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London pre-open: Stocks seen lower as GDP shrinks more than expected
(Sharecast News) - London stocks were set to fall at the open on Wednesday following downbeat US and Asian sessions, as investors mulled the latest UK GDP figures. The FTSE 100 was called to open down 25 points.
Data released earlier by the Office for National Statistics showed the economy contracted more than expected in July as strikes and poor weather took their toll.
GDP shrank 0.5% following 0.5% growth in June, and versus consensus expectations of a 0.2% decline.
ONS director of economic statistics Darren Morgan said: "In July, industrial action by healthcare workers and teachers negatively impacted services and it was a weaker month for construction and retail due to the poor weather.
"Manufacturing also fell back following its rebound from the effect of May's extra Bank Holiday.
"A busy schedule of sporting events and increased theme park visits provided a slight boost."
Paul Dales, chief UK economist at Capital Economics, said: "The 0.5% m/m fall in real GDP in July...could possibly mean that the mild recession we have been expecting has begun.
"Even so, with wage growth still uncomfortably strong, we suspect the Bank of England will still raise interest rates one final time next week, from 5.25% to 5.50%."
On the corporate front, investors were digesting news from Tuesday evening that BP chief executive Bernard Looney has resigned after failing to fully disclose details of past relationships with colleagues.
Housebuilder Redrow said weekly sales over the summer had almost halved due to rising mortgage costs amid a "challenging" market as it also revealed a fall in full-year profits.
The company said sales per outlet per week for the first 10 weeks of the new financial year were 0.34 compared with 0.61 a year ago.
"Following the macroeconomic volatility of the last financial year, as we go into 2024 the market remains challenging and uncertain. However, we believe we are well positioned to respond to the market as it develops," the company said in a statement.
Underlying pre-tax profits for the year to July 2 fell 4% to £395m, with revenue flat at £2.1bn. The total dividend was cut to 30p a share from 32p.
Investment management firm St James's Place confirmed recent rumours that it is replacing its long-running chief executive officer Andrew Croft with former Prudential boss Mark FitzPatrick.
SJP said back in May that it was looking for a successor to Croft, who has been with the company since 1993, serving as chief financial officer from 2004 to 2017 and CEO since 2018.
Reports in recent weeks suggested FitzPatrick was leading the race to become the company's new CEO.
Insurer Aviva said it had agreed to sell its 25.9% stake in Singapore Life Holdings (Singlife), together with two debt instruments, to Sumitomo Life for £800m in cash.
Sumitomo Life will pay £500m for Aviva's equity stake and £300m for the two debt instruments. Sumitomo Life is currently a 23.2% shareholder in Singlife and sees Singapore as a key market within its overall Southeast Asia strategy, Aviva said in a statement.
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