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LONDON MARKET OPEN: Stocks up as UK out of technical recession

Stocks in London started strong on Friday following the Bank of England’s dovish hold on interest rates on Thursday, as new data showed UK gross domestic product reached a stronger-than-expected level in March.

The FTSE 100 index opened up 43.05 points, 0.5%, at 8,424.40. The FTSE 250 was up 68.41 points, 0.3%, at 20,599.71, and the AIM All-Share was up 2.06 points, 0.3%, at 785.76.

The Cboe UK 100 was up 0.6% at 842.48, the Cboe UK 250 was up 0.4% at 17,883.51, and the Cboe Small Companies was down 0.5% at 15,965.01.

In European equities on Friday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both up 0.5%.

At its May meeting, the Bank of England’s Monetary Policy Committee voted by a majority of 7 to 2 to maintain bank rate at 5.25%. Two members preferred to reduce the bank rate by 0.25 percentage points, to 5.00%.

Seven members, Bank of England Governor Andrew Bailey, Sarah Breeden, Ben Broadbent, Megan Greene, Jonathan Haskel, Catherine Mann and Huw Pill, voted in favour of the status quo.

Swati Dhingra and BoE Deputy Governor Dave Ramsden voted for a cut.

The UK economy grew ahead of expectations in March and in the first quarter of 2024, according to numbers on Friday.

According to the Office for National Statistics, UK GDP rose by 0.4% in March from February, ahead of FXStreet cited consensus of 0.1% growth. UK GDP had expanded 0.2% on-month in February, according to revised data.

In the first quarter of 2024, GDP is estimated to have risen 0.6%, beating expectations of a 0.4% rise and following a 0.3% decline in the fourth quarter of 2023 and a 0.1% decline in the third quarter. Compared with the same quarter a year ago, GDP rose 0.2%.

‘The UK economy powered out of its technical recession in the first quarter, judging by the initial GDP figures released today. The economy expanded by a whapping 0.6% quarter-on-quarter. Admittedly the data underlying that number has been pretty volatile. Some of that bounce – and the 0.3% contraction that came before it in the fourth quarter – is linked to a suspiciously large fall in retail activity at the end of last year which was fully recouped in January,’ said ING analyst James Smith.

‘Likewise, GDP increased by 0.4% in March alone, and some of the drivers of that (like hospitality and administration) look more like noise than signal. Some caution should therefore be taken when interpreting these figures, just like the weaker numbers at the end of last year. Still, it tallies with other economic indicators which suggest the economy is entering a period of stronger growth.’

Sterling was quoted at $1.2528 early Friday, higher than $1.2511 at the London equities close on Thursday.

The euro traded at $1.0781 early Friday, up from $1.0775 late Thursday. Against the yen, the dollar was quoted at JP¥155.73 versus JP¥155.61.

In London’s FTSE 100, miners led the way, with Antofagasta up 2.4%, Glencore up 2.2% and Anglo American up 1.6%.

Gold was quoted at $2,366.02 an ounce early Friday, higher than $2,332.88 on Thursday.

British Airways owner IAG rose 1.3%, after it said revenue in the first quarter of 2024 rose to €6.43 billion from €5.89 billion a year earlier.

Operating profit multiplied to €68 million from €9 million, while pretax loss narrowed to €87 million from €121 million.

‘Our group benefits from the strength of our core markets - North Atlantic, South Atlantic and intra-Europe - and the performance of our brands. Investment across the group in transformation is delivering encouraging improvements in punctuality and customer experience at our airlines,’ said Chief Executive Officer Luis Gallego.

‘We are well-positioned for the summer. The high demand for travel is a continuing trend. IAG expects non-fuel costs to increase slightly in 2024, reflecting investment. Net debt on March 31 stood at €7.44 billion, down from €9.25 billion a year earlier.’

In the FTSE 250, TBC Bank rose 1.2%.

The Tbilisi, Georgia-based lender announced a share buyback programme of up to ₾75 million or £22.4 million, after it reported pretax profit in the first quarter of 2024 rose to ₾343.2 million, or £102.3 million, from ₾296.3 million a year earlier.

Total operating income rose to ₾618.0 million from ₾532.2 million, with net interest income up to ₾442.8 million from ₾366.8 million, net fee and commission income up to ₾104.3 million from ₾92.4 million, while other non-interest income ticked down to ₾70.8 million from ₾73.0 million.

TBC Bank’s total customer base at March 31 rose to 17.9 million from 13.3 million a year earlier.

Looking ahead, Chief Executive Officer Vakhtang Butskhrikidze commented: ‘I believe that the group is well positioned to build further on this strong start to the year and deliver excellent results for our shareholders in 2024, as well as ensuring we are on track to meet our strategic targets for next year.

Elsewhere in London, Ultimate Products lost 17%, despite launching a share buyback programme of up to £1 million to run until the end of July.

This was because the owner of homeware brands, including Salter and Beldray, said revenue fell by 7% in the three months ended April 30, its third quarter.

Ultimate Products said trading was hit by a slowdown in near-term sales from landed stocks, typically at higher gross margin, reflecting the broader slowdown seen in retail sales to consumers.

It expects these trading conditions will continue throughout its fourth quarter.

Brent oil was trading at $84.25 a barrel early Friday, higher than $83.62 late Thursday.

Israeli Prime Minister Benjamin Netanyahu said Israel will defend itself ’alone‘ if necessary, after Washington threatened to withhold further arms should Israeli troops begin a large-scale push into the southern Gaza Strip city of Rafah.

He said Israel would fight ’with our fingernails‘ to win, in his first public statement after the White House said it would restrict arms supplies in the case of a broader attack on Rafah.

Israeli operations in Rafah are so far mainly limited to the east of city, where an evacuation order was issued at the start of the week.

Secretary of State Antony Blinken told his Egyptian counterpart that the US opposes forced relocation of Palestinians from Gaza, after Israel seized the border crossing at Rafah.

In a telephone call with Egyptian Foreign Minister Sameh Shoukry, Blinken reaffirmed President Joe Biden’s ’clear position that the US does not support a major military operation in Rafah and the US’ rejection of any forced displacement of Palestinians from Gaza,‘ State Department spokesperson Matthew Miller said.

Blinken ’also expressed the US’ support for the reopening of Rafah crossing and the continued flow of urgently needed humanitarian assistance,‘ Miller said.

In Asia on Friday, the Nikkei 225 index in Tokyo ended up 0.4%. In China, the Shanghai Composite ended marginally up, while the Hang Seng index in Hong Kong was up 2.3% in late dealings. The S&P/ASX 200 in Sydney closed up 0.4%.

In the US on Thursday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.9%, the S&P 500 up 0.5% and the Nasdaq Composite up 0.3%.

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