London open: Stocks slide on weak US cues; UK GDP in focus

Opening Market Report
07:42, 12th May 2022

(Sharecast News) - London stocks slid at the open on Thursday, taking their cue from a weak session on Wall Street, as investors mulled uninspiring UK GDP figures.
At 0850 BST, the FTSE 100 was down 1.8% at 7,213.37.

Victoria Scholar, head of investment at Interactive Investor, said: "Risk-off sentiment is gripping European markets, which have opened sharply lower dragged down by the tech-driven sell-off on Wall Street last night after US inflation data came in hotter than expected. All European sectors are in the red this morning with basic resources leading the declines.

"The FTSE 100 has opened sharply lower down by almost 2% within a whisper of breaking below support at 7,200 with miners like Glencore, Antofagasta and Anglo American towards the bottom of the index"

Data out earlier from the Office for National Statistics showed the UK economy contracted in March amid rising prices following no growth the month before.

GDP shrank by 0.1% versus expectations for no change, leaving the economy just 1.2% above its pre-Covid level. The data showed that the main contributor to the monthly decline was a 0.2% contraction in the services sector.

February's GDP was revised down to no growth from an initial estimate of 0.1% growth.

During the first three months of the year, growth slowed to 0.8% from 1.3% in the previous quarter, versus expectations for 1% growth. This marked the lowest quarterly growth in a year.

Darren Morgan, ONS director of Economic Statistics, said: "The UK economy grew for the fourth consecutive quarter and is now clearly above pre-pandemic levels, although growth in the latest three months was the lowest for a year.

"This was driven by growth in a number of service sectors as the economy continued to recover from Covid-19 effects, including hospitality, transport, employment agencies and travel agencies. There was also strong growth in IT.

"There were, though, some downward effects from other services, including retailing, wholesaling and car sales and also health, due to continuing decreases in the Test and Trace service and vaccination programmes.

"Our latest monthly estimates show GDP fell a little in March, with drops in both services and in production. Construction, though, saw a strong month thanks partly to repair work after the February storms."

Paul Dales, chief UK economist at Capital Economics, said: "The risk of recession has just risen, although strong price pressures will probably mean the Bank of England will raise interest rates further."

In equity markets, Hargreaves Lansdown was the worst performer on the FTSE 100 after it reported a drop in new business and new client numbers for the four months to 30 April.

Food producer Cranswick fell sharply following reports that a number of retailers including Aldi and Sainsbury's had recalled its food-to-go products containing chicken due to concerns about salmonella contamination.

On the upside, BT rallied as the telecoms and broadcasting group said it was moving its sports TV division into a 50-50 joint venture with Warner Bros Discovery and reported a small rise in adjusted annual core earnings after revenue fell 2%.

Retailer JD Sports gained as it said like-for-like sales were more than 5% higher year-on-year, driven by both the "strength and breadth" of its brand relationships and category offerings.

Engine maker Rolls-Royce rose it said it continues to trade in line with expectations and that it expects low double-digit percentage underlying revenue growth in the civil aerospace business. It also backed its 2022 guidance

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