FTSE flat as UK economy posted zero growth in February. Photo: Jan Woitas/dpa/Alamy Live News
The FTSE 100 and European stocks opened mixed this Thursday as new data showed the UK economy stalled in February.
The FTSE 100 (^FTSE) opened flat at 7,831 points, while the CAC 40 (^FCHI) rose 1.08% to 7,477 points in Paris. In Germany, the DAX (^GDAXI) rose 0.31% to 15,752.
The British economy stagnates in February
The UK economy stagnated with no GDP growth in February amid a wave of public sector strikes.
The economy was flat for the second month of the year, the Office for National Statistics said, as striking teachers, railway workers and civil servants brought the UK economy to a standstill.
The ONS reports that service sector output fell 0.1%, while manufacturing fell 0.2% and construction grew 2.4%.
This follows 0.4% growth in January, which was revised up from 0.3% growth in the previous release.
Daniel Mahoney, UK Economist at Merchant Banks, said: “Monthly GDP (mother) was flat in February at 0%. This was close to consensus (0.1%). The services sector saw a modest slowdown in growth of 0.1% after a more promising January expansion of 0.7%.
Continue reading: The UK economy grinds to a halt amid strikes in February
“Teachers’ strikes in February led to a 1.7% fall in education sector output, the largest contributor to services showing negative pressures. Without industrial action, February would likely have posted a slightly positive monthly GDP figure. The disappointing services figures were offset by more encouraging news elsewhere: For example, the construction sector grew 2.4% in February, driven by growth in both repair and maintenance and new work.”
Yael Selfin, Chief Economist at KPMG UK said: “A combination of upward revisions to GDP data and improving global economic conditions could help the UK economy avoid a recession this year. While this will ease the burden on policymakers, medium-term growth prospects remain relatively weak by historical standards.
The story goes on
“Economic activity will remain subdued in the near term as households continue to be squeezed by elevated prices and the cumulative impact of past interest rate hikes. Although business sentiment continues to improve, helped in part by the decline in wholesale energy prices, we expect investment to be constrained this year amid tightening credit conditions and uncertainty about future policy direction.”
USA and Asia
Across the pond, S&P 500 futures (ES=F), Dow futures (YM=F), and Nasdaq futures (NQ=F) were all in the green as trading began in Europe.
Wall Street fell on Wednesday, reversing gains from earlier in the session after inflation data showed consumer price gains had cooled in March and Fed minutes revealed further rate hikes were not ruled out.
The Dow Jones (^DJI) lost 0.11% to close at 33,646 points. The S&P 500 (^GSPC) fell 0.41% to 4,091 and the tech-heavy NASDAQ (^IXIC) slipped 0.85% to 11,929.
Some of the key takeaways from the minutes of the March Federal Reserve meeting — when the central bank hiked interest rates by 0.25% — showed officials forecasting the economy was likely to slide into recession later this year. Officials expressed concern about problems in the banking sector and reduced their expectations for rate hikes, while some even considered suspending rate hikes.
In Asia, Tokyo’s Nikkei 225 (^N225) rose 0.26% to 28,156 points, while Hong Kong’s Hang Seng (^HSI) fell 0.16% to 20,277. The Shanghai Composite (000001.SS) slipped 0.27% to 3,318 points.
FTSE100
Back in London, the blue chips were little changed in early moves with just Tesco (TSCO.L) continues to rise following top-end full-year results.
The British retailer up 1.80% as it reported top-notch sales and operating profit numbers. Operating profit is expected to be around £2.63 billion ($3.29 billion) for the year to February 25, compared to £2.83 billion a year earlier. Statutory pre-tax profit halved.
Shareholders will receive a dividend of 7.05 per share in June worth £516m, with the company also announcing plans to buy back £750m of its shares.
Continue reading: Property prices fall as demand falls, while rents continue to rise
Imperial Brands (IMB.L) fell 2% on its trade update, with the maker of the Gauloises and John Player Special saying sales volumes were down on a surge in demand during “COVID-related changes in buying patterns” but that was having the impact offset by “strong pricing” for its combustible products.
“We expect stronger net sales performance in the second half, supported by a normalization in volume trends and price increases in the first half,” it added.
FTSE 250-listed Darktrace (DARK.L) rose 2% as the cybersecurity firm offset weaker revenue expectations by announcing an improved margin forecast of around 19%.
pounds against dollars
The pound (GBPUSD=X) rose against the dollar to trade at $1.25, its highest in over a week and near a 10-month high, despite the economy showing no growth in February.
The dollar weakened yesterday after US inflation fell to its lowest level in nearly two years, fueling hopes that the Federal Reserve may soon hike US interest rates.
The same against the Euro, with the Pound Sterling (GBPEUR=X) hovering around €1.13.
oil markets
Meanwhile, Brent Crude (BZ=F) lost ground to trade around $87/barrel as traders sought to consolidate positions amid signs of market tightening and encouraging US inflation data.
A tight oil market could lead to higher prices in the second half of the year, said International Energy Agency chief Fatih Birol.
Watch: UK economy stagnates with no growth in February as strikes hit productivity
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