London open: Stocks slide as softer-than-expected GDP, Middle East tensions weigh

(Sharecast News) - London stocks slid in early trade on Friday as weaker-than-expected UK GDP data and the ongoing conflict in the Middle East weighed on sentiment, with Brent crude remaining above $100 a barrel. At 0830 GMT, the FTSE 100 was down 0.7% at 10,228.42.

Data from the Office for National Statistics showed the UK economy stalled in January, just weeks before war in the Middle East sent global energy prices soaring.

GDP was 0.0% in January, down on December's 0.1% uptick and below expectations for growth of 0.2%.

While construction improved by 0.2%, the dominant services sector showed zero growth and production fell 0.1%.

In the three months to January, GDP rose 0.2%, although that was below forecasts for a 0.3% uplift. Over the quarter, services grew by 0.2% - after showing no growth in the three months to December - while production output was 1.3% stronger. Construction output, however, slid 2.0%, compounding a 2.1% fall in the previous three months.

The Bank of England's Monetary Policy Committee meets next week and had been widely expected to trim interest rates to help bolster anaemic economic growth. However, oil and gas prices have soared since the end of February in response to war in the Middle East - Brent crude is currently trading at over $100 a barrel - and analysts now widely expect the cost of borrowing to be left on hold at 3.75%.

Liz McKeown, director of economic statistics at the ONS, said: "Growth ticked up slightly in the latest three months, partly reflecting the recovery of car manufacturing following the cyber incident in the autumn.

"Within services, which also increased, wholesale continued to rebound from a weak summer.

"However, the overall picture remains subdued, with no growth in the latest month."

Susannah Streeter, chief investment strategist at Wealth Club, said: "'Worries about how the UK economy will withstand the energy crisis have ratcheted up after a highly disappointing report card showed growth stalled in January. The Office for National Statistics painted a picture of stagnation for the UK, with the mighty services sector flatlining and production contracting, with the construction sector only just eking out growth.

"It doesn't bode well for the resilience of companies ahead, faced with escalating energy prices which are likely to see many businesses battening down the hatches, putting investment plans on hold while hoping the storm subsides. Stagflation is stalking the UK economy, with inflation set to rise while stagnation settles in, with risks increasing that the economy could go into reverse."

"Oil prices are staying hot, with the benchmark Brent crude hovering stubbornly above $100 a barrel as the conflict involving Iran looks increasingly intractable. The energy shock which has rocked markets shows little sign of abating at the end of a turbulent week. Multiple interventions, including the unprecedented release of 400 million barrels of emergency supplies coordinated by the International Energy Agency, have not been able to counter mounting concern about severe disruption to global oil output and distribution."

In equity markets, oil giants BP and Shell were the top gainers on the FTSE 100 but precious metals miner Fresnillo and gold miner Hochschild lost their shine as gold prices dipped.

Corporate news was scarce, but property developer Berkeley Group fell as it reaffirmed annual guidance of £450m in pre-tax profit but warned the war on Iran was "weighing heavily" on risk sentiment.

In a trading update for the four months to 28 February, the company said demand had remained constrained by the impact on consumer confidence of geopolitical events and macroeconomic uncertainty, although sales enquiries "remain good and the value of underlying reservations has been recovering towards the levels seen over the summer prior to the pre-Budget hiatus".

"While reaffirming guidance, we are aware of the risk of a further deterioration in macro conditions with the potential for higher inflation in the near term and for interest rates to remain higher for longer," Berkeley said.

Market Movers

FTSE 100 (UKX) 10,228.42 -0.74% FTSE 250 (MCX) 21,980.79 -0.85% techMARK (TASX) 5,823.26 -0.41%

FTSE 100 - Risers

BP (BP.) 537.60p 1.83% Shell (SHEL) 3,354.00p 1.02% London Stock Exchange Group (LSEG) 8,598.00p 0.26% Legal & General Group (LGEN) 241.20p 0.21% Schroders (SDR) 571.00p 0.18% ICG (ICG) 1,517.00p 0.13% GSK (GSK) 2,030.00p 0.10% Centrica (CNA) 206.70p 0.10% Hikma Pharmaceuticals (HIK) 1,208.00p 0.08% Imperial Brands (IMB) 3,126.00p 0.06%

FTSE 100 - Fallers

Smurfit Westrock (DI) (SWR) 2,987.00p -3.36% Informa (INF) 746.40p -2.92% Fresnillo (FRES) 3,510.00p -2.88% JD Sports Fashion (JD.) 72.52p -2.87% Entain (ENT) 551.80p -2.53% Intertek Group (ITRK) 3,788.00p -2.42% Weir Group (WEIR) 2,898.00p -2.35% Burberry Group (BRBY) 1,037.50p -2.31% Mondi (MNDI) 832.00p -2.27% Antofagasta (ANTO) 3,622.00p -2.16%

FTSE 250 - Risers

Shawbrook Group (SHAW) 373.25p 3.26% Syncona Limited NPV (SYNC) 96.80p 2.87% Harbour Energy (HBR) 285.80p 2.07% Ithaca Energy (ITH) 253.50p 1.50% Fidelity China Special Situations (FCSS) 307.00p 1.49% Vistry Group (VTY) 411.50p 1.28% Trustpilot Group (TRST) 169.50p 1.19% Patria Private Equity Trust (PPET) 567.00p 0.71% Energean (ENOG) 868.00p 0.69% Kainos Group (KNOS) 764.50p 0.66%

FTSE 250 - Fallers

Hochschild Mining (HOC) 636.50p -4.14% Ceres Power Holdings (CWR) 315.00p -3.48% AO World (AO.) 89.30p -3.46% THG (THG) 30.00p -3.40% RHI Magnesita N.V. (DI) (RHIM) 2,465.00p -3.14% Pacific Horizon Inv Trust (PHI) 884.00p -3.07% Applied Nutrition (APN) 226.00p -3.02% Utilico Emerging Markets Ltd (DI) (UEM) 271.00p -2.87% Vesuvius (VSVS) 425.40p -2.82% TP Icap Group (TCAP) 266.00p -2.76%