London close: Stocks finish firmer ahead of Easter break

London’s equity markets closed higher on Thursday ahead of the Easter break, despite lingering concerns over the UK’s recessionary status in the latter part of last year.

The FTSE 100 ended the day up 0.26% at 7,952.62, while the FTSE 250 saw a slightly stronger gain of 0.37% to reach 19,884.73.

In currency markets, sterling was last down 0.09% on the dollar to trade at $1.2628, while it rose 0.16% against the euro, changing hands at €1.1694.

“While a latecomer to the global stock rally, the FTSE 100 has done its best to catch up, reaching a new one-year high today,” said IG chief market analyst Chris Beauchamp.

“A 3% gain for the quarter might not be the most impressive return, but the index has made great strides over the past three months, and its previous high is now in sight.

“Improving earnings, less hawkish monetary policy and rebounding fund flows seem to put the index in a good place for the rest of the year, countering some of the gloom from this morning’s GDP figures.”

Beauchamp added that the outlook for the US economy was continuing to improve, though caution ahead of the long weekend limited any significant upside in early trading.

“Fourth quarter GDP growth was revised higher, while consumer sentiment has continued to brighten too.

“The carrot of rate cuts continues to be dangled in front of investors, but the real story is the rebound in earnings over the past year, with further growth expected in the first quarter according to current forecasts.”

Data confirms UK recession, while US growth tops forecasts

In economic news, final figures from the Office for National Statistics confirmed the UK’s entry into a recession in the latter half of last year.

GDP contracted by 0.3% in the final quarter of 2023, maintaining the previously estimated figure, following a 0.1% decline in the preceding quarter.

Chancellor Jeremy Hunt expressed optimism, citing a decline in inflation from over 11% to 3.4%, growth in January, and eight consecutive months of real wage increases.

Hunt also highlighted government measures, including National Insurance cuts, aimed at stimulating growth.

“Overall, today’s data release does not change much,” said Ashley Webb, UK economist at Capital Economics.

“The UK’s mild technical recession at the end of last year was as mild as previously thought and the economic recovery is probably already underway.

“And our forecast for inflation to fall further than the consensus and for interest rates to be cut faster and further than current market pricing suggests the economic recovery in 2024 and 2025 will be stronger than most expect.”

On the continent, official data revealed a surprising decline in retail sales in Germany in February, marking the fourth consecutive monthly decrease.

Sales dropped by 1.9% compared to the previous month, indicating challenges in driving economic recovery through consumer spending.

In contrast, the US economy showed resilience, with fourth-quarter GDP figures exceeding expectations.

According to the Bureau of Economic Analysis, GDP expanded at an annual rate of 3.4% in the fourth quarter of 2023, up from the initial estimate of 3.2%.

That growth followed a strong third quarter performance, with the economy growing by 4.9% year-on-year.

Additionally, the US labour market remained robust, with initial unemployment claims slightly decreasing to 210,000 for the week ended 23 March, lower than economists’ forecasts.

However, secondary unemployment claims rose by 24,000 to 1.819 million.

Furthermore, consumer confidence in the US improved marginally in March, according to the University of Michigan‘s consumer confidence index.

The index rose to 79.4, up from 76.9 in February, reflecting reduced concerns about inflation.

JD Sports and Spirent surge, ex-divs prove a pre-Easter drag

On London’s equity markets, JD Sports Fashion soared 15.65% following the announcement that it expected full-year profits to fall within the range of £915m to £935m.

Despite anticipating challenges ahead due to reduced product innovation and increased discounting, the company remained optimistic about sales prospects, particularly with the upcoming Paris Olympics and European football finals.

Electrical retailer AO World rallied 12.19% after announcing that its adjusted pre-tax profit for the 2024 financial year was expected to reach “at least” the top end of the previously-guided range of £28m to £33m.

The core business continued to perform positively in the fourth quarter, driving investor confidence.

Spirent Communications surged 12.48% following the news of Keysight Technologies’ £1.16bn acquisition deal, outbidding US peer Viavi Solutions.

The company was now recommending Keysight’s offer of 201.5p per share, representing a 15% premium over Viavi’s offer.

On the downside, M&G, Prudential, Smith & Nephew, Taylor Wimpey, Moneysupermarket, Primary Health Properties, Travis Perkins, Ithaca Energy and Hargreaves Lansdown all traded weaker due to the absence of entitlement to dividends.

Utilities Severn Trent, SSE, British Gas owner Centrica, and Pennon Group all faced declines amid a funding crisis at Thames Water.

Shareholders withdrew a £500m bailout of the London-focussed water supplier after regulators rejected the company’s proposals for significant price hikes, leniency on pollution penalties, and higher dividends.

Reporting by Josh White for Sharecast.com.

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