported a 15% drop in pretax profit to £244 million in 2022 from £287 million in 2022.

This was despite a 7.4% increase in revenue, including joint-ventures and associates, to £9.60 billion from £8.93 billion in 2022. Statutory revenue, which excludes those items, was 4.8% higher at £7.99 billion from £7.63 billion.

Balfour said the lower profit in 2023 was predominantly due to lower gains on investment disposals as previously guided, while a £56 million tax credit relating to the recognition of additional UK tax losses in 2022 did not repeat.

Balfour lifted its final dividend by 14% to 8.0 pence from 7.0p. It meant its annual dividend was 10% higher at 11.5p from 10.5p. In addition, it said it plans to repurchase £100 million of its stock during the 2024 phase of its share buyback programme.

Elsewhere, Seraphim Space Investment Trust climbed 8.0%. The investor said that the ‘counter-cyclical nature’ of the space technology sector has been a good tonic for the ‘existential challenges posed by heightened geopolitical tensions and climate change’.

The company said its net asset value per share grew 1.8% to 94.57 pence on December 31, from 92.90p on June 30.

Brent oil was quoted at $83.00 a barrel early Wednesday afternoon, up from $82.49 at the time of the London equities close Tuesday. Gold was quoted at $2,163.02 an ounce, largely flat from $2,163.49.

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Issue Date: 13 Mar 2024