LONDON MARKET CLOSE: Stocks in the red after gloomy UK GDP print

Stock prices in London closed in the red on Thursday following news that the UK economy shrank by more than expected in the third quarter of the year. The bears are back in charge today, as UK GDP...…

LONDON MARKET CLOSE: Stocks in the red after gloomy UK GDP print

(Alliance News) - Stock prices in London closed in the red on Thursday following news that the UK economy shrank by more than expected in the third quarter of the year. "The bears are back in charge today, as UK GDP data provided yet another warning that we may already be in a recession," commented Joshua Mahony at IG. The FTSE 100 index closed down 28.04 points, or 0.4% at 7,469.28.

The FTSE 250 ended down 101.58 points, or 0.5%, at 18,762.07, and the AIM All-Share closed down 4.26 points, or 0.5%, at 826.18. The Cboe UK 100 ended down 0.4% at 746.56, the Cboe UK 250 closed down 0.6% at 16,210.55, and the Cboe Small Companies ended down 0.4% at 13,059.63. UK gross domestic product shrank by more than initially expected in the third quarter, according to the latest figures from the Office for National Statistics.

The UK economy is now estimated to have contracted by 0.3% between July to September. This was downwardly revised from a previous estimate of a 0.2% decline. "Despite an upward revision to annual growth in 2021, downward revisions across the quarters of 2022 mean that real GDP is now estimated to be 0.8% below its pre-coronavirus pandemic level, revised from the previous estimate of being 0.4% below," ONS commented.

Danni Hewson at AJ Bell said the update from the ONS didn't "add much" to what we already know about the direction of travel for the British economy but, she added, there were a few things that were "troubling". "Business investment fell by even more than had been thought and is now a whopping 8.1% below pre-Covid levels. Investment is the fuel that helps stoke the embers of a cooling economy and with the UK now at the bottom of the table of G7 countries when it comes to growth, it's clear more needs to be done to inspire confidence that post-Brexit, post-pandemic the UK is worth another look," she said.

The pound was quoted at USD1.2028 at the London equities close Thursday, down compared to USD1.2093 at the close on Wednesday. In London's blue-chip index, United Utilities and British American Tobacco finished 2.3% and 1.0% lower, respectively, as the firms went ex-dividend. In the FTSE 250, discoverIE closed down 0.3% despite the customised electronics maker saying it has acquired Magnasphere, a US-based company that designs and manufactures magnetic sensors and switches for industrial electronic purposes.

discoverIE said it will pay out USD22 million on a debt-free, cash-free basis before expenses, funded from existing debt facilities. The firm added that the acquisition will be immediately accretive to underlying earnings and underlying operating margin. Elsewhere in London, clothing retailer Superdry jumped 16% as it reported its interim revenue had grown by 3.6% year-on-year thanks to a strong performance in its stores.

Superdry Chief Executive Julian Dunkerton said: "It's been well documented that conditions are extremely challenging which weren't helped by the unseasonably warm weather in October and into November. However, by combining great product with affordable prices, we managed to grow sales in the first half." Dunkerton said that he was encouraged to see how the firm has started the second half of its financial year, noting its "biggest ever week" for Ecommerce orders. He explained this was driven by a return to "record levels" of jacket sales over the Black Friday period and "good momentum through the recent spell of colder weather".

The dollar regained some ground on Thursday, after figures showing the US economy grew faster than previously thought in the third quarter. The euro stood at USD1.0599 at the European equities close Thursday, lower against USD1.0612 at the same time on Wednesday. US gross domestic product grew by 3.2% in the third quarter on a year before, the revised figures showed.

This was an increase from the previous estimate of 2.9% growth. Market consensus cited by FXStreet had expected the estimate to remain at 2.9%. Despite the dollar strengthening slightly on Thursday, it remained still significantly weaker against the Japanese yen than it was earlier in the week, prior to the Bank of Japan's surprise shift in policy.

Against the yen, the dollar was trading at JPY132.32, higher compared to JPY132.08. Japan's central bank tweaked its longstanding monetary easing programme on Tuesday. The change marks a rare shift of gears for the dovish central bank, which has largely left its policy intact even as counterparts in other major economies hike rates to tackle inflation.

Stocks in New York were lower at the London equities close, with the DJIA down 1.4%, the S&P 500 index down 1.8%, and the Nasdaq Composite 2.6% lower. In European equities on Thursday, the CAC 40 in Paris ended down 1.0%, while the DAX 40 in Frankfurt ended down 1.3%. Brent oil was quoted at USD82.69 a barrel at the London equities close on Thursday, up from USD81.68 late Wednesday.

Gold was quoted at USD1,796.92 an ounce, lower against USD1,815.20. In the economic calendar on Friday, financial markets in the UK will close early for Christmas. By Heather Rydings, Alliance News senior economics reporter Comments and questions to EMAIL Copyright 2022 Alliance News Ltd.

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