Yahoo Finance FTSE 100 Live: ‘Economy flickers to life’ but blue-chips lose 1%, Heathrow passenger numbers climb
The British economy finally saw some growth, albeit still slowly, in the second quarter, as GDP grew by 0.2%.
That was better than economists’ expectations of stagnation, and puts a the possibility of a recession further in the distance. And despite the slow pace, it was the fastest growth since the first quarter of 2021.
Read more on the latest GDP figures here
FTSE 100 Live Friday
Strong June lifts Q2 GDP by 0.2%
FTSE 100 ends week in the red
Heathrow reports July passenger surge
Santander to cut selected mortgage rates from Monday
15:38 , Daniel O'Boyle
More lenders have announced mortgage rate reductions and new deals, following a stream of rate cuts earlier this week.
Santander said that from Monday, selected fixed purchase and remortgage rates for homeowners will decrease by up to 0.29 percentage points.
It will announce details of the new rates on Monday and added there are no changes planned to its residential tracker mortgages or buy-to-let deals.
Co-Operative Bank to buy Sainsbury’s 3,500 mortgages months after talks collapsed
15:09 , Daniel O'Boyle
The Co-Operative Bank is set to buy Sainsbury’s Bank’s portfolio of 3,500 mortgages, worth around £479 million, months after earlier talks had collapsed.
Sainsbury’s mortgage holders will have their loans transferred to the Co-Operative Bank over the next year “to ensure a smooth process”.
Nick Slape, CEO of The Co-operative Bank said: “We are delighted to have agreed this transaction with Sainsbury’s Bank. Once the transfer activity is complete, we look forward to welcoming the new customers who will benefit from our ambitious new technology platform, which will simplify our banking services and will make us more efficient, giving us the flexibility to introduce new products and services.
Tesco to swap cheaper product lines into convenience shops
14:23 , Daniel O'Boyle
Tesco is to swap cheaper product lines into its convenience stores as shoppers battle the rising cost of living.
It revealed that more than 50 everyday products in its smaller Express shops will be replaced by better priced alternatives, many from its own-brand range.
The move comes as German discounter rivals Aldi and Lidl have witnessed sharp sales growth in recent months as cash-strapped shoppers seek to trim their shopping bills.
FTSE 100 down nearly 100 points
13:51 , Daniel O'Boyle
The FTSE 100 has lost nearly 100 points today, fallling further after today’s opening.
The index of London blue-chips is currently at 7,520.59, 98 points below where it started the day.
Big fallers include Entain, Antofagasta and Prudential.
City Voices: London is a beacon for talent, so why is our unemployment rate higher than the national average?
13:25 , Muniya Barua
Young Londoners will be opening their exam results with trepidation later this month and potentially considering their future career path.
Having overcome such adversity during the pandemic, students choosing to enter the world of work will find the skills they need to succeed are rapidly changing due to technological advances and the race to reach net zero.
At the same time, businesses across the capital are grappling with severe skills shortages that are acting as a barrier to improving growth and holding back productivity.
Later start worth £145m as Lionesses get ready to roar in Women’s World Cup quarter-final
12:55 , Daniel O'Boyle
London pubs are expected to fill with football fans for the first time in the Women’s World Cup on Saturday lunchtime when England take on Colombia for a place in the semi-finals — as Lionesses fever hits new heights.
The later 11.30am kick-off time on a Saturday and the progress of the team after they got through the group of 16 first knockout round with a tense penalty shoot-out win over Nigeria on Monday morning has seen a surge in excitement.
Fans are expected to spend an estimated £145 million this weekend, with six million people forecast to tune in at home, according to savings site VoucherCodes.co.uk, with around £116 million being spent on match day essentials such as beer and snacks. As many as 1.9 million supporters are expected to head off to pubs to cheer on the team, spending around £29 million.
The Standard View: The UK economy is stuck in a low-growth trap
12:29
The UK economy is not in recession but it is stuck in a low-growth trap.
GDP in the three months to June registered a 0.2 per cent jump, marking the fifth successive quarter in which the economy has kept its head above water since a 0.5 per cent advance in the first quarter of 2022 — when Britain was still bouncing back from the Covid-19-induced recession.
June was a strong month but our economic performance must be measured by more than single-month or even quarterly figures.
The British economy remains smaller today than it was pre-pandemic, while the US is more than five per cent larger. And if inflation fails to fall, higher interest rates may tip the country into recession.
City Comment: Enjoy the economic cheer of surprise GDP growth... for now
12:14 , Jonathan Prynn
I had almost forgotten what it feels like to be pleasantly surprised by UK economic data.
So the 0.5% pick up in GDP in June was a real tonic on a Friday morning.
By many measures the good ship UK plc is proving a remarkably sea-worthy vessel considering the storms it has sailed through.
But as ever there is a sting in the tail. Any numbers that point to frothier than expected economic activity immediately put pressure on the Bank of England to, in the immortal words of former Federal Reserve chairman William McChesney Martin, take the punchbowl away from the party through more interest rate pain.
City bets on fresh Bank of England interest rate hike as GDP leap beats forecast
11:45 , Daniel O'Boyle
City markets were pricing in another interest rate price hike today after stronger than expected economic growth in June sent gilt yields higher.
GDP grew 0.5% in the month, a level not bettered since October 2022, against City forecasts of around 0.3%. Economists said the growth was flattered by a bounce-back from May, which lost a day’s output to the extra Bank Holiday for the King’s Coronation, but nonetheless pointed to a resilient economic performance.
The warm weather is also thought likely to have helped sectors such as retail. Detailed figures from the Office for National Statistics showed all three major sectors of the economy advancing for the first time in nine months.
London business groups team up to deliver plan for ‘higher-paying jobs’
10:58 , Daniel O'Boyle
London’s business groups have teamed up to deliver a new plan for skills training that they say will put Londoners in “better, higher-paying jobs”.
BusinessLDN, Federation of Small Businesses London, the London Chamber of Commerce and CBI London outlined steps to boost skills including new AI and green engineering courses and a ”one-stop-shop” for jobseekers to get support and advice.
The recommendations also include creation of a coalition at the borough level to help boost basic digital skills for disadvantaged Londoners, in order “to ensure every Londoner has the everyday digital skills needed for life and work”
China fears hit the FTSE 100, property stocks fall in FTSE 250
10:26 , Graeme Evans
The FTSE 100 index is 1% lower, down 78.56 points at 7540.04, amid more worries over China’s stuttering economy.
Hong Kong’s Hang Seng index finished the session 0.9% lower while the Shanghai Composite lost 2% at the end of a week in which China reported worse-than-expected trade figures and a slide into deflation territory.
The struggles of the world’s second largest economy put pressure on European stock market sentiment, despite July’s inflation reading of 3.2% fuelling hopes of a soft landing for the US economy.
Fears over weaker China demand meant Glencore slipped 9p to 445.85p and copper miner Antofagasta declined 37p to 1545p, while BP led a poor session for the energy sector by falling 6.95p to 483.95p.
Interest rate-sensitive stocks also struggled on the back of the latest UK GDP figures, leaving Piccadilly Lights owner Land Securities 8.2p lower at 632.8p and retail warehouse business Segro off 15p to 736p.
Former blue-chip British Land, whose portfolio includes the Broadgate and Paddington Central campuses, fell 10.7p to 323.8p and Great Portland Estates shed 14.4p to 414p as the FTSE 250 index weakened 102.91 points to 18,890.90.
North Sea explorers Harbour Energy also retreated 5.1p to 254.5p and Ithaca Energy weakened 4.6p to 164p.
On the risers board, professional services firm FDM Holdings jumped 61p to 579p after its half-year results showed a 34% rise in profits to £29.8 million.
Deliveroo shares, meanwhile, were 1.2p higher at 129p after Credit Suisse raised its target price to 183p following yesterday’s results.
Huge Wilko store estate would be tough to re-let, new data suggests
09:54 , Daniel O'Boyle
A number of landlords will struggle to quickly re-let the huge Wilko estate following the chain’s collapse, data suggests as it emerged scores of shops are still sitting empty from two other high-profile retail casualties.
Homeware chain Wilko fell into administration on Thursday in a move that puts 12,500 jobs at risk.
The 93-year-old business, which has grappled with inflationary pressures and felt the impact of the cost of living crisis on customer spend, was unable to secure a rescue deal. PwC will work on the administration including any search for buyers of the brand name or its around 400 shops.
Another year of big losses for Odeon
09:52 , Simon Hunt
British cinema chain Odeon is struggling to get its finances back into shape after the pandemic, new filings show, as a sluggish pick-up in footfall and a dearth of blockbuster film releases in 2022 led to another year of 8-figure losses.
Company revenues of £202.9 million remain 18% below pre-Covid levels Pre-tax losses for the year stood at £36.8 million. Despite soaring inflation, average ticket prices fell 1% to £7.95, while average customer spend on food and drink sunk 12% to £3.46.
The release of some big Hollywood titles in 2022, including Tom Cruise’s Top Gun: Maverick and Black Panther: Wakanda Forever, spurred a more than 50% year-on-year increase in cinema attendance to 15 million.
The firm refinanced its £400 million debt that was due to mature as soon as next week, in favour of a new debt facility with 12.75% interest that matures in 2027.
Odeon conceded that its going concern status depended on a promise of financial support from its parent, US cinema giant AMC, from whom it expected to require further funding for at least another year to keep it afloat.
“A more robust slate of major movie releases is scheduled during 2023, which has generated optimism that attendance and revenue levels will continue to improve,” Odeon said.
Fixed mortgage rates firmly on the way down
09:33 , Daniel O'Boyle
The decline in mortgage rates after a surge to 15-year highs seemed clearer today, as rates declined further.
According to Moneyfacts, the average two-year fixed residential mortgage rate is 6.80%, down from 6.83% yesterday as lenders including Halifax and First Direct brought in new lower rates from today.
The average five-year fixed rate fell from 6.33% to 6.28%.
Buy-to-let rates also dipped, but more slowly.
Rates have been edging down for the past three weeks after June inflation figures came in below expectations, leading traders to believe the Bank of England will not raise interest rates as high as initially feared.
FTSE 100 lower on China fears, FDM surges 12% in FTSE 250
08:56 , Graeme Evans
Concerns over China’s property sector have fed into a weaker session for the London market, with the FTSE 100 index down 0.6% or 45.60 at 7573.
Prudential lost 10.5p to 1028p and mining stocks also came under pressure after the Shanghai Composite fell 2% and the Hang Seng weakened 0.7%.
BT Group shares led the risers board, but the improvement was a modest 0.7p to 115.95p.
The FTSE 250 index fell 45.91 point to 18,947.90, driven by falls in the oil and gas sector after North Sea explorers Harbour Energy and Ithaca Energy weakened 2%.
IT-focused professional services firm FDM Holdings jumped 12% or 61p to 579p after its half-year results showed a 34% rise in pre-tax profits to £29.8 million.
Key market data
08:36 , Daniel O'Boyle
Take a look at our key market data as the FTSE 100 fell by 0.5% in early trading.
Some of yesterday’s big fallers, such as Entain and Spirax-Sarco, continued their declines today.
‘Unusual’ manufacturing surge drove GDP growth
08:09 , Daniel O'Boyle
James Smith, developed markets economist at ING, said the positive GDP surprise could mostly be put down to ‘unusual’ levels of manufacturing growth.
“The UK economy grew faster than expected in June, helped by a surge in manufacturing production,” he said. “Monthly GDP rose by 0.5% on the month, though the 2.4% increase in manufacturing between May and June is extremely unusual (at least outside of the Covid-19 period). The result is that overall second-quarter economic growth came in at 0.2%, a bit higher than expected.
“The ONS puts this down to pharmaceuticals and car production. And while the latter can probably be partly explained by the ongoing improvement in supply conditions (production is up 15% since last summer’s low), it’s hard to explain why so much of this growth fell in June specifically. The impact of May’s bank holiday appears to have been fairly minimal in comparison to past royal events.
“Still, while much of the positive surprise can be explained by those manufacturing sectors, the rest of the economy looks fairly resilient too. That was helped by better weather in June which seems to have boosted the likes of hospitality and retail.”
May bank holidays ‘make the economy look stronger than it really is'
07:40 , Daniel O'Boyle
The growth in GDP was not enough to make Ruth Gregory, deputy chief UK Economist at Capital Economics, optimistic. She still predicts a recession this year, and said the June numbers look better than the reality because they are being compared to a month with three bank holidays.
“The 0.5% m/m rise in real GDP in June and 0.2% q/q increase in Q2 confirmed that a recession has so far been avoided,” she said. “But with much of the drag from higher interest rates still to come, we are sticking to our below-consensus forecast that the UK is heading for a mild recession later this year.
“On the face of it, June’s 0.5% m/m rise looks encouraging. It was stronger than we and the consensus had forecast (0.3% m/m) and left the level of GDP in June 0.8% above its pre-pandemic February 2020 level. However, as the rise was mostly due to the return to the normal number of working days in June after May’s bank holiday for the King’s Coronation, it makes the economy look stronger than it really is.
“The ONS didn’t provide an estimate of the impact of the extra bank holiday. But it did note that it explains some of the 1.8% m/m gain in industrial production as well as some of the 0.2% m/m in services output. If the net effect was similar to the extra bank holiday for the Queen’s funeral last September, then it might have boosted GDP growth by 0.3ppts.”
Heathrow passenger numbers climb to 7.7 million in July
07:37 , Daniel O'Boyle
Passenger numbers at Heathrow airport soared to 7.7 million in July, up 21.4% from last year as Brits sought to escape the bad weather back home.
While the growth was strong, the numbers are still below pre-pandemic levels.
Traffic to Turkey was at record highs, while there were near-record numbers of passengers going to Portugal, Gibraltar and Italy.
New York remains the most popular destination.
Heathrow CEO John Holland-Kaye said: "It's great to see so many passengers getting away to grab some summer sun. We've got a great range of popular destinations and our teams are delivering excellent service which will ensure your travels get off to the best start."
Holland-Kaye will leave later this year, but the date hasn’t been announced yet.
Economy “flickering to life"
07:31 , Daniel O'Boyle
Matthew Fell, director of competitiveness at BusinessLDN, said that while the latest GDP growth was good news,, it was still far from where the economy should be.
“These figures show that the economy is flickering into life, but the UK is stuck in a low-growth rut. There are several low-cost measures where the Government could provide a much-needed boost to growth, including reversing the decision to end VAT-free shopping for international shoppers,” he said.
“Powering up productivity is also essential to move out of the economic slow lane and remedy the ongoing cost of living crisis. The Government should unleash innovation with a deal on Horizon Europe and boost digital skills capabilities to take advantage of AI and emerging technologies.”
Inflation warning cools US shares, FTSE 100 seen lower
07:22 , Graeme Evans
A warning by a Federal Reserve official of “more work to do” in the fight against inflation meant US markets surrendered initial gains to finish broadly flat last night.
The Dow Jones Industrial Average opened 350 points higher after the annual rate of consumer prices rose by less than expected in July to 3.2%, a figure that fuelled expectations that the central bank won’t need to continue hiking interest rates.
However, the mood changed after the comments by San Francisco Fed President Mary Daly as the Dow finished just 0.15% or 53 points higher.
The FTSE 100 index closed up 0.4% yesterday but CMC Markets expects the top flight to open 42 points lower at 7576 following the Wall Street sell-off.
Asia markets ended the week in the red, with the Hang Seng in Hong Kong down 0.8% and the Shanghai Composite off 1.5%.
Could GDP rise mean higher interest rates?
07:11 , Daniel O'Boyle
Joseph Calnan, corporate FX dealing manager at Moneycorp, said the better-than-expected GDP figures might be a “positive plot twist”, but they also increase the xchance of higher interest rates.“June’s stronger-than-expected growth feels like the first positive surprise in a long run of economic plot twists,” Calnan said. “However, both GDP and inflation are still off where they need to be, with the Bank of England and government policymakers clearly struggling to deliver on their respective remits.
“The thornier question is what this will mean for interest rates. What the BoE has been looking for in its relentless campaign of back-to-back interest rate hikes is a meaningful slowdown in the economy, and this doesn’t hit that brief.
“Despite the backdrop of spiralling wage growth and a hot labour market; it’s possible the 25 bps rate rise forecast at the next MPC meeting will remain. But, as the past few months have shown us, you can never be sure which way the next set of economic indicators will go.”
UK economy unexpectedly grows
07:02 , Daniel O'Boyle
UK GDP was up by 0.2% in the second quarter of the year, defying expectations of stagnation.
The economy grew by a stronger-than-expected 0.5% in June as good weather boosted many sectors.
That helped the quarterly figure also rise, staving off fears of a recession, which is typically defined as two consecutive quarters of contraction.
ONS Director of Economic Statistics Darren Morgan said: “The economy bounced back from the effects of May’s extra bank holiday to record strong growth in June. Manufacturing saw a particularly strong month with both cars and the often-erratic pharmaceutical industry seeing particularly buoyant growth.
“Services also had a strong month with publishing and car sales and legal services all doing well, though this was partially offset by falls in health, which was hit by further strike action.
“Construction also grew strongly, as did pubs and restaurants, with both aided by the hot weather.
“Across the quarter as a whole, GDP grew a little with widespread growth across manufacturing – aided by falling raw material prices – computer programming and hospitality.”
Morning refresh: What you need to know to start the day
Thursday 10 August 2023 22:07 , Simon Hunt
Good morning from the City desk of the Evening Standard.
High street chain Wilko yesterday collapsed into administration, putting 12,000 jobs at risk. The 93-year-old retailer has been unable to find emergency investment to save its 400 shops across the UK. Boss Mark Jackson said: “We left no stone unturned when it came to preserving this incredible business but must concede that with regret, we’ve no choice but to take the difficult decision.”
Like many businesses, Wilko has been hit by inflationary pressures supply chain challenges as well as fierce price competition among budget retailers. It is the first major high street chain to fall victim to the tough trading environment -- but it may not be the last.
City eyes are on UK GDP figures to be released this morning. Monthly real gross domestic product (GDP) is estimated to have fallen by 0.1% in May 2023 after growth of 0.2% in April 2023. Will that economic contraction have persisted into June?
Here’s a summary of our other headlines from yesterday:
Deliveroo could be about to announce its first dividend as underlying profits grow faster than expected
Entain sets aside £585 million to settle HMRC Turkish bribery probe
Persimmon profits slump as reservations fall 35% and forward sales book down 27% in latest sign of severe strain in housebuilding market
And...when is an office not an office? Zoom opens London ‘engagement hub’
