September’s 0.1% contraction meant the UK grew by just 0.1% in the third quarter, down from 0.5% in the second quarter.
The rate is set to improve in the current quarter but the weakness may fuel hopes of another interest rate cut in December.
FTSE 100 Live Friday
GDP disappoints in third quarter
Land Securities lifts earnings guidance
TT Electronics rejects bid approaches
Market update: GSK and Astra lower in flat FTSE 100, Whitbread hit by downgrade
10:01 , Graeme Evans
Fresh selling of GSK and AstraZeneca shares and a lacklustre set of GDP figures today contributed to a downbeat session for London’s FTSE 100 index.
The latest weakness in the drugs sector came after Donald Trump last night announced vaccine-sceptic Robert F Kennedy Jr as his health secretary pick.
GSK touched a fresh low for the year of 1299p early in the session before settling 2% or 29.5p lower at 1324p. The fall for AstraZeneca of 288p to 10,004p unwound the recovery seen after Tuesday’s third quarter results.
A weak handover from Wall Street on the back of worries that US interest rates will take longer to fall also dampened the mood.
The FTSE 100 index initially fell by 30 points before returning to its opening mark at 8068, meaning the top flight has barely changed over the week.
One of the best performances came from Land Securities, which rose 2.5% or 14.5p to 594.5p after half-year results included upgraded earnings guidance.
Chief executive Mark Allan said demand for space remains robust and that investment market activity has started to pick up. The shares are still 16% lower this year.
Oil’s latest price fall boosted interest in easyJet, which rose 12.6p to 530p, while Aviva lifted 5.4p to extend gains since Thursday’s update to 6% at 480.8p.
Whitbread fell 37p to 2905p after analysts at Barclays removed their Overweight stance on the Premier Inn business and lowered their price target to 3160p.
Today’s disappointing update on the UK economy will have done little for Whitbread sentiment after September’s 0.1% contraction contributed to GDP growth of just 0,1% in the third quarter.
The domestic-focused FTSE 250 index fell 35.71 points to 20,487.10.
Burberry consolidated yesterday’s gains of 19% after new boss Joshua Schulman unveiled a turnaround plan focused on the group’s British heritage.
The shares were 2.4p higher this morning at 870.4p after UBS analysts removed their Sell stance and lifted the bank’s price target from 410p to 975p.
They said: “Burberry’s new strategy focused on its roots can stabilise the business and improve sales momentum in the short term, which will matter the most despite our scepticism around margins.”
Former FTSE 250 stock TT Electronics jumped 37% or 29p to 108p after AIM-listed Volex said it had made two unsuccessful takeover approaches.
Volex, which fell 12% or 41.5p to 302p, believes the combination will create a “scaled and diversified leader” in the specialist electronics market.
TT shares recently fell to a ten-year low after a profit warning in September caused by issues at two sites in North America.
Oil price under pressure as IEA warns on 2025 outlook
08:55 , Graeme Evans
Brent Crude is down by more than 1% this morning and on course to finish the week more than 2.5% lower at less than $72 a barrel.
The pressure comes after the International Energy Agency predicted that global oil supply will exceed demand in 2025 even if OPEC+ cuts remain in place.
UBS Global Wealth Management said today: “We continue to believe that oil market participants are pricing in a too pessimistic outlook for 2025.
“Despite the re-election of Donald Trump and his pro-drilling pledge, we believe that it is not the person sitting in the White House that determines the US crude production path, but the prevailing spot price.”
The bank believes that US crude production could be flat or even negative next year if current prices prevail. It has a new target of $80 a barrel for 2025.
It added: “Tariffs remain a risk for oil demand growth in 2025, but further rate cuts and fiscal stimulus measures would likely offset the associated economic growth drags.”
FTSE 100 drops amid GSK and Astra pressure, Land Securities up 2%
08:29 , Graeme Evans
The selling pressure on GSK shares continued today after the drugs giant fell 4% or 49.5p to a fresh low for the year of 1304p.
In a poor session for the sector, AstraZeneca shares gave up their post-results gains of the past two sessions by falling 2% or 252p to 10,040p.
The FTSE 100 index fell 30.85 points to 8040.34, with Whitbread among the other fallers after analysts at Barclays removed their Overweight stance on the Premier Inn business.
The shares retreated 51p to 2890p, which compares with the bank’s new lower price target of 3160p.
Land Securities shares topped the FTSE 100 after the property business used interim results to upgrade earnings expectations for the year. The shares lifted 2% or 11p to 591p, still down 16% on the year.
The FTSE 250 index has fallen 0.3% or 56.96 points to 20,465.85.
In the All-Share, TT Electronics jumped 39% or 30.5p to 109.5p after AIM-listed Volex said it had made two unsuccessful takeover approaches for the business.
Economy slows at faster-than-expected pace
07:48 , Graeme Evans
The UK economy’s 0.1% growth rate in the three months to September is the weakest this year, having risen 0.5% in the second quarter and 0.7% in the first.
The services sector almost ground to halt in the third quarter, a performance impacted by the decline in information and communication activity,
Capital Economics still expects GDP growth to pick up in the coming quarters as the government’s debt-financed spending boosts activity and as the drags from higher inflation and higher interest rates continue to fade.
It said: “Even so, we have become a bit more concerned about underlying weakness in the economy and the risks to our GDP forecast have shifted slightly to the downside.”
Today’s figures raise the chances the Bank will cut interest rates again in December, although Capital Economics said February is still more likely.
Land Securities lifts earnings guidance amid improving trends
07:34 , Graeme Evans
Land Securities today raised full-year earnings guidance, boosted by growth in occupancy and positive rental uplifts across its retail and London portfolio.
In results showing a return to half-year pre-tax profit, chief executive Mark Allan said the company’s “operational outperformance” had continued.
He said property values have stabilised, with growth in rental values resulting in a positive total return on equity.
Allan added: “We expect these trends to persist, as customer demand for our best-in-class space remains robust and investment market activity has started to pick up.
“We have continued to reposition our portfolio towards higher-return opportunities and are confident of deploying further capital towards this in the second half.
“Having managed our balance sheet well as markets corrected, we are now well placed to deliver growth and attractive returns."
The Piccadilly Lights business raised its outlook for EPRA earnings per share and now expects 2025 results to be in line with last year's level despite £500 million of net disposals over the past year.
TT Electronics rejects £248m Volex approach
07:23 , Graeme Evans
Volex, the power and data connectivity business led by Nat Rothschild, today revealed it has made two takeover approaches to TT Electronics.
Its latest move was at 139.6p a share, valuing TT at £248.6 million and a premium of 76.7% to last night’s closing share price in the FTSE All-Share.
The interest by AIM-listed Volex comes after TT’s valuation fell to a 10-year low on the back of September’s profits warning, which was caused by issues at two sites in North America.
Vole believes the combination will create a “scaled and diversified leader” in the specialist electronics market. However, the board of TT has declined to engage with it and rejected each of the Volex proposals.
UK economy in September setback, up 0.1% in Q3
07:07 , Graeme Evans
The UK economy declined 0.1% in September, compared with City expectations for growth of 0.2% and after the previous month’s 0.2% improvement.
This means that the UK expanded by just 0.1% in the third quarter of the year, according to figures by the Office for National Statistics.
The annual growth rate of 1% was in line with City forecasts for the quarter.
FTSE 100 seen lower after Wall Street weakness, Brent Crude falls
07:02 , Graeme Evans
London shares are set to come under pressure after US markets last night fell on the back of comments by Federal Reserve chair Jerome Powell.
His signal that interest rates may take longer to decline came on the day that US producer prices rose by more than expected.
The dollar rallied to leave the pound at $1.26, while leading US benchmarks including the S&P 500 index fell by as much as 0.6%.
The weaker backdrop means the FTSE 100 index is forecast to give up all yesterday’s rise, with futures pointing to a decline of 36 points to 8036.
The price of oil has also reversed, leaving Brent Crude at $71.62 a barrel after industry body IEA yesterday forecast an oil surplus next year.
