London close: Stocks slip as US GDP growth decelerates

28th Feb 2024 15:01

(Sharecast News) - London's equity markets experienced a downturn by the close on Wednesday, largely influenced by underperforming stocks such as St James's Place and Reckitt Benckiser, following disappointing financial results.

Investor sentiment was also influenced by the latest GDP data from the United States.

The FTSE 100 index dropped 0.76% to 7,624.98 points, while the FTSE 250 fell 0.78% to 19,013.58 points.

In currency markets, sterling was last down 0.16% on the dollar to trade at $1.2665, while it lost 0.1% against the euro to change hands at €1.1686.

"Risk on sentiment has taken another, albeit slight, beating as China's embattled major property developer Country Garden faces a winding up petition in Hong Kong," said IG senior market analyst Axel Rudolph.

"US fourth quarter GDP growth being revised slightly lower also didn't help the bulls ahead of the Fed's preferred PCE inflation gauge on Thursday.

"Weaker-than-expected eurozone economic sentiment furthermore dragged stocks down, except for the German DAX 40 index which hit yet another record high as investors pile into it."

Rudolph said the latest earnings season highlighted that European stocks remained undervalued compared to US stocks in terms of PE ratios, which was why investors were favouring investing in Europe's largest economy.

"New Zealand's central bank signalling a slightly less aggressive stance on, still possible, rate hikes and sticking to its 5.5% base rate for the fifth month in a row led to strong Kiwi dollar depreciation, dragging the Aussie down with it.

"While oil, gold and silver prices were little changed on the day Bitcoin decided to break through its psychological 60,000 barrier."

US fourth quarter GDP revised down, UK services struggle

In economic news, the last quarter of 2023 saw a slight deceleration in economic expansion in the US, with gross domestic product (GDP) growing at an annualised pace of 3.2%, just below the preliminary estimate of 3.3%.

Despite a downward revision in inventory growth, upward revisions in household consumption, non-residential and residential investment, as well as government outlays, mitigated the impact.

However, stockpiling subtracted 0.27 percentage points from GDP growth, contrasting with a prior estimate of a slight positive contribution.

On the prices front, the headline price deflator for personal consumption expenditures rose slightly higher than previously thought, reaching an annual rate of 1.8%, while the core level saw a 2.1% increase.

"Based on this data, the US consumer looks strong, and inflation is hovering around the Fed's target rate," said Kathleen Brooks at XTB.

"This is the second reading of GDP and there is one more release to go, but so far it looks like a soft landing has already happened for the US economy.

"But, far from making life easy for the Fed, it actually makes it harder, as this data doesn't give a clear signal about when the Fed should cut rates."

On home shores, the UK services sector struggled in February as weak demand persisted.

According to the Confederation of British Industry's latest survey, while business and professional services firms noted a slight improvement in the general business situation and a return to growth in business volumes, sentiment sharply deteriorated among consumer services firms.

Expectations for future business volumes and profitability remain subdued across the sector.

"Our latest survey emphasises that firms continue to face challenging conditions, with profits falling for the ninth quarter in a row," said Charlotte Dandy, the CBI's economic surveys manager.

"Additionally, prospects for investment remain weak across the sector, with firms telling us that uncertainty regarding demand continues to be the greatest factor holding business back.

"At next week's spring budget, firms will be looking out for measures that build confidence to invest in our economic future and prop up the UK's labour market."

In the eurozone, confidence unexpectedly worsened in February, signalling ongoing challenges in the region's recovery from the Covid-19 pandemic and geopolitical tensions.

The eurozone sentiment indicator, which gauges both business and consumer confidence, declined to 95.4, falling short of expectations for a slight rise.

While there was a marginal increase in consumer confidence, it was outweighed by a significant drop in business sentiment, particularly in the services sector, reaching a six-month low.

St James's Place and Reckitt slide, Direct Line jumps

On London's equity markets, St James's Place saw a substantial decline of 18.54% after announcing a full-year loss, coupled with a dividend cut and provisions for potential client refunds.

Similarly, Reckitt Benckiser Group faced a downturn of 12.43% as its fourth-quarter sales failed to meet expectations.

Housebuilder Taylor Wimpey was off 4.77% in response to a nearly-halved profit for 2023 due to increased mortgage rates impacting demand, though it noted some positive signs in current trading.

Outside the FTSE 350, Halfords Group tumbled by 26.67% after revising its profit guidance downwards, citing weakened performance across its core markets.

On the upside, Direct Line Insurance Group surged 21.94% after reports surfaced of its rejection of a takeover bid from Belgian insurer Ageas.

Vodafone Group saw a modest increase of 1.91% following confirmation of its intention to sell its Italian operations to Swisscom for €8bn.

Luxury carmaker Aston Martin Lagonda reversed earlier losses, gaining 1.01% after it reported a significant narrowing of annual losses driven by higher prices for its vehicles.

HICL Infrastructure rose 2.47% after announcing the sale of its stake in the US Northwest Parkway toll-road project to VINCI Highways for $232m, initiating a £50m share buyback with the proceeds.

The sale, expected to be completed in the second quarter, represented a 30% premium to the company's 30 September valuation.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,624.98 -0.76%

FTSE 250 (MCX) 19,013.58 -0.78%

techMARK (TASX) 4,352.91 -1.09%

FTSE 100 - Risers

Rolls-Royce Holdings (RR.) 370.50p 3.32%

JD Sports Fashion (JD.) 117.60p 2.35%

Beazley (BEZ) 652.50p 1.87%

Smurfit Kappa Group (CDI) (SKG) 3,334.00p 1.58%

Kingfisher (KGF) 233.70p 1.39%

3i Group (III) 2,449.00p 1.37%

Barclays (BARC) 168.90p 1.22%

NATWEST GROUP (NWG) 236.50p 1.20%

HSBC Holdings (HSBA) 609.50p 1.18%

SSE (SSE) 1,612.50p 1.16%

FTSE 100 - Fallers

St James's Place (STJ) 505.80p -18.55%

Reckitt Benckiser Group (RKT) 5,062.00p -13.29%

Smith & Nephew (SN.) 1,048.50p -5.88%

Taylor Wimpey (TW.) 133.85p -4.77%

Halma (HLMA) 2,278.00p -3.68%

Croda International (CRDA) 4,600.00p -3.12%

Anglo American (AAL) 1,710.00p -2.97%

Unite Group (UTG) 950.00p -2.81%

Burberry Group (BRBY) 1,276.00p -2.71%

Hikma Pharmaceuticals (HIK) 1,939.50p -2.56%

FTSE 250 - Risers

Direct Line Insurance Group (DLG) 202.20p 23.78%

Aston Martin Lagonda Global Holdings (AML) 183.50p 3.97%

HICL Infrastructure (HICL) 124.60p 2.47%

RHI Magnesita N.V. (DI) (RHIM) 3,674.00p 2.40%

Bluefield Solar Income Fund Limited (BSIF) 104.60p 2.15%

Bank of Georgia Group (BGEO) 4,600.00p 1.77%

Vietnam Enterprise Investments (DI) (VEIL) 593.00p 1.72%

Essentra (ESNT) 165.40p 1.60%

VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 461.00p 1.43%

Currys (CURY) 67.45p 1.43%

FTSE 250 - Fallers

Future (FUTR) 622.50p -7.64%

Watches of Switzerland Group (WOSG) 411.80p -5.77%

W.A.G Payment Solutions (WPS) 71.00p -5.33%

PureTech Health (PRTC) 200.00p -4.99%

Genus (GNS) 1,830.00p -4.69%

Ferrexpo (FXPO) 72.20p -4.56%

Grainger (GRI) 251.80p -3.30%

SSP Group (SSPG) 218.20p -3.19%

C&C Group (CDI) (CCR) 145.80p -3.19%

Jupiter Fund Management (JUP) 82.65p -3.11%