FTSE 100 plunges after weak gross domestic product release

  • FTSE 100 plunges 175 points
  • GDP for March comes in below expectations
  • BT and Rolls-Royce defy the trend after results

London’s index of heavyweight shares has, as the hoary old market report’s phrase has it, fallen out of bed with a bump.

The FTSE 100 index was down 175 points (2.4%) at 7,172, with just half a dozen of the index’s constituents in positive territory.

One of those was BT Group PLC (LSE: BT.A)which was up 1.6% at 179.2p after it agreed to spin its BT Sport broadcast arm into a new 50-50 joint venture with the newly merged Warner Bros Discovery Inc (NASDAQ: WBD) which owns Eurosport.

The telecoms giant also released its full-year results.

“‘BT Group saw revenue fall 2% as expected in the financial year as supply chain problems and a delayed recovery from Covid-19 took weighed on its topline, but a tight handle on costs meant adjusted Ebitda rose 2% to £ 7.6 billion and came in higher than expected. That will install greater confidence around BT Group’s ambition to grow annual revenue for the first time in six years and deliver higher adjusted Ebitda of at least £ 7.9 billion in the 2023 financial year, ”said City Index market analyst, Joshua Warner.

Also defying the trend after results was Rolls-Royce Holdings PLC (LSE: RR.)up 0.6% at 80.98p.

“Rolls Royce hasn’t been able to catch a break over the past few years, but we’re finally starting to see green shoots amid a budding recovery. The recovery in engine flying hours is continuing to build, though the ever changing state of affairs in China means getting back to pre-pandemic levels is still some way off. Still, the resumption of air travel is a net positive for the new, leaner business. It’s encouraging to see new orders coming through the pipelines as airlines work to build up capacity and pounce on a travel-hungry public, ”said Laura Hoy, an equity analyst at Hargreaves Lansdown.

Talking of Hargreaves Lansdown PLC (LSE: HL.)its shares were leading the Footsie’s retreat, tumbling 9.5% to 809.4p after a trading statement failed to hit the spot so far as the market is concerned.

“The challenging backdrop driven by unprecedented macro-economic and geo-political events has impacted markets and investor confidence, in turn leading to moderate flows and asset levels with net new business of £ 2.5 billion in this period,” the wealth management firm’s chief executive , Chris Hill, admitted.

On the macroeconomic front, consumer weakness weighed on UK gross domestic product (GDP) in March.

Quarterly GDP growth was 0.8% in the first quarter, less than the 1.0% economists had expected and it fell by 0.1% month-on-month in March, thanks to a significant fall in consumer-facing services.

“Year on year the economy grew at 8.6%; however, the underlying picture is weak. A return of tourism could be mistaken as real evidence of a post-pandemic normality but by and large momentum for consumer-facing services is weakening, ”said George Lagarias, the chief economist at Mazars Wealth Management.

“Production and construction also disappointed. Both sectors are suffering from high input costs and wildly unbalanced supply chains. While production might be less important for GDP, it is usually a precursor for services. Currently, consensus forecasts 3.7% -3.8% growth at year -end. “

“While we believe that the UK economy will probably grow this year, versus the previous one, we expect more economic weakness in the coming months. This is a result of higher interest rates, tax hikes and persistent inflation reducing real income, as well as external pressures due to the general slowdown in the global economy, “Lagarias opined.

6.50am: Big drop in prospect unless GDP provides a pleasant surprise

All the FTSE 100 index’s gains from the previous day are expected to be undone on Thursday as markets continue to reflect worry about inflation, central bank tightening and potential recessions.

Spread-betting platforms were predicting drops of 100 to 120 points for the London benchmark, undoing all the work from the day before, when it gained just over 104 points or 1.44% to finish at 7,347.66.

Another Wall Street sell-off took place overnight, following US consumer price inflation fell slightly to 8.3%.

Tech and growth stocks on the Nasdaq led the decline, tumbling another 3.2%, with the S&P 500 falling 1.65% and the Dow Jones dropping 1%.

“While there was disappointment that inflation didn’t fall as much as expected, the initial move higher in yields didn’t last long, with the US 10-year yield unable to sustain a move above 3% and closing lower for the third day in a row, ”said market analyst Michael Hewson at CMC Markets.

“This failure would appear to suggest concern that bond markets are becoming less worried about inflation, than they are about a slowdown in the wider economy.

“In any case, what these wild market moves are telling us is that investors have very little idea of ​​whether we’re near a short-term base, or whether we’ve got further to fall.”

Today’s news in London includes a glut of macroeconomic data, including quarterly GDP, industrial and manufacturing production, and trade data, coming days after the Bank of England warned that a recession could be on the cards.

The UK economy is expected to have slowed from the fourth quarter expansion of 1.3% to around 1%, although March likely to be the weakest month.

On the company diary, there’s results from BT Group PLC (LSE: BT.A)Grainger and Versarien PLC, as well as trading updates from Balfour Beatty plc (LSE: BBY)Coca-Cola HBC and ConvaTec.

6.50am: Early Markets – Asia / Australia

Asian shares tumbled on Thursday following overnight losses on Wall Street as the US consumer price index in April remained near its highest level in more than 40 years.

The Shanghai Composite in China declined 0.46% while Hong Kong’s Hang Seng index fell 2.25%.

Japan’s Nikkei 225 was trading 1.80% lower and South Korea’s Kospi slipped 1.65%.

Australia’s S & P / ASX200 fell 1.75% as the country’s first cryptocurrency ETF met with lukewarm reception on its debut on Thursday with the underlying price of bitcoin falling to a six-month low of US $ 26,766.

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