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FTSE 100 makes strong gains, pound rises after Ukranian advances

© Reuters. FTSE 100 makes strong gains, pound rises after Ukranian advances

FTSE 100 makes strong gains, up 95 points
UK GDP rose 0.2% in July, slightly weaker than expected
Pound rises after Ukranian advances in war against Russia

The pound hit its highest level against the US dollar since the end of August today following the surprise news that Ukraine had made rapid gains in recapturing territory from Russia though its counteroffensive in the north-east.

That military success is lifting hopes of a change in Russia’s energy squeeze on Europe, although Moscow did hit back last night by targeting infrastructure facilities in central and eastern Ukraine.

Sterling was trading at $1.17, up around one cent, away from the 37-year lows hit last week.

10.00am: Shares in Serco fall on news CEO plans to retire

Shares in Serco Group (LON:SRP) PLC slipped 6% following news that chief executive, Rupert Soams, was to step down.

Russ Mould, investment director at AJ Bell said ““Serco shareholders were disappointed that Rupert Soames is to retire as chief executive next year, which will conclude nine years with the company.”

Mould said “Soames is widely credited as reviving Serco’s fortunes.”

“He restored the outsourcing group’s credibility after the electronic tagging scandal where Serco took responsibility for three offences of fraud and two of false accounting between 2010 and 2013.”

Mould said now “the business has returned to notably better health.”

“Its reputation has improved, debt is forecast to come down and profit is expected to go up, which means Soames can exit knowing he has made a difference.”

Peel Hunt analyst Christopher Bamberry said Soames was “highly regarded.”

But they added his successor, Mark Irwin, was “well known to analysts, having been a regular presenter at results presentations.”

9.30am: UK economy stagnating

Martin Beck, chief economic advisor to the EY ITEM Club, said today’s GDP figures show an economy with “little momentum” adding “it’s touch-and-go if GDP will see a second successive quarterly contraction in quarter three.”

He thought last week’s announcement of an energy price guarantee “should greatly reduce the risk of the economy experiencing a deep recession, but the next year or so will still be very challenging for the economy.”

“Households still face a further decline in their real incomes during the second half of this year which, even if some can save less and borrow more, will weigh on consumer spending.”

“As things stand, the economy is unlikely to do more than stagnate over the coming year” he cautioned.

ING Economics expect UK growth figures to be volatile in the months ahead with the extra bank holiday in September to distort figures as did the Jubilee celebrations in June.

As a result ING think we will have to wait until later in the fourth quarter to get a clearer sense of where the economy is headed.

For now, ING expect growth in quarter three to be flat with the quarter four figure negative.

9.00am: FTSE in fine fettle in early trading

The FTSE 100 made a bright to the week on Monday pushing back above 7,400 supported by gains in mining and banking stocks, and despite slightly weaker than expected UK GDP figures for July.

At 8.55am the blue chip index was trading 52 points higher at 7,403 with the broader FTSE 250 92 points higher at 19,280.

Mining stocks rose 1.9%, tracking firm metal prices on supply risks in China and a softer dollar.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank said: “I believe that the latest market optimism could be explained by hope to see a second month of softening inflation in the US at this week’s CPI release.”

US CPI figures are due tomorrow and the market will be looking for further evidence that inflationary pressures have peaked in the US with the rate expected to fall to 8.1% in August from 8.5% in July.

British sports betting company, Entain PLC (LON:ENT), was a weak early feature following news that the Australian financial crimes regulator has opened an investigation to assess whether the group was complying with anti-money laundering and counter-terrorism financing laws.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) said it began the enforcement investigation after an extensive supervisory campaign covering the whole corporate bookmaking sector, without giving further details.

Serco Group (LSE:SRP) PLC also fell following news of the retirement of chief executive office Rupert Soames today.

He will retire in September 2023 and step down both from the board at the end of this December 2022, to be replaced by Mark Irwin, who is currently the CEO of Serco’s UK & Europe Division.

8.30am: Technical recession hangs in the balance after July’s GDP

A technical recession hangs in the balance according to economists following today’s slightly weaker than expected UK gross domestic product (GDP) figures for July.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the 0.2% rise in GDP in July was

slightly below the consensus, and showed the economic recovery has petered out, but has not gone into reverse yet.

Output in both the industrial and services sectors was 0.1% higher than in April, but construction output was down 0.4%, as higher prices for materials continued to choke off demand, he pointed out.

High temperatures and anecdotal evidence that firms and households are reducing their consumption of energy took 0.05pp off GDP.

Looking ahead, the extra public holiday for the Queen’s funeral on September 19 has the potential to be more damaging for the economy than the extra day off for the Jubilee in June, as the hospitality and tourism sector likely won’t benefit, but many businesses still will shut, Tombs commented.

He said he expects a 0.2% hit to GDP in September from the funeral which suggests that a technical recession is hanging in the balance, given that business surveys have weakened since July and are consistent with GDP merely holding steady in quarter three.

8.10am: FTSE 100 makes a bright start to the week

The FTSE 100 opened higher on Monday following gains in the US on Friday and despite slightly weaker than expected UK GDP figures.

At 8.10am the lead index was trading 26 points higher at 7,376 with the broader FTSE 250 up 55 points at 19,243.

GDP rose 0.2% in July, slightly below market expectations for a 0.3% increase, while in the three months to July, growth was flat.

Serco Group (LSE:SRP) PLC announced the retirement of chief executive office Rupert Soames today.

He will retire in September 2023 and step down both from the board at the end of this December 2022, to be replaced by Mark Irwin, who is currently the CEO of Serco’s UK & Europe Division.

Residential property business Grainger PLC said that rents had risen 4.5% in the year to date reflecting strong rental market conditions in the second half of the trading year.

Grainger, highlighted a record occupancy rate of 98.2%, and said the rental market was buoyant.

7.40am: UK trade deficit narrows in July

Trade figures out today show the total trade deficit narrowed by £2.0bn to £20.8bn in the three months to July 2022.

The figures excluding precious metals and remove the impact of inflation.

For July, total imports of goods, excluding precious metals, decreased by £0.5bn (0.9%) total exports of goods, excluding precious metals, increased by £2.1bn (6.7%).

There was an increase in exports to EU countries in July 2022 primarily driven by higher exports of fuels, and machinery and transport equipment, which increased by £0.8bn and £0.4bn respectively.

7.15am: UK GDP slightly weaker than expected

Gross domestic product (GDP) grew by 0.2% in July 2022 following a fall of 0.6% in June 2022 according to the Office for National Statistics while for the three months to July GDP was flat compared with the previous three months.

Both figures were slightly weaker than market expectations of +0.3% and +0.1% respectively.

Services grew by 0.4% in July 2022, after a fall of 0.5% in June 2022, and was the main driver to the rise in GDP; information and communication grew by 1.5% and was the largest contributor to the services growth in July.

Production fell by 0.3% after a fall of 0.9% in June 2022; this was mainly because of a fall of 3.4% in electricity, gas, steam, and air conditioning supply.

Construction also fell in July 2022 by 0.8%, after a fall of 1.4% in June 2022; the decrease in monthly construction output in July 2022 came solely from repair and maintenance, which fell 2.6%.

Output in consumer-facing services grew by 0.6% in July 2022, following flat growth in June 2022; consumer-facing services remained 4.3% below their pre-coronavirus (COVID-19) levels (February 2022) in July 2022.

6.55am: FTSE 100 seen opening higher

FTSE 100 expected to open slightly higher on Monday following gains in the US on Friday and strong gains in Asia overnight.

Spread betting companies are calling the lead index up by around 20 points.

US stocks put an end to a three-week losing streak on Friday, as investors signaled the ECB hike and Powell’s warning about more rate increases is behind them.

At the close, the S&P 500 had gained 1.5% at 4,067; the Dow ended 1.2% higher at 32,152 and the Nasdaq ran another. 2.1% to close at 12,112.

In the UK. GDP figures are due.

Read more on Proactive Investors UK

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