Stocks up amid growth for UK economy; Fed in focus

(Alliance News) - Stock prices in London opened slightly higher on Wednesday morning as investors cheered renewed, albeit minor, growth for the UK economy in April.

The FTSE 100 index opened up 10.82 points, or 0.1%, at 7,605.60. The FTSE 250 was up 18.66 points, or 0.1%, at 19,207.16, and the AIM All-Share was up 0.33 of a point at 795.05.

The Cboe UK 100 was up 0.1% at 758.65, the Cboe UK 250 was up 0.1% at 16,727.40, and the Cboe Small Companies was up 0.1% at 13,296.33.

The UK economy is estimated to have grown 0.1% in the three months to April.

The Office for National Statistics said real gross domestic product is estimated to have grown by 0.2% in April, after shrinking by 0.3% in March.

Looking at the broader picture, GDP grew by 0.1% in the three months to April.

Nicholas Hyett, an investment analyst at Wealth Club, said chances of a 0.5% rate hike by the Bank of England next week "just got higher" as a result of the growth data.

"The GDP growth, albeit modest, creates the space for the Bank of England to be more aggressive in its rate hikes," he said.

The positive GDP figures follow a UK jobs report on Tuesday that showed that unemployment edged down in the three months to April while pay growth accelerated.

The Bank of England announces its interest rate decision on Thursday next week. Before then, the US Federal Reserve will be the focus of market attention.

The Fed announces its latest monetary policy decision at 1900 BST on Wednesday, after the European close. A press conference with Chair Jerome Powell follows at 1930 BST.

The US annual consumer price inflation rate eased to 4.0% last month from 4.9% in April, according to the Bureau of Labor Statistics on Tuesday. The figure for May came in below market consensus of 4.1% inflation.

The cooler-than-expected headline inflation number boosted expectations that the US central bank will hold interest rates steady on Wednesday.

Markets now see a 95% chance of rates staying where they are, according to the CME FedWatch Tool. Last week, markets saw just a 73% chance of this outcome.

Up to this point, the Fed has moved faster than the Bank of England. The US federal funds rate currently stands at 5.00% to 5.25%, while the UK bank rate is 4.50%.

Wall Street ended higher on Tuesday in the wake of the inflation data and increasing confidence that the Fed will pause its rate rises. The Dow Jones Industrial Average closed up 0.4%, the S&P 500 up 0.7% and the Nasdaq Composite up 0.8%.

The dollar was mixed as the US central bank's decision loomed.

The pound was quoted at USD1.2613 early on Wednesday in London, higher compared to USD1.2609 at the close on Tuesday. The euro stood at USD1.0788, lower against USD1.0795. Against the yen, the dollar was trading at JPY140.04, virtually unchanged from JPY140.05 on Tuesday.

In London, Entain was the worst blue-chip performer in early morning trade, down 9.6% at 1,194.50 pence, after a share placing.

The sports betting and gambling company raised about GBP600 million through a placing and retail offer to help fund its acquisition of STS, Poland's leading sports-betting operator.

The placing price of GBP12.30 represented a 6.9% discount to Entain's closing share price of GBP13.22 on Tuesday.

Shell was up 0.5%. The oil major said it plans to buy back shares worth at least USD5 billion in the second half of 2023. This is 25% larger than the ongoing USD4 billion share buyback programme that Shell had announced when it released its 2022 results in February.

Further, Shell said it aims to reduce capital spending to between USD22 billion and USD25 billion per year for 2025, compared to USD22.60 billion in 2022.

Shell also said it will keep crude oil production steady until 2030 instead of a previously planned cut of 1% to 2% per year until the end of the current decade.

The company said it will stabilise liquids production to 2030, with Chief Executive Officer Wael Sawan, who started his role at the start of 2023, scrapping the plan of his predecessor Ben van Beurden.

In the FTSE 250, Victrex was the index's worst performer, down 11%.

The polymers maker said headwinds in the wider chemical sector are likely to continue over the summer and "at least" to the end of its financial year in September.

Victrex said year-to-date revenue is tracking down by a mid-single-digit percentage rate as a result. If this were to continue, full-year revenue would be down between 6% and 10% year-on-year.

Games Workshop jumped 5.2% after it said it expects to report an improved performance in its recently concluded financial year, thanks to its direct sales, as licensing revenue slipped.

The miniature wargames maker and retailer said it expects core revenue in the financial year ended May 28 to be not less than GBP440 million. This would be 14% higher than GBP386.8 million the year before.

Pretax profit is expected to rise to at least GBP170 million, which would be at least an 8.3% improvement from GBP156.5 million a year before.

Elsewhere in London, Robert Walters plunged 14%.

The recruitment firm said annual profit in 2023 will be "significantly" lower than current markets expectations amid reduced levels of candidate confidence and a lengthening of time to hire.

In European equities on Wednesday, the CAC 40 in Paris was up 0.3%, while the DAX 40 in Frankfurt was up 0.2%.

In Tokyo on Wednesday, the Nikkei 225 index closed up 1.5%. In China, the Shanghai Composite closed down 0.1%, while the Hang Seng index in Hong Kong was down 0.6%.

The S&P/ASX 200 in Sydney closed up 0.3%.

Brent oil was quoted at USD74.73 a barrel early in London on Wednesday, up from USD73.98 late Tuesday. Gold was quoted at USD1,950.70 an ounce, higher against USD1,944.33.

Still to come in Wednesday's economic calendar, EU industrial production figures are out at 1000 BST and US producer price data is released at 1330 BST.

By Heather Rydings, Alliance News senior economics reporter

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